In Troubled Times How Vermont Got $600 Million From Foreign Investors
Starting around 2008, as the economy began struggling and banks got skittish about lending, foreign investors began sending hundreds of millions of dollars into Vermont.
They were attracted by a federal EB-5 visa program administered by the state of Vermont.
It allows foreigners willing to invest at least $500,000 to get green cards and live in the United States.
New Hampshire didn’t have anything like it, but the state is warming to the idea.
NHPR’s Chris Jensen reports.
Sound of construction……
Heavy machinery at work.
That’s been a pretty routine sound at Jay Peak in Northern Vermont the last few years.
The resort has been busy expanding and upgrading its facilities.
Sound of kids splashing and yelling…
Including an indoor water park.
And it all costs a lot of money.
“About $275 million has been raised and spent or in the process of being spent.”
That’s Bill Stenger, the CEO of the Jay Peak resort.
And that money all came from foreign investors, many of whom are from China.
“We have 550 investors in the Jay Peak projects here.”
Each agreed to risk a $500,000 investment for projects promising to create new jobs.
In exchange, the federal government granted their immediate family members green cards, allowing them to live in the United States.
It’s called the EB-5 immigrant investor program
Congress created it in 1990.
But it remains a somewhat controversial program.
Critics question whether it is right to allow wealthy foreigners to buy their way into the United States.
And they have doubts about how many new jobs really are created.
But advocates see it as a good way to attract investors, particularly in rural areas that badly need help.
Stenger says in 2008 - when the financial world turned upside down and traditional financing withered – the EB-5 program was indispensable.
Without the EB-5 funds there wouldn’t have been such widespread improvements.
“We would be the same old sleepy little ski resort we were back in 2006 versus a four-season, very different place today.”
And that’s gotten the attention of people in New Hampshire.
Jeff Hayes heads up the North Country Council, a regional planning group.
“To see $600 million invested just across the border and not be part of that is a concern.”
Tom Mullen is one of the owners of the Owl’s Nest Resort & Golf Club in Campton.
“Clearly Patrick Leahy and the state of Vermont saw the opportunity that for whatever reason wasn’t seen here in New Hampshire.”
The Jay Peak loans came through its state-run EB-5 Regional Center.
Bill Stenger had a major role in persuading state officials to open it back in 1997.
Now there are a little more than 300 EB-5 centers around the country.
Typically they are private, for-profit organizations.
They solicit business proposals, recruit investors for those projects and take a cut.
Nationwide, a few have been accused of defrauding investors, who are never guaranteed that they’ll get their money back.
That’s why some investors apparently find a state-run regional center more attractive.
“It is a perception thing.”
That’s Jeffrey Carr, the president and senior economist at Economic & Policy Resources, Inc.
It’s an EB-5 consulting firm in Williston, Vermont.
“For some groups of investors they get greater comfort if they know that there is government involvement in it and that implies government approval.”
Indeed, Vermont does not accept every business proposal it gets, says Brent Raymond, the Director of International Trade & Foreign Investment for Vermont.
“The state of Vermont has been careful, very careful about what sorts of projects we approve.”
Vermont sees EB-5 as a long-term economic development tool and it doesn’t want to jeopardize its reputation by approving any project, Raymond says.
Nevertheless since 2006 EB-5 projects have brought about $600 million into Vermont, according to Raymond.
Earlier this year the late Executive Councilor Ray Burton said New Hampshire needs something like the Vermont program.
“I have been very interested in this program since I heard about it mainly through business folks in Council District Number 1 as an opportunity to bring foreign investment.”
But Burton said he couldn’t get the state to do anything about it.
“We could never move Governor Lynch off dead center. He was ‘Well, we’ll study it. We’ll study it. Well, he studied it for six years and nothing happened.”
But George Bald, the former commissioner of the Department of Resources and Economic Development, says the complex application required by the federal government would have been expensive.
“We had been quoted anywhere from $250,000 to $400,000.”
Plus, Bald said he was under severe pressure to reduce costs, so he never asked for the funds.
“It was an expensive, complicated program and as I said we didn’t even have funding for a director of economic development.”
Jeff Carr, the head of the EB-5 consulting firm in Vermont, says about one third of the applications for a regional center are rejected by the federal government.
“So, can you imagine even if DRED went ahead and did this and they spend a quarter of a million dollars and then not get approved?”
Had the state managed to establish such a center Bald says he’s not sure how much it would have boosted New Hampshire’s economy during the recession. Success would have depended on businesses with good projects capable of attracting investors coming forth.
That may start.
In 2010 the owners of the Ragged Mountain Resort opened the New Hampshire EB-5 Regional Center in Danbury. The goal is to raise $35 million to improve the ski resort.
In the last few months three more centers have been approved by the federal government.
They are Live in America – Boston Regional Center LLC; the United States Investors Regional Center and the Invest New Hampshire Regional Center which is based in Campton.
The Campton operation covers Carroll, Grafton and Coos Counties, rural areas that particularly need investment.
That center’s manager, Kelly Wieser, says its first project is raising $10.5 million for improvements to the Owl’s Nest Resort.
Her father, Tom Mullen, is one of the resort’s owners as well as the new regional center.
“Our goal collectively would be to make it available to other projects, initially in the three counties and then beyond that if the opportunity presents itself.”
The state’s new DRED commissioner, Jeff Rose, says he’s also thinking about EB-5 money.
“I’ve spoken with businesses throughout the state who have expressed an interest in the program.”
So, Rose says, the state will be looking at EB-5 programs, including what Vermont did.