The Empire State Development Corporation admits that Bruce Ratner is misusing the federal EB-5 program which gives out green cards to foreign lenders in return for loans that create jobs or "retain jobs that would be lost without their money."
According to the ESDC, Ratner's attempt to use the program to raise nearly $250 million from Chinese lenders will not create any new jobs and is not needed to retain jobs.
That's what the Daily News reports today. First Norman Oder points this out about the News's headline:
Despite a phenomenally dull (and misleading) online headline, there's some important news in a Daily News article today headlined State agency says Bruce Ratner used federal program to finance Atlantic Yards project, Nets arena.
The headline in print is far more forceful: "Ratner plan Nets critics: Insist fund is about money grab, not jobs."
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Sports reporter and columnist Mike O'Keeffe breaks the news that the eyebrow-raising green-cards-for-cash-program (20 years old as it may be) is apparently being used improperly by Forest City Ratner to boost its bottom line, rather than creat jobs:
State agency says Bruce Ratner used federal program to finance Atlantic Yards project, Nets arena (Or, in print: "Ratner plan Nets critics: Insist fund is about money grab, not jobs.")
By Michael O'Keeffe. Daily News Sports Writer
A state official says funds Nets minority owner Bruce Ratner raises for the Atlantic Yards through a federal program that grants green cards to foreign investors will not create any new jobs beyond those already forecast for the $4.9 billion project, which includes a $900 million arena for the Nets.
Elizabeth Mitchell, a spokeswoman for the Empire State Development Corporation, said Ratner turned to the EB-5 program because it will save money on Atlantic Yards financing. (Emphasis added.)
That's decidely not the purpose of the program and actually appears to violate it. The article continues:
"If this financing was not available - or if Forest City Ratner is not as successful as we hope in raising funds under this program - then Forest City Ratner will need to raise funds from other sources to facilitate build-out of the entire project," Mitchell said in an email.
The EB-5 program was created in 1990 to encourage economic development in this country by granting green cards to foreign investors, and their families, who invest $500,000 or more to projects that create new jobs or retain jobs that would be lost without their money. The investors get back their money, and permanent residency in the United States, after two years.
Raising money through the EB-5 program, said David North, a former Labor Department official who is now a fellow with the Center for Immigration Studies, is much less expensive than financing projects through traditional means.
City officials urged Forest City Ratner to explore the program after the Brooklyn Navy Yard successfully sought $125 million earlier this year through the program, FCR spokesman Joe DePlasco said. The federal government still needs to approve the Atlantic Yards financing.
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"It's ridiculous to think that Forest City Ratner can't fulfill its obligation to build a new rail yard without this money," said blogger Norman Oder, whose Atlantic Yards Report serves as a clearinghouse for information about the Brooklyn project. "It looks like an effort to save money on financing. Parent Forest City Enterprises has more than $467 million in cash and credit capacity, according to its 9/8/10 earnings release. If it had to spend the money, it would."
North said Ratner probably isn't breaking any rules by tapping into the pay-to-stay scheme for cut-rate financing because the program's rules are vague. But he does object to granting residency to anybody who can write a $500,000 check.
"It shows the artificiality of the program, since these jobs would be there anyway, no matter where the funding comes from," North said. "I think the whole program is a terrible idea."
Develop Don't Destroy Brooklyn co-founder Dan Goldstein said it is disturbing to hear that Ratner is wooing Chinese investors with permanent residency after he already took on another partner, Russian mining magnate Mikhail Prokhorov.
"Green cards are valuable," Goldstein said. "They shouldn't be given out by somebody who is overhyping development projects."
Norman Oder, who orginally broke the green card story, followed up the O'Keeffe article, starting with a response to Mr. North's analysis and a reprise of his own jobs analysis:
'm not so sure the rules aren't being broken. They sure look like they're being stretched.
After all, the whole effort is accompanied by astounding and misleading public relations, starting with the presentation of the project as coupled with the Nets and the NBA.
And it's clear that this is violating the spirit (if not the letter) of the law, given that Congressional backers all say it's about job creation, not job retention.
Show us the math
As I wrote, show us the math. Forest City Ratner spokesman Joe DePlasco offers some vague assurances:
"The scope of the work (EB-5 financing) would cover is a subset of the total Atlantic Yards scope," DePlasco said. "And the jobs are a subset of the total project job creation as calculated based on the federal application guidelines.
Yes, there are established formulas by which investment is multiplied to project indirect and direct jobs.
However, 7696 jobs would associated with this investment. Extrapolate these job figures--for an investment about 5% of the entire $4.9 billion project--and Atlantic Yards should create or retain nearly 154,000 jobs.
Looking more closely
To reprise my analysis.
Yes, EB-5 investment monies can apparently be used as "last-mile" funding and thus be credited for a project as a whole.
But that should be evaluated by the federal government. And let's test that against reality.
Can this investment be piggy-backed on the investment in the arena and thus be seen as saving a construction jobs?
By my calculation (regarding job estimates for 2011 and 2012) it would be 1756 construction jobs over two years, or 3070 direct, indirect, or induced jobs, a figure that's still insufficient.
Maybe they'll try, but that's ridiculous. The arena's already funded, and its timing is driven by the naming rights agreement and other obligations.
Can this investment guarantee future construction jobs, or future office or retail jobs? No.
We have no idea whether funding is available for those buildings.
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Which city daily hasn't covered this story at all, to date? The New York Times.
