EB5 Investors Magazine | Page 46

Continued from page 42 Looking at our own EB-5 project activity over the last three years, limiting the number of contiguous census tracts reaching a high unemployment rate TEA to 12 (like California does) could eliminate roughly 65 percent of the EB-5 projects we have worked on over the period. All of the “weeded-out” projects are those that would have been located in metro areas. Limiting the number of contiguous census tracts for a high unemployment rate TEA to one single census tract could eliminate roughly 90 percent of all of the EB-5 projects we have worked on over the last three years. From that data, it seems apparent that there are simply not enough single high unemployment rate census tracts all by themselves within metro areas that geographically intersect with the commercial marketplace for projects that could utilize the EB-5 program. Limiting high unemployment rate TEAs to only one census tract (or any arbitrary number for that matter) is not even consistent with the economics of labor market commuter sheds (e.g. where the workers for an EB-5 project would reside) or supply chains (which reflect the supplier-vendor relationships and the geographic reach of the job creation of projects). Nor would such a proposal, if it survives as-is in the EB-5 reform legislation, reflect sound economic development policy. The approach should be to find ways to encourage more capital investment and jobs in the U.S. economy at no taxpayer expense—not restrict it! For example, one possible reform that could be helpful in this regard would be to reduce the job requirement to eight jobs per EB-5 investor for rural projects. This could be done alone or in tandem with a reform that would increase the jobs per EB-5 investor requirement for urban projects. For example, a requirement that 12 jobs per EB-5 investor for urban projects without another compelling economic distress indicator in addition to a high unemployment rate at 150percent of the U.S. average,4 would not be an unreasonable approach for compromise. Such an approach to TEA reform would be a far better avenue into the urban-rural TEA reform division.5 That approach would also go a long way towards avoiding the possible negative outcome of the proposed EB-5 reform as written that would diminish the effectiveness of the EB-5 program as an economic development tool when needs across the country remain high. In short, it would avoid a proposed TEA reform approach that essentially punishes the EB-5 program for its success. Lastly, leaving TEA review and certification to the USCIS likewise seems limiting. Aside from the loss of state or local input on the desirability of possible EB-5 projects, how does this seem like a good idea with USCIS processing backlogs at already unacceptable levels? Case adjudicators are already overburdened when all they have to do is check the mathematics of proposed TEAs and confirm the fact that the unemployment data used in the TEA calculations is “current.” One possible risk of accepting this reform proposal could be to encourage arbitrary denials of TEAs, if for no other reason than to possibly shorten a case’s adjudication time. as proposed. As a stakeholder community, a broad consensus will be needed on key reform issues like TEA policy to ensure a vibrant EB-5 program. Bolstering the program with appropriate safeguards and transparency will allow the EB-5 program to realize the promise it has to deliver substantial new capital investment and jobs throughout a U.S. economy in a diverse group of industries. If the EB-5 stakeholder community allows itself to become divided during the reform process, the result will be a significantly smaller and scaled back EB-5 program where there will be “winners and losers” following reform. There will be much less new investment and job creation than there would otherwise have been. The EB-5 program is a rising tide type of a program that truly can make a large contribution to lifting all of the country’s economic boats. It is up to the stakeholder community to accept the challenge and guide the reform effort toward that result. If we as a stakeholder community fail to do so, all we will need to do is “look in the mirror” for who to blame. Thousands of more jobs and billions of more dollars of future investment in the U.S. economy hang in the balance. ★ 1 These amounts would increase to $800,000 and $1.2 million, respectively, under the bipartisan bill. Further, the initial reform legislation allows for these minimum investment amounts to increase at least every five years (and gives the Secretary of Homeland Security the ability to adjust this amount more frequently, if desired), for the change in the Consumer Price Index over the period. Urban TEA job areas include a Consolidated Statistical Area (CSA) if a project is located in an area defined as a CSA, a Metropolitan Statistical Area (MSA) if a project is located in a MSA. If a project is located in a rural TEA, the rural TEA job area includes a small, narrowly defined number of contiguous counties to include the county where the EB-5 project is located plus only the counties adjacent to the Targeted Employment Area (e.g. a contiguous ring of counties adjacent to the host county for the project—see page 12). It is not clear how this area would be defined for multiple project locations (potentially involving multiple rural TEAs). 2 3 That is, jobs that can be brought into the “10 jobs per EB-5 investor” math. Such as including an economic distress metric like having a high poverty rate in at least one of the census tracts in a custom “high unemployment rate” TEA. This was the approach adopted in the Senate via the Amendment No. 1455 (to S.744), which was agreed to by Senators Reid, Leahy, and Schumer last year. That Senate-passed legislation was not passed by the U.S. House of Representatives before 113th Congress adjourned. 4 In addition to an effort to find some common ground on the so-called “Derivatives” reform effort. 5 Jeffrey Carr, president of Economic & Policy Resources Inc., oversees the company’s activities of as a whole, and is also involved in the management of the firm’s EB-5 program and public policy practices. Carr has more than 34 years of experience as an economist/analyst, with expertise in economic impact studies, EB-5 project and regional center operations business plans, macroeconomics, economic forecasting, economic impact analysis, and more. He has served as the state economist and principal revenues analyst for the Vermont Agency of Administration for over 23 years, and previously served as legislative Jeffrey Carr director and economist for a member of the U.S. House of Representatives. Carr has been the Vermont State Economic Forecast Manager for the New England Economic Partnership (NEEP) for the past 22 years, and he also serves on the NEEP Board of Directors. He speaks and writes extensively on EB-5, economic forecasting, economic development, and fiscal policy. The next 90 to 120 days will be a test of the EB-5 stakeholder community to come together to encourage a thoughtful dialogue and consensus on the TEA and other reform policies 44 EB5 INVESTORS MAGAZINE