An investigation into this criticism reveals, however, that the
current flexibility the states are allowed (i.e., the current practice
of census tract combinations) helps to realize the intention of
the EB-5 program. The intent of the program is to create jobs—
most specifically, jobs for those who are unemployed.
Contrary to critics’ angst, current TEA policy truly promotes
new job creation in areas of high unemployment. Specifically,
within a connected regional economy, new jobs tend to positively impact those living in disadvantaged areas more than they
affect those in low unemployment areas. In new research from
the W. E. Upjohn Institute, it has been shown that new jobs
created in areas containing high unemployment have a disproportionately large and positive impact on the labor force in that
area compared to new jobs in an area with low unemployment.5
The table below, using results from that study, shows that the
vast majority of new jobs are soaked up by those living in high
unemployment areas, not by those in low unemployment areas.
Figure 1: Long-run effect of 1,000 new
jobs on local residents’ employment
600
522
500
400
300
239
In regards to the EB-5 program, these findings indicate that
jobs created by a new project in a TEA made of combined census tracts will have a disproportionately positive impact on the
labor force in the high unemployment areas, even if the project
is not located precisely in those disadvantaged areas.
The Consequences of a Single Census Tract Limit
A single census tract limit on TEAs, or even an arbitrary limit
of a higher number of tracts (such as a 10-tract limit), would
prevent potential projects—to which workers from high unemployment areas could reasonably commute—from locating in
an area where those workers would benefit.
The S. 1501 definition of a high unemployment TEA disallows
the combination of census tracts to create TEAs and also implies
that states, MSAs, counties, cities and census block groups
exhibiting unemployment rates greater than 150 percent of the
national average would also no longer be eligible. This policy
would drastically diminish the number of TEA-based options for
project investment.
As the curent market dictates that EB-5 projects must virtually always locate in a TEA because of the lowered investment
incentive, the policy would prevent many viable projects that
would otherwise spur positive economic activity from proceeding. Limiting the possible labor force to be calculated in a TEA
to an area as small as a single census tract would severely hinder
EB-5 investment and the resulting economic growth from the
EB-5 program.
Case Study: Impacts of a Census Tract
Limit in Los Angeles, California
Figure 2: 2014 High Unemployment Area
Map of Central Los Angeles, C Ɩf