Lynnwood staff brief council on reapplying for Opportunity Zone designations; displacement concerns raised

Sarah Cho, the city center program manager, told the Lynnwood City Council the city plans to reapply for Opportunity Zone (OZ) designation for two census tracts — the city center tract and the South Lynnwood tract — in the program's second-round application. The Department of Commerce application window opened April 28 and closes May 28, staff said, and the draft resolution before council would confirm Lynnwood's support for submitting the application.

The nut of the issue, staff said, is that the federal Opportunity Zone program provides tax incentives to encourage certain private investment but does not allow local governments to insert use restrictions into the federal designation. "We can't place any parameters within this program because it is a federal program," Sarah Cho said, adding that "what helps protect the city from concerns such as displacement" is local land-use code and subarea plans.

Council members pressed staff on the risk that incentives could accelerate displacement or price out long-term residents in South Lynnwood. Planning staff told the council the proposed OZ census tracts largely overlap areas where Lynnwood's subarea plans and existing zoning already anticipate higher-density redevelopment in the city center and along Highway 99. Staff said larger redevelopment projects typically attracted by OZ incentives would mostly affect commercially zoned parcels and unlikely to cause wholesale displacement of small residential parcels in South Lynnwood.

Council members asked for more detail on protections and how the city could pair OZ incentives with local policies to limit displacement. Council vice leadership and other members said they would withhold final support for a resolution until those questions were addressed. Cho and planning staff said city review of zoning and subarea policy — separate from the federal application — is the mechanism to add protective measures.

Next steps: staff will finish compiling application materials for the May 28 deadline and return to council with a resolution for a formal vote, and council requested clearer documentation of how subarea plans and zoning would interact with OZ incentives.

Authorities and legal references in the briefing were limited to the Department of Commerce and federal OZ guidance; council noted related comments from the Department of Commerce on the city's comprehensive plan regarding gentrification concerns in South Lynnwood.

Ending: Council received the briefing and asked staff for follow-up information on displacement protections; the resolution and a formal vote are scheduled to return to council in a subsequent meeting.