Allentown is exchanging development dollars for green cards using a federal program called EB-5 visas.
Downtown Allentown looks very different than it did a few years ago. As part of the City Center development, there are restaurants, stores and even upscale apartments. The next phase, Five City Center, will be the biggest investment yet: $225 million to build an office tower, high-rise apartments and a public park.
But Allentown isn’t secretly sitting on $225 million. To get funding, it has turned to a controversial source: the Immigrant Investor Program, or EB-5 visas.
It works like this: Foreign investors lend a minimum of $500,000 to a project that will create at least ten jobs per investor. In exchange, they get a green card for themselves and their families (along with repayment of principal, and interest on the loan).
“At no cost to the taxpayer, [EB-5] enables projects that otherwise wouldn’t have any funding, or significant enough funding to move forward,” says Ron Klasko, an immigration lawyer in Philadelphia.
Klasko says it’s a creative funding source for cities that might not have development dollars on hand. But critics of EB-5 visas say that it allows wealthy foreigners to buy their way to the front of the lengthy immigration line. There are also concerns about transparency, fraud and security.
Allentown is the latest Pennsylvania city to cash in on the Immigrant Investor Program. Many projects around the state have already used this funding source, including Philadelphia’s Navy Yard, both Temple University and University of Pittsburgh Medical Centers, and parts of the Pennsylvania Turnpike.
Pennsylvania has a number of “regional centers” which help investors find projects that need funding. All projects must be in economically distressed areas. These “targeted employment areas” are defined differently in each state, but essentially must provide jobs to neighborhoods that are at at least 150 percent of the national unemployment rate.
Audrey Singer, a researcher for the Brookings Institute, says this is hard to measure.
“It’s really difficult to know how many jobs are being created, how long-term they are, whether they are good jobs, or where the jobs are really located,” says Singer.
She wants a stricter definition of targeted employment areas. Right now, projects can use the unemployment rate of contiguous neighborhoods to qualify. A well-off neighborhood in Philadelphia can qualify as a targeted employment area as long as it abuts a neighborhood with high unemployment. The idea is that development next door will create jobs for the lower-income community.
Allentown’s unemployment rate sits at 7.2 percent, 144 percent of the national average. The Five City Center project is funded through CanAm, a regional center, and there are 40 investors putting in $500,000 a piece.
In an interview with The Morning Call, City Center Investment Corp. CEO J.B. Reilly said, “this $20 million will drive additional development which will drive additional jobs … we have 150 people working in the hotel that wouldn’t have the jobs without the EB-5 financing.”
They estimate that 658 direct and indirect jobs will be created by the development.
The city benefits from the loan, as well.
“It provides a lower cost of funding,” says Klasko. “There are situations where financing is available at 9, 12 or 14 percent, but this loan might come in at 2 or 3 percent. The foreign national’s main return is the green card, not return on investment.”
Allentown’s loan rate is 2 percent.
The 40 investors will get two-year green cards for themselves and their families. If the required number of jobs is created by the end of that two-year period, the investors can become permanent residents and apply for citizenship.
The program allows wealthy investors to skip the immigration line and bring their entire family at once, which can be difficult under other circumstances. But it can be risky: some investors have been scammed, and if the jobs aren’t there at the end of two years, their visas won’t be extended.
“EB-5 is like a Rubik’s Cube,” says Steve Yael-Loehr, an immigration lawyer at Miller Mayer law firm and a professor of immigration law at Cornell Law School. “You have to line up the immigration requirements, the timing in terms of when the jobs will be created and the other money that’s coming in.”
“But when all the sides line up, you’ve got a four way win. It’s a win for the U.S. workers because there are more jobs. It’s a win for U.S. taxpayers because its economic development at no expense to them. It’s a win for the U.S. developer because EB-5 funding is usually the capstone to get the project going or finished. And it’s a win for the investors, who get a green card.”
Allentown is working to line up the squares of its Rubik’s Cube. Officials are hoping that it will be as successful as the Pennsylvania EB-5 projects that are already completed. Each of them reached the jobs goal the program requires to grant permanent visas.