By Sam Hemingway, Free Press Staff Writer  

Vermont — Bill Stenger stood on a patch of muddy ground and waved at the operator inside the bucket loader as it rumbled across the construction site for Jay Peak’s new hotel just west of the ski resort’s existing base lodge.

“You can’t see it right now, but we’re standing on top of a $1 million, state-of-the-art stormwater-retention system,” Stenger, 60, shouted over the roar of the machinery.

Stenger, co-owner and president of the 53-year-old resort, nodded at a labyrinth of cement footings poking through a recently arrived coat of snow.

“There it is,” he said, grinning and gesturing at what eventually will be a 78,000-square-foot, $17 million slope-side hotel with 57 bedroom suites.

Welcome to Phase I of Jay Peak’s plan to make itself into a year-round recreation destination. Coming soon: Phase II, which will include two more condominium hotels, a huge indoor water park encased in thermopane glass, an indoor ice skating and curling rink, a bowling/nightclub area, plus a slew of new trails and lifts.

Total cost of Phase I and II: Almost $100 million.

And Jay Peak doesn’t plan to borrow a dime to pay for any of it.

Instead, the money will come from close to 200 foreign investors willing to plunk down $500,000 apiece so they can obtain a “green card” visa from the U.S government that will allow them and their families to live full-time in the United States — forever.

The money-for-green-card arrangement is permitted under what’s known as the EB-5 program administered by Citizenship and Immigration Services, the agency formerly known as the Immigration and Naturalization Service.

The program is designed to provide green cards to foreigners who provide at least $500,000 in investment capital for projects in high unemployment areas of the country. With each $500,000 investment, the program requires the creation of 10 jobs.

“It’s a win-win-win thing,” Stenger said. He reasons that, when the resort’s expansion work is done, Jay Peak will be bigger and better and that 2,000 or more permanent jobs will be available in and around Orleans County.

“I’m excited,” Stenger said. “This is a rural community with the highest unemployment rate in the state. It is going to see $100 million in a strategic investment that is going to change the character and lives of thousands of people.”

James Candido, a state economic-development specialist who monitors EB-5 projects for Vermont, said anyone who thinks EB-5 is just a way for rich foreigners to buy their way into the United States misses the point.

“This is a pure job-creation visa program,” Candido said. “The only goal of this program is to create American jobs with foreign dollars.”

Only Jay Peak and Sugarbush Resort have used the EB-5 program in Vermont. Sugarbush Resort is raising $20 million through EB-5 to pay for an expansion of hotel and lodge facilities scheduled for construction in 2009.

Stenger, the first Vermont business leader to figure out how to make use of EB-5, thinks the program could provide needed investment capital to Vermont businesses of all kinds — especially at a time when most other sources of money and credit have dried up.

“The opportunity is enormous,” he said. “We’re plowing the field for the rest of Vermont … . I want it to go beyond Jay Peak. I want it to go to other parts of the state. I want it to be used for other things than just the travel industry.”

EB-5’s beginnings

The origins of EB-5 go back to the mid-1980s, a time when the Canadian city of Vancouver was undergoing a dramatic facelift financed by capital from foreigners — mostly from Hong Kong — in return for permission to emigrate to Canada.

The initiative caught the attention of Congress, and legislation to create a similar program in the states was introduced in 1986.

“This one provision will generate over $8 billion annually in new investments in small and independent U.S. businesses, and provide up to 100,000 new jobs for Americans,” the late Sen. Paul Simon, D-Ill., told colleagues during a 1986 Senate debate on the proposal.

The 1986 bill failed, but in 1990 a similar measure was added to an immigration-reform law signed into law by President George H.W. Bush. One of the bill’s prime sponsors was Sen. Ted Kennedy, D-Mass.

“Kennedy was for it because he was getting criticism galore from Irish citizens in Boston,” Stenger said. “They were saying, ‘Why are our relatives having to move to Canada to get into the United States?’”

The early years of EB-5 were troubled by allegations that investors were getting green cards despite paying only a fraction of the required $500,000 investment, after which the programs they supposedly had funded were scrapped.

That and a heavy-handed INS crackdown that followed gave EB-5 a bad name and scared away potential investors for a time, but the program has begun to draw more interest over the past five years.

Today, there are 32 EB-5 projects in the country, involving investment in everything from inner-city redevelopment projects to almond nut farms to Hollywood movies. About 1,000 foreign investors are expected to gain green cards via EB-5 this year.

“It’s getting stronger,” Bill Wright, a spokesman for Citizenship and Immigration Services said of the program. “We’re confident that the program is positive and beneficial to the nation.”

Stenger said he first heard of EB-5 in 1997 from Dale Ellis, a Montreal businessman and Jay Peak season-ticket holder.

“Dale said Canada was seeing hundreds of millions of dollars of investment and asked ‘Why don’t you people do that?’” Stenger said.

Stenger took the advice and later met with William Shouldice, the commerce secretary for then-Gov. Howard Dean, to see if the state would help establish an EB-5 regional center in Orleans County.

“Bill asked me, ‘Do you have a problem if we apply for all of Vermont to be a regional center?’” Stenger said. “So, using Jay Peak as the example, the entire state was submitted.”

INS agreed to make the entire state a regional center under EB-5, except for the Burlington area, because of its lower unemployment levels.

Implementation of EB-5 in Vermont then stalled when Stenger learned that program rules required him to have all his project’s potential investors prepared to make their money available to Jay Peak at exactly the same time.

“That was like herding cats,” he said. “We kind of went into neutral for quite a few years.”

A 2003 revision of the program rules loosened up that requirement and Stenger moved ahead with design work for the Phase I expansion. In 2006, he started nailing down investors. Since then, he has attracted the 35 investors needed for the Phase I hotel project and almost 100 of the 150 he needs for the Phase II expansion.

A majority of the investors are from the United Kingdom, but they include people from Canada, France, India, Ireland, Mexico and parts of Scandinavia. Earlier this month, a Vermont trade mission led by Stenger, state government officials and Sen. Patrick Leahy, D-Vt., spent a weekend in Ireland talking up EB-5 with potential Irish investors.

“Let’s face it,” said Leahy, an enthusiastic booster of the state’s EB-5 program. “How many people, including in the state of Vermont, are rushing to invest large amounts of money in the Jay area right now? By using this program, we can attract the money and create jobs.”

Down the road

Candido, the state economic-development specialist, said the success of Jay Peak and Sugarbush with EB-5 could open the door to more widespread use of the program as a tool for economic development.

“We’ve gotten calls from a bunch of different types of industries, including movie studios, real estate projects, office buildings, laboratories,” Candido said. In addition, three other ski resorts are exploring the possibility of using EB-5.

He said the state has been hesitant recently to promote EB-5 possibilities too much because the program has not yet been re-authorized by Congress. Leahy said he’s confident that will happen early in 2009.

Stenger, who speaks around the state about the virtues of EB-5, said he recommends that participants in the program — both investors and the recipient companies — get to know each other as part of the decision-making process.

“I tell them I want them all to come here,” he said of the Jay Peak investors. “In fact, I insist that they come. I want them to see what’s here and get excited about what we’re doing. And every one of them are.”

He also tells them that they will eventually share in the profits from their investment in Jay Peak, even though under the EB-5 rules they are advised that their investment is “at risk,” meaning there is no guarantee of a payback.

After all, he said, their investment is why the expansion project is such a can’t-lose proposition.

“I don’t have a mortgage on the bricks and mortar,” he said. “I have no debt. The only expense I have is the operation of it and the utilities to run it. I’m going to be successful. I’ve been able to defer and, in large part, eliminate the biggest cost of development, which is capital.”