It’s expensive to build right now and while there are multiple reasons why, cost continues to be one of the biggest hurdles to overcome.
Bloomington-Normal’s Economic Development Council [EDC] is hopeful a new federal program giving tax breaks to investors will be yet another incentive to get developers building.
Two spots in Normal and one area of Bloomington will be considered “opportunity zones” starting next year, offering federal tax benefits to investors putting up funds.
The state of Illinois nominated more than 500 census tracts to be federal opportunity zones this year, and the U.S. Treasury Department approved 240 of them across the state.
EDC President and CEO Tyler Cravens said the distinction could help developers secure capital for large projects.
“At the end of the day that’s what it’s really geared towards,” Cravens said. “This does fill a gap. It’s not easy to get projects financed.”
The opportunity zones do not require any specific type of development. Cravens said building housing is one of the first major needs that comes to mind.
“That doesn’t mean that we’re not going to see commercial, logistics, manufacturing projects benefit from this as well,” Cravens said.
The EDC helped the town and city identify eligible areas for the governor’s office to nominate. Those nominations were reviewed and confirmed by the Treasury Department.
Where are the zones?
Bloomington-Normal accounts for three of those 240 statewide zones.
One encompasses Uptown Normal starting at Fell Avenue and following the train tracks to Beech Street, before stretching north to Shelbourne Drive. The west border of the zone follows Linden Street from Shelbourne Drive to Sycamore Street before rejoining with Fell Avenue.
Another covers a large area of northwest Normal, including Fairview Park, Heartland Community College and Normal West high school. That zone stretches west to Route 39, cutting off along Gregory Street to the south and Interstates 74 and 55 to the north. The eastern border follows Main Street but juts out at Raab Road to Linden Street.
“The Town of Normal has spent more than two decades revitalizing Uptown Normal, and private development has followed. This designation builds on that work and gives northwest Normal, a key gateway corridor into our community, a way to be more competitive and attract investment,” Normal Mayor Chris Koos said in a statement.
The final area covers Downtown Bloomington, and is a rectangle bordered by Oakland Avenue to the south, McLean Street to the east, Locust Street to the north and Mason Street to the west.
Council member Cody Hendricks represents Ward 6, which includes the downtown area. He said adding more housing is a priority, but he also hopes the zone will add something that is missing to the Downtown Streetscape: a hotel.
“It’s something that we desperately need as we see more and more visitors to our downtown,” Hendricks said. “I think if we're able to get a hotel that would expand the amount of visitors we have.”
Hendricks said it could also help to fill in vacant spots in the opportunity zone. He also hopes opportunity zone funds could speed up Downtown development, adding funds into the tax increment financing [TIF] districts established there.
What is an opportunity zone?
An opportunity zone is a generally economically distressed area that could benefit from further investment.
The goal is to spur on capital investment by helping developers secure the funds needed to take on large projects and allowing investors to receive tax benefits for the money they invest.
Here’s how it works: An investor puts money into a qualified opportunity fund. At some point, a developer approaches that fund requesting money for a capital project like a multifamily apartment complex or a multistory commercial structure.
“So they put money into those funds, and those funds invest in projects exclusively in those opportunity zones,” Cravens said.
Opportunity zones differ from enterprise zones or tax increment financing, or TIF, districts. All three offer tax benefits but in different ways.
For instance, a flagship benefit of an enterprise zone is state sales tax relief on building materials. In a TIF district, developers can get certain expenses reimbursed from a fund collecting taxes generated in the district.
By comparison, opportunity zone funds are privately managed. They do not disperse tax dollars; rather the investor can get a tax break on the private dollars they have invested.
How much of a tax break or benefit an investor receives depends on how long they have invested into the qualified opportunity fund.
Opportunity zone 1.0 vs 2.0
The 240 new additions will be considered “2.0” opportunity zones, adding on to the state’s 327 existing “1.0” zones. The 2.0 zones come with new rules and different guidelines, but similar benefits.
The original opportunity zones were created in the 2017 Tax Cuts and Jobs Act. The 2.0 zones were created in the One Big Beautiful Bill Act in 2024.
According to Illinois’ Department of Commerce and Economic Opportunity, 2.0 zones have some tighter restrictions and require more reporting to track their effectiveness. The 2.0 version also allows for rural opportunity zones in census tracts outside of populous areas. The rural zones have extra incentives.
The other primary difference is that 2.0 zones are permanent, whereas 1.0 zones have a decade-long lifespan.
The only 1.0 opportunity zone in McLean County is the census tract encompassing Illinois State University. That zone will expire in 2028. New investments into the fund accounts for those zones will end at the end of 2026.
“The prior tract was not in an area where it could be heavily utilized over the past 10 years,” Cravens said.
2.0 opportunity zones will be redesignated every 10 years and will go through the same nomination and approval process as this incoming round of opportunity zones.
What are qualified opportunity funds?
Qualified Opportunity Funds [QOF] are the privately managed vehicles through which investment dollars are collected and dispersed to developers. Different QOFs may focus on different geographic areas or types of development.
“You might think of them like a bank fund,” Cravens said. “They are just another fund out there that you can go and get funding from, they just have these special parameters in place.”
The creation of these three Twin City opportunity zones does not mean three new QOFs will be created. Rather, a developer can approach any QOF so long as the project will be developed within a zone.
QOFs must spend 90% of the funds on the opportunity zones and must provide documentation every six months to prove that ratio is being enforced.
What’s a census tract?
Census tracts are segments of the population determined by the US Census Bureau. A tract can contain anywhere between 1,000 to 8,000 people and usually are bound by a geographic area.
For instance, Illinois State University’s campus, including the Quad and its sports venues, is a census tract.
They don’t carry any legal or administrative power and are mostly used for data collection and analysis.
To be considered an opportunity zone, the census tract must be in a lower income area, which is determined by the median area income of those living in that spot.
