SPI President & CEO Mary Scott Nabers
A federal program funded by foreign investment has become extremely attractive to public officials throughout the country. They like the program because it provides funding for all types of large public projects – funding that is extremely hard to come by for most governmental entities. This new aspect of an old program is important and the need to understand how it works is great.
The EB-5 Visa for Immigrant Investors was created by the Immigration Act of 1990 and the program was designed to incentivize foreign investment in the United States by offering a green card to immigrants willing to make a certain level of investment. Simply put, individuals willing and able to invest a minimum of $500,000 may be eligible for EB-5 visas. The visas, once granted, cover an entire family.
Here’s how it works: EB-5 funds come from non-Americans interested in coming to America legally. The money they invest in EB-5 programs can then be allocated to public officials for large public projects, often projects that are tied to critical needs in a region such as transportation infrastructure, water and social infrastructure. The funds that flow to new projects must create at least 10 new jobs and to be able to qualify for a visa with the minimum investment, the project must be located in a rural or impoverished area. Investors able to commit up to $1 million are able to place money in United States projects anywhere in the country. The EB-5 funds can also flow to private- sector projects but governmental projects are often preferred. Since the start of the program, EB-5 visas have generated more than $1.5 billion in funding and have created more than 30,000 jobs.
The government currently grants around 10,000 EB-5 visas each year, but the visas weren’t always so common. The program was slow to take off because potential investors were wary of the original, very onerous application process as well as the chance that their application would be suspended. But in 2011, United States Citizenship and Immigration Services (USCIS) instituted a series of reforms that streamlined the process and this resulted in an exponential increase in the number of applications.
There are few restrictions now on the types of projects that are eligible for EB-5 funding, but thousands of public officials still don’t understand the program well enough to take advantage of it. The funding comes at an incredibly low interest rate and no repayment of any kind is required for many years. The program offers a very attractive option for most large public projects.
A number of states and municipalities were quick to establish Regional Centers, which are designed to attract EB-5 investment. In spite of the activity, however, many governmental entities, taxpayers and the general public have taken little notice. That is likely to change as reports get out about successful projects.
One program funded by EB-5 money is an ongoing development at the Port of Baltimore. Investments from EB-5 visas will finance new infrastructure that is required for the port to handle the much larger cargo ships soon be coming through the nearly-completed Panama Canal expansion. Funds from the EB-5 investors will double the capacity of the Port of Baltimore’s Seagirt Marine Terminal, and allow the installation of four “super post-Panamax cranes,” the largest modern container cranes in the world.
And, a public-private partnership between the city of Dallas and an investment management firm has established an EB-5 resource center to recruit EB-5 investors. The City of Dallas Regional Center (CDRC) leverages both public and private financing and selects investors whose projects have the best chance of success. Then, program officials provide assistance and help the investors through the EB-5 application process. The city of Dallas benefits because of the many public projects it is able to fund.
EB-5 funding is not ideal for every situation and there are still bureaucratic barriers that sometimes frustrate all parties. But, for public entities and private developers, this new money provides a unique source of funding at a time when it is sorely needed. Foreign investors will continue to be attracted by the prospect of investing in America. And, the desire to bring their children to a country offering so many diverse opportunities will continue to drive the program.
As long as America’s critical infrastructure needs outstrip the country’s financial resources, government officials will find EB-5 funding an attractive option.