Agenda Item Wording:
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Opportunity Zone Nomination - Authorize staff to process Opportunity Zone 2.0 census tract nomination for staff recommended tracts.
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Agenda Date: 06/15/2026
Prepared by:
Devon Jones, Economic Development Manager, devon.jones@visalia.gov, (559) 713-4190
John Lollis, Assistant City Manager, john.lollis@visalia.gov, (559) 713-4323
Paul Bernal, Director of Planning and Community Preservation, paul.bernal@visalia.gov, (559) 713-4025
Department Recommendation:
Authorize staff to process Opportunity Zone 2.0 census tract nomination for staff recommended tracts:
1. Tract 12 - ‘Downtown Visalia’ (06107001200) (see Attachment 2 for area)
2. Tract 20.03 - ‘Mooney’ (06107002003) (see Attachment 3 for area)
3. (if option) Tract 17.01 - ‘Washington Elementary, s/o 198, w/o Ben Maddox’ (06107001701) (see Attachment 4 for area)
4. (if option) Tract 11.01 - ‘Oval’ (06107001101) (see Attachment 5 for area)
Summary:
Opportunity Zones (OZs) are a federal capital gains tax incentive intended to attract long-term private investment to low-income communities. The program allows any taxpayer with eligible capital gains, including individuals, corporations, and institutional investors to reinvest those gains in designated census tracts and receive preferential federal tax treatment without needing federal approval. The incentive is carried out through Qualified Opportunity Funds (QOFs), which aggregate investor capital and direct it toward eligible investments within designated OZs. Eligible investment activities are intentionally broad. They may include new real estate development, rehabilitation of vacant or underutilized properties, local operating businesses, manufacturing facilities, energy projects, mixed-use developments, and similar productive uses.
Property generally cannot be purchased and held without meaningful follow-on investment and still qualify for OZ tax benefits. By offering capital gains tax relief rather than an up-front tax credit, the incentive is structured so that investors assume the investment risk. If an OZ investment is unsuccessful, the long-term tax benefit associated with holding the investment for 10 years is never realized.
The OZ Program was originally scheduled to sunset on December 31, 2026. With the passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, the program is now a permanent part of the federal tax code. As part of this legislation, a new round of OZ census tract designations-referred to as “Opportunity Zones 2.0”-will be implemented. Beginning in July, governors will have the ability to nominate up to 25 percent of eligible low-income census tracts as OZs. On January 1, 2027, the U.S. Department of the Treasury will certify nominations, and the new OZ 2.0 map takes effect. These designations will remain in place for 10 years at a time. The Governor’s Office of Business and Economic Development (GO-Biz) is leading the statewide nomination process. On June 15,th GO-Biz’s online application portal should launch for local jurisdictions to submit census tract nominations. That portal should be located on their GO-Biz Opportunity Zone website <https://business.ca.gov/resources/infrastructure-development/opportunity-zones-in-california/>. GO-Biz and the Department of Finance will then evaluate census tracts for nomination by the Governor’s office and in September/October will formally submit nominated census tracts to the US Treasury.
At the County level, Mike Washam and Alida Verduzco Silva from the Tulare County Resource Management Agency are coordinating the local census tract nomination process amongst the jurisdictions. With an estimated 25-30% reduction in eligible census tracts for OZ 2.0, regionally the County was planning on securing 12 census tracts given OZ 1.0 consists of 17 census tracts in total. City staff is optimistic in securing two census tracts in OZ 2.0 given this low countywide total. However, given Visalia’s population, there may be a possibility to secure three tracts should additional tracts be available. ’Novogradacs OZ 2.0 mapping tool <https://www.policymap.com/embed/widget/12163/DNAOEK4MOFUIAGJCCEX7MVRX9IRWBIKG> is a good resource for identifying eligible tracts that staff has utilized. There are eight eligible census tracts in total that include City of Visalia territory. The Novogradac tool identifies those eligible tracts. To qualify, a census tract must satisfy one of the following tests:
1. Median family income (MFI) below 70 percent of the metropolitan average or the statewide average (for non-metro areas) (versus 80 percent in the original OZ provision).
2. Poverty rate of 20 percent or greater (unchanged), plus a newly established MFI cap set at 125 percent of the applicable state or metro median. The MFI cap closes a statistical loophole that allowed a small number of high-income census tracts to qualify for OZ status.
Experience from OZ 1.0 underscores that OZ designation alone does not generate investment. Only well-chosen zones paired with development-ready policies and investment-ready development potential will attract capital and deliver impact at scale. Various policy groups have been providing general considerations for what makes a strong census tract for OZ 2.0 consideration, such as the Economic Innovation Group (EIG), the Federal Reserve Bank of San Francisco, Novogradac, and the Urban Institute. The Urban Institute developed a mapping tool <https://www.urban.org/projects/informing-2026-opportunity-zone-selections-state-and-local-decisionmakers/opportunity> to help guide decisionmakers on which tracts may better attract OZ investment interest. Some considerations include:
- Incentive has thus far mainly been a tool for real estate driven investment that adds value to property instead of just transferring ownership.
- Should target tracts that have investment-ready projects or project potential that could attract private capital but still need an incentive to unlock development potential.
- Higher density residential attracted more investment interest than single family residential.
- Commercial mixed-use including residential and commercial, and straight commercial or industrial projects also garnered interest.
