HomeMy WebLinkAbout2026-037 Opportunity ZonesDate: June 26, 2026 Report No. 2026-037
INFORMAL STAFF REPORT TO MAYOR AND CITY COUNCIL SUBJECT: Opportunity Zones 2.0 Program Nominations EXECUTIVE SUMMARY: This Informal Staff Report is staff initiated and was prepared to provide a summary of the current and new Opportunity Zone Programs and the Census tract nominations under the new Opportunity Zone 2.0 Program.
BACKGROUND:
Current Opportunity Zone 1.0 Program The Opportunity Zone Program, created in the Community Renewal Tax Cuts and Jobs Act of 2017, is a federal economic stimulus tool designed to assist distressed communities. This tool
offers a tax benefit of an investor’s capital gains into a Qualified Opportunity Fund. This program
provides a capital gains tax deferral, whereby 90% is taxed after a period of 5 years, 85% is taxable for 7 years and the gain is excluded after a 10-year period.1 Investment in Opportunity Zones is unlikely if additional funds, other than the “tax benefit” are not offered, according to Springsted.2 This makes this zone a prime location to look at incentivizing. The federal tax benefit, combined
with other funding sources and mechanisms, such as an economic development incentive or Tax
Increment Reinvestment Zones, may make the project feasible. The greatest benefit can be made by projects that are held for the entire 10-year period. The zones are designated by the Governor of each state in the U.S. The State of Texas currently
has 628 designated Census tracts under the 1.0 Program. Two Opportunity Zones are located in
Denton County. A single Census tract, 206.02, is the zone identified in the City of Denton. The zone is generally located east of Bell Avenue, South of Mingo Road and University Drive, West of Mayhill Road, and North of McKinney Street (see Exhibit 1).
Opportunity Zones 2.0 Program
The Opportunity Zone 2.0 Program was created under the One Big Beautiful Bill Act (OBBA) of 2025 under the tax code, which also included ten-year designation cycles. The effective date of the new program is January 1, 2027. The 2.0 Program simplified the benefits for investors by offering a 5-year deferral, 30% basis step-ups and lower threshold for improvements from 100% to 50%.
The zones are still designated by the Governor of each state. Governors may nominate 25% of the eligible Census tracts in the state. There are a total of 2,420 eligible census tracts in the State of Texas, of which 605 (25%) can be designated under the 2.0 Program. The Texas Economic Development and Tourism Office (EDT), which falls under the Office of the Governor is leading
the nomination process for the Opportunity Zone 2.0 Program. The recommendations are due to
the state on June 26, 2026. State Opportunity Zone 2.0 designations are due to the U.S. Department of Treasury by August 3, 2026.
Date: June 26, 2026 Report No. 2026-037
SUMMARY OF STAFF RECOMMENDATIONS: An interdepartmental team from Economic Development, Community Development,
Development Services and the City Manager’s Office was developed to review the eligible tracts
and make recommendations on tracts to be nominated for Opportunity Zones in the City of Denton. There are a total of 24 eligible Census tracts in Denton County, of which 12 are located in the City of Denton. Federal and state guidance prioritizes alignment with state and local economic policy, plans and goals; economic need and investment potential. At the state level, the EDT is also
specifically considering the following:
• Statutory Compliance: nomination of tracts that clearly meet federal eligibility
• Local Support: consideration for those tracts which the local community will support through Economic Development incentives and tools
• Project Viability: sites where private capital can realistically be initiated in 2-4 years and where investments encourage inclusive growth (e.g. affordable housing, workforce initiatives, etc.).
• Geographic Balance: to help ensure representation across regions of the state;
leverage rural incentives and provide an additional incentive for tracts which have been affected by a declared disaster. City staff have identified the following three Census tracts for possible designation, which are
presented in order of priority: 211, 212.03 and 208. Additional Information on the proposed Census
tracts is also provided in Exhibit 2. Staff will submit the nomination packet with the recommended Census tracts below by July 26, 2026. Census Tract 211
This Census tract is located in the Downtown Tax Increment Reinvestment Zone (TIRZ) No. One.
Up Zoning has been conducted to help make the area more dense. An Opportunity Zone will encourage capital investment and redevelopment in the zone and will support the floodplain Pecan Creek Tributary PEC-4 reclamation project, fosters the consideration to help reduce urban sprawl in the Economic Development Chapter 380 and Tax Abatement policies and aligns with the Design
Denton Downtown Plan.
Date: June 26, 2026 Report No. 2026-037
Census Tract 212.03 An opportunity zone will encourage capital investment and redevelopment in a low to moderate
income Census tract. The Novartis Innovative Technologies project is located in Census Tract 212.03. A designation will help recruitment efforts in one of the Economic Development Strategic Plan's Strategic Growth Areas, biomedical/life science industry.
Census Tract 208 The final Census tract includes the airport, most of the Westpark TIRZ No. Two and the industrial park; general office zoning, which aligns with the Economic Development Strategic Plan recruitment efforts and a site with significant infrastructure challenges along Westcourt Road, Springside Drive, and Corbin Road.
Date: June 26, 2026 Report No. 2026-037
ATTACHMENTS: Exhibit 1: Current Opportunity Zone
Exhibit 2: Proposed Census Tracts for Nomination STAFF CONTACT: Erica Sullivan
Economic Development Program Administrator Erica.Sullivan@cityofdenton.com (940) 349-7731 REQUESTOR: Staff initiated
STAFF TIME TO COMPLETE REPORT: 9 hours PARTICIPTAING DEPARTMENTS: Economic Development, Development Services,
Community Development and City Manager’s Office
1 Certified Development Finance Agency’s Opportunity Zone Solutions, supported by Cohn Reznick, Online
internet: https://www.cdfa.net/cdfa/cdfaweb.nsf/resourcecenters/OZ.html
2 Springsted, “Being Opportunity Zone Investment Ready,” Jan. 17, 2019.
Exhibit 1
Current Opportunity Zone
The current Opportunity Zone 206.02 is no longer eligible.
Exhibit 2
Proposed Census Tracts for Nomination
Census Tract 211
This Census tract is located in the Downtown Tax increment Reinvestment Zone (TIRZ) No. One.
Up Zoning has been conducted to help make the area more dense. An opportunity zone will
encourage capital investment and redevelopment in the zone and will support the floodplain Pecan
Tributary PEC-4 reclamation project.
This is an eligible Opportunity Zone Tract
Census Tract 212.03
An opportunity zone will encourage capital investment and redevelopment in a low to moderate
income Census tract. The Novartis project is located in this tract. A designation will help
recruitment efforts in one of the Economic Development Strategic Plan's Strategic Growth Areas,
biomedical/life science industry.
Please note that the City of Denton’s online map layer is outdated (2010), so the tract has been divided in the more
current 2.0 map. This is an eligible Opportunity Zone Tract.
Census Tract 208
The tract includes most of the Denton airport; Westpark TIRZ No. Two and industrial park; and
general office zoning that aligns with the Economic Development Strategic Plan and highlighted
site with significant challenges.
Site: Westcourt Road, Springside Drive, and Corbin Road
General Office along Fort Worth Drive
Both are located in an Eligible Opportunity Zone tract