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Updates To Census Tracts Throw Opportunity Zones A Curveball

A distribution center within the Tradepoint Atlantic industrial development in Baltimore County.

The 2020 U.S. census was a pivotal one for many parts of the commercial real estate industry, but perhaps none more than the opportunity zone program.

The geographical boundaries of thousands of census tracts, which are crucial in determining how federal dollars are distributed through dozens of programs, were changed with the 2020 census, and others were removed, merged or replaced completely, Bloomberg reports. About 15% of census tracts that were designated as opportunity zones by state governments in 2018 no longer exist.

About 19 of every 1,000 remaining opportunity zones grew in size by 5%, the threshold for being considered a significant change for data reporting, Bloomberg reports. Census tracts designated as opportunity zones were twice as likely to be expanded by at least 20% than non-opportunity zone tracts in Bloomberg's analysis. Some changes that involved opportunity zones came at the express request of business people involved in developments within those zones. 

One such example is at Tradepoint Atlantic, a 3,300-acre distribution hub at a former Bethlehem Steel plant in Baltimore County. The census tract containing the Sparrows Point region where Tradepoint Atlantic stands was initially disqualified from the opportunity zone program because it did not contain any residents, but lobbying from executives at the project led the U.S. Census Bureau to merge Sparrows Point with an adjacent tract with a residential population.

While such lobbying efforts are not illegal, the appearance of conflicts of interest could hamper the efforts of the business people and politicians invested in growing opportunity zones since the matter of whether to keep altered census tracts or include newly created tracts within the opportunity zones framework set out in the Tax Cuts and Jobs Act is not yet settled.

No timeline has been set by the Biden administration for determining eligibility for new or modified census tracts for the opportunity zone program, Bloomberg reports.