We’re spotlighting the impact of each of the Forbes OZ 20 Grand Prize winners. Two communities and two funds were honored at the 2020 Winter Innovation Summit for bringing transformative capital to long-overlooked areas across the U.S.
Born and raised in Erie, Pennsylvania, business owner Lisa Heidelberg never thought she’d stay. “As a younger person, I always thought, oh yeah, I’m out of here.”
The sentiment wasn’t unique to Heidelberg. A quintessential industrial Midwest-meets-Appalachia city, Erie has lost nearly a third of its population since 1960. Mayor and lifetime resident Joe Schember recalls the bustling industrial city of a bygone era. “When I was a kid growing up in Erie, we had 140,000 people, and you could walk down West 12th Street — it was our industrial corridor — and get five good job offers in a day.”
Today Mayor Schember laments that today “12th Street looks more like an industrial wasteland.” Battling outsourcing, automation, and seismic shifts in global supply chains, the once-thriving industrial city became a parable for the socioeconomic decline of America’s manufacturing heartland.
A 2017 report described Erie in stark terms, concluding that nearly half of all Black residents live in poverty, and that the median Black worker in Erie makes a mere 43% of median white worker’s earnings.
Erie found an opportunity in the 2017 Tax Cuts and Jobs Act. Matt Wachter, President of Finance and Development at the Erie Downtown Development Corporation (EDDC), read about the Tax Cuts and Jobs Act’s opportunity zones (OZ) program just before the program became law in 2017. By allowing investors the opportunity to reinvest unrealized capital gains with reduced tax burdens, OZs in Erie could provide a windfall of investment to its neighborhoods with the least resources.
Wachter immediately knew that OZs offered a ticket to revitalization. “This is something that was written for Erie and the Eries like it all over the United States.” By incentivizing investment in its urban core, Erie’s opportunity zones have, in Wachter’s words, “sparked a real amount of ingenuity and creative power in the community.”
With some 8,700 OZs across the country, local coordination to leverage their potential is paramount. Erie’s eight OZs were collectively designated Pennsylvania’s Flagship Opportunity Zone and are now a major focus of Erie’s broader economic development initiative — the Erie Forward plan.
Erie is currently home to some $750 million in ongoing investment. The EDDC and Erie Regional Chamber and Growth Partnership are working to get even more capital into the areas where it will have the biggest impact.
The first phase of EDDC’s plan will add more than $100 million in investment into downtown Erie through 2022. In that time EDDC hopes to triple the number of businesses within the development, raise job numbers from 90 to over 425, and multiply the number of residential units by more than ten. It’s the sign of changing fortunes for Erie. The growth in the tax base alone could have a marked impact on schools and city services.
Years of public-private collaboration focused on reinvention is helping officials and collaborators to creatively adapt to bringing investment to the Flagship Opportunity Zone. It’s the same preparation and creativity behind the more recent Erie ReStart, aimed at Covid-19 economic recovery and the safe reopening of local businesses.
The capital invested in the Flagship Opportunity Zone is a major step toward reducing systemic disparities for people of color and reversing Erie’s socioeconomic decline. Erie’s Flagship City Food Hall, scheduled to open in early 2021, is the centerpiece of Erie’s OZ efforts. Located in the nation’s poorest zip code, where the median annual income is $10,631, the food hall is characteristic of Erie’s innovative approach to economic development. The food hall represents a catalyst for entrepreneurship and commerce for communities suffering from chronic underinvestment.
Black entrepreneurship can meaningfully reduce systemic disparities along racial lines. “Our African American population is only participating in the labor market at a rate of around 25%,” explains James Grunke, President and CEO of the Erie Regional Chamber and Growth Partnership. “By investing in underserved areas, opportunity zones can help us move the needle.” Empowering and enabling long-overlooked communities to build and innovate a local economy, Erie is working to advance socioeconomic opportunity while reducing disparate outcomes for people of color.
For lifers like Heidelberg — a Black business-owner, caterer, and chef — the upshot of opportunity zones is staying in her hometown to build a better future, defying decades of decline. “Why do I stay?” Heidelberg wonders. “It’s a great city with great people. And I think, wouldn’t it be nice to be part of the renaissance that is going on here?”
Investing in communities that have historically been excluded from capital and power is a chance to accelerate economic equity and upward mobility in communities of color. Across the U.S., 57% of OZ residents are nonwhite, compared to 39% of the general population. Erie’s development efforts have fast-tracked the city’s potential to revitalize communities and address economic inequality.
The boldness of Erie’s OZ initiative was risky, explains Matt Wachter, but the results speak for themselves. “Opportunity zones have taken what we thought was going to be a 25-year development plan and shrunk it down to five, and the reason why it’s done that is because we’ve had an ability to attract capital much more readily than we ever initially anticipated.”
“I’m very, very thankful for the vision of an organization like Erie Downtown Development Corporation,” Heidelberg concludes, “because it can be tough to get people on board for change, it’s happening right in front of our faces; not in spite of us, but with us.”
By Gavin Serr, Student Fellow; edited by Sorenson Impact Center Communications team.
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Read more about the Erie Downtown Development Corporation at erieddc.org and the Erie Regional Chamber and Growth Partnership at eriepa.com.
