Tuesday, December 27, 2011

Times editorial criticizes EB-5 gerrymandering, ignores Atlantic Yards example, as well as other EB-5 abuses

In an editorial today headlined Million-Dollar Visas, the New York Times opines:
The federal government’s investor visa, created in 1990, gives foreigners a chance at green cards if they invest $1 million to build a business in the United States that creates at least 10 jobs. Investing in an area with high unemployment would cut that price in half.

The program, known as EB-5, has led foreigners to invest in projects around the country, like factories, resorts, shipyards and other enterprises in designated poor areas in need of jobs. A report in The Times last week found that EB-5 applications have nearly quadrupled in two years, to more than 3,800 in the 2011 fiscal year.

But the program has spawned cynical practices that are stretching the rules and violating the spirit of the law. Some participants in New York, the report found, are pouring money into development zones that are misleadingly labeled as high-unemployment areas to qualify for the lower $500,000 investment threshold, but are not poor or underdeveloped.

For example, a $750 million office tower in the mid-Manhattan diamond district has raised 20 percent of its financing through the EB-5 program. This was made possible through a trick of mapmaking in which state officials counted the number of unemployed people in the census tract next door, which includes Times Square, to justify calling the whole area a high-unemployment zone.

Likewise, the gerrymandered lines of the development zone in Lower Manhattan near Wall Street skirt the wealthy enclaves but cross the East River to enfold a public-housing project in Brooklyn. Visa-seekers have used this district in three separate projects to qualify for the $500,000 discount.

Federal officials issue the visas but they say they have to defer to the state when it comes to drawing boundary lines. State officials say they are following the guidance of federal regulators. The surest fix would be for Congress to amend the 21-year-old law to tighten the rules to stop gerrymandering and make sure investments are steered to places that truly need development.

America has always welcomed not just immigrants seeking refuge but also those seeking and bringing prosperity. That should not happen in a way that subverts the intent of Congress.
What's missing

Well, it's good that the Times is taking EB-5 issues seriously, but it's glaring that one of the key projects to take advantage of this gerrymandering, the Atlantic Yards project, went unmentioned. (Is that the "spirit of the Times," channeled through the publisher, a former business partner with Atlantic Yards developer Forest City Ratner?)

It's also notable that the Times does not recognize that the intent of Congress--to create jobs--is subverted in other ways, such as giving immigrant investors credit for jobs created by money contributed by taxpayers, or by allowing dubious calculations of indirect job creation.

From the industry

Commented EB-5 industry dealmaker and consultant Brian Su:
It appears that The New York Times is not quite positive towards the job-creation driven EB-5 program which has brought tens of thousands direct, indirect and induced jobs to New York in last couple years.  I hope that our annual big EB-5 investment event the 2012 EB-5 Investment Summit: Dealmakers Conference in New York City will draw positive attention and coverage from The New York Times.
Well, let's see if the "job-creation driven program" gets some scrutiny.

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