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GARDEN CITY — The planned construction of a $42 million resort in Garden City has earned some enthusiastic supporters in this town of fewer than 600 residents.
Boasting 84 rooms, 70 condos, a conference facility, and 40,000 square feet of commercial space, the project will create an estimated 482 jobs. Garden City’s planning commission has approved the preliminary plans, meaning the first phase of the Waters Edge resort will most likely emerge within the next few years.
Despite this initial support, serious questions surround the project’s viability and funding. According to some residents, the resort will struggle to survive its first winter. Garden City is a summer town where business booms in July and August, then tapers off through fall. By the time snow flies, most businesses have closed for the season.
Bear Lake Valley residents have seen resorts come and go over the years, which leads many to question the need for a project like the Waters Edge. They point to failed ventures from the past as evidence that there isn’t a strong demand.
So why are investors willing to pour millions of dollars into a resort that some locals feel is doomed to failure? The answer is simple: the Waters Edge is an EB-5 project. The EB-5 program originated from the Immigration Act of 1990 as a way to attract international funds for domestic development. It provides green cards for foreign investors and their families, as long as they invest $500,000 in projects that create at least 10 jobs.
The EB-5 program has been widely criticized as a “cash-for-visas” exchange riddled with corruption, fraud, and broken promises. Private sector brokers, working with regional centers like the one located here in Utah, are largely to blame. They receive a commission regardless of a project’s outcome, and are known to lure foreign investors by giving inflated figures on projects and promises of an easy road to citizenship. In extreme cases, brokers have assured investors that their investments were backed by the federal government, which is blatantly false.
According to a Los Angeles Times investigation, these dishonest tactics have resulted in investors being deported “when their investments failed to create enough jobs or otherwise didn’t comply with the program rules.” On the financial side, misinformed investors have “lost the entire investments when the projects foundered.”
This project is much needed in Garden City, but it has a lot of hurdles still.
–- John Spuhler, Garden City mayor
Only 42 percent of EB-5 investors ultimately receive a green card, according to figures from the U.S. Citizenship and Immigration Services. And the odds are even worse that an investor will get a green card and the money back on their investment. Some reports claim that less than 10 percent succeed on both counts.
A scathing analysis by the New York Times suggests that inept program administrators have their share of the blame: "Aside from accusations of outright fraud, there is also a clear lack of understanding among government administrators about how to manage an investment program. As a result, they often approve businesses that are simple to understand, like a condo development or a grocery store, but whose business models don’t generate enough profit to hire workers."
In response to such criticism, the USCIS concedes that it has lacked oversight. They maintain that their focus has been on job creation, not on the viability of projects and how they were pitched to investors. But despite these disturbing flaws, the EB-5 program has kicked into high gear. More than $2 billion has been invested since 1990, with about half of that coming in the last fiscal year.
Utah resident Hai Huynh is spearheading the overseas recruitment of investors for the Waters Edge resort. He has reached out to business partners in Vietnam, who have reciprocated by investing nearly $20 million in the project.
Critics point out that the problems that have plagued so many other EB-5 projects could easily resurface at the Waters Edge. Foreign investors are pouring money into a resort in a small town located in a state they may never have even heard of prior to the investment pitch. Do they understand the seasonal challenges the Waters Edge will face? Are they aware of Bear Lake’s questionable track record when it comes to sustaining resorts?
To their credit, officials from the USCIS have pledged to improve the EB-5 program and protect foreign investors from the abuses of the past. If reform is truly taking place, the Waters Edge resort could become a bright spot in the new era of increased integrity and transparency.
On paper, a spacious resort on the shores of a gorgeous, turquoise lake sounds like a home run. But even the name “Waters Edge” is a misnomer that conjures up images of Lake Tahoe and could mislead investors.
Garden City Mayor John Spuhler believes Waters Edge could be just what the city needs.
"This project is much needed in Garden City, " Spuhler said. "But it has a lot of hurdles still."
Some of those hurdles include strict financial approval. Spuhler says the Waters Edge project has passed preliminary approval, but it still has a ways to go.
"If they can't meet financial requirements they won't have a project," the mayor said.
While much of the tourism is during the summer months Spuhler says winter tourism is growing and that the new resort would help make Garden City a more popular spot during the off season.
Grant Olsen joined the ksl.com team in 2012 as a contributing writer. He covers travel, outdoor adventures, and other interesting things.
