A new partnership between the Richard K. Mellon Foundation and Arctaris Impact Investors, a Boston-based impact investment group, is launching a $20 million investment fund to underwrite economic development projects in distressed communities in Allegheny and Westmoreland counties.
The fund, unveiled Wednesday, will target projects that support economic development, workforce training, infrastructure and sustainable job creation in qualified Opportunity Zones in the counties.
Opportunity Zones are designated areas of distressed communities that carry special tax incentives for investment and development.
The initial $20 million in the fund includes $16 million from Arctaris and a $4 million commitment from the R.K. Mellon Foundation.
Arctaris partnered with foundations and governments across the country over the last 11 years to launch projects in distressed communities from Maine to Nevada. Closer to home, a $40 million revitalization project in downtown Erie, slated for completion later this year, is expected to house 25 small businesses in the city’s struggling downtown area.
Founder and CEO Jonathan Tower said Arctaris focuses on communities in difficult circumstances because of the exit of a major employer. Last year, one of its funds partnered with local foundations and state government to reopen the Saddleback Ski area in Western Maine, a facility that was the largest employer in two counties before it closed five years earlier.
While Arctaris is new to Southwestern Pennsylvania, the R.K. Mellon Foundation, launched by Richard King Mellon in 1947, has played a significant role in the region’s development for more than seven decades. It helped underwrite everything from Pittsburgh’s original emergence from its status as the Smoky City during Renaissance I in the 1950s to the Digital Foundry, a new high-tech facility in New Kensington’s Corridor of Innovation.
The new investment fund is just the latest project for the foundation with estimated holdings of $3.1 billion. Earlier this year, it committed to investing $1.2 billion across the region over the next decade.
Foundation Director Sam Reiman was enthusiastic about the potential the new partnership could unleash in the region.
“Private investment is the fuel of prosperity,” Reiman said. “It’s the best way to create sustainable prosperity at scale. The Opportunity Zone program provides incentives to investors to bring the revitalizing fuel of private capital to our communities that need it most. We believe Allegheny and Westmoreland counties should realize the benefits of this proven program, and our board was willing to make the first investment to lead the way.”
Reiman said the foundation’s commitment leveraged a $16 million commitment from Arctaris, a firm with more than 11 years of experience and six funds focused on impact investments in low-income communities.
Local communities eligible for investment in the Southwestern Pennsylvania Opportunity Zone Program include a designated Opportunity Zones area of Jeannette that spills over to Penn, New Kensington, Arnold and a sector of Hempfield in the Adamsburg area. Opportunity Zones in Allegheny County eligible for such investments include a broad swath of low-income communities ranging from Braddock to Tarentum and Harrison. In all, projects in communities in 23 Allegheny County municipalities and four in Westmoreland could be eligible for such investment.
Tower said Arctaris is in conversations with some of Southwestern Pennsylvania’s major banks and foundations and hopes to expand the investment fund over the next three to six months.
R.K. Mellon Foundation spokesman Tim Reeves said the foundation plans to partner with local and county officials and other partners to “identify a pipeline of positive projects for the region” that would meet the fund’s investment criteria. Meanwhile, the foundation is working with Arctaris to create a community advisory board and hire a local full-time employee in Southwestern Pennsylvania.
Local officials welcomed the arrival of a new investment fund targeting needy communities.
“The opportunity to attract investment into some of our distressed communities is always something we advocate for. It certainly is something that we encourage, and appreciate. And we look forward to hearing more details of that partnership,” said Westmoreland County Planning Director Jason Rigone.
