Investment fund to focus on developments in Milwaukee, other communities with high poverty and unemployment

Developments proposed for Wisconsin communities that have higher poverty and unemployment rates will be the focus of a new investment fund.

The Badger State Opportunity Fund, which hopes to raise $15 million, will focus on projects in Opportunity Zones — which provide wealthy investors with big federal tax breaks.

It will be the first such investment fund that focuses on Wisconsin, said William Martin, chief innovation officer for the City of Racine, which is helping launch it.

Most funds that focus on Opportunity Zones are based in East Coast or West Coast cities, Martin said. And they tend to ignore Wisconsin, he said.

The Badger State Opportunity Fund will cover Wisconsin's 120 such zones, which are based in Census tracts that cover 60 cities and villages in 44 counties.

Those communities range from Milwaukee and other cities, such as Racine and West Allis, to small towns.

"This gives a chance for all those communities to work together," Martin said.

The fund will seek investments from people earning at least $200,000 annually, or with at least $1 million in net worth — not counting the value of their primary residence.

Martin said the fund hopes to raise at least $10 million, with a $15 million target and a $25 million cap. It would begin investing in developments by mid-2020, he said.

Racine is involved in helping start the Badger State Opportunity Fund but is not investing city cash. 

The city is playing a role because Mayor Cory Mason sees the fund as a way to help attract private capital to projects in Racine's Opportunity Zones, Martin said.

Martin is president and chief executive officer of Wisconsin Diversified Investments, which will operate the fund. 

The Opportunity Zones program, created by 2017 tax cut legislation approved by a Republican-led Congress and signed by President Donald Trump, is supposed to provide capital gains tax relief for long-term investments in distressed communities.

The Milwaukee area is seeing developments in Opportunity Zones.

They include The West, a high-end apartment community finishing construction near West Allis Farmers Market; Convent Hill South, a proposed mixed-income apartment high-rise on downtown Milwaukee's north end; Komatsu Mining Corp.'s future corporate campus in the Harbor District; and the proposed north side Ikon Hotel.

But the program, which took effect in 2018, has been criticized for drawing investments to neighborhoods that aren't truly poor.

Its eligibility and oversight requirements are minimal compared with other federal community development tools, according to a report released in September by the Urban Institute.

Tom Daykin can be emailed at tdaykin@jrn.com and followed on Instagram, Twitter and Facebook.