California Formalizes Strict Approach to TEA Designation

The newly formed California Governor’s Office of Business and Economic Development (GO-Biz) held a conference call today to provide EB-5 stakeholders with an update related to the issuance of Targeted Employment Area (TEA) designations in the state of California.  Specifically, the call was meant to formally announce that California would now provide customized TEA certifications for projects that qualify under the new state guidelines.

Eligible TEAs include metropolitan statistical area, counties, cities, or individual census tracts with qualifying high unemployment. The state has introduced a new web page which will list the qualifying TEA counties, cities, MSAs and census tracts.  The goal of the database is to allow projects to immediately know if they are eligible for a TEA designation, prior to applying for certification from the state.  Projects that do not fall into any of the areas listed on the website will not be eligible to receive a formal certification letter from the state. 

EB-5 projects that received special area designations in previous years may request a renewed certificate if it is for the same investment project, it covers the same subarea, and the then current unemployment data provides a high unemployment rate for the aggregated area.  Likewise, applications that have been submitted and are currently pending will be evaluated under the previous guidelines.  Such requests will be handled on a case-by-case basis and renewed certificates might be issued at the discretion of the state.  While this grandfathering of existing projects is welcome news that will not disrupt pending projects, Brook Taylor, Deputy Director for Communications and Policy for GO-Biz was not able to state how long this policy would be in place for. 

Importantly, the state will no longer allow applicants to link multiple counties, cities or census tracts together to create an area of high unemployment certified by the state, commonly referred to as “gerrymandering.”  Mr.  Taylor noted on the call that aggregating counties, cities, or census tracts are not in line with the state guidelines of the program as the intent of the state is to support projects in areas of high unemployment and to ensure transparency in the TEA designation process.

If a project is not eligible for state certification, it will to apply directly to the USCIS to obtain TEA designation by showing that the project is in fact located in an area of high unemployment.   The designation and certification of TEAs in California is effective from May 1, 2012 through April 30, 2013, when a new certified list will be issued based on calendar year 2012 unemployment data.

Many stakeholders on the call voiced their concerns that implementation of this new policy will prevent many cities in California from being able to attract EB-5 immigrant investor funds, this includes places such as Anaheim, San Francisco, and San Jose .  In response, Taylor noted that it was concerns over expansive interpretations of TEAs by other states notably New York and Florida that prompted California to eliminate the practice of joining census tracts to form TEAs.  Despite California’s concerns, in the January 23, 2012, EB-5 Stakeholder Meeting USCIS officials noted that they will “defer to the state’s TEA designation in terms of the state’s definition of the geographic boundaries of the TEA based upon high unemployment.”