GAO report: more evidence that EB-5 immigrant investor program helps wealthy areas (+developers), not public interest
|The "Bed-Stuy Boomerang," Atlantic Yards site in blue;|
graphic by Abby Weissman
For example, New York State agreed to add census tracts in Bedford-Stuyvesant to the Atlantic Yards site in Prospect Heights to create a zone of high unemployment, saving the project developers tens of millions of dollars in each of three separate capital raises, totaling some $577 million.
Since then, the Wall Street Journal's Eliot Brown has reported on some glaringly gerrymandered maps, all supporting luxury projects that rely on cheap financing. And also see Trump-Branded Project Developer in Austin Seeks to Tap Immigrant Visa Program.
(The immigrant investors eschew high interest because they instead want the green cards. The public is supposed to benefit from job creation, but investments likely instead fuel profit. I think the program is riddled with dishonesty.)
Yes, the program's defenders say that the projects still draw workers from a larger area, which is true, but there's no proof they draw them from the zones of high unemployment. In 2011, a federal official acknowledged that it seemed the spirit of the law wasn't being respected. Nothing has changed since then.
The GAO report
The GAO report, Immigrant Investor Program: Proposed Project Investments in Targeted Employment Areas, does not make recommendations. However, while looking at a relatively small sample, from the fourth quarter of FY 2015, it determined that 99% of those using EB-5 went in a Targeted Employment Area (TEA).
Within that category, nearly all high unemployment TEAs, and only 3% rural areas, which also qualify as TEAs. Some in Congress want to reform the law to ensure that more investments go to rural areas (though that doesn't necessarily resolve the question of whether the public benefits).
States calculate TEAs, often at the behest of project sponsors, to help them get cheap money. So 90 percent of those investing in a high unemployment TEA, based the TEA on the average unemployment rate for a combination of census areas, the report notes.
Notably, the locations where the projects themselves were located did not have high unemployment. As shown in the table below, 77% percent of the projects were in areas with unemployment rates of 6% of lower.
Finally, who benefits? Some 74 percent of petitioners chose real estate, including mixed use projects, hotels and resorts, commercial, and residential developments; the remaining 28 percent invested or planned to invest in infrastructure projects, such as railways and highways, or transportation, restaurants, medical, and education facilities (percentages do not sum to 100 due to rounding).
Those kinds of projects often create temporary construction jobs, which passes federal muster, and lower the cost to builders. Whether they create permanent jobs is another question.