The gist: Trustees on the Lafayette Public Innovation Alliance authorized Mayor-President Joel Robideaux to begin talks with investors interested in leveraging federal Opportunity Zone tax benefits to attract money to tech startups. It’s not yet clear what role LPIA would play in this.
Catch up, quickly: LPIA is a public trust created and chaired by Robideaux to grow Lafayette’s innovation economy. Opportunity Funds are tax advantaged money pools created to invest in Opportunity Zones. Lafayette Parish has several Opportunity Zones, which you can see here.
Most Opportunity Funds have been investing in real estate, but Robideaux wants to see investments in startups. In his mind, LPIA will play a role in making that happen, as noted in his opening letter in LCG’s Opportunity Zone prospectus. “Through the LPIA we plan to establish and manage Opportunity Funds focused on both traditional real-estate investments, as well as technology and innovation investments rooted in blockchain and encrypted digital assets,” he writes. It’s still undetermined whether LPIA will start its own fund or serve as a coordinator for others.
“You can’t just take money from investors without a plan,” Megan Reiss, a New Orleans attorney whose firm is advising Lafayette General on setting up their Opportunity Fund, told the board. The trustees discussed a wide range of investment concepts, but nothing concrete is in place. Finding investors before the startups could be tricky, especially since Opportunity Funds only have six months to deploy any capital that they raise.
One possible move? Buying Opportunity Machine’s new digs Downtown. In this scenario, LPIA would buy the old nightclub building set to be renovated for the OM’s new home and lease it back it the OM. LEDA purchased the building for $1 million and may be receiving $5.6 million from the state to renovate it and make other possible Downtown plays, assuming Gov. Edwards doesn’t strike it from the list of projects set to be funded, according to LEDA CEO Gregg Gothreaux.
LPIA doesn’t have any money, save for the $100 Robideaux personally seeded the trust when it was created last year. The organization has met three times, discussing a wide range of operational possibilities. But there is no plan for how LPIA will fund its operations moving forward.
The clock is ticking. To take the fullest advantage of the tax benefits, LPIA would have to get its fund set up and investment capital raised by the end of 2019. Otherwise, potential investors won’t be able to reap the maximum tax benefit of the program by the time the program sunsets in 2026, making the investment less attractive. That means funds need to have projects ready to roll, and it’s not yet clear what projects LPIA has in its sights that are investable.
What happens next? There was general consensus among the trustees that Opportunity Funds represented a great way to foster investment in Lafayette, and that something should be done. But the details remain up in the air. The only clearly defined next steps are that Robideaux’s going to start talking to investors, and LPIA’s trustees plan to ramp up their meeting frequency from once a quarter to monthly. The date of the July meeting has not been set.