It’s a good thing the Sacramento Kings are pretty far along on their development around Golden 1 Center because one of the key money sources could be in serious jeopardy.
Known as the EB-5 program, it awards green cards to foreign investors who put in at least $1 million and create or preserve at least 10 jobs. Yes, you can buy your way into the line for U.S. citizenship.
There has been a lot of Democratic blowback to President Donald Trump’s cruel and wrongheaded executive order to limit immigrants and refugees, which canceled some 60,000 visas until a federal judge blocked it.
But it’s a bipartisan push in Congress to eliminate these investor visas, while Trump’s typical outrage is strangely missing. You’d think he might want to close a loophole tailor-made for wealthy Chinese hedging their bets. But, no, he’d rather slam the door on women and children fleeing the bloody civil war in Syria.
Friday, Sen. Dianne Feinstein of California, the top Democrat on the Judiciary Committee, and Sen. Chuck Grassley of Iowa, the panel’s Republican chairman, announced a bill to end the EB-5 program, which they say is full of fraud and abuse.
Their bill would not claw back visas that have already been issued, so the Kings project would apparently get in under the wire. It would redirect the nearly 10,000 visas available each year to other immigrants, though Trump and chief strategist Steve Bannon might try to drastically cut those numbers.
Congress created the EB-5 program in 1990 and in December renewed it until the end of April. Since 2012, it has generated nearly $9 billion in investment and 35,000 jobs, according to government estimates.
The senators, however, question whether the promised jobs have actually materialized and whether areas have been wrongly designated as “high unemployment,” which requires only a $500,000 investment. (U.S. Citizenship and Immigration Services is proposing to increase the minimum investment to $1.35 million in high-unemployment areas and $1.8 million elsewhere.)
Feinstein and Grassley also cite cases of investors being defrauded, including a $68 million Ponzi scheme involving a Bay Area oil company, a $160 million convention center in Chicago and allegations of $125 million in fraud in two Seattle real estate projects. If Trump wants to drain the swamp of corruption, this seems like a good place to look.
Then there are national security concerns of sketchy individuals, possibly even spies, taking advantage of the program. Where’s extreme vetting when you need it?
The senators say there have not been enough reforms since these issues were raised in a 2014 report from the Department of Homeland Security’s inspector general and a 2015 report by the Government Accountability Office. “The EB-5 program is inherently flawed,” Feinstein said in a statement. “It says that U.S. citizenship is for sale. It is wrong to have a special pathway to citizenship for the wealthy while millions wait in line for visas.”
Rich immigrants like the program because it’s cheaper than similar ones in Australia and Canada. Immigrants can invest directly in businesses or in regional centers that broker and pool EB-5 investments. As of Monday, there were 1,266 centers, including 218 in California.
Developers like it because investors demand lower returns. In an early project, $18 million raised through the program helped convert Sacramento County’s McClellan Air Force Base into a business park. EB-5s became much more popular during the Great Recession as other financing sources dried up, with nearly 9,000 visas issued in 2015 compared to 64 in 2003.
The Kings and partner JMA Ventures capitalized on the EB-5 program to help pay for the public plaza and the $500 million Downtown Commons mixed-use development around the arena, including The Sawyer, the 16-story hotel and condo tower scheduled to open this summer.
The team won’t say how much in EB-5 financing was raised, but says it met job creation and other requirements. Kings and JMA officials went to China to recruit potential investors and worked with Golden Gate Global, a San Francisco-based EB-5 investment fund that says it has raised more $400 million since 2011 and helped find investors for the $8 billion redevelopment of Hunters Point shipyard and Candlestick Park in San Francisco.
EB-5 visas – used to build the Barclays Center arena in Brooklyn – were also talked about in some of the early financing plans for Sacramento’s arena. But the city eventually found other sources for its $255 million contribution toward the $500 million-plus construction cost. The Kings didn’t use EB-5 for any of their construction financing, either.
That’s for the best. It would have been a very bad look for wealthy Chinese to get a green card by helping pay for a city-owned arena in the capital of California, home to about 3 million undocumented immigrants from all walks of life who can only dream about getting on the path to citizenship.
Speaking of bad looks, it’s curious that this troubled program hasn’t become a target for Trump and Bannon. They do seem to be on an anti-immigrant crusade, including an executive order circulating to curtail the H1-B visa program that Silicon Valley companies rely on to bring in foreign software engineers.
It’s also curious because the vast majority of EB-5 visas go to investors from China, a favorite scapegoat for the president.
Could it be that Trump wants to help his developer buddies? After all, he did say Friday he wants to roll back regulations passed after the 2008 financial crisis because “friends of mine, that have nice businesses, they can’t borrow money.”
Or is it possible he wants to keep the program intact for his own business empire? His son-in-law Jared Kushner, now a senior adviser in the White House, raised $50 million in EB-5 funds, mostly from Chinese investors, to open the Trump Bay Street apartment tower in Jersey City in November.
President Trump can talk all he wants about putting “America First” and championing forgotten workers over Wall Street fat cats. But action – or lack of action – speaks much louder than words.