By Adrian Rodriguez | [email protected] | Marin Independent Journal
PUBLISHED: August 4, 2026 at 3:17 PM PDT | UPDATED: August 5, 2026 at 6:51 AM PDT
Five census tracts in the southeast San Rafael and downtown areas could earn a federal designation to encourage economic revitalization.
The San Rafael City Council recommended that the Office of the Governor nominate the areas for designation as federal “opportunity zones.” The program, which was created under the federal Tax Cuts and Jobs Act of 2017, provides tax benefits to developers within these low-income communities.
Two census tracts within the Canal neighborhood are part of the initial program that is scheduled to sunset at the end of the year, said Greg Minor, assistant director of community and economic development.
The “One Big, Beautiful Bill Act” of 2025 made the opportunity zone program permanent, with new designations taking effect in January for the next 10 years.
In April, the Internal Revenue Service released a list of more than 2,600 eligible census tracts for the next cycle. The governor can only nominate about 600, Minor said.
Because it is a competitive process, the city has submitted its recommendations with a priority ranking.
The top priority census tract includes a bulk of the Canal neighborhood and bayside communities east of Interstate 580. The second priority is a census tract that includes the downtown area.
“These two census tracts provide the strongest opportunity for investment that aligns with the city’s economic development, housing resilience and revenue objectives,” Minor said.
The Metropolitan Transportation Commission is funding an east San Rafael specific plan that would help shape opportunities for future development in the area. Additionally, there are multiple proposed and approved housing sites in the two tracts, as well as other development opportunities, Minor said.
In the third and fourth ranking are census tracts that encompass the waterfront Canal area, and the central Canal area, respectively. These are the two census tracts that are part of the existing program. They consist of primarily high-density, multifamily housing and a high percentage of low-income and Latino residents.
The last priority is the census tract that consists of Francisco Boulevard West and the Bret Harte neighborhood and areas west of I-580 and south of downtown. The area is largely industrial and commercial.
Census tracts must meet a set of criteria to be certified, including demographic factors such as poverty and median family income, renter occupancy and unemployment.
Selection will also consider alignment with the state’s affordable housing goals, state housing allocations, and whether the areas have business-ready sites with any active or planned investment, Minor said.
“These areas align with many of the state priorities,” Minor said of the recommended census tracts.
Previously, there was a concern that the opportunity zone designation had unintended consequences.
In the Canal neighborhood, residents and their supporters feared tax incentives for developers were trending toward gentrification and the displacement of longtime community members.
As concerns grew, the City Council adopted a relocation assistance program for tenants within the opportunity zone who were evicted through a “no fault” eviction.
The issue was at the center of controversy at an apartment complex at 400 Canal St., where new owners in 2022 launched an $8.2 million renovation and began asking tenants to voluntarily relocate. Rent increases and evictions soon followed.
In response, the city enacted a temporary relocation assistance program and the right for the tenant to return after rehabilitation was complete.
The tenant protections are expected to expire when the first phase of the opportunity zone ends this year.
Micah Hinkle, director of community and economic development, said staff plans to separate its tenant protection policies from the opportunity zone designated areas. Staff is preparing recommendations for a citywide approach for tenant protections, he said.
The opportunity zone recommendations have the support of the East San Rafael Working Group, a public-private partnership whose members include the city, San Rafael Chamber of Commerce and the Canal Alliance, a nonprofit serving the Latino community.
Omar Carrera, chief executive officer of the Canal Alliance, said one of the key lessons from the first version of the opportunity zone program is that community members were passive participants in the designation process. Decisions were made without local input, coordination or a shared framework to align investment with community priorities, he said.
Carrera said the top priority tract includes underused commercial areas and land that could support sustainable redevelopment and business expansion. The area is also in need of help with climate adaptation and sea level rise protections. Investment could help with that, Carrera said.
Carrera said the partnership created in the East San Rafael Working Group is essential, given the competitive nature of the opportunity zone process.
“Across California and the nation, communities are competing aggressively for designation, often backed by significant lobbying resources and well-funded interests,” he said. “East San Rafael cannot compete on lobbying dollars alone. Its strength lies in the coalition that has been built and the remarkable level of alignment it represents.”
Governors have until Sept. 30 to submit their nominations. The U.S. Department of the Treasury is expected to certify nominations in November.
