Tesla: New Technology, Same Old Subsidy Charade
Tesla Motor’s shameful subsidy competition for its battery factory is wrapping up to a close in a state known for big gambling. The Nevada Governor’s Office of Economic Development (GOED) announced last week it had assembled a breathtaking package for the proposed “Gigafactory” totaling as much as $1.3 billion in tax breaks. Governor Brian Sandoval has called the legislature into a special session starting this week to approve the deal, which is unprecedented in size in Nevada. Included are new transferable tax credits based on the electric vehicle manufacturer’s hiring and investment, plus extensions of existing business, sales, and property tax abatement programs that would allow Tesla to operate completely tax-free in the state for ten years. (The majority of the subsidy package lasts for twenty years.) If approved in its current iteration, the megadeal will be among the 15 most expensive state subsidy packages in U.S. history.
Two weeks prior to this announcement and in anticipation of a subsidy shakedown by Tesla, Good Jobs First coordinated with groups in the five states named by Tesla to compete for the battery factory. Along with Arizona PIRG, the California Budget Project, Progressive Leadership Alliance of Nevada (PLAN), New Mexico’s SouthWest Organizing Project, and Texans for Public Justice, we issued an open letter calling for transparency and cooperation between states forced into a subsidy bidding war for the battery manufacturing jobs. Media response to this effort was strong, but state lawmakers bound by non-disclosure agreements common to secret site selection negotiations did not comply with our requests.
Aside from the subsidy terms, the only information made public about the pending Nevada deal consists of overly optimistic job-creation talking points. During last week’s press conference Gov. Sandoval told attendees that 22,000 new jobs would be created by the project and that the total economic impact would be $100 billion over the 20-year subsidy term. 6,500 new direct permanent positions will purportedly enjoy an average wage in excess of $25 per hour, according to the Governor’s office. A day before the special session is rumored to begin, the economic impact study informing these extravagant economic figures has not been presented for public review and the economic projections are being challenged. Economist Richard Florida believes 3,000 permanent positions are more likely, and estimates the total job creation impact at 9,750 – less than half of the 22,000 claimed by GOED.
For anyone paying attention to the super-hyped “Gigafactory” site selection competition, the announcement that the company had selected Reno, Nevada came as no surprise. Although Tesla has maintained over recent months that it was also negotiating terms with Arizona, California, New Mexico and Texas, it broke ground outside Reno early this summer. The location is proximate to lithium mining operations, boasts freeway and class 1 rail access, and is less than a day’s drive from the Tesla assembly plant in Fremont. Storey County, Nevada – Tesla’s future home – is famous in the state for approving industrial permits in less than a month. In hindsight, Tesla’s unusual announcement that it intended to break ground in several sites is starting to appear disingenuous.
What exactly the company has been seeking over the past few months is more of a mystery. Tesla has announced, at various points during this period, that it wanted laws changed to allow direct sales of its cars to consumers, as is the case in California. It emphasized that the most important factor for launching the Gigafactory was expedited permitting, so Tuscon, Arizona issued Tesla an unsolicited blank building permit in July. Initially mum on the topic of economic development subsidies, (and well after reports surfaced of a $800 million subsidy offered by San Antonio, Texas) CEO Elon Musk announced last month during a conference call that he expected the “winning “ state to ante up a $500 million investment for the battery factory.
In the context of all of this messaging on the company’s priorities, the size of the subsidy offered by Nevada is all the more confounding. During last week’s press event in Carson City, Musk repeatedly stressed that incentives were not among Tesla’s most important considerations in its location decision. What remains unanswered is why Nevada was compelled to offer more than double the $500 million subsidy originally sought by Tesla. Until the veil is lifted from secretive corporate incentive negotiations, the public will be left out of the critical conversations that determine the who, where, and why of business subsidy decisions it is forced to fund. In the meantime, many questions remain as the state’s lawmakers move toward a vote on the largest subsidy package in Nevada history.