EB-5 Visa Program: Its The End of RIMS II As We Know It, and I Feel Fine
by John Barrett
The validity of using RIMS II as a verifiable economic methodology has been in limbo since June 19, 2013. On this day, the Bureau of Economic Analysis (BEA) issued a press release announcing the discontinuation of the RIMS II model. The RIMS II model had specifically approved by USCIS as a valid methodology to calculate indirect job creation arising from an EB-5 project. This press release rippled through the EB-5 community and led to questions concerning deference for projects and regional centers already approved for RIMSII. How long would the latest RIMSII data and multipliers, updated in 2010, be considered valid? What options, if any, would USCIS offer to positively adjudicate pending EB-5 applications that relied upon those prior jobs reports? The press release added another level of uncertainty to an already uncertain adjudication process.
Fast forward one year and on July 3rd, 2014, BEA announced that in 2015 it intends to begin producing a modified economic model to replace RIMS II. This new press release also raises many questions for participants in the EB-5 field. Among these is whether or not your project should use this new modified model in the future? Will USCIS still recognize this new model as a verifiable methodology as it did RIMS II? These are legitimate concerns, especially given the time invested to get a project/regional center application adjudicated successfully. Any uncertainty can materially affect the marketability of a project. To answer all of these questions it is useful to compare what the new economic model will look like compared to what BEA had produced prior to its June 19, 2013 press release.
Historically RIMS II has contained two sets of multipliers, an annual series and a benchmark series. These two series contain two main differences. The first is the level of industry detail available in each series. The benchmark series’ underlying national I/O relationship is based on the benchmark I/O table, which contains detail enough to provide a set of multipliers for 406 industries. This benchmark I/O table is produced every five years. The annual series of multipliers based its national I/O relationship on an annual I/O table constructed with more current but less detailed data for 62 industries. Both of these two series are “regionalized” by annually updating their location quotients with regional wages and earnings data.
USCIS requires the use of multipliers at a sufficient level of detail, in terms of NAICS code, to constitute a meaningful and transparent methodology. In the past, the RIMS II benchmark series multipliers were the multipliers used on thousands of successfully adjudicated I-526s and I-924s and they provided this level of NAICS specificity desired by USCIS, often to six-digits.
Going forward, according to the BEA announcement, here is what the new modified economic model will look like. The benchmark series will not change and it will be improved. It will still use the benchmark I/O table for its underlying national I/O relationship. The first incarnation of the benchmark series to be released in 2015 will use the newly derived 2007 benchmark I/O table, an improvement over the 2002 benchmark I/O table used in the past. The model will be updated annually with local data to capture the latest location quotients, just as it was in the past. BEA will also provide a more aggregated 62 industry set of multipliers based on the same benchmark methodology, just as it has in the past.
So where is the change that forces BEA to use the term “modified” when referencing its future model? The omission going forward is the annual series of multipliers. These multipliers required the time consuming task of annually updating the underlying national I/O relationships, albeit at a much more aggregate level. This series of multipliers which made the tradeoff of industry detail for more timely data on production technologies will no longer be produced. This is the cost savings alluded to in the second sentence of the BEA announcement. The annual series of multipliers were useful for certain exercises where industry detail was not as important as attempting to capture the most current distribution and magnitude of inputs to production used by those 62 industries.
The benchmark series that will continue to be produced, unchanged, is the appropriate choice for EB-5 practitioners. It has always allowed economists to accurately estimate the economic impacts from EB-5 projects and USCIS has recognized that with their favorable adjudications. The worry and consternation that has been floating through the EB-5 world about the fate of RIMS has been for naught. The BEA will produce an improved benchmark series starting in 2015 and EB-5 practitioners can continue to use the new model with confidence.
Reprinted with permission.
John Barrett is an economist with significant experience with EB-5 program, including serving as an expert witness before the USCIS Decision Board and winning on the issue of “tenant occupancy.” Before co-founding Performance Economics, Mr. Barrett was a Regional Economist at the Bureau of Economic Analysis in the division that developed the RIMS II input-output model. He was also a Principal at IHS Global Insight, the world’s leading economic forecasting and consulting firm. He may be reached at email@example.com.