The Economic Impact of the EB-5 Regional Center Program with Jeff Carr – Episode 75
Because policymakers have failed to act, the EB-5 Regional Center program continues to face a great deal of uncertainty. Today, Mona and Mark are joined by Jeff Carr of Economic & Policy Resources, Inc. to discuss the EPR report on the economic impact of EB-5 Regional Center projects and his aim to inspire lawmakers to extend the program long-term. Listen in for insight around how the report was put together and learn about the wide range of industries and regions that benefit from the EB-5 Regional Center program.
Due to inaction in Washington, the EB-5 Regional Center program remains in limbo. Lawmakers don’t seem to fully understand the economic opportunities or the job creation they put at risk by failing to extend the program and increase the number of available visas. For this reason, Jeff Carr and his team at Economic & Policy Resources, Inc. (EPR) collaborated with the EB-5 Investment Coalition and IIUSA to generate a report detailing the economic value and job creation impacts of project capital investment activity under the EB-5 program.
Jeff serves as the President and Senior Economist at EPR. He has 35 years of experience as an economist-analyst, completing 225-plus economic impact studies and developing EB-5 project business plans in 45 states. Today, he joins Mona and Mark to discuss the role of an economist in assessing the economic impact of the EB-5 Regional Center program and share the findings of the newly published EPR report.
Jeff offers insight around the source of the data used in the study as well as the economic model he employed to ensure the accuracy of his assessment. Listen in for a breakdown of the report’s findings and learn about the wide range of industries and regions of the country that benefit from the $11 billion in capital investment and 355,200 jobs generated by EB-5 Regional Center projects in the US.
The Role of the Economist in EB-5
- Economists help us track the number of jobs created by EB-5 projects, ensuring that each investor logs the 10 jobs required to receive immigration benefits. They use government data to calculate what is called the multiplier effect, measuring the jobs not directly tied to the project site.
- These indirect and induced jobs only apply to EB-5 projects done through a designated Regional Center. Direct projects require W-2 and I-9 forms to prove that jobs were created, and roles with suppliers and vendors for a project do not count.
The Impetus for EPR Report
- The EB-5 Regional Center program is facing a great deal of uncertainty because lawmakers have failed to provide a long-term extension or supply an adequate number of visas. The report delivers an industry-wide consensus regarding the economic impact of capital investments associated with the program.
- The EPR report only covers the economic impact of Regional Center projects (and not direct projects) because the data is readily available. The IIUSA trade association leveraged the Freedom of Information Act to acquire the reports every Regional Center is required to submit to USCIS.
- Jeff’s hope is that this information will demonstrate the economic value of Regional Center projects. In addition, the report seeks to make the case for extending the program long-term and providing additional visas.
The Economic Impact of Regional Center Projects
- Jeff’s team determined that the EB-5 Regional Center program generated $11B in capital investments during the 2014 and 2015 fiscal years. (That two-year period was selected because the program was not constrained by visa scarcity or skewed by the threat of a program sunset during that time.)
- Unfortunately, the study does not consider the economic impact of ongoing operations. This would include the jobs created via the ongoing operations of a hotel or commercial building, for example. The report also leaves out the economic activity of the investors themselves once they have immigrated to the US.
- The EB-5 Regional Center program created an impressive 355,200 jobs nationally in the two-year period between 2014 and 2015. This accounted for a full 6% of the total job growth in that time.
The Industries & Regions that Benefit from EB-5
- One common criticism of the EB-5 program is that it seems to favor the real estate and construction space over other industries. But the EPR report illustrates that a wide range of industries benefit from the program, including wholesale trade, healthcare, manufacturing, educational services, the arts, entertainment and recreation.
- Another critique of EB-5 is that investments are concentrated in large metropolitan areas like New York, Los Angeles, Miami and Seattle, but Jeff points out that components of projects for large cities are often fabricated in the Midwest. And though the Midwest brought in only $380M in direct investment (3.5% of EB-5 projects), the region enjoyed 13% of the job creation and 14% of the total output.
The Advantages of the REDYN Economic Model
- Jeff’s team leveraged the REDYN model because of its dynamic comprehensive geographic equilibrium (CGE) feature. Other models miss the robustness of the supply chain, measuring only the jobs created locally.
- Jeff argues that the REDYN model is superior to others because it provides an accurate accounting of ALL the jobs created by the project. Where other models are static, REDYN allows economists to count job-creation at a steel manufacturer in Ohio for a project built in NYC.
The Source of the Data for the EPR Report
- Every Regional Center files an I-925A with USCIS at the end of the year to report the total amount of money invested and the estimated number of jobs created. This is the data IIUSA used to generate the EPR report.
- Jeff’s team then calculated the economic impact of the EB-5 Regional Center program by state and region (as defined by the Census Bureau). The EPR report reflects the benefits of the program in terms of job creation, output and income.
A Call to Action for Lawmakers
- Should policymakers fail to act, the US economy will lose out on tens of billions of future foreign investment dollars and hundreds of thousands of new US job opportunities. Jeff encourages anyone with an interest in the EB-5 program to contact lawmakers in Washington and urge them to authorize the Regional Center program for the long term.