Sen. Chuck Grassley is blaming “moneyed” New York developers for crushing proposed legislation that would have extended the EB-5 visa program for five years.
In a series of tweets on Friday, the Republican senator from Iowa indicated that his “EB-5 Reform Act” would not be included in the upcoming federal funding bill, which Congress must pass by March 23 to avoid a government shutdown. EB-5 visas — popular among New York developers — let foreign investors obtain a U.S. green card in exchange for investing $500,000 into a job-creating development project.
In his Twitter tirade, Grassley said that he and Sen. Bob Goodlatte of Virginia worked out a “compromise” that was rejected by “Manhattan real estate moguls” and their “moneyed interests.” He lambasted the EB-5 program for being “rife with fraud and corruption” as well as “major national security loopholes.”
To date, the EB-5 program has been extended in a series of one-year resolutions, despite calls to overhaul the program by raising the investment amount and requiring more transparency. “It’s very difficult to run a program like that,” said Ron Klasko, managing partner at Philadelphia-based Klasko Immigration Law Partners.
In recent weeks, Sens. Grassley and Goodlatte circulated a proposal that sources said was negotiated with industry representatives. Those representatives pulled their support last week, sources said.
“The EB-5 industry is at the edge of a cliff right now,” said Doug Hauer, chair of Mintz Levin’s EB-5 financing practice. “It may not be too late to reposition the discussion with lawmakers, but that’s going to involve concessions on the part of the parties who have negotiated the deal thus far.”
Grassley and Goodlatte’s proposal would have raised the minimum investment amount to between $925,000 and $1.025 million, up from $500,000 to $1 million.
It also would have “set aside” a certain number of visas each year for projects located in specific geographies and sectors. For example, 200 visas would be earmarked for government infrastructure projects, while 1,450 visas each would be allocated for projects in rural areas and high-poverty urban areas.
Although Grassley didn’t name names, Related Companies — which relied on EB-5 investment to help fund its Hudson Yards development — has lobbied against changes to the program. So has the U.S. Immigration Fund, a regional center that has raised money for many Manhattan projects.
Ron Klein, a former U.S. Congressman and now a lobbyist with Holland & Knight, said the “set asides” unfairly punish urban developers. “We’ve been fighting against including this bill because parts are just fine — such as anti-fraud provisions — but the other is a death sentence for urban areas,” said Klein, whose clients include USIF.
Another problem with Grassley and Goodlatte’s proposal was the elimination of so-called “targeted employment areas,” or low-income areas where the investment threshold is lower. Over the past few years, many New York developers cobbled together census tracks to benefit from TEA designation even though their projects were physically located in ritzy Manhattan neighborhoods.
“People were saying, ‘Why are EB-5 funds going to build high-end condos?’ The answer is condos are not being built for people who need jobs — but by people who need jobs,” said Abteen Vaziri, the director of Greystone EB-5 Holdings.
According to Klein, there were other mechanical issues with the latest proposal, including a 120-day moratorium on new investor filings and a provision that bars EB-5 money from projects that have sovereign money as part of the capital stack. “For [the past] three years, the exact same people have been writing this bill and you end up with the same result,” he said.
But he stopped short of saying that EB-5 would not be part of the omnibus bill.
“My view is it’s never over until it’s over,” Klein said. “We have until Friday.”