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The EB-5 visa program allows foreign investors to obtain green cards, provided they invest $500,000 to $1 million. The program is up for reauthorization in Congress, and as economics correspondent Paul Solman reports, there is some controversy over whether or not the program should continue.
Much attention on Capitol Hill is focused on a deadline this week to pass a major federal funding bill.
But, as is often the case, other, less noticed bills get swept up in the process.
Tonight, we have a report about one of those, a controversial immigration program tied to jobs, development and money that's due to expire Friday. It's been around for two decades, but is up for renewal and possibly some changes.
Economics correspondent Paul Solman has the first of two reports on that program this week. It's part of our series Making Sense of financial news.
Officially, this is an economically depressed part of Brooklyn, New York.
So where are we?
NORMAN ODER, Freelance Journalist:
We're right here at the northern tip of 163.
OK, so there.
And the Barclays Center is right over there.
For years, freelance journalist Norm Oder has been following this project, formerly called Atlantic Yards, now Pacific Park, and is writing a book about it.
What's being built is the shaded area right here.
What's being built is condominium housing. The investors, foreigners, mostly Chinese, who, as part of our country's EB-5 visa program, can get permanent U.S. resident visas, green cards, for themselves, spouse and minor children, in return for their investment.
The chunk of change required?
EB-5 investments are supposed to be a million dollars unless it's in a rural area or in an area of high unemployment. That's called a targeted employment area. Then it's $500,000. Guess what? Every project is finagled into a high unemployment area. Look around here. We're in a prosperous area. A brownstone over here is easily over $2 million, condos in some of these buildings close to a million.
How do you get to be a targeted employment area? You have to create a zone of high unemployment. So, how do you do that? You have to connect census tracts, so it adds up, in total, to be 150 percent of the overall national unemployment average.
So this is what they did. This is taking you out here in this arc through the neighborhood of Crown Heights, and then into this neighborhood Bedford-Stuyvesant, all the way up into this poor district, creating this rather odd shape. I call it the Bed-Stuy Boomerang.
Oder means that the targeted employment area is a contorted tract drawn to meet the high unemployment hurdle for the lower half-million-dollar investment, which must create 10 jobs as a condition for the visas.
There's something really fake going on.
Nevertheless, it's perfectly legal under current EB-5 legislation.
Forest City Ratner, the developer of Pacific Park, says it — quote — "complied with all the required guidelines and laws. We have created thousands of construction and permanent jobs in an area with historically very high unemployment levels" — unquote.
Seventy percent of the development company is owned by a firm in Shanghai, so Chinese investors are getting green cards for building luxury housing in a ritzy neighborhood, and the bulk of the profits will go to China.
Not surprisingly, it isn't just crusading reporters who find EB-5 projects like this one problematic.
SEN. CHARLES GRASSLEY (R), Iowa: So, much of the investment money coming into targeted employment areas has been directed towards lavish, and I mean lavish, building projects in well-to-do urban areas.
One of the most notorious examples of this gerrymandering is the Hudson Yards Project.
Republican Senator Charles Grassley is talking about this EB-5 project in Manhattan, which persuaded foreign investors to build luxury apartment buildings, office towers and retail space right next to the hip High Line and Chelsea neighborhood.
To reach the unemployment threshold, the developers delineated a skinny tract that stretched 10 miles north, to include the poor, densely populated Manhattanville housing project. Related Companies, the developer of Hudson Yards, didn't respond to PBS NewsHour's requests for comment.
SEN. CHARLES GRASSLEY:
Even The Wall Street Journal, which never met a business project it didn't like, reported on how this program has been abused.
Case in point, a Chicago developer who suckered several hundred Chinese into investing $160 million in a proposed hotel and Convention Center near O'Hare Airport. A slick Chinese-language promotional video, using Illinois officials and the state seal, helped convince investors this was legit.
We welcome EB-5 investors to the state of Illinois and the city of Chicago.
But nothing was built, no visas issued, the money siphoned instead for personal use and to fund a cosmetic surgery business. The developer was charged with fraud.
Moreover, the job creation claims are suspect, says Brookings researcher Audrey Singer.
AUDREY SINGER, Brookings Institution:
There's very little knowledge of who gets those jobs, where they live, whether they're good jobs, whether they're short-term or long-term jobs.
And yet the EB-5 program is booming, especially since the crash of '08, when traditional bank financing for real estate development dried up.
The number of foreign investors who were allocated visas under the Regional Center program has jumped from 805 in 2007 to the annual limit of 10,000 the past two years, a limit already reached this year by September. Ninety percent of those applying are Chinese.
So, why shouldn't EB-5 be reined in, or simply scuttled, when its authorization runs out this month?
Immigration professor Stephen Yale-Loehr helped structure the project in Brooklyn, where this piece began.
STEPHEN YALE-LOEHR, Cornell University:
The program is good in a variety of ways. It creates jobs for U.S. workers at no expense to the U.S. taxpayer. Particularly during the great recession, when developers could not find domestic capital to start or finish their projects, EB-5 money became one way that they could do so.
ANGEL BRUNNER, EB5 Capital:
My passion was in redeveloping neighborhoods, and then I found EB-5, which is another tool to do it.
Angel Brunner is the co-founder of EB5 Capital, a private firm that recruits investors through so-called regional centers and then pools foreign capital for developers.
What I really liked about it was that it didn't take taxpayer money, and that it was a foreign source of capital.
A cheap source, as investors settle for low returns in exchange for green cards and eventual citizenship. And not all EB-5 projects are suspect.
The same regional center that helped finance the Pacific Park project in Brooklyn also helped put Wi-Fi in the New York City subways. Another example, just a stone's throw from the nation's Capitol Building, a famous space that's gone to seed is getting a much-needed face-lift.
It's the original site of the Beatles' first North American concert in the 1960s. It's gone from parking lot to waste management facility and now finally to class-A retail and class-A office.
But only because of EB-5. So, for this program, as for so many others, there's the good along with the bad.
And remember the investors, says Stephen Yale-Loehr.
It's not just $500,000 they're bringing to the United States. They're buying homes here. They're paying taxes on their worldwide income. They're sending their children to college here and paying college education.
So each investor who is coming to the United States is spending or investing a lot more than what the program requires to get the green card.
Thus, Senators Grassley and Patrick Leahy have introduced a bill to amend the program, increase transparency and oversight to prevent fraud, raise the minimum investment to $800,000 from the current $500,000 for targeted employment areas, and define those areas by census tract, no more Bed-Stuy Boomerangs.
Journalist Norm Oder remains unconvinced.
I think there should be a giant pause and rethink the whole thing.
Meanwhile, the clock is ticking toward the December 11 reauthorization deadline.
This is economics correspondent Paul Solman, reporting for the PBS NewsHour.
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