by Gregory Wing, President & CEO of Education Fund of America, LLC
Much has been said recently about the effectiveness of the EB-5 visa program and its role in financing the development of projects in places like Manhattan and Los Angeles. The portrayal that the EB-5 program only benefits real estate companies with big projects in urban cities is a mischaracterization – and one likely fueling the notion that Congress should reverse the scales in favor of the program’s “intended beneficiaries” in rural and underserved areas.
While compelling on face value, I take issue with this argument on two counts. First, it ignores the existence of many beneficial EB-5 projects serving communities throughout the U.S. By way of example, charter school projects like the ones my firm funded in Utah, South Carolina, Arizona and other states would not have been possible without EB-5 investments. Second, it fails to account for the original intent and fundamental objective of the underlying EB-5 program, which is to create jobs everywhere in America, from Soho to South Phoenix. And at no cost to taxpayers.
I use South Phoenix as an example because it is where one of our most successful schools got started-a top-quality charter school called “Champion.” Champion operated against tremendous odds, with a significant percentage of its initial students performing way below grade level and in a community where only 20 percent of the population has a bachelor’s degree. Yet despite these odds, Champion has managed to rise from a “C-rated” school to an “A-rated” school and was named “Charter of the Year” by the Arizona Charter School Association in 2013.
It’s an inspiring success story for the community, and EB-5 will help impact many more lives as we open their second school next month and their third school next year. We are now funding our 20th school with EB-5 capital. EB-5 has enabled the creation of new schools in cities from Ft. Worth, Texas to Ft. Lauderdale, Florida; Charlotte, North Carolina to Chandler, Arizona; Spartanburg, South Carolina to Salt Lake City, Utah. Thousands of children, some in very disadvantaged situations, would never have had the chance to participate in the life-changing opportunities now afforded them were it not for EB-5. EB-5 is needed, and it is working to fulfill its original intent of creating jobs. Our Arizona schools have created more than 300 jobs, including teaching and support positions, and our schools are creating thousands more nationwide.
To be sure, the EB-5 program could benefit from smart reforms to enhance program integrity and root out bad actors – and there is wide support for stronger oversight. Amongst other things, more stringent safeguards for ensuring securities law compliance and efforts to conduct background checks to verify bona fides of regional center-associated individuals could go a long way in furthering program accountability by providing assurances and further protections for EB-5 investors.
But additional reforms should be focused on expanding and boosting the overall impact of the program, not narrowing the program or biasing one region or category of community over another. In fact, a recent economic analysis released by the EB-5 Investment Coalition states that there is no economic reason to favor rural over urban investment and warns that program changes favoring rural areas over urban ones could in fact dampen EB-5 investment interest and therefore, job growth.
That same analysis notes that one of the most important functions of EB-5 investments is in creating “patient capital” for projects in economically distressed areas-projects that could not otherwise find the funding they need. Two economists from the Harvard Business School-affiliated Institute for a Competitive Inner City found at least 178 EB-5 funded projects nationwide – including our schools – are “increasing employment and revitalizing urban areas.” As our economy continues to recover, projects like ours are living proof of EB-5’s power to help businesses, entrepreneurs and public-private partnerships access the capital they need to invest in their communities and create jobs.
EB-5 investments generated at least $1.6 billion in private investment and 31,000 new jobs in 2013 alone. In our many EB-5 funded schools across the country, each new job being created helps lift up a generation of young people who will have a better chance to succeed. Ultimately, our representatives in Congress need to look beyond the headlines and “champion” a program with the proven ability to provide vital capital to a variety of projects beyond commercial real estate that are creating long-lasting and positive impact.
EB-5 is not another loophole for real estate developers – it is a program that has a proven record of working for everyone everywhere. And it is needed now.
Wing is president and CEO of the Education Fund of America, LLC; and co-founder and principal of Green Card Fund, a USCIS-approved EB-5 Regional Center in Arizona.
*Opinions expressed within this article do not necessarily represent the views of IIUSA and are provided for educational purposes.