MARSHALL — There were two Lyon County communities — Marshall and Tracy — vying to be part of a new federal program that would offer tax incentives for investment in economic development. They got one out of two.

On Friday, it was announced that part of the city of Marshall was among the 128 census tracts around Minnesota being recommended as Opportunity Zones by Gov. Mark Dayton. The Opportunity Zones program, established as part of the federal Tax Cut and Jobs Act of 2017, is meant to encourage development and housing investment.

Local economic development groups had been hopeful that both Marshall and Tracy would be recommended as Opportunity Zones, said Economic Development Authority Director Cal Brink. While it was positive that the Marshall zone was selected, he said, “We’re equally as upset that we didn’t get Tracy.”

However, Brink said the most positive part of Marshall qualifying for an Opportunity Zone is that the eligible area of town includes both land around the Red Baron Arena and Expo, and Marshall’s industrial park. Those areas could both benefit from further development.

“It couldn’t be any more ideal,” Brink said of the Opportunity Zone location.

There are still a lot of details that need to be worked out about how the Opportunity Zones program will work, Brink said. However, the program will offer tax breaks on unrealized capital gains that are invested into economic or housing development within the Opportunity Zones.

“Potentially, it could be a great opportunity if you’re looking to expand a business,” Brink said.

Development projects in Opportunity Zones will need to be approved by the U.S. Department of Treasury, said a Friday news release from Gov. Dayton’s office. Approved projects will be eligible for funding through Opportunity Funds, investment vehicles set up as either partnerships or corporations for investing in properties located in Opportunity Zones. Guidance for the Opportunity Funds is being developed by the Treasury Department and the Internal Revenue Service, the news release said.

“Opportunity Zones have the potential to bring much needed investment to some of Minnesota’s lowest-income areas to spur economic development,” Minnesota Department of Employment and Economic Development Commissioner Shawntera Hardy said Friday. “This program could lead to new strategies to bridge public-private partnerships.”

“We believe that some Opportunity Zones may be attractive for investments in workforce housing, which is in short supply in many communities around the state,” said Minnesota Housing Commissioner Mary Tingerthal.

Under the federal law, each state governor was authorized to designate 25 percent of their state’s eligible census tracts as Opportunity Zones. Dayton designated 128 out of the 509 total census tracts eligible for the program, the Governor’s Office said Friday.

In addition to the Opportunity Zone in Marshall, the governor also recommended one zone in each of Redwood, Yellow Medicine, Nobles and Pipestone Counties.