PUBLISHED: August 16, 2026 at 12:58 PM PDT
San Rafael city leaders are hoping that federal tax credits will help kickstart economic development in the Canal neighborhood and a portion of downtown.
They are submitting a proposal to have those census tracts designated as “Opportunity Zones” with hopes that tax benefits will spur investment into building and improving properties to create local jobs, economic opportunities and growth for those underserved areas. Additionally, city officials hope that development can bolster the area’s resiliency as large portions, including high-density housing, along the San Rafael Canal face the threat – short- and long-term – of flooding.
Those tracts are being submitted to the governor who can nominate roughly 600 zones across the state for the special designation.
It is important that the Canal nominees come with the support of the Canal Alliance, which raised objections to the first round of zones because it feared the tax breaks would set the stage for investors to rehabilitate older apartment complexes in the neighborhood and evict low-income tenants to make room for needed construction or by raising rents.
The city’s adoption of temporary “relocation assistance” requirements that landlords pay displacement fees to tenants was in response to that worry. The city requirements also gave tenants the right to return to their apartments after construction was completed. Continuation of those requirements, making them citywide, is part of the land-use and community planning currently in the works.
Two Canal neighborhood tracts were chosen for the first round of tax breaks. The program was made permanent as part of the Trump administration “Big Beautiful Bill” and the door has been opened for more nominations.
The new nominations also include portions of the Francisco Boulevard West and Bret Harte neighborhoods and the industrial and commercial areas south of downtown.
Some of the state’s priorities will be advancing housing goals and how close the shovel-ready planned improvements are.
The Canal Alliance’s support is focused on underused commercial properties that, with the help of tax benefits, be redeveloped into job-creating business opportunities. New construction could also address the area’s need for protection from flooding caused by sea-level rise.
Omar Carrera, Canal Alliance’s CEO, said the new round of nominations come with expanded public input and community collaboration. One of those groups is the East San Rafael Working Group, which is composed mostly of local business owners and San Rafael Chamber of Commerce members, who hear from city staff and elected officials at their meetings.
Joining forces with the San Rafael Chamber, the group urged the City Council to endorse the nominated tracts, calling selection as an Opportunity Zone “one of the most meaningful tools available to attract the scale and type of capital” needed to implement the planning goals for the area. The investment could encourage “durable benefits” that can help support existing businesses, create local jobs and improve the area’s environmental resilience, the chamber and the working group said in a letter to the council.
City leaders believe their goals dovetail with those priorities set forth in Sacramento.
The federal government’s rules that limit zones to those that meet moderate-income family and poverty levels list nearly 2,500 census tracts eligible for nomination.
Even with 600 allotted to California, that sets the stage for competition for those nominations.
There is an economic disparity reflected in San Rafael’s nominees. Broad community support, the real need for economic investment and the possible short- and long-term benefits it could promise should bolster San Rafael’s proposal in that competition.
