Aiming to jumpstart economic growth, 20 counties in northwest Minnesota are working with the University of North Dakota to lure foreign investment.
Winning the trust of foreign financiers can be a challenge, but local officials can offer investors a unique incentive: visas to enter the United States.
The federal government's EB-5 Immigrant Investor program grants foreign investors conditional visas that allow them and their families to live and work in the United States.
To qualify for the visa, they must invest at least $1 million in a new or recently created business, or $500,000 for businesses in rural or high-unemployment areas like northwestern Minnesota. That makes it a boon to businesses like Ultra Green, a Plymouth, Minn., company that sells biodegradable food service products like plates and baking pans.
Ultra Green CEO Mack Traynor first heard about the EB-5 foreign investor visa program when the company recently opened a factory in Devils Lake, North Dakota to make the products from wheat straw.
Traynor, who has one investor confirmed, anticipates securing as much as $8 million from Chinese investors.
"The EB-5 money I call the accelerator," he said. "It allows me to put my foot on the pedal a little bit harder and go faster."
“I think it's realistic we're going to see a minimum of $10 to $20 million per year of investment which is not an insignificant amount in a rural area.”Bruce Gjovig, director of the UND Center for Innovation Foundation
That means faster expansion of the factory and earlier profits for the company.
But it's not easy money. Although there's no shortage of people willing to put up $500,000 in exchange for a visa, Traynor said companies must complete extensive paperwork to satisfy immigration regulations.
But his biggest challenge is earning the trust of Chinese investors.
"They don't trust anybody," Traynor said. "They don't believe you. I have to prove everything. Even an audit. They don't believe you when you say we have an audit. They say that doesn't make any difference. They always lie on those. [They say] 'Everybody lies on those.' They keep two sets of books. "
Investors are wary for a reason. If a project fails, they might lose their investment and their visa.
Traynor will travel to China next month to meet with potential investors.
Ultra Green is the first company to benefit from the EB-5 Regional Investment Center established nearly two years ago at the University of North Dakota Center for Innovation Foundation.
Organizers expect more projects to start falling into place.
Bruce Gjovig, director of the UND Center for Innovation Foundation, said foreign investment can help businesses expand across North Dakota and northwest Minnesota.
"Sources of equity especially in rural areas is a very difficult thing to secure and find," he said. "And this is a program that's designed specifically for equity into firms in targeted areas or rural areas and growing firms. So I think it fits very well. "
Under the rules of the program, each $500,000 investment must create or preserve 10 full-time jobs, Gjovig said.
If that occurs, within two years, investors and their families may become permanent residents and later apply for U.S. citizenship.
"I think it's realistic we're going to see a minimum of $10 to $20 million per year of investment which is not an insignificant amount in a rural area," Gjovig said. "And I think it could grow to $100 million a year or more. That will be a five, six year ramping up to get to that $100 million level."
There are 241 regional EB-5 foreign investment centers in 41 states. Each center can focus on a single project or on specific sectors of industry and business. The UND Center for Innovation Foundation targets investments in agribusiness, aerospace, real estate, information technology, biotech, manufacturing and energy. The program has been around for 20 years but Minnesota has yet to take advantage of it.
A recent study commissioned by the Minnesota Trade Office said the state does not have a clear strategy for how to use the program. According to the study, investment centers "can efficiently attract significant foreign investment and create jobs."
As a result, a handful of groups in the Twin Cities and rural Minnesota are considering EB-5 investment applications, Minnesota Trade Office Executive Director Katie Clark said. The state is analyzing data to determine what parts of the state qualify as targeted rural or high unemployment areas.
Clark said a map should be completed by the end of the year.
"We're not quite sure why there hasn't been EB-5 development in the past," she said. "We think that this could be a strategy for investment and job creation. But it needs to be done in a way that is very thoughtful and careful and strategic."
Federal approval of an EB-5 investment center can take several years.
In northwest Minnesota some economic development officials have a head start.
Among those working through the University of North Dakota EB-5 center, is Harold Stanislawski, executive director of the Fergus Falls Economic Improvement Commission. Stanislawski said it is important to use every possible option to create jobs.
"That's why I got involved in it to begin with," he said. "I wanted more capital options in my economic development tool box and the region's economic development toolbox so that we have a better chance of attracting deals to our area."
Stanislawski said he's exploring foreign investment for several projects.
He thinks a couple of successful ventures will attract the attention of foreign investors and give Fergus Falls an edge in the economic development arena.