Qualified Opportunity Zone Impact Measurement Product Launch
Credible QOZ impact measurement will need to be done by a third-party fiduciary.
Bantam is pleased to officially launch our Qualified Opportunity Zone Impact Measurement product. (This blog post continues my series on Qualified Opportunity Zones ("QOZs"). You can read my other posts here.)
QOZ Fund Investment Risks
There are two primary non-investment risks to QOZ investments: the appearance of gentrification and the potential for future legislative changes that require reporting on the local impact of the investment.Both of these risks can be addressed by proper QOZ impact measurement and reporting.Since the QOZ initiative was a bi-partisan effort, and other programs such as the Low Income Housing Tax Credit and New Markets Initiative have been continuously renewed, I think a repeal of the QOZ program is a very remote possibility.However, as written, the QOZ program has virtually no guardrails. Besides the prohibition against a few "sin" businesses, such as casinos, race tracks, and liquor stores, virtually anything goes. For a comparison, review the QOZ programs seven pages to the 30 page Low Income Housing Tax Credit Owner's Compliance Manual or the 39 page introduction to the New Markets Tax Credit Program.With the Democrats seemingly poised to take back a majority in Congress, the potential for additional reporting is real.
The Necessity of Third-Party QOZ Impact Measurement
While the QOZ program allows investors to self-certify when they timely file their taxes, credible QOZ impact measurement will need to be done by a third party.Bantam's third-party audit of impact offers a number of benefits, including:
• Credible measurement by a third-party fiduciary;
• Impact measurement by a benefit corporation ( we are an impact investment ourselves), and;
• Turnkey reports to share with all stakeholders, the press, and other interested parties.
Bantam’s QOZ Impact Measurement Product
Bantam’s QOZ impact measurement product is a fiduciary, third-party audit of a QOZ fund’s economic impact on the local community. The audited items include:
• Local jobs created;
• Job quality;
• Local bank balances;
• Local supply chain spend, and;
• Local taxes paid.
The deliverables include:
• Assistance setting up policies and procedures to track local impact;
• An annual turnkey report, ready for distribution to all stakeholders;
• Impact scoring;
• Benchmarking v. similar QOZ businesses (after a baseline has been established), and;
• For large QOZ funds, onsite visits for operational due diligence.
QOZ Impact Measurement from Inception
In order to maximize local impact, integrate with the community, and track progress, QOZ funds should establish impact measurement from a funds inception.Policies and procedures implemented early will ingrain an impact mindset as well as make reporting easier over the life the investment.This will help de-risk the investment and validate it to all stakeholders. You can read more about our Qualified Opportunity Zone services here.