Gov. Peter Shumlin and Jay Peak co-owner Bill Stenger returned from Asia in the wee hours of Monday morning. Joined by a small state delegation, the group avoided a typhoon, made all their appointments on time, and spent a solid week promoting spinoffs of the ski resort’s immigrant-funded development projects in the Northeast Kingdom.
Stenger went looking for investors to support a Korean biotech firm planning to locate in Newport and expansions at Jay Peak’s newly acquired “sister” resort, Burke Mountain. He asked the governor to come along to demonstrate the state’s support — official cachet that goes a long way in foreign business pitches, state officials say. Through the federal EB-5 Immigrant Investor Program, investors and their immediate family members can receive green cards for permanent residency in the U.S., so long as each investment generates 10 jobs — or 10 jobs’ worth of American economic activity — within two years.
A couple of investors signed up during the trip, Stenger said, and more than 20 have made commitments in the few days since they met. Agreements in hand, they’ll now start applying for conditional visas, a process that easily lasts months. Stenger estimates the delegation met more than 500 investors in Beijing, Shenzhen and Shanghai in China, and Ho Chi Minh City in Vietnam. Each must pay $500,000 to secure a visa.
“I’m expecting between 100 and 150 investors to come from this trip,” Stenger said Tuesday, the majority to solidify in the next 30 days.
That would yield between $50 million and $75 million in capital, to be split between Newport’s future AnC Bio and Burke Mountain. Stenger is not authorized yet to raise funds for Jay Peak’s other planned development, a combined mixed-use block, marina and waterfront hotel in downtown Newport.
The recent trip to Asia cost nearly $100,000, Stenger said in September. It’s money he’s happy to “front,” and that he hopes to get back. But it remains to be seen how much, if any, will be repaid.
The Legislature created a special fund in 2011 to collect fees from investors, the idea being to help underwrite the state’s cost of administering the EB-5 program.
That fund’s balance at the moment, however, is zero. And once money’s in the bank, how to spend it will be another question.
EB-5 special funding
Vermont’s EB-5 Regional Center exists to promote the projects it chooses to align with. Developers submit detailed business plans to the state’s regional center, which screens them and decides whether or not to sign an agreement allowing the developer to raise EB-5 funds.
Brent Raymond, who heads up the state’s regional center, said the U.S. Citizenship and Immigration Services agency requires regional centers to actively market and promote economic development through the EB-5 projects. And promotion involves travel.
“So we can do that on our own. Which I’ve done,” Raymond said in September. “Or we can be asked by a project to attend an event with the project.”
Raymond and others from the state have done that, too. Generally, these events include conferences for immigration attorneys or foreign investment expos — or a trip designed to solicit investors for one particular developer.
Jay Peak’s September travels in Asia marked the first overseas trip Shumlin has taken for EB-5, but at least the third time Stenger requested state presence on his pitching tours. Shumlin accompanied Stenger on a trip to Florida in spring 2013, and Raymond joined Jay Peak representatives in Las Vegas in June. Raymond previously traveled overseas with American Dream Fund, a company that proposed building luxury retirement resorts with EB-5 funding, but with whom the regional center later severed ties.
To keep down the regional center’s travel and operational costs, the Legislature in 2011 allowed the state to assess a $1,500 fee for every investment in a Vermont EB-5 project. There still would be General Fund appropriations, according to Lawrence Miller, secretary of the Agency of Commerce & Community Development. But the EB-5 Regional Center “shouldn’t cost a helluva lot,” Miller said in a September interview.
“The problem is, we have a zero balance in that right now,” Raymond said. Miller confirmed that a bit of money has gone in and out of the fund, but more time will be needed to build it up.
The fee is not assessed until an investor receives his or her conditional visa — visitor status stemming from a successful I-526 immigration form. This is how investors and their families get into the country for two years, while their investments hopefully go to work.
Those I-526 forms take time to wind their way through the federal immigration system, while USCIS vets visa applications to ensure investors are eligible for residency.
“The typical processing time for Vermont is four to six months, with the occasional outlier of seven months,” Raymond said, adding that visas elsewhere in the country often take up to a year for approval. An investor’s money may be deposited into the project’s escrow account, he said, but the state will not assess its own fee until the I-526 is approved.
“We don’t want to be billing them for what potentially could be an investor that’s not approved,” he said.
Once conditional visas come through, the state’s bill goes directly to the project itself, not the investor. It’s issued on a quarterly basis.
“I think they expected the money would just start coming in when that was passed,” Raymond said about legislation establishing the special fund.
EB-5 operational spending
Although the special EB-5 investor account is empty, Raymond feels the intention to save taxpayer money is established. Therefore, if a developer asks for the state’s company on a special promotional trip, he’ll say, “Sure, but it has to be at your cost.”
“If we’re going to be traveling with a project,” Raymond said, “we don’t want to have taxpayers covering the cost, even though there are a lot of positives for the economy.”
He added that, when he does travel specifically for one EB-5 developer, he also tries to incorporate meetings related to the other hat he wears for the state: director of international trade. Raymond routinely emphasizes that he and other state officials are legally prohibited from explicitly endorsing any of the regional center’s EB-5 projects, as an investment adviser would. The state’s role is to promote the regional center itself — its methods and track record — and the state of Vermont as a great place to live, work and invest.
What happens on a special project, therefore, and who ultimately should pick up the tab, may involve nuance.
“There’s been some discussion about what’s fair,” Raymond said.
The zero-balance fund that eventually will accrue investor fees was established to offset the regional center’s operational costs, he said. Indeed, the enabling legislation that created the special fund reads, “Expenditures from the fund shall be used only to administer the EB-5 program.”
Miller said a developer such as Jay Peak may ask to be compensated out of the special fund for money the developer spent on special promotional travel, such as September’s state delegation to China and Vietnam. That prospect raises the question of which regional center activities count as standard operations and which are considered special services for an EB-5 project.
“The stuff that’s dedicated to one (project), I would tend to think of as special. And the things that are core to the USCIS requirements of the regional center, I tend to think of as supported by the fee,” Miller said Tuesday. “We’ll be establishing those procedures as we go through it.”
After all, Miller pointed out, Jay Peak hasn’t yet requested compensation for September’s trip to Asia, and won’t have opportunity to do so until more visa applications are approved.
“There would have to be some (funds) we have received to pay out of, after all,” Miller said in September. He also pointed out that the special investor fund was created after AnC Bio was formally established as an EB-5 project, and the fund is not retroactive for existing agreements. Just Burke Mountain, among Jay Peak’s approved EB-5 plans, could receive any benefits from it.
