Opportunity zones 2.0 turns state nominations into the scarcest form of capital
With $112B already raised in the program's first round and a Sept. 28 nomination deadline, a state's map, not an investor's tax bill, decides which projects get financed.
Gil Michel-Garcia spent four years trying to develop one of the first cobalt processing plants in the United States, deep in Arizona's Yuma Desert, and then put together a presentation to make sure state officials knew about it—“We just tried to make presentations and emails to everybody and their mother,” the EVelution Energy co-founder told Bisnow. The effort paid off when the Arizona Commerce Authority selected the plant's census tract this summer as one of 125 opportunity zones the state submitted to the Treasury Department for approval.
The stakes are easy to size. EVelution has lined up a customer for $850M of the cobalt the plant would produce—a critical mineral used in electric-vehicle batteries, microchips and jet engines—and the $450M project already holds commitments for $345M of debt financing, roughly three-quarters of the cost. What it wants is equity, and inclusion on the federal map could unlock up to $50M of it and put construction on track by next year. “There are hundreds of millions of dollars riding on this,” Michel-Garcia said.
He is one of many developers across the country sizing up potential sites and lobbying their state governments to nominate properties for the next generation of the opportunity zone program, according to Bisnow. The program dates to President Donald Trump's first term and had been set to expire this year before the One Big Beautiful Bill Act made it permanent, and its first iteration drew a pool that totaled more than $112B—a funding source that size, no longer facing a sunset, explains the queue forming at every state capital.
A nomination rationed at 25%
The mechanics reward the diligent: nominations are due Sept. 28, states can request a one-month extension, and at least seven have already submitted their maps, but each state may nominate only 25% of its qualifying parcels, which makes a line on a state's submission the thing worth winning. Michael Tillman, chief executive of Fort Lauderdale investor PTM Partners, told Bisnow that working with the state is good business and that a developer on a census tract whose qualification is in doubt “would be foolish to not be working on that.”
Where a sponsor can push depends on the state: Bisnow describes processes that vary widely—some with robust public-comment periods, others with none at all—with most input starting at the municipal level and trickling up to state government. That makes for an uneven field where a developer with a local relationship and a coherent story finds more purchase in a state that runs an open process than in one that runs none.
Read the deadline as a capital-markets process and its function comes into focus: the extension buys a month, not a year, and the 25% ceiling means a state cannot simply bless everything that qualifies; it has to choose, which puts developers in direct competition for a limited set of lines. A tract is picked or it isn't, and no investor who liked the story can reverse the call—a different discipline from raising a fund, where the sponsor controls the outcome by controlling the pitch.
What permanence changes
The variable most likely to be underestimated is the sunset that is no longer there: a deadline is itself a sales tool for a tax incentive, and a program without one has to be sold on planning rather than urgency, which should change both the pace of fundraising and the kind of capital it draws. Sponsors can now treat a designation as a durable line in the capital stack rather than a race against a statutory cliff, which argues for longer holds and more patient vehicles, and could make the compressed products of the first round look like artifacts of their expiration date.
The binding constraint in round two is state allocation: the 25% ceiling and Treasury review are the chokepoints, and the sponsors who treat Sept. 28 as a capital-markets date, a line on the fundraising calendar, look best positioned to hold nominated tracts when permanent money arrives. The Arizona example is suggestive: the project the state is carrying to Treasury is a cobalt refinery built to serve EV batteries and jet engines, which hints that the second round will be pitched as an industrial-policy vehicle as much as a real estate one.
The first round's $112B measures how much capital the structure can pull, not how well the money performed, and the second round will eventually be judged on whether permanent designation produces permanent development. The bet built into the law is that a durable incentive draws patient capital where a sunset drew opportunistic capital, and the next few years of fund formation will test it.
The OZ law is one more instance of Washington moving the terms of development. Federal policy has become a first-order input in development math—this publication reported this summer on a modular steel-frame rule change that promised to trim build costs by more than 10 percent—and the OZ permanence pulls the same lever from the capital side, changing what a project can raise.
The maps are due Sept. 28, and however the Treasury decisions land, the mechanics of the second round are clear enough to underwrite: the asset being competed for this fall is a state's nomination, and the capital follows the map.
The asset being competed for this fall is a state's nomination, and the capital follows the map.