Let’ s say you’ re building downtown where the department stores are or the financial centers are, and nobody lives there. Or maybe you’ ve got a couple of luxury condos there, and then half a mile away you’ ve got unemployment rates of 20-25 percent, where poorer people live. You’ ll look at the census tracts, and sometimes you’ ll find zero unemployment, because there’ s nobody that lives there— period. So if you held it to the fact that it has to be in low unemployment areas, that would be ridiculous, because you might have a waterfront area with no unemployment but it’ s poor all around, so you’ ve got to have the flexibility to include that.
Even if it was a simple census tract with an unemployment rate of 40 percent, there is nothing in the law that says employees have to be hired from that area. You could have a project in Los Angeles, and the owner would be in his rights to employ 20 people from Arizona, or have people drive in from San Diego every day and fill those jobs. But the idea is, just like with any economic development, if you’ re creating opportunities in an area where there is high unemployment, you’ re raising the opportunities for employment. In any economic development program, if you build a project, it doesn’ t mean that everyone is going to be hired from that area, but there are going to be more opportunities, and businesses are going to need people. That’ s a likely source of employment, and that’ s all you can do, other than writing it into the law or making it a requirement, and I don’ t know how you would enforce it.
Staff: What effect do you think these sorts of controversies have on the program as a whole?
Winer: It definitely has a negative effect. Whether it’ s a legitimate beef because it was fraud or a scandal, or it’ s something that gets blown out of proportion, it’ s going to create negative perceptions. What the average person gets out of that is somebody is doing something underhand to skim money— government bureaucracy, a scandal, people being paid off, free money, illegal immigrants are coming in, the country is falling apart— all of that comes to mind. It’ s unfortunate when you find that a project marketed in China was misrepresented— those stories need to be out there, because they’ re true, you can’ t hide that, and people need to know about it and be protected. But it obviously gives a black eye to the program.
The ones that I have the issue with are stories like Barclays. If they could prove that all the investors would have invested anyway, or if they could prove that nobody was hired from high unemployment areas, then I’ m fine with it. But the angle I had a problem with was that you shouldn’ t use those areas. If the problem was that it was a huge project and EB-5 was just used to help the developers get free money, then they took advantage of the program, the program was not the problem. I think the way that it comes out is that there is a problem with the program that allows that to happen.
“ You have to have some kind of criteria, other than just somebody sitting down and independently saying this is good, this one isn’ t.”
Staff: Gerrymandering certainly has a negative connotation, but is this sort of flexibility necessary for the program?
Winer: Gerrymandering in itself comes from USCIS. I think states often say that they restrict certain things because they don’ t want to approve something that’ s going to get turned down by USCIS as gerrymandering, and they don’ t even always know what they’ re talking about. The question is: what is gerrymandering? California has a good compromise— they allow 12 census tracts. Now is 12 the perfect number? Well, there’ s no perfect number, there’ s no perfect system. You could make exceptions, but you have to have some kind of criteria, other than just somebody sitting down and independently saying this is good, this one isn’ t. The 150 percent criterion is good, and the 12 tracts do limit the crazy so-called gerrymandering. You can’ t come up with 500 census tracts, which would be clear gerrymandering, or you can’ t take something where five tracts away from the project the unemployment rate is still two percent and you’ re using one hundred tracts to get the unemployment rate.
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