- Affordable housing development did not secure as much investment as market rate or above median rent development.
o Though there are hopes that OZ policy changes could lead to better leveraging of Low-Income Housing Tax Credit (LIHTC) investment interests in future iterations.
- Avoid displacement risk.
That being said, the two tracts that staff is recommending for nomination have considerable investment potential:
1. Tract 12 - ‘Downtown Visalia,’ 06107001200 (see Attachment 2 map)
This tract consists of the downtown core including the Kaweah Health Medical Center, the Rawhide baseball stadium, Main Street and downtown, the Visalia Convention Center, Family HealthCare Network (FHCN), and Soccer City 1852. Given long term development needs of Kaweah Health, downtown, future potential around the Rawhide stadium, the need for additional hotel beds adjacent to the Convention Center, and the attractiveness of downtown Visalia, and potential for upper story/mixed use development in proximity to major employment centers such as Kaweah Health Medical Center and FHCN, this is an incredible opportunity to provide an investment incentive for the heart of the community.
2. Tract 20.03 - ‘Mooney’ (06107002003) (see Attachment 3 map)
Another unique opportunity, Tract 20.03 is the only eligible tract along the Southern Mooney Boulevard corridor and includes the Sequoia Mall site that is currently in the process of being redeveloped by the property owner, Paynter Realty and Investments. The OZ could be the ideal incentive to attract additional investment dollars to speed up or otherwise encourage that redevelopment process. Other notable opportunities in this tract include the Visalia Mall, the shopping center on the west side of Mooney at Whitendale, and the roughly 4.5 acre vacant site owned by the operator of the Marbella Visalia senior living community along Caldwell Avenue.
In addition, if given the opportunity to nominate additional tracts, staff would recommend the following:
3. Tract 17.01 - ‘Washington Elementary, s/o 198, w/o Ben Maddox’ (06107001701) (see Attachment 4 map)
There are a number of interesting opportunities in this tract, such as roughly eight acres of vacant multi-family zoned sites (mostly Regional Housing Needs Allocation [RHNA]) and approximately 14.6 acres of vacant single-family zoned sites. Though these opportunities may fare better at attracting OZ investment should policy changes occur that could better complement LIHTC investment interests. Additionally, the Office Conversion corridor along Court/Locust could garner interest, though we would want to avoid displacement of any occupied residences. Also, the Olive Plant and Advanced Food Products industrial facilities could be opportunities, as well as, the Kaweah Health clinic and additional medical facilities along the Court Street corridor.
4. Tract 11.01 - ‘Oval’ (06107001101) (see Attachment 5 map)
This tract is currently in the existing OZ 1.0. As indicated below, information on OZ investment activity is not readily available so it is difficult to quantify whether or not the incentive program has led to investment in the tract. That being said, given guidance provided by policy stakeholders regarding strong OZ 2.0 candidate tracts, this tract may not be as ideal as the other tracts recommended by staff. Again, OZ designation alone does not generate investment. That said, the Commercial Mixed Use (CMU) zoning and Downtown Mixed Use (DMU) zoning could be opportunity areas, particularly where vacant or underutilized property exists. But again, potential OZ investors will be, and the City should be, wary of displacement impacts in the pursuit of OZ investment returns particularly amongst residential tenants.
Background Discussion:
Due to the structure of OZ 1.0, namely the lack of reporting requirements of QOFs on specific investment activity, staff is unable to report on impacts from OZ 1.0 specific to Visalia. Staff is aware of a few development projects primarily in the industrial park area that received QOF investment and it is highly likely that other developments utilized the OZ incentive (the Novogradac mapping tool <https://www.policymap.com/embed/widget/12163/DNAOEK4MOFUIAGJCCEX7MVRX9IRWBIKG> also maps the existing OZ 1.0 tracts). Unfortunately, with the new census tract designations and new eligibility criteria for OZ 2.0, most of Visalia’s industrial zoned land is ineligible for OZ 2.0. However, the County of Tulare is recommending the Goshen tract (06107000901) which includes a portion of the Visalia Industrial Park, including Tier 3 industrial property west of Plaza Drive and the remainder of the CapRock phase 3 development.
Fiscal Impact including annual maintenance and operating costs: None
Prior Council Action: None
Alternatives: Per Council direction
Recommended Motion (and Alternative Motions if expected):
recommendation
I move to authorize staff to process Opportunity Zone 2.0 census tract nomination for staff recommended tracts:
1. Downtown (06107001200)
2. Mooney (06107002003)
3. Washington Elementary, s/o 198, w/o Ben Maddox (if possible) (06107001701)
4. Oval (if possible) (06107001101)
Environmental Assessment Status: N/A
CEQA Review: N/A
Deadline for Action: 06/15/2026
Attachments:
1. EIG OZ Brief
2. Attachment 2 - Tract 12 - ‘Downtown Visalia’ (06107001200)
3. Attachment 3 - Tract 20.03 - ‘Mooney’ (06107002003)
4. Attachment 4 - (if option) Tract 17.01 - ‘Washington Elementary, s/o 198, w/o Ben Maddox’ (06107001701)
5. Attachment 5 - (if option) Tract 11.01 - ‘Oval’ (06107001101)
Strategic Goal: Indicates which City Strategic Goal(s) this item supports. Check all that apply.
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