Public-private partnerships have been a point of contention over the years; can government bureaucracy really coexist with free-market enterprise? However, in the niche world of the EB-5 immigrant investor program, these arrangements not only coexist, but also seem to be working well and growing in numbers.
The EB-5 visa program offers U.S. green cards to foreign investors in exchange for an at-risk investment of at least $500,000 and the creation of 10 full-time American jobs. For public officials grappling with struggling economies, the program offers a creative solution. In the past two months, the state of Michigan and city of Miami have both received approval from United States Citizenship and Immigration Services to operate EB-5 regional centers -- entities authorized to accept foreign investments and channel them to job-creating projects. Michigan, which received its approval on April 9, became just the second state to have its own regional center. Meanwhile, Miami joins a handful of municipalities that operate regional centers. Additionally, numerous private regional centers are working closely with state and local development agencies in a less official capacity.
The visa program's public-private legacy began in Vermont, when the state established the Vermont EB-5 Regional Center in 1997, adopting Jay Peak Resort as its first EB-5 Pilot Project. Through the state-operated regional center, Jay Peak Resort has raised over $250 million of capital from over 500 investors emigrating from 56 countries, and created thousands of new jobs in the northern region of Vermont. For years, the regional center remained the only such state-run entity in the country. As the program has grown in recent years, so too have such public-private partnerships, in an effort to capture the full benefits that EB-5 can offer to developers, investors and Uncle Sam.
State- or municipality- run regional centers, as well as private regional centers that partner or work in some fashion with local municipalities and development agencies, will better understand the needs of that region or community and have a broader long term view. Government-affiliated regional centers will likely care, first and foremost, about job creation and economic development in their region over the financial success of a single project; more jobs mean more taxpayers. Because of this, they are more likely to choose projects that strictly adhere to EB-5 requirements and meet program goals, and look beyond the project that is going to net the most profit.
"You have to be morally, ethically and personally involved in the project," said Mikki Canton, managing director of the City of Miami Regional Center, in an interview with EB5Investors.com. "It has to be about more than just making money." The relationship relies on public-private interest, public-private commitment, and the willingness to work together to deliver on the promises of the EB-5 program.
These types of partnerships encourage EB-5 regional centers to engage their communities on a much deeper level than do uniquely private outfits. For example, Miami has implemented a few policies that get right to the heart of community development, drawing upon the spirit of a program that encourages targeted investment in areas that need it the most. The regional center works with a sliding scale of interest rates to offer even more favorable terms to projects doing the most good--a hospital project in an underserved community, for instance. Having the flexibility to accommodate projects that create jobs and address pressing community issues takes the regional center concept to another level. The regional center will also place a portion of its profits in a fund for public safety enhancement, which is used to purchase public goods such as fire trucks. These initiatives can serve as models to holistically develop the social and economic health of the regions they serve.
Building upon past success
Government involvement often means placing administration of the regional center under an existent agency -- Vermont's regional center is run by the Vermont Agency of Commerce and Community Development, and in Michigan, their operation is part of the Michigan Community Development Authority and is staffed by the Michigan State Housing Development Authority. This allows state officials to draw upon existing relationships, resources and knowledge reserves to determine the best way to operate EB-5 in their specific region.
The original public-private partnership has served as an example for others. "We have definitely studied what Vermont has done," said Joe Borgstrom, director of the State of Michigan EB-5 Regional Center. "They have done a great job, but we will have to do a few things differently than them simply because our state has a different make up." The solutions that EB-5 can offer are not one-size-fits-all and Borgstrom understands that: "Vermont is pretty rural while we have large urban and manufacturing centers. We are going to play to our strengths."
Borgstrom says that areas such as Detroit and Flint will be targeted, but not exclusive, beneficiaries of the program. To date, EB-5 has had a limited impact on Detroit, but the potential is enormous, because the city -- underdeveloped and underserved -- is exactly the type of community for which the EB-5 program's "targeted employment area" provision is designed.
Expanding the EB-5 market
Private entities often shy away from government regulation, but in the EB-5 world, the two go hand-in-hand. In Miami, the city's planning and zoning commissions, along with a separate panel of EB-5 experts, are actively involved in the process of vetting EB-5 projects. And in Vermont, the state carefully reviews projects in a multi-step process before they go to market. "We know what we should do and definitely what we should not do," Canton said. "We cannot afford to make a mistake. We are accountable and have to operate with transparency in the sunshine. We are not going to run afoul of any regulations." The challenge of increased transparency and strict adherence to regulations is rewarded with the enormous amount of credibility that government involvement can offer in a market of increasingly cautious investors.
The bottom line -- whether you are talking about the industrial centers of Detroit or the rolling mountains of Vermont -- is that the EB-5 program is an asset to the United States. Public-private partnerships in EB-5 allow communities to create a long-term vision for revitalization and development.