My most recent project was an economic and fiscal impact analysis for a Client’s EB-5 Regional Center application. This is my first encounter with the EB-5 program and I found the program and its various requirements fascinating. This is the great thing about my job; I am always learning new things.
The Employment Based Immigration Fifth Preference (EB-5) program provides a method of obtaining permanent US residency for foreign nationals who invest money in the United States. In order to qualify for the program, foreign investors must invest $1 million in a project in most areas or $500,000 in a rural or high unemployment area. The project must generate at least 10 full-time jobs for US workers per foreign investor and benefit the US economy. The project must be a new commercial enterprise or an investment in an existing troubled business.
If all of the conditions are met and proper forms are filed and accepted, the foreign investor, his or her spouse and unmarried children under the age of 21 will be admitted to the US and provided with Green Cards, giving them the authorization to work or attend school in the US. The program has been in place since 1990, since there it had a number of changes giving the program more oversight of investors and the approval process. Over the last four years (2006-2009), a total of 7,128 EB-5 visas have been issued.
One of the project options is to create a regional center, a combination of projects and investors located over a defined geographic region. According to the US Citizenship and Immigration Services website, a regional center is defined as “any economic unit, public or private, which is involved with the promotion of economic growth, improved regional productivity, job creation, and increased domestic capital investment.” An economic impact model must be used to estimate direct and indirect jobs created by the regional center and its projects, and also show how the projects will result in increased regional productivity.
My client is applying to receive a Regional Center designation and needed an economic impact analysis as part of the application. An economic impact analysis utilizes an input-output model, in this case the IMPLAN model, to estimate direct, indirect, and induced jobs and output associated with a project. Here’s a quick summary of the economic impact analysis. Output is all the money generated by the construction and operation of the project within the regional economy. Direct impacts are jobs and output generated by the project itself. This is the employees working for the project and salaries paid to these employees and expenses of the project. As money is spent within a region, it is spent multiple times, having multiple impacts. If you are given a dollar and you buy a candy bar at a grocery store, you had a direct impact of $1. The grocery store then uses that $1 to pay salaries to its employees and purchase other candy bars from the manufacturer to refill its stock. The benefits of salary and restocking expenditures are indirect impacts of your original spending. Grocery store employees then spend their salaries within the region and the candy bar manufacturer purchases supplies to make more candy bars, these are induced impacts of your original purchase. The money (output) keeps moving through the regional, having a total impact of money than just the $1 originally spent. These activities also create direct, indirect and induced jobs in the region.
Our economic impact analysis helped the client estimate the number of direct and indirect jobs that could be generated by the regional center, as well as the total (direct, indirect and induced) output of the center. One of the interesting parts of the EB-5 program is that both direct and indirect jobs created by the project can be counted towards the 10-job requirement. In addition to an economic impact, we also performed a market analysis covering the economic needs of the region and why the regional center may be beneficial to the area; as well as a fiscal impact analysis, which estimated local government revenue from property, sales and income taxes generated by the regional center.
Our analyses were just a part of the complete regional center application, which also included projected capitalization plans, plans for marketing and promotion of the regional center, and other operational data. With the application submitted, it will take approximately six months before the regional center application is processed.
That’s the EB-5 program in a nutshell. For more information on the EB-5 program, please visit the US Citizenship and Immigration Services website at http://www.uscis.gov.