EB5 Investors Magazine | Page 53

An investigation into this criticism reveals, however, that the current flexibility the states are allowed (i.e., the current practice of census tract combinations) helps to realize the intention of the EB-5 program. The intent of the program is to create jobs— most specifically, jobs for those who are unemployed. Contrary to critics’ angst, current TEA policy truly promotes new job creation in areas of high unemployment. Specifically, within a connected regional economy, new jobs tend to positively impact those living in disadvantaged areas more than they affect those in low unemployment areas. In new research from the W. E. Upjohn Institute, it has been shown that new jobs created in areas containing high unemployment have a disproportionately large and positive impact on the labor force in that area compared to new jobs in an area with low unemployment.5 The table below, using results from that study, shows that the vast majority of new jobs are soaked up by those living in high unemployment areas, not by those in low unemployment areas. Figure 1: Long-run effect of 1,000 new jobs on local residents’ employment 600 522 500 400 300 239 In regards to the EB-5 program, these findings indicate that jobs created by a new project in a TEA made of combined census tracts will have a disproportionately positive impact on the labor force in the high unemployment areas, even if the project is not located precisely in those disadvantaged areas. The Consequences of a Single Census Tract Limit A single census tract limit on TEAs, or even an arbitrary limit of a higher number of tracts (such as a 10-tract limit), would prevent potential projects—to which workers from high unemployment areas could reasonably commute—from locating in an area where those workers would benefit. The S. 1501 definition of a high unemployment TEA disallows the combination of census tracts to create TEAs and also implies that states, MSAs, counties, cities and census block groups exhibiting unemployment rates greater than 150 percent of the national average would also no longer be eligible. This policy would drastically diminish the number of TEA-based options for project investment. As the curent market dictates that EB-5 projects must virtually always locate in a TEA because of the lowered investment incentive, the policy would prevent many viable projects that would otherwise spur positive economic activity from proceeding. Limiting the possible labor force to be calculated in a TEA to an area as small as a single census tract would severely hinder EB-5 investment and the resulting economic growth from the EB-5 program. Case Study: Impacts of a Census Tract Limit in Los Angeles, California Figure 2: 2014 High Unemployment Area Map of Central Los Angeles, C Ɩf