The important initial step of determining if your EB-5 project might be TEA-eligible can often be frustrating. Sometimes no matter how hard you try, it seems impossible to make a reasonable TEA. When the most common way of obtaining a state TEA letter (combining two or more census tracts (“tracts”) doesn’t work, there is another possible method to consider. This method involves utilizing a smaller subarea that some states will consider when certifying TEAs—a census block group (“block group”).
A block group is a smaller subarea than a tract as each tract is made up of one or more block groups. While in practice, tracts are the typical building block of a TEA, several states (and some cities/counties in Texas) will also consider block groups when determining TEA-eligibility.
The same census-share methodology that is utilized to calculate unemployment rates at the tract level can also be used with block groups. American Community Survey data is typically one part of the census-share calculation and ACS releases data on block groups at similar intervals as they do tracts—currently the latest is 5-year 08-12 data. For a refresher on the census-share methodology, please see www.ids18.wpengine.com/dude-wheres-my-tea/
A benefit with block groups is that you are able to get down to a smaller subarea, providing more flexibility in finding TEA-eligible areas.
The example below shows a project location located within Census Tract 5110.01 in Harris County, Texas. If we try the typical route with census tracts, we find that the tract does not qualify on its own, as the unemployment rate is too low (9.3%). Furthermore, there are not any high unemployment tracts in the area to try and construct a reasonable TEA with tract combination. So, with utilizing census tracts proves unsuccessful.
Census Tract view from www.ids18.wpengine.com/map
However, tract 5110.01 is composed of two block groups (Block Group 1 and Block Group 2). Further analysis reveals that the project location is within Block Group 2. Applying the proper census-share methodology techniques reveals that this block group has an unemployment rate of 16.4%, well above the needed threshold to be TEA-eligible.
Census Block Group view
With this example, you can see that block groups can provide another route to TEA certification when census tracts don’t work. While this example focused only on one block group, most states that will accept block group methodology will allow combinations of block groups, as they do with census tracts.
Will the state of my project consider block groups?
Unfortunately most states do not accept block groups. Below is a list of states that will consider (or have indicated they plan to consider) block groups in some form:
- New Mexico
- Some Texas cities/counties
As with all TEA analysis, one must take into account methodology differences amongst states and the states listed above have different policies for how they treat block groups. The list above is not necessarily exhaustive, as there may be other states accepting block group methodology. While some states TEA websites will specifically mention if they accept block groups, most are unclear. Usually a call to the designating authority is required to ascertain if the state will consider block groups. For information on state agencies that are designated to certify TEAs, please see http://impactdatas.wpengine.com/eb-5/state-agencies-teas/
An additional note of caution when utilizing block groups:
- The unemployment rate for a TEA changes over time (typically annually). As a general principle, the smaller the overall labor force that makes up the TEA, the greater the likelihood that a significant change can happen to the unemployment rate over time. Since block groups are by definition smaller than their respective tracts, depending on the final TEA make-up, block groups may be more susceptible to losing TEA-eligibility over time as the labor force changes.
In summary, if the state designating TEA authority for your project permits them, block groups can be a valuable tool for obtaining TEA-eligibility when other methods are unsuccessful.