Looking for ways to help make Rochester's $6 billion makeover a reality, Destination Medical Center leaders are considering whether to tap into a federal economic development program that raises money from wealthy foreign investors seeking a path to U.S. citizenship.
The DMC Economic Development Agency plans to study whether it would make sense to use the EB-5 program to help fund local construction projects. The EDA's Executive Director Lisa Clarke said EB-5 is one of many financing tools being considered.
"The DMC Development Plan identified the federal EB-5 program as one of many potential investment sources to support DMC projects. As part of the implementation phase of the Development Plan, the EDA will begin to explore EB-5, and other sources of project funding, as part of the comprehensive business and economic development strategies for DMC," Clarke said in an emailed statement.
The 20-year DMC plan seeks to turn Rochester into a global destination for health care. Mayo Clinic has already pledged to invest $3.5 billion in downtown Rochester towards that effort and leverage another $2 billion in private investment. Lawmakers approved spending $585 million in public funds to support those efforts.
More developers have been taking advantage of the EB-5 program in recent years. As part of the program, immigrants who are willing to invest a minimum of $500,000 are eligible to receive a two-year, conditional green card. If the project creates at least 10 jobs after two years, the investor is eligible to receive a regular U.S. green card. The North American High Speed Rail Group is considering using EB-5 to help finance a high-speed rail line from Rochester to the Twin Cities. It turns out that Rochester is also home to the first EB-5 regional center in the state.
Expanding program
The North Dakota/Minnesota EB-5 Regional Center opened an office in Rochester a couple of years ago, according to Alexandra Loveless, the center's senior project manager. She said the center picked Rochester because of its potential for economic growth.
"We were approached by some individuals who were already doing business down in the Rochester area. They had done some work with the Mayo Clinic, and they had talked about all the expansion that was going to be happening and how Rochester was just really a booming area right now," she said.
The nonprofit center is owned and managed by the University of North Dakota Center for Innovation Foundation. When it opened in 2011, the center was originally focused on North Dakota and 20 northern Minnesota counties. A couple of years later, when the center sought approval from U.S. Citizenship and Immigration Services to expand its coverage to all of Minnesota, it was the only EB-5 regional center, Loveless said. Fast forward to 2015 and there are five other approved regional centers in the state.
The program was established in 1990 and operated in relative obscurity until 2005, when it started to become more popular — especially on the east and west coasts, Loveless said. The vast majority of EB-5 investors come from China, where the program is well established. The center has an office in Shanghai, China, set up to work with foreign investors.
"China is the most well-educated market on EB-5, and so it's the easiest market to enter into," she said.
Oversight questioned
The North Dakota/Minnesota EB-5 Regional Center has raised more than $100 million via EB-5 and is in the midst of funding its third project. So far, all of the developments have been in North Dakota.
The EB-5 program has had its share of critics in recent years. The U.S. Government Accountability Office issued a report last month that found the federal government needs to do a better job overseeing the program to address fraud and national security risks. Also looming is the potential for major changes to the program.
The program is set to expire on Sept. 30 unless Congress takes action. Sen. Chuck Grassley (R-Iowa) and Sen. Patrick Leahy (D-Vt.) are sponsoring a bill seeking to tighten oversight of the program. It would also raise the minimum investment requirements from $500,000 to $800,000 for projects in areas with higher unemployment and from $1 million to $1.2 million for all other areas.
Loveless said the center is holding off on pursuing any other projects until Congress acts.
EDA board member Gary Smith said he'll be among those helping advise the private, Mayo Clinic-run group on whether to use EB-5.
"It may or may not make sense to do it. Once we look at it, a decision will be made whether or not that's something to pursue," said Smith, who is also president of Rochester Area Economic Development Inc.
As for critics' concerns with the program, Smith said he is confident that if the EDA decides to use the EB-5 program, it will be done wisely.
"It will have good stewardship here," he said. "It's not going to be something that's done shoddily. It will only be done after a lot of research, through a determination we can get a lot of value out of that."