Under EB-5, which has raised more than $500 million for Atlantic Yards/Pacific Park, immigrant investors (mostly from China) get visas for themselves and their families if they park $500,000 in an investment that purportedly creates 10 jobs.
They eschew market-rate interest and get their money back in five to seven years, as the visas are the carrot. The intermediaries and recipient of the loans make big profits, but the public does not necessarily gain, as often the money merely substitutes for a high-interest loan, and job creation is merely estimated, and calculated not merely on the immigrant investors' funds but the entire pot of money.
If the EB-5 money were truly seed money, it might be justifiable, but in a large majority of cases, it's just added profits. But Senators like Chuck Schumer of New York wanted to keep the money flowing to favored projects, such as those from the developer Related.
On Tuesday, 2/2/16, the Senate Judiciary Committee held a hearing, The Failures and Future of the EB-5 Regional Center Program: Can it be Fixed?, which significantly articulated the critique of reformers from rural states.
They don't so much want to kill the program--I believe it needs a total re-think--but to ensure that the gravy train goes beyond the big cities, to crack down on abuses, and to raise the minimum investment, which has been stagnant for 25 years (and thus hardly keeping up with inflation).
Only one Senator on the Committee, Sen. Dianne Feinstein (D-CA), suggested killing it.
Tomorrow, the House Judiciary Committee holds a hearing at 2 pm, IS THE INVESTOR VISA PROGRAM AN UNDERPERFORMING ASSET?, which again hints at reforms but hardly a total rethink.
House Judiciary Committee Chairman Bob Goodlatte (R-VA) said in a press release:
“While I support the overall goal of the EB-5 investor visa program, it is currently riddled with fraud and abuse and has strayed further and further away from the program Congress envisioned when creating the program a quarter century ago. The facts make it clear that this program is in desperate need of statutory and regulatory reform. At the minimum, the investment amount should be increased, gerrymandering should be curtailed, and national security concerns should be addressed in order to reform this troubled program.Grassley dismayed
Sen. Chuck Grassley (R-IA) chaired the hearing, urging "as much reform and enforcement as can get done," saying the law was supposed to create employment and infuse new capital into the country, "not to provide immigrant visas to wealthy individuals."
Well, actually, it was both, but Grassley's right in that the use of regional centers--investment pools that lend money to projects--has veered away from Congressional intent. Probably because everyone, including Congress, is susceptible to rhetoric about "job-creating investments" and have not looked closely.
"How many more projects in Midtown Manhattan at the expense of Rural America need to be highlighted?" Grassley asked rhetorically.
He asked witness Nicholas Colucci, Chief, Immigrant Investor Program of U.S. Citizenship and Immigration Services (USCIS), why the agency has rubber-stamped state and local designations of TEAs.
Colucci smoothly said the USCIS regulations defer to the states, but noted that Department of Homeland Security Secretary Jeh Johnson has proposed "limiting TEAs to a specified number of contiguous census tracts."
Under questioning from Sen. Thom Tillis (R-NC), Colucci acknowledged that he didn't have statistics about the location of EB-5 investments, but suggested that New York, California, Florida, and Texas probably received the most. He agreed that there should be more guidance regarding TEAs.
Sen. Jeff Sessions (R-AL) asked about raising the minimum investment, and Colucci noted that an increase--unspecified--was in Johnson's letter and can be part of a regulatory action.
"Is there more we can do to track the jobs that are created?" asked Sen. Amy Klobuchar (D-MN). Colucci said the Department of Commerce was doing "a more precise study for us."
Getting a fair share
|"Atlantic Yards III," involving Shanghai government-owned Greenland|
"Can you say with certainty today that no foreign government owns a regional center or doesn't invest in a regional center or its affiliated enterprises?" Grassley asked at 1:56 of the hearing.
There have been three rounds of EB-5 fundraising for the Atlantic Yards project, renamed Pacific Park Brooklyn in 2014. The first round, $228 million, was done on behalf of original developer Forest City Ratner.
- Politico NY, Schumer springs to defense of controversial real estate program
- The Real Deal, Chuck Schumer defends NYC developers against EB-5 gerrymandering allegations
- Center for Immigration Studies, EB-5 Chief Gets a Gentle Grilling on EB-5 Problems
The Hill,Senators struggle to bridge divide on foreign investor visas The Business Journals,Critics say immigrant investor visas subsidize real estate projects in wealthy areas