From The Northwest Herald comes a story that illustrates how EB-5 funds are beginning to be considered more often in planning and urban development projects. We are seeing more and more Economic Development Authorities and local councils elect to consider the use of EB-5 funds as part of the overall financing package now that domestic sources of funds may not be available, or cost prohibitive.
In the past, if a city or county wanted to build an office park, manufacturing zone, logistics hub or similar infrastructure development, they would simply issue general obligation, municipal or tax revenue bonds to finance the development. Now, with local coffers strapped, and property tax revenues declining (as the value of properties declines) many no longer have that option.
Enter the U.S. government and federal stimulus, combine that with a limited source of local funding and add the promise of EB5 visa foreign investor immigrant investors, and many projects that would otherwise not have been built are now being considered, The McHenry Lakewood sports complex, a project being considered in the EB5 visa Chicagoland Foreign Investment Group (CFIG) Regional Center, is just one of them. Here is an excerpt from the story on their source of funds:
?The other funding source will come from a federal financing program called employment based fifth preference, or EB-5. The program, created in 1990, offers foreign investors who create or save jobs permanent resident status.?
Eb-5 visa funds have been used in project development for many years, the oldest use being in the re-development of former military bases through the California Military Bases (CMB), and the Philadelphia Industrial Development Corporation (PIDC) projects. Newer EB-5 infrastructure projects include the American Logistics International Regional Center, City of Dallas Regional Center, Metropolitan Milwaukee Association of Commerce (MMAC), Upstate New York Regional Center, and several others.
The advantage that some of these projects have over EB-5 visa projects funded solely by EB5 visa immigrant investors is that they may have access to external sources of funding from a revenue collecting authority such as a municipality or city. Now with the introduction of Federal stimulus there may even be funding from the United States government. The question that should be asked by EB-5 visa immigrant investors is to what extent can that tax authority issue bonds, are these bonds general obligation (GO) or are they project specific, and what conditions may be attached to both the project that the authorities ability to tax it?s citizens.
For many potential EB-5 investors, the mere fact that there is a governmental body overlooking the status of the project to insure that there funds are well spent is a comforting thought, something that private developers would not be able to promote, the question of how in depth that oversight is, though, should be asked by any potential EB-5 visa immigrant investor. Ultimately, no matter who backs the project, of the venture is not a commercial success, it is likely that tax payers will continue to support it?s operation, only fund the initial development.
Lakewood sports complex clears committee hurdle
By KEVIN P. CRAVER
WOODSTOCK ? A McHenry County Board committee is recommending that the principals of a proposed Lakewood sports complex get $18 million in federal economic stimulus bonds to help the project along.
The Finance and Audit Committee voted Tuesday, 6-0, to recommend granting the bonding authority to McHenry County Sportsplex LLC, which wants to build a complex on 200 acres on Route 47 between the split of Route 176.
Plans for the $40 million project call for a facility that will provide indoor and outdoor fields and courts for numerous sports. The main building would be 125,000 square feet and contain restaurants and retail.
?I was very pleased with the support from the county,? President and CEO Lou Tenore said. ?This will create jobs, improve quality of life, and is intended to be a gathering place for people of all ages.?
The business plan states that the facility will create 420 permanent jobs, bring in 600,000 visitors a year, and make $15 million in its first year. Its business model is not reliant on rental ? it will own the leagues and create revenue through attendance and merchandising.
McHenry County received $27.5 million in federal bonding authority for private projects under the $789 billion American Reinvestment and Recovery Act. The bonds are meant to encourage lending for shovel-ready projects by giving investors a 45 percent refund of the federal taxes payable on them.
The full County Board must approve the request, which it likely will do at its next meeting Jan. 5.
The other funding source will come from a federal financing program called employment based fifth preference, or EB-5. The program, created in 1990, offers foreign investors who create or save jobs permanent resident status.
Joining Tenore at Tuesday?s meeting were the two investment banking firms who are going to underwrite the stimulus bonds and the EB-5 investment.
?They were in here with $35 million of the $40 million they need to do the job,? said committee Chairman Marc Munaretto, R-Algonquin.
Lakewood is close to starting the process of annexing the land, Village President Erin Smith told the committee. Village Administrator Catherine Peterson said the village hoped that construction would begin next year and that the complex would open in 2011.
The sportsplex is not the first private enterprise to approach the County Board for the stimulus bonds. EquityOne Sports Development applied in August for $15 million to build a baseball stadium at Route 14 and Lake Shore Drive in Woodstock, for the McHenry County K-Nines minor-league baseball team.
But Munaretto?s committee would not move the request forward until EquityOne had an underwriter for the bonds. President Mark Houser said late Tuesday afternoon that he still was lining up financing.
Both Houser and Tenore said their projects would complement, not compete with, each other. Tenore said youth who move up through baseball leagues at the complex would have a chance to graduate to minor-league baseball.
?I hope [the sports complex] goes,? Houser said. ?It would be great for the area.?