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Could conference center be financed in euros?

Program grants green cards for investment cash

The prospect of building a convention center in downtown Durango has been bubbling up in public discussion since at least the 1960s. Funding the center was the original purpose of the Business Improvement District, and in 2009, the Durango City Council approved a conditional-use permit for the proposed Railroad Square Hotel and Conference Center.

But a combination of economic recession, sparse investor support and city resistance to use taxpayer dollars for the project have forced the concept onto the back burner.

Now convention center backer Al Harper and others in the economic-development community are eyeing a federal program aimed at attracting foreign investment as an avenue to fund the convention center and other major projects in the area.

The program, called the EB-5 Immigrant Investor Program, offers foreign investors the chance at a green card in exchange for investing big money in U.S. projects that put Americans to work. To qualify, green-card hopefuls must invest $500,000 in economically disadvantaged or rural areas such as Durango or $1 million elsewhere and must prove their investment will create or preserve at least 10 jobs.

Proponents of the 23-year-old program overseen by U.S. Citizenship and Immigration Services see it as a win-win for foreign investors looking for a path to citizenship and American governments, businesses and workers.

But news and government accountability reports have revealed serious deficiencies in the program, and even those who support the program are open about the costs, risks and time involved.

For example, the process to become a Regional Center, an entity authorized to accept and funnel investments into specific projects, can take years and cost well into the hundreds of thousands of dollars.

Region 9 Economic Development District will host two discussions Wednesday for local government and business leaders to learn more about the program and discuss the idea of forming a Regional Center in Durango. Mikki Canton, an attorney working to help Miami-Dade County and the city of Miami become a Regional Center, will speak about her experience with the program and answer questions.

“The Durango conversation is just beginning,” Canton said. “I think it’s wonderful (that) they’re taking a very serious look at it.”

The EB-5 program has exploded in the years since the economic recession with 14,085 of the 23,560 applications from foreign investors coming since 2008. The number of regional centers also has skyrocketed, increasing from 26 to 226 between 2004 and February of this year.

“It’s a confluence of supply of wealth overseas and demand for capital in U.S.,” said Peter Joseph, executive director of Association to Invest in the USA, a trade organization for the EB-5 Regional Center program. “We’re on pace to have another record-breaking year.”

More than 90 percent of immigrant investors put money into Regional Center-affiliated enterprises, according to the latest data available from the U.S. Citizenship and Immigration Services, or USCIS.

There are four regional centers in Colorado. One center, the Colorado Regional Center, formed in 2011 and has funneled about $80 million in EB-5 money into a recently completed $370 million residential and commercial development in Vail.

Getting authorized as a Regional Center “took twice as long as we intended and cost three times as much,” said Chet Schwartz, manager of the Colorado Regional Center.

Canton estimated the cost to create a private regional center could run between $400,000 and $500,000.

To sustain their operations, the centers charge an administrative fee that is usually 10 percent of the investment amount.

The program does have its skeptics. The way immigration services counts jobs created by EB-5-funded projects has been criticized by the Government Accountability Office. In 2005, the GAO reported that it was almost impossible to nail down the actual number of jobs created by the EB-5 program because all of the jobs created by a project are attributed to the immigrant investor, even if the project also was funded by investors outside of the EB-5 program.

“USCIS adjudicators only ensure that each business created the minimum requirement of at least 10 jobs but do not apportion the creation of additional jobs between EB-5 investors and non-EB-5 investors,” the report said.

The endeavor is risky for investors, and there is no guarantee they will receive a green card in exchange for their investment. Only about 20 percent, or about 4,900 immigrants who initially applied for the program, received permanent visas in the program’s history, according to USCIS numbers.

Recent news reports have told stories of investors who were lured into bogus investments that fell through, leaving them out hundreds of thousands of dollars and ineligible for a green card.

The Securities and Exchange Commission oversees investment opportunities offered by the EB-5 program, but it only recently has started to get involved in actively regulating the program, Canton said.

In February, the commission announced charges against Anshoo Sethi, the man behind the Intercontinental Regional Center Trust of Chicago, alleging that he fraudulently sold more than $145 million in securities and collected $11 million in administrative fees on a project that was almost completely fabricated.

Those involved in EB-5 centers agreed that regulatory involvement is a good thing for the program, though Schwartz admitted the program could use some fundamental improvements.

“If I were king of the world, I would rewrite this and have a capitalization requirement that regional centers have to put capital into projects and that they have to have certain experience levels in investing,” he said.

On the other hand, too much regulation also has the risk of paralyzing the system, he said.

ecowan@durangoherald.com

IF YOU GO

Region 9 Economic Development District will hold two meetings Wednesday at the Strater Hotel to hear specific details about the EB-5 program and the types of projects it might fund.

There will be a breakfast meeting at 8 a.m. for the private sector and general public, and a lunch meeting at noon intended for local government representatives.

RSVP to Region 9 by 5 p.m. Monday by calling 247-9621 or emailing terry@scan.org.

Oct 16, 2021
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