Surprise looking to attract more foreign investors

(Source: Phoenix Business Journal - by Mike Sunnucks)
The city of Surprise wants to attract more foreign investment to finance solar and technology startups.
Economic Development Director Jeanine Jerkovic said Surprise has applied to become a regional center in the federal EB-5 visa program, which allows foreign nationals and their immediate families to get permanent U.S. green cards if they invest $500,000 to $1 million in the U.S. economy.
“We hope it will spearhead another source of funding,” Jerkovic said.
She expects the foreign investment zone designation to help attract cash infusions for solar, biomedical and high-tech startups in Surprise, including the AZ TechCelerator, a business incubator housed in the old Surprise City Hall. She also said there is one health care company that could receive foreign investment if the city gets the EB-5 designation.
If the Arizona Department of Commerce and federal government designate Surprise as a regional center, the foreign investment threshold would be $500,000 and each investment must create at least 10 jobs to qualify for the visa program.
Regional centers must exhibit economic needs, including economic distress such as high unemployment rates. In January, the U.S. unemployment rate was 9.7 percent. The rate in Surprise was 8.4 percent overall, but it was as high as 14 percent in some geographic areas, Jerkovic said.
Fernando Jimenez, international trade and investment director for ADOC, said his agency approved Surprise’s application to become a foreign investment zone at the beginning of the year, and it now is under consideration by the U.S. Bureau of Citizenship and Immigration Services. He expects a decision within six months.

Good opportunity

The EB-5 visa program has been around since 1990, but has come more into focus as credit and financing options evaporate for startups and small businesses. U.S. financial institutions have strangled small-business and consumer lending as banks try to boost reserves and avoid bad investments during the recession.
“This is a great opportunity for projects that don’t have conventional sources of funding,” Jimenez said.
He said the regional investment zones can be operated by cities or by private groups. They can be narrowly designated for a single project or industry, or have a broader scope.
Jerkovic said Surprise’s proposed EB-5 zone covers the entire city and is focused on new technologies including solar, biotechnology and information technology. She hopes it will help bring business investments into the West Valley from markets such as Spain, Canada and China.
ADOC also has approved applications for investment zone designations from Yuma, Florence and South Phoenix. Those are under consideration at the federal level, Jimenez said.
But Rob Sanchez, author of the Job Destruction newsletter in Chandler, said foreign investors sometimes get their green cards without coming through with promised investments. He also questions the idea of the U.S. government essentially selling green cards to rich investors.
“Foreigners come into the U.S. flashing big billfolds, but they rarely invest the half- to $1 million they were supposed to,” Sanchez said. “They usually end up investing a fraction of the money, perhaps $10,000 in dubious enterprises, and they have no intent to hire Americans.”

Piggyback efforts

Surprise’s efforts piggyback on those of Westmarc, which is seeking foreign trade zone status for the West Valley. That status would bring state and federal tax breaks for manufacturing, distribution and industrial companies.
Jack Lunsford, president of the economic development group, said getting foreign trade zone status would help attract businesses from California. He said federal agencies are reviewing Westmarc’s application.
There currently are six foreign trade zones in the state, including parts of Phoenix and Mesa. The West Valley trade zone would includes areas of Goodyear, Avondale and Tonopah off Interstate 10.
Arizona’s only EB-5 zone to date is operated by Scottsdale-based McDowell Enterprises Inc. That zone encompasses Maricopa and Pinal counties and allows for foreign investment in development and construction of medical buildings.
McDowell Enterprises is a developer of medical office buildings. Company executives did not comment for this story.
There are 89 regional centers nationwide under the EB-5 program, according to the Bureau of Citizenship and Immigration Services. Some of them are in Los Angeles, Napa Valley and Riverside, Calif.; Las Vegas; Seattle; and Miami.