Updated 12/10: The LA Business Journal has uncovered an eyebrow-raising practice in which developers use poor neighborhoods in the US to get money from rich foreign nationals, who get green cards in exchange. No joke! This is happening! A dual front in the worldwide class wars! Under the EB-5 program, foreign citizens can get a US visa just by investing $500,000 or more in a "targeted employment area" (a community that needs the jobs); in the past few years it's become a very popular method for funding development in Los Angeles, since developers can pay much lower interest to these individual investors--mostly Chinese and South Koreans--than they would to a bank. The TEAs are determined by each state, and in California, Governor Schwarzenegger's administration "allowed developers to link an unlimited number of census tracts." So all a developer had to do was draw a map big enough to include lots of high-unemployment areas, no matter how far from their actual project, and they could start collecting that foreign cash. (Brown's administration has limited the number of census tracts, which hasn't helped that much.) Update: Developer Singpoli Group has asked us to clarify that this is all completely legal. This is all completely legal. Governor Schwarzenegger's administration created a loophole by allowing these unlimited maps; Governor Brown's administration has tried to close it by limiting the number of census tracts that can be included.
For instance, developer Hardage Group is building a Marriott Courtyard in Marina del Rey that's managed to qualify for EB-5 funds even though MdR has an unemployment rate below six percent, not even half the LA County average (it is "not in a city, county or census tract defined by the state as a high-unemployment area"). But Hardage's map for the project
heads northeast from the marina, avoiding the commercially successful areas of Santa Monica, Culver City and Playa del Rey, then expands broadly to the southeast, encompassing poorer communities such as Crenshaw, Baldwin Hills, Leimert Park, Hyde Park and a wide swath of South Los Angeles. It ends at 120th and Figueroa streets, some 80 blocks south of USC. A laborer who lived in that neighborhood would face an hour-and-a-half bus ride to the hotel site. Using that map of 150 census tracts, Hardage can say their Marriott is in an area with 15 percent unemployment.
The LABJ also found a Pasadena hotel developed by Singpoli Group that uses a map that runs down to Compton (it's collected $38 million in EB-5 money), a Temple City project with a map "including 10 cities and one unincorporated area stretching to Compton nearly 20 miles away," and a Cerritos office building with a map covering six miles and three cities. (That last one was under the new Brown rules.) But of course when the developers go to hawk their wares in China, all they talk about is how rich the areas around their projects are.
· Developer Money Crosses the Lines? [LABJ, sub. req. sadly]