One of the most important steps of any EB-5 project is determining whether or not the project is located within a targeted employment area (TEA). In general, TEAs are designated by state agencies—though it is possible to request special TEA designation letters based upon combined census tracts. When census tracts cannot be combined to form a TEA, however, an alternative in some states is to use smaller geographic areas—known as census blocks—to create census block groups that qualify for TEA designation.
What Are Census Blocks?
Like census tracts, census blocks are geographic areas defined by American Community Survey (ACS) data. Census block data are released by ACS at regular intervals, and the most recent data is from August 2012.
States that Allow Census Block Groups
Currently, only a handful of states accept the use of census block data in issuing special TEA designation letters. Following are the states that have indicated they allow or intend to allow census block groups when determining TEAs:
- New Mexico
- Texas (select cities and counties)
Each state has different policies regarding whether they accept census block groups and, if so, how census blocks are treated. If this information is not available at the state’s TEA website, a call to the designating authority may be required to obtain it.
When to Use Census Blocks
The advantage to using census blocks rather than census tracts is that blocks are smaller areas that allow for a more flexible census-share calculation. In other words, when calculating whether an area qualifies as a TEA, a group of contiguous census blocks can more easily be combined to form a TEA—even when that area would otherwise be ineligible for TEA designation based upon census tract data.
For example, consider a project located in a census tract with an unemployment rate that disqualifies it from TEA designation. The first step would be to use the census-share methodology to determine if a group of contiguous census tracts might qualify for TEA designation. When no combination of census tracts results in a TEA, however, a combination of census blocks might.
Disadvantage of Using Census Blocks
Both the national average unemployment rate and the unemployment rate of any given area change over time. These changes tend to carry more dramatic effects when the labor force of a TEA is smaller.
As a result, census block groups are more greatly affected by changes to unemployment—and this sensitivity makes these smaller areas more susceptible to losing their TEA designation.
Despite this disadvantage, however, census blocks do provide an alternative way to obtain special TEA designation letters from those states that allow this method of calculating unemployment.