Opportunity Zones 2.0
A regional coalition is preparing to nominate Jefferson County census tracts for federal Opportunity Zone 2.0 designation. Here is what the program does, who is involved, and how community members can contribute.
EDC Team Jefferson Executive Director David Ballif presented on the Opportunity Zones 2.0 program to the Jefferson County Board of Commissioners on March 9, outlining the nomination process and a deadline of May 1, 2026. "In a nutshell, the idea is to channel resources and investments to distressed or less-resourced communities around the United States," Ballif told Commissioners. "The mechanism is significant tax savings for investors who place capital into designated zones."
What Is Opportunity Zones 2.0?
Opportunity Zones were first established in the 2017 Tax Cuts and Jobs Act as a way to direct private capital into economically distressed census tracts. The One Big Beautiful Bill Act, signed into law in 2025, made the program permanent and added new incentives specifically for rural investment.
The program works by offering investors a three-part tax benefit when they invest capital gains into a federally designated Opportunity Zone:
Defer: Investors can roll capital gains into a Qualified Opportunity Fund (QOF) and defer paying taxes on those gains for five years.
Reduce: After five years, a portion of the original deferred gain is forgiven: 10% in a standard zone, 30% in a rural zone.
Eliminate: After holding the investment for 10 years, any appreciation on the new investment is completely tax-free.
Jefferson County's Rural Position
All of Jefferson County qualifies as rural under OZ 2.0. That means investments here would be eligible for the Qualified Rural Opportunity Fund (QROF) designation, which carries a higher basis step-up (30% versus 10% in urban zones) and a lower improvement threshold: rural investors need to put 50% of a property's purchase price into improvements, compared to 100% in urban zones.
"Everything in the North Olympic Peninsula, in Jefferson County, qualifies as rural," Ballif said. "So it's absolutely a massive benefit."
As a practical example: an investor who purchases a $200,000 building would need to put $100,000 into renovations to meet the federal improvement threshold, rather than the full $200,000 required in an urban zone. That lower bar was designed specifically to make rural property improvement feasible while keeping costs manageable.
What Changed from OZ 1.0
The 2.0 program applies stricter eligibility criteria. Census tracts must now fall below 70% of median family income, down from 80% in the original program. That shift has changed which Jefferson County tracts qualify: Port Townsend's waterfront and downtown area is the county's strongest candidate, and a tract covering Brinnon and the West End also qualifies.
The contiguous tract exception, which previously allowed adjacent tracts to be nominated even if they did not independently meet income thresholds, has been eliminated. Each nominated tract must now qualify on its own.
The program is now permanent, with 10-year designation periods and redesignation cycles every decade. New reporting requirements will allow communities and the state to track where investments go and what results they produce, something OZ 1.0 did not require.
How Nominations Are Scored
Washington State can designate up to 98 zones from 394 eligible census tracts, a competitive 25% cap, with at least 25 designations required to be rural. Applications are scored by the Washington State Department of Commerce on a 137-point scale across five categories:
● Community Economic Need (21 pts)
● Investment Readiness (57 pts, the single largest category at 42% of total)
● Policy Alignment (19 pts)
● Community Support (27 pts)
● Rural/Tribal/Geographic considerations (13 pts)
Investment Readiness is where applications are won or lost. Evidence of actual projects, investors, and job creation potential carries the most weight. Community documentation of service gaps, particularly healthcare, also scores significantly.
A Regional Collaboration
The plan is to submit through the Emerald Coast Opportunity Zone (ECOZ) consortium, a multi-agency regional partnership spanning Jefferson and Clallam counties that secured 14 designations during OZ 1.0. The consortium includes cities, tribal nations, port authorities, and economic development organizations across the North Olympic Peninsula.
For the 2.0 cycle, EDC Team Jefferson and Clallam EDC will again co-lead nominations for their respective counties under the ECOZ umbrella. Jefferson County, the City of Port Townsend, and the Port of Port Townsend are expected to participate as well. Coordination with tribal partners is a priority: Ballif noted that the Hoh Tribe has indicated interest in Opportunity Zones, and tribal engagement is also a factor in the scoring.
Ballif identified two likely eligible tracts for Jefferson County. The primary tract covers Port Townsend waterfront, downtown, Castle Hill, and up to the boatyard, an area with a concentration of investment-ready opportunities including the Evans Vista workforce housing project. The secondary tract covers Brinnon, where the Pleasant Harbor Master Plan Resort could strengthen the application, and the West End.
What Has Worked Elsewhere, OZ 1.0
Across the country, during OZ 1.0, roughly $90 to $100 billion was invested in approximately 5,600 low-income neighborhoods. Washington State saw $2.4 billion in OZ investments through 2022 and was rated second in the nation for the share of its zones likely to attract high-impact investment.
Closer to home, the Port Angeles Wharf project, a 2020 waterfront renovation, saw occupancy rise from 65% to 95% with nine new small businesses created. The investment totaled three times the initial acquisition cost. A consistent finding from OZ 1.0: trusted local partners and local investment anchors were what brought outside capital to the table.
In Brookville, Indiana, a town of 4,500, a local business owner who sold their company used OZ to reinvest their capital gain back into their hometown, financing new apartments, senior living, the town's first hotel, a pharmacy, and a restaurant.
How Community Members Can Contribute
The strength of any nomination depends on documentation of real projects and real interest. The coalition is looking for:
● Investors or wealth advisors who have capital gains and interest in Jefferson County projects
● Businesses or developers with active projects, plans, or expansion ideas within eligible census tracts
● Letters of support from local businesses, organizations, and community members. Letters of support from local government entities carry points in the scoring as well.
Key Dates
April 1: WA Commerce OZ nomination portal opens
April 6: David Ballif presents OZ 2.0 overview to Port Townsend City Council, 6 PM
May 1: Application portal closes, 5 PM
July 1: Washington nominations due to U.S. Treasury
January 1, 2027: New Opportunity Zones officially designated
Get Involved
If you have a development project or investment interest in a likely-eligible census tract, contact EDC Team Jefferson: admin@edcteamjefferson.org.
For more on the program, visit commerce.wa.gov/opportunity-zones and eig.org/opportunity-zones.
EDC Team Jefferson is Jefferson County's designated Associate Development Organization (ADO) for the Washington State Department of Commerce, working to improve economic well-being and quality of life for Jefferson County residents and businesses since 2007.