Economic analysis problem revealed!
February 17, 2012 12 Comments
2/27 Update: see my post including generic text seen in several recent RFEs.
The USCIS Office of Public Engagement has just sent the following email:
Dear Stakeholder,
In our last stakeholder call regarding the EB-5 immigrant investor program, a number of stakeholders raised questions with respect to our adjudication of petitions that for purposes of the job creation requirement have utilized what has been commonly termed a “tenant-occupancy” methodology. In light of the number of questions we received on this subject, we thought that providing clarification of our approach was warranted.
The “tenant-occupancy” methodology seeks credit for job creation by independent tenant businesses that lease space in buildings developed with EB-5 funding. USCIS continues to recognize that whether it is economically reasonable to attribute such “tenant-occupancy” jobs to the underlying EB-5 commercial real estate project is a fact-specific question. Each case filed will depend on the specific facts presented and the accompanying economic analysis.
USCIS is now moving forward with the adjudication of certain pending I-924 Applications For Regional Centers Under the Immigrant Investor Pilot Program that are supported by the “tenant-occupancy” economic methodology. Our newly-hired economists and business analysts will be bringing expertise to these new adjudications, and requests for evidence will be issued to certain applicants and petitioners to address any questions or issues we have about the economic methodologies employed in their specific cases. Our adjudications will continue to be made on a case-by-case basis and we do not intend to revisit factual findings. I-526 Immigrant Petitions by Alien Entrepreneurs and I-829 Petitions by Entrepreneurs to Remove Conditions will have predictability in connection with early regional center adjudications.
Our retention of experts with economic and business analysis expertise is part of our ongoing efforts to improve our administration of the EB-5 program. We are taking other steps to both improve the efficiency of the program as well as to ensure its integrity. We look forward to keeping you informed of these improvements.
Kind Regards,
Office of Public Engagement
U.S. Citizenship and Immigration Services
http://www.uscis.gov
The caginess of this phrasing is nice in that it avoids undercutting previous approvals, but gives no guidance for how we should deal with “tenant-occupancy” jobs going forward and what will and won’t be acceptable. This is huge. I hope that Requests for Evidence issued will provide further hints.
EB-5 Updates 
USCIS being USCIS!
I read that as a silent shout out that some rather pathetic projects were put forth. I would guess that folks tried to beat the fee and submitted hurriedly prepared proposals, that did not make the grade. It’s just a thought.
Tenant jobs have been a staple BUT I can see where some rather tenuous or outright ridiculous connections may have been asserted. It’s a nexus issue that is NOT new to EB-5 (re-read Izummi). It is a rookie mistake that has undoubtedly been reoccurring in droves. I am not surprised. I plan on including some in-depth discussion on NEXUS in upcoming talks in April.
The tenuous connection between money to jobs have been asserted not just by rookie regional centers, but even prevalent in the economic studies of some long standing regional centers. Right now not only TEA definition is being stretched, revenue projection goes beyond belief in some projects’ economic studies.
I think the new economist(s) decided to change the rules. Our application was held with the group from 11/2010. The application was very detailed and professionally handled by economists with proven track records in EB-5. What was puzzling was the fact that nothing was mentioned about the Tenant Occupancy in the 10/2011 RFE. This screams that the new processes established for T.O. came into play after 11/2011 once the normal RFE response should have been received. We had one exemplar that represented T.O. as a example of this category. Everyone understands that folks can’t move from one office to a new office building and still count these as new jobs. Case in point; I new office building has new leases based on new services or medical offices not available in this region before, therefore no office swap from old to new offices would or had occurred.
Thank you for your comment. If you receive another RFE treating the T.O. issue, I’d be very interested to know what it says exactly. Since the projects that you propose actually will create jobs, I think that you needn’t worry, except about the delay. It will be troublesome to provide whatever additional evidence/demonstration USCIS decides to request, but where job creation will indeed occur there must be an acceptable way to show it and gain approval. The waters have been muddied by some proposed investment projects whose actual job creation impact obviously/logically couldn’t be near what’s claimed on paper, and it’s unfortunate that many applications have to suffer for the faults of those few.
I really look forward to hearing more from you on this topic!
I have a new item posted that touches on this issue and more at: http://www.slideshare.net/BigJoe5/a-case-to-improve-nexus-planning-for-eb5-rc-projects-2192012
Is USCIS going to discredit tenant jobs all together? Is that a new development that the economists at USCIS brought?
This email does not indicate that USCIS is discrediting tenant jobs altogether, since these jobs are approvable on a case by case basis (“USCIS continues to recognize that whether it is economically reasonable to attribute such “tenant-occupancy” jobs to the underlying EB-5 commercial real estate project is a fact-specific question.”) I will look forward to seeing how RFEs issued on specific cases drill down the problem. My guess is that one issue may be “moving across town” jobs versus “new” jobs. USCIS has commented before in stakeholder meetings that investment in building a new office building for a company that’s just relocating can’t claim that it contributed to creating the jobs in that company. But in fact, nearly all economic reports that I’ve seen count jobs of office tenants as new job creation and don’t deal with the question of whether these may be relocated jobs. If a developer builds a new retail building, it’s very likely that the Starbucks store that leases there is actually a new Starbucks store that will create new jobs in the neighborhood. On the other hand, if a developer builds a new professional office building it’s more likely than not that tenants will be existing local businesses with existing employees just moving from one office to another. In the case of new government office space, it’s not only likely but almost certain that “tenant” jobs will just be existing government employees moving across town. I don’t know how practically econ reports can deal with this, but new vs. relocating jobs is an important issue and I can imagine that USCIS may be trying to deal with it finally.
I urge folks to share their REDACTED RFEs, please. Some of the potential RC projects that I have seen floated around shockingly miss some fundamental basics of EB-5. There are some folks merely seeing dollar signs and not understanding what will qualify. Suzanne makes a great point–it has been slow going–it is too bad that the decent proposals had to wait for the “first-in first-out” process to catch up to a more regular workflow state. I truly believe that the backlog that happened in a rush to beat the fee, cluttered the whole program. On the other hand, USCIS must have gotten many prime examples of what will NOT qualify. The currently developing “Guidance Memo” should include some clear examples based on the volume of proposals that they have had to review to this point.
Suzanne,
Great work putting these issues out in front, please keep us all posted if you hear of anything new. I agree with John, I think that this is a new direction, or at least as Joe says a more “bright light” interpretation of Izzumi which is good in a way, to RFE the weaker projects, but it seems to have plugged up the whole system and with not a lot of clarity on how to go forward. This is frustrating for Centers, attorneys, developers and investors and is not a great way to run a program.
It’s a shame what is happening in EB-5. Seems to me like the adjudicators, present and past, at USCIS charged with handling RC petitions are unsophisticated as to how to read the Code of Federal Regulations. I guess that shouldn’t come as a surprise in that the government allows individuals from, let’s say the Forestry Service, to transfer to USCIS and become adjudicators.
Once made an adjudicator, it seems these folks believe they, in fact, do know how to read regulations and interpret them reasonably without having any sort of formal legal training. Unfortunately, the recent events surfacing at USCIS (tenant occupancy) clearly indicate that the the adjudicators just don’t make the grade.
For tenant occupancy to be a long-standing practice of EB-5 Regional Centers, while now being called into question as an unreasonable economic methodology, shows how little these adjudicators knew and know.
I, for one, am pleased USCIS is hiring economists and, perhaps, securities attorneys, so that this program is finally running as it should.