Three recently published national reports offer three different takes on the federal EB-5 Immigrant Investor program: glowing, constructive and critical.
The EB-5 program offers green cards to immigrants and their immediate family members who create American jobs by investing in U.S. business. In rural areas like Vermont, or places with high unemployment, the investments cost $500,000 each. Elsewhere the cost is $1 million per investment.
Gov. Peter Shumlin, and two previous governors, have said EB-5 is an important economic strategy for Vermont. Shumlin traveled in the fall to Asia with Jay Peak president Bill Stenger and others to drum up interest in a set of projects in the Northeast Kingdom: expansions at Jay Peak and Q Burke Mountain ski areas, establishment of a Korean biomedical firm in Newport, and the buildout of an expansive mixed use waterfront also in the tiny border town.
According to the EB-5 industry trade group Association to Invest in the USA (IIUSA), it’s a smart move. Economic impact from EB-5 investments more than doubled in one year alone, in a recent study of national data by the association. In 2012, EB-5 activity contributed $3.39 billion to nation’s gross domestic product, and more than 42,000 jobs.
Should the annual cap on EB-5 visas be lifted, the economic impact of the program would increase, according to the Association to Invest in the USA. The 10,000 visa limit is expected to be reached for the first time in 2014.
Even at current levels, which are below 10,000 visas per year, the association’s finding dwarfs an earlier estimation of economic impact by the U.S. Citizenship and Immigration Services agency, which administers EB-5. The agency’s 2010 report estimated $42 million in direct investment contributed $117 million annually to GDP and supported about 2,000 jobs.
In addition to increased EB-5 activity in the intervening years between the studies, the Association to Invest in the USA incorporated a much broader data set than federal agency has used. The association’s data includes not just the value of EB-5 investments, but also household spending by immigrant investors and other immigration expenses such as lawyer fees and travel.
The discrepancy between those findings illustrates a point made by Brookings Institution analyst Audrey Singer in a separate analysis of the EB-5 program. In her work to analyze the successes and failures in the program, Singer found scant public data for evaluating EB-5.
“Once I got into it, I realized how little is actually known about how the program is operated, what the trends are, how difficult it is to evaluate it,” Singer said in an interview Tuesday.
“There are no comprehensive, longitudinal data regarding regional centers’ economic impact on project completion rates, job creation levels, and other regional- and municipal-level economic indicators such as change in unemployment rates,” she wrote in her report.
Singer calls on USCIS to collaborate more with the U.S. Department of Commerce to help vet the complex business plans at the heart of EB-5 investments. She’d also like to see more public-private partnerships to amplify the regional impact of EB-5 projects.
Vermont is an outlier in that regard. The state’s EB-5 program is part of the state’s Agency of Commerce and Community Development. No other regional EB-5 center is operated by a state government.
Stenger and his business partner Ariel Quiros — by far the most prolific developers to avail themselves of the unconventional source of capital in Vermont — work extensively with state and regional economic development agencies. They coordinate efforts related to the work force and housing needs of their projects as well as their impacts on transportation and infrastructure, for example.
But a federal official is questioning the level of reporting transparency for the national program. The Department of Homeland Security Inspector General takes issue with a paucity of evidence from USCIS that the program delivers on its economic development promises nationwide. The Inspector General also questions whether the EB-5 program could have an impact on national security.
“Several conditions prevent USCIS from administering and managing the Employment-Based Fifth Preference regional center program effectively,” the Inspector General wrote, attributing the problems to a lack of data and the statutory limitations in which the agency operates.
USCIS officials defended the performance of the program within current limitations. The secretary of the agency says he would welcome more statutory authority.
“It is precisely these (fraud and national security) concerns that have driven USCIS over the past several years to undertake a complete transformation of how we administer the EB-5 program,” USCIS Director Alejandro Mayorkas responded. And he did not argue that more in-depth analyses of EB-5’s impact would be nice.
“We note the draft report’s finding that USClS is not in a position to quantity the impact of the EB-5 program on the U.S. economy. We agree,” Mayorkas responded. But such a study would be outside of its scope and statutory obligations, he said.
The agency was more conciliatory on several other points, and noted that many remedies the IG suggested already were in process before the report came out in December.
All three full reports, with annotations, can be viewed at the links below.
This article was updated at 11:45 a.m. Wednesday.
