Chinese investors have begun signing up to spend $500,000 each to help pay for a long-awaited connection between the Pennsylvania Turnpike and I-95.
In exchange, the investors hope to get permanent residency in the United States for themselves and their families.
Agents for the novel financing plan have been pitching the proposal in China since September, touting the project's financial stability and showcasing photos of Gov. Corbett and Turnpike Commission officials breaking ground for the construction in Bucks County.
"Guaranteed by U.S. Government, Class A+ Repayment Credit!" proclaimed the Chinese-language website promoting the investment last month. "A key expressway-connecting hub project in U.S.A.!"
(The website language has been toned down following inquiries by The Inquirer, to remove suggestions of government guarantees for investors. Now, the site says, "Pennsylvania Turnpike Commission enjoys an A+ rating," a reference to the Standard & Poor's rating on turnpike revenue bonds, which aren't involved in this financing plan.)
More than 100 investors have applied so far to invest in the I-95/turnpike connection. The Turnpike Commission is counting on 400 wealthy foreign investors, mostly from China, to provide $200 million for the $420 million project.
The rest of the money will come from federal and turnpike funds.
The heavily indebted Turnpike Commission is borrowing the $200 million from foreign investors under the federal Immigrant Investor Program that grants "EB-5" immigration visas to foreigners who provide at least $500,000 to U.S. projects that create 10 or more American jobs.
The deal offers something for everyone:
The turnpike will get cheap money, saving about $35 million over traditional borrowing costs over five years. The turnpike will pay a 2 percent annual interest rate, about half the current rate for municipal-bond borrowing.
The foreign investors and their families will get a quick path to legal residence in the United States, though they may lose money on their investment.
The brokers and lawyers will collect millions in commissions and fees, with each of the 400 investors paying $50,000 to the dealmakers and $15,000 to the lawyers.
The first $50 million installment from the foreign investors is due to be paid to the Turnpike Commission by April.
The Berwyn company created to make the deal, the Delaware Valley Regional Center, expects to meet that deadline, said Joseph P. Manheim, its managing director.
"It is going as we had planned," he said. "We are on track."
The deal was suggested to turnpike officials by Turnpike Commissioner Pasquale T. "Pat" Deon Sr., a Bucks County restaurateur, beer distributor, and Republican power broker. Deon, who also is chairman of the board of SEPTA, saw SEPTA make a similar deal to borrow $175 million to pay for its smart-card fare-payment system in 2011.
Similar EB-5 foreign-investor deals have provided funding for the Convention Center, the Temple University Health System, and the Comcast Center.
The turnpike deal was created by Manheim and other officials of the Swarthmore Group, a Philadelphia investment-management firm headed by James E. Nevels, a prominent Republican donor and fund-raiser.
Nevels is chairman of the board of the Federal Reserve Bank of Philadelphia and was the first chairman of the Philadelphia School Reform Commission, appointed by Republican Gov. Mark Schweiker. Nevels is also a former president of the Pennsylvania Society, the organization best known for its annual Manhattan gathering of Pennsylvania politicians, lobbyists, and business people.
The Swarthmore Group is not involved in the turnpike deal; the Delaware Valley Regional Center was created as a separate company, said Manheim, chief investment officer of the Swarthmore Group.
"We've been doing it on our own time," he said.
Young Min Ban, portfolio manager for the Swarthmore Group, is director of the Delaware Valley Regional Center. Pamela Mandle, chief executive officer of Swarthmore Group, is a minority investor in the regional center.
The deal is structured so the Turnpike Commission can repay the foreign investors after five years with cash or with a municipal bond. The bond pricing will be set on the date the loan is made, which means the bond could be worth considerably less than $500,000 in five years if interest rates rise.
The investors, in effect, are the turnpike's hedge against interest-rate increases.
Manheim acknowledged the investors might not get all their money back.
"There are a variety of risks associated with any kind of investment," he said. "That's a given."
For many EB-5 investors, though, the prime attraction is a U.S. green card, not the full return of their investment.
Construction began in October on the long-awaited direct connection between I-95 and the turnpike.
PKF-Mark III Inc. of Newtown won the contract to build the first section of the $420 million Stage 1 of the new interchange, which will finally provide an unbroken I-95 between Maine and Florida.
For decades, I-95 has been incomplete in New Jersey near Trenton.
When Stage 1 is completed in 2018, I-95 will be rerouted onto the Pennsylvania Turnpike east of the connection and then onto the New Jersey Turnpike. The current I-95 north of the connection will be redesignated as I-395 or I-195.
Since I-95 was built through Bucks County in 1969, crossing the turnpike, truckers and motorists have complained about the lack of a direct link between the two superhighways. Drivers must exit to local roads and then get on the adjoining highway.
That was the result of a federal prohibition at the time on using federal highway money for toll roads, such as the turnpike.
But even with the completion of Stage 1, the only direct connections will be from the westbound turnpike to southbound I-95 and from northbound I-95 to the eastbound turnpike.
All other direct connections will have to wait for the still-unfunded Stage 2, expected to cost about $600 million and to begin construction in 2020.