Targeting Opportunity Zones and Other Distressed Communities for Federal Site Locations

Background

Before its revocation, Executive Order 13946, titled "Targeting Opportunity Zones and Other Distressed Communities for Federal Site Locations," primarily impacted federal real estate policies. It mandated that agencies prioritize choosing sites within Opportunity Zones and other distressed areas for federal facilities. This directive was intended to leverage federal space utilization to spur economic development in underprivileged areas by attracting businesses and infrastructure projects. The shift in federal site selection aimed at stimulating economic growth through increased governmental and commercial activities in these zones, which was part of a larger strategic plan to invigorate economically lagging regions.

The order introduced significant changes to existing laws and regulations concerning federal property management. It amended Executive Order 12072 regarding Federal Space Management and Executive Order 13006 pertaining to locating federal facilities on historic properties. By directing the General Services Administration and other agencies to emphasize selecting sites in distress zones, the order effectively transformed the criteria for federal space acquisition. This adjustment pressured agencies to reconsider cost efficiencies and security considerations, often prioritizing economic impact over logistical pragmatism, which occasionally clashed with traditional federal space management principles.

Social policy was also influenced, as the initiative aligned with the Trump administration's broader economic agenda to revitalize neglected areas through Opportunity Zones, a program established by the Tax Cuts and Jobs Act of 2017. This policy intended to create tax incentives for investors in these zones, combined with federal site selection strategies, to catalyze comprehensive development. The expectation was that increased federal presence in these areas would lead to ancillary growth, attracting private investment and improving the socio-economic conditions of local communities. However, the order's efficacy was often questioned, as critics argued that it could lead to government inefficiencies and did not sufficiently address the root causes of economic distress.

Reason for Revocation

The revocation of this executive order by President Joseph R. Biden Jr. on February 16, 2023, can be contextualized within a broader ideological shift of the Biden administration towards emphasizing climate sustainability and equitable development. The Biden administration has frequently underscored the importance of addressing systemic inequalities while aligning federal policies with environmental and climate resilience standards. By revoking this order, the administration signaled a return to traditional criteria for federal site selection, prioritizing immediate practicality over the prospect of stimulation in distressed areas.

This revocation was likely part of a larger programmatic reevaluation that sought to restore federal property management's focus on efficiency and security without being bound by the necessity of location within Opportunity Zones. While the previous administration's focus on stimulating economic growth in distressed areas was not fully abandoned, Biden's administration leaned towards more direct and comprehensive ways to address economic inequality, such as enhancing educational opportunities and direct financial supports, rather than primarily relying on indirect investment pathways.

Additionally, the Biden administration aimed to integrate equity across various policies, potentially finding the one-size-fits-all approach of the order too broad and insufficiently nuanced to tackle the complexities of economic distress. By revoking this order, President Biden was likely preparing to introduce more targeted programs that can address the specific needs of different communities more effectively than a generic selection of federal sites based on location.

This decision was likely also influenced by the evolving understanding of Opportunity Zones, which had increasingly come under scrutiny for not fully delivering on promised outcomes. Reports suggested that these zones sometimes benefited wealthier investors at the expense of meaningful community upliftment, creating justifiable hesitation in continuing unaltered expansion of this facet of economic policy.

Winners

The revocation of the order could benefit certain federal agencies that faced challenges and operational inefficiencies in aligning their real estate strategies with the constraints imposed by the order. Agencies needing flexibility and discretion in site selection, such as those focused on national security or requiring specialized facilities, could now prioritize logistical and security concerns without the added layer of mandatory location constraints within Opportunity Zones. These agencies can now streamline operations and allocate resources more effectively based on essential operational needs.

Furthermore, communities with infrastructure and capabilities already aligned with federal strategic needs may see heightened official interest with the broader discretion allowed in location selection. Urban areas with existing governmental infrastructure but not necessarily classified as distressed, such as suburban zones with good connectivity and resources, could experience a rise in federal facilities, leading to economic stimulation without bypassing traditional site selection prerequisites.

This revocation also indirectly benefits critics and communities concerned about gentrification and unbalanced development resulting from untempered investment in distressed areas. With federal site selection criteria broadened, there is potential for a more balanced approach that considers community needs and sustainable growth, reducing risks of displacement stemming from rapid investor-driven developments. This aligns with civic organizations advocating for balanced development that serves existing residents fairly.

Losers

The reversal of the executive order represents a potential setback for depressed regions and Opportunity Zones that hoped for increased federal investment as a catalyst for economic rejuvenation. Without the additional emphasis on locating federal facilities in such zones, these areas may witness slower growth and fewer development initiates that might have otherwise resulted from a heightened federal presence. The tapering of expectations may also impact local businesses that anticipated increased activity and opportunities from federal worker influxes.

Investors who positioned themselves to capitalize on federal location-driven incentives within Opportunity Zones might experience diminished returns as the direct pipeline of federal development projects to these areas reduces. Developers who were banking on subsequent infrastructure and commercial investments from a federals-led surge may find it harder to market properties or secure agreements meant for synergistic benefits aligned with federal activities.

Moreover, the legislative change leaves communities and local officials who had aligned planning efforts with the expectation of adhering prioritization of federal sites potentially scrambling to engage legislators and planners for continued focus and investment. Such realignment may require considerable reallocation of resources and efforts, which can be costly and time-consuming, potentially dragging project timelines and leaving existing plans languishing without the anticipated catalytic federal investment.