The Immigrant Investor ( EB-5 ) Program was created in 1990 to encourage immigrants wishing to reside in the United States to invest capital in a new commercial enterprise in order to create new and permanent fulltime jobs . Immigrant investors in the EB-5 program are normally required to invest $ 1 million in regional center projects , unless the project is located in a targeted employment area ( TEA ), which allows a reduced investment level of $ 500,000 . So the question arises , just how much does an immigrant investor ’ s $ 500,000 expenditure , along with household and other expenditures impact the local economy ? Moreover , what are the broader economic effects one can glean from this analysis if the individual investor impacts are extrapolated to reflect national trends in EB-5 immigration ?
This article provides a case study of an immigrant investor ’ s $ 500,000 investment in the construction and operations of a hypothetical hotel project ( one of the most common EB-5 projects ) in Los Angeles , CA . It further generalizes these findings by applying the results to recent national immigrant statistics . The study uses the IMPLAN v3 ( MIG , Inc .) input-output modeling software and associated regional data for the Los Angeles-Long Beach-Riverside Combined Statistical Area ( LA-CSA ) to analyze the impacts of the investor ’ s $ 500,000 investment , household expenditures and other related relocation expenditures on the local economy . The article examines the impact of these expenditures on jobs , contribution to gross domestic product ( GDP ), and federal , state , and local tax revenues .
EB-5 Investment Effects
One must first identify a project in which the immigrant ’ s $ 500,000 will be invested in order to determine the impact that the immigrant investor ’ s expenditure will have on a local economy . Therefore , we begin with a hypothetical hotel project in Los Angeles seeking EB-5 funding . This typical EB-5 project consists of a construction hard cost budget of $ 100 million , which is assumed to be in the second year of a 24-month timeline in 2013 , so all jobs — direct , indirect , and induced — are considered . In addition , the hotel has $ 10 million in annual gross operating revenues and a full service restaurant with $ 5 million in annual revenues , both occurring in 2014 . Table 1 presents the IMPLAN events representing the three industry sectors , along with the event years and deflators : 34-Construction of new nonresidential commercial and health care structures , 411-Hotels and motels , including casino hotels , and 413-Food services and drinking places .
Table 1 . Events for Hypothetical Los Angeles Hotel Sector
34 Construction of new nonresidential commercial and health care structures
411 Hotels and motels , including casino hotels
413 Food services and drinking places
Industry Sales ( M $)
Event Year
Output Deflator
$ 100 2013 1.134
$ 10 2014 1.126
$ 5 2014 1.096
It is useful to look at the multipliers associated with each activity in more detail to better understand the number of jobs created within each industry sector . The employment final demand multipliers consist of three main effects : direct , indirect and induced , representing the jobs created per $ 1 million spent . The change in employment in an industry per million dollars spent in that industry is measured by the direct effects multiplier . The number of jobs created directly from a $ 1 million investment is shown in Table 2 , ranging from 6.9 jobs for construction to 16.42 for food services . The response by all local industries caused by inter-industry spending is the indirect effects multiplier , ranging from 2.43 to 3.3 jobs per $ 1 million invested . Finally , changes in household and government spending , as income is generated from the direct and indirect effects create the induced effect . Additional jobs from this impact range from 11.19 to 12.47 jobs . Adding together the three effects results in the total effects multiplier , which represents the total number of jobs created per $ 1 million dollars spent . These effects range from 20.6 for construction to 30.8 for restaurants , implying for example , that for every $ 1 million dollars of gross revenues earned in the restaurant industry , 30.8 jobs are created in the local economy .
Table 2 . Hotel Construction and Operations Multipliers for Los Angeles-CSA
Industry Code and Sector
34-Construction of new nonresidential commercial and health care structures
411-Hotels and motels , including casino hotels
413-Food services and drinking places
Source : v3 ( MIG , Inc . 2010 )
Direct Effects
Indirect Effects
Induced Effects
Total Effects
6.9139 2.5457 11.1887 20.6483
9.0346 3.3003 12.4672 24.8022
16.4188 2.4301 11.9697 30.8186
Using the dollar expenditures and output deflators ( to deflate the expenditures to the 2010 data year ) in Table 1 , and the total effects multipliers from Table 2 , one can see the total impacts of the hotel project on the local economy . Table 3 shows the impacts of construction and operations of the hotel and restaurant in the LA-CSA . A total of 2,181 new jobs are created with an associated $ 190.11 million contribution to GDP . In addition , $ 26.97 million is generated in federal taxes and $ 15.97 million is generated in state and local tax revenues . The $ 100 million spent in construction in 2013 creates 1,820 jobs , while the $ 10 million of gross revenue from hotel operations in 2014 will create 220 jobs , and finally the $ 5 million of restaurant operations in 2014 will generate 141 jobs .
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