ILW.com’s EB-5 panel of experts: focus changes to USCIS / CSC’s interpretation of indirect calculation of jobs

January 18, 2010 by USAdvisors
Filed under EB-5 Regional Center News, EB-5 Visa News, FAQ, USCIS

After publishing the story from yesterday: ILW.com hosting panel of EB-5 visa experts, third and last part in EB-5 series: “Investors For Experts”, I noticed that the agenda had changed considerably from its original format reported here in December: ILW.com hosting panel of EB-5 visa experts.

This should not come as a surprise to EB-5 practitioners because of questions raised after an IIUSA / AILA EB-5 stakeholder’s meeting with USCIS and California Service Center representatives in December concerning job creation methodologies and the use of RIMS II and other economic models in the counting of indirect and induced jobs inside and outside of the EB-5 Regional Center.

For EB-5 Regional Centers that do not count, or account for direct jobs, these comments were unsettling and many would like clarification on USCIS and CSC’s interpretation of the law and their references to the Matter of Izumi. Boyd Campbell of the America’s Center for Foreign Investment has written an opinion on the subject here and I would invite others to do the same. Young Noh of EB-5center.com has posted many articles on the subject and I would suggest all EB-5 news readers refer to his site for his excellent analysis. This article in particular focuses on this issue: Implications of USCIS allowing job-creation (direct and indirect) only within the underlying regional center geographic area.

This subject of counting of indirect jobs has obviously taken on much more importance as you can see from the change in focus and the subject matter from when they first announced the series:

http://eb5visanews.com/ilwcom-hosting-panel-eb5-visa-experts-part-series/

December 17:

The third and final phone session will be covering EB-5 Regional Centers on January 21, 2010 (registration ends on January 20):

Due diligence in selecting a regional center
Employment methodologies
Co-counsel and other experts

January 18:

THIRD Phone Session on January 21: USCIS On EB5

Government Perspective On EB5 Program
Follow up on Stakeholder Meeting and Dec 11 Memo

The focus has shifted from questions of due diligence and an internal discussion of job creation methodologies to getting clarity from the USCIS / CSC’s representative on their comments during the EB-5 stakeholders meeting in December. The question is of such importance that the time spent trying to get clarity on the issue of job accounting and creation that it was clearly felt by the panel necessary to change the agenda of the call.

The moderator of the discussion will be Lincoln Stone who has chaired many such EB-5 panels before and is also instrumental in the submission of approved Regional Centers who rely solely on the accounting of indirect and induced jobs, sometimes also referred to as Capital Injection or Expenditure methodology, so listen closely as he seeks direction from the CSC officials, in particular, Sasha Haskell, who’s comments in the stakeholder’s meeting caused the recent turmoil.

The economics expert on the panel will be David Andersson, EB-5 Regional Center principal of the Whatcom Opportunities Regional Center and member of AUBER: The Association for University Business and Economic Research, and I am sure that he will offer very valuable insight into the importance of this issue as he has been a very strong proponent of the Indirect only / Capital Expenditure model for many years.

While many may disagree with USCIS / CSC’s stance, I do believe that their concern that actual jobs are created (not simply transferred from within or created far beyond the targeted area) and reasonable methodologies used to prove that is valid.

My impression is that what they are stating is that the EB-5 visa exists to allow foreign nationals to invest and create a certain number of U.S. jobs in return for a green card and that by simply stating that because funds have been spent in a targeted region therefore, by default, “x” amount of jobs have been created.

I will use South Florida as an example of why I question this methodology (please forget for a minute that Miami or Ft. Lauderdale do not qualify as a TEA, this is an illustration only). I can show beyond any doubt that billions of dollars were spent to build some of the most beautiful hotels, condos and office space this side of Dubai.

At the same time, I can also show a vacancy rate of over 80% in many of these luxury apartments, thousands of square feet of unoccupied Class A office space and a doubling of the local unemployment rate. There is no question that the money was spent, but where are the jobs? By any definition, there was a huge loss of jobs (direct, indirect and induced) in all sectors of the economy despite a massive investment of capital (both equity and debt). Fortunately no EB-5 Regional Center investments were located in this area at the time, but one can see the analogy for Centers located in other regions of the country that might have experienced job loss despite capital being invested.

I can see where the capital expenditure method works in times of rising GDP and declining Non-farm payrolls, but do see the possible need for evidence that direct jobs were created (in the particular EB-5 regional center investment) when the opposite is true, if only to verify that the foreign nationals funds did indeed create jobs through the EB-5 regional center’s investment. One can argue that on the macro level investment would eventually create jobs, and that might be true in the long term, but unfortunately this is a program with a very short timetable and high standards for removal of conditions at the I-829 stage.

The long term success of the EB-5 program, I believe, will mean that regional centers should be able to demonstrate that U.S. jobs were created, or saved. Simply showing that the investor’s money was spent may not be adequate proof to our representatives in Washington of what a valuable program this is, or that indeed, American jobs were created or saved as a result of foreign national’s investing through the immigrant investor green card program. Empirical evidence would discredit those who say this program is about rich foreigners “buying” green cards by showing definitive proof that investment resulted in expanded U.S. payrolls and a greater U.S. GDP.

Opponents of the program are likely to ask for empirical data that U.S. jobs were indeed created, not simply transferred from one location to another, or that capital invested resulted in increased U.S. GDP through production of goods and services and the creation of employment. It is my belief that the indirect-only capital contribution methodology does not adequately prove the creation of jobs. It may satisfy the requirements of the law as Congress intended, despite concerns from the agency that oversees the program, but I feel that if the program is to succeed there should be a realization that opponents of the program (and immigration in general) may try to block efforts to make this visa program permanent or expand the scope for investment unless the stakeholders here can positively prove that jobs are created through immigrant investment.

I would invite other opinions and definitely recommend all EB-5 visa news readers to subscribe to the final segment of the three part series by registering at ILW.com’s site. The registration deadline for this discussion is 11:59 PM EST on January 20, 2010.