EB5 Investors Magazine Volume 4 Issue 1 | Page 16

Continued from page 13 the metro area, or one-quarter or more of its employment is composed of workers who live in central counties. However, this inclusion would enable far more abuse of the TEA process than anything currently possible through gerrymandering. This would automatically grant full TEA status for 450 non-rural counties all across the country, many of which have low levels of unemployment. These counties are all parts of MSAs and have strong social and economic ties to the central county based on commuting patterns and employment. In many of these counties there are a very limited number of census tracts (if any at all) that have qualifying rates and even if it were to be allowed, blatant gerrymandering extending through many distant counties could not get such areas qualified as a TEA. Yet, Senators Grassley and Leahy, along with many others, who are so concerned about allowing an urban TEA when the high unemployment areas may be a few miles (or sometimes even less) away from a project area, apparently have no concerns about allowing TEAs in these non-rural areas with low unemployment rates. the case with many previously designated TEA projects in Los Angeles, Riverside, and San Bernardino counties). This ‘outlying county’ concept was inserted to gain TEA status for any county within an MSA that may potentially have a rural component. There are legitimate rural type areas within these counties; however, why game the system and open up the EB-5 program to exploitation just to grant TEA status to a few chosen areas within these counties that may be rural in nature? A much more effective, fair, and simple approach to expanding rural TEA opportunities within MSAs would be to grant rural TEA status to all census tracts not within an urbanized area of 50,000 or more population, as defined by the most recent decennial census data, if the individual census tract meets a predetermined minimum size and maximum population density criteria. Conclusion The TEA provisions in Grassley-Leahy are clearly flawed, but if those in the industry work together there is no reason that we can’t achieve positive reform. With different interests at stake and the urban-rural divide, it is foolish to believe that everyone will be in complete agreement with any proposal, but the final provisions do need to be fair to all. The EB-5 program was created to bring private foreign investment into the United States and to create jobs. Rural counties already receive what some may consider an unfair advantage by getting automatic TEA status, and rural states have the lowest unemployment rates in the nation. As one example, Vermont, which already receives full TEA status for 11 of its 14 counties, would now increase that number to 13 counties under the ‘outlying county’ concept as it would gain full TEA status for Franklin and Grande Isle counties with respective 2015 annual average unemployment rates of 3.7 percent and 4.1 percent. I have proposed some suggested language for high unemployment and rural definitions that tighten up the high unemployment definitions and expand the definition of rural. This could be used as a starting point for discussion on achieving a balanced TEA reform. TEA and Non-TEA Investment Amounts Should Rise Together Why raise the TEA investment from $500,000 to $800,000 while keeping the non-TEA amount at $1 million? I agree that the amount needs to be raised, but shouldn’t we keep the same proportion or at least something similar? Why not $600,000 and $1.2 million (same proportion) or $750,000 and $1.25 million (same dollar increase). If we don’t want EB-5 investments concentrated in low unemployment, high-income areas, why are we narrowing the investment gap between TEA and non-TEA? TEA Proposals Not All Bad Some of the TEA proposals make sense. Making TEA designations valid for a two-year period is a positive and I would even recommend going to three years. It is important to not put already TEA designated projects at risk and to not force some investors to come in at higher entry levels (as will now be 14 This will also relieve the unnecessary burden of having to re-apply each year. A local unemployment rate in relation to the U.S. rate is unlikely to change dramatically over a short period of time, but if it does decline, why should a project be penalized for an improving economy, which it may even have contributed to? After all, isn’t that what the EB-5 program set out to do: to create jobs in communities with high unemployment? A nice inclusion in the TEA definition is areas within the geographic boundaries of any military installation closed during the last 20 years, based upon a recommendation by the Defense Base Closure and Realignment Commissio n (BRAC). I’m less enthused, but okay with the proposal to give equivalent TEA status to infrastructure projects and manufacturing projects. Suggested Language for Defining High Unemployment and Rural Area TEAs High Unemployment Area A high unemployment area is defined as an area that has experienced unemployment of at least 150 percent of the national average rate, using the most recently available annual average or 12-month average data. Acceptable data sources for purposes of calculating unemployment include U.S. Census Bureau data (including data EB5 INVESTORS MAGAZINE