Tesla Motors wins $1.3 billion incentives package in Gigafactory deal UPDATED

Tesla Motors has chosen the Tahoe-Reno Industrial Center to house the Gigafactory.  While we’re excited at the fact that Tesla has made a bold concrete step forward with their plans, reiterating the goal of selling 500,000 electric cars a year by 2020, there’s a big question – the incentives package.  We understand that Big Business in America often involves talking Governments into “investing” money in the Business activities – translated, that means giving the business a subsidy in terms of tax credits or tax abatements so the business will go ahead and do something the business should be doing anyway.

Tesla Motors needs to build this Gigafactory anyway, so why not just get on with the business of doing so?  Why play this big game getting various state governments to compete with each other to come up with the best incentives package?

Don’t look at me like I’m being naive.  This is an honest question – why should our tax dollars be spent this way to subsidize businesses?

Before the deal was announced it was estimated Nevada was going to subsidize Tesla by about 10% of the factory’s cost – or $400 million.

Evade blocked charging stations with one of these handy J1772 extension cords.

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The Albuquerque Business Journal posted an interview with Albuquerque Economic Development’s Gary Tonjes about the negotiations.  He said Nevada had offered $1.3 billion, which he thought wasn’t surprising for a project this size.  Tonjes described some new tax laws passed last year in New Mexico as having taken away “one of the biggest obstacles the state had to job creating” and playing a critical role in New Mexico being a finalist in the competition.

During a Gubernatorial election campaign debate last night, California Gov. Brown said that Tesla Motors wanted a huge up-front cash payment.

The Reno Gazette-Journal has a detailed running log of raw reports surrounding the deal Nevada struck with Tesla Motors.  It contains some statements by various officials as to the size and content of the incentives package.   Gov. Sandoval declined to discuss details during the press conference, instead he spent the press conference saying not to worry about the size of the incentives package and to focus on the gain Nevada will receive.  However, InsideEV’s has parsed through the RGJ reporting and came up with this list of incentives:
  • $725 million for a 20-year 100 percent sales tax abatement
  • $332 million for a 10-year 100 percent property tax abatement
  • $120 million in transferable tax credits
  • $75 million in transferable tax credits worth $12,500 per job times 6,000 jobs).
  • $27 million for a 10-year, 100 percent modified business tax abatement
  • $8 million in discounted electricity rates for eight years
Given that the Gigafactory is expected to cost $5 billion, Nevada is paying about 25% of its cost?
We’ll reiterate a detail from our earlier report: In August, The Progressive Leadership Alliance of Nevada and several advocacy groups in other states posted an open letter seeking to open the veil of secrecy surrounding the deals being wrangled to win the Gigafactory.
Maybe this is business as usual and deals of this sort happen all the time.  It’s jaw dropping that landing a deal like this is so important to Nevada’s political leadership that they’ll pay this much money to the business offering the deal.UPDATE: After publishing the above I was pointed to a document giving more details of the deal.  It was posted by DiversifyNevada, and contains bullet points describing the gains Nevada will see, the incentive package, and even some legal changes that will be required.
 Download the PDF.There’s some interesting grants made by Tesla to various Nevada institutions, such as battery research at UNLV.
Tesla’s Gigafactory in Nevada

Project Highlights

  • Approximately $100,000,000,000 in economic impact over 20 years
  • 6,500 direct jobs on-site with an average wage in excess of $25 per hour and full benefit package
  • Facility will be one of the largest buildings in the world
  • 5 million+ square foot battery manufacturing facility, “Gigafactory”
  • $5 billion initial investment in facility within 3-5 years: ($1 billion in building, $4 billion in equipment)
  • An additional $5 billion in planned replacement equipment over a subsequent 10 year period, or a total investment of $10 billion
  • Peak construction employment of more than 3,000 construction and installation workers over a three year period
  • Expansion of USA Parkway to connect Highway 50 to Interstate 80
  • Tesla will make a direct contribution to K-12 education of $37.5 million beginning in August 2018
  • Tesla will commit to grant $1 million to fund advanced battery research at UNLV
  • Tesla will prioritize the employment of Nevadans and Veterans

Economic Data

  • Gigafactory will create 16,000 indirect jobs in the community
  • Total of over 22,000 jobs
  • Gigafactory will increase state employment by approximately 2%, and regional employment by more than 10%
  • Direct economic impact generated by the project will be nearly $40 billion over 20 years
  • Indirect economic impact will be approximately $60 billion over 20 years
  • The Gigafactory will add over 3% to the State’s Gross Domestic Product which represents more than a 20% increase in regional GDP
  • Estimated value of abatements is between $675 million and $1.1 billion depending upon size of investment

Fiscal Projections After Abatements

  • $430 million in state General Fund revenue over 20 years
  • $950 million in local government revenue over 20 years
  • $500 million in K-12 education revenue over 20 years
  • $1.9 billion in total fiscal impact

 

Summary of Potential Legislation

ABATEMENTS

  • Up to 100% abatement of Sales Tax until June 30, 2034
  • Up to 100% abatement of Real Property Tax until June 30, 2024
  • Up to 100% abatement of Personal Property Tax until June 30, 2024
  • Up to 100% abatement of Modified Business Tax until June 30,  2024

TAX CREDITS*

  • Transferable Tax Credit of $12,500 per permanent, full-time job, up to 6,000 jobs – average wage of jobs must be $22 per hour to qualify
  • Transferable Tax Credit of 5% of first $1 billion investment
  • Transferable Tax Credit of 2.8% of next $2.5 billion investment

ECONOMIC DEVELOPMENT RATE RIDER

  • Extension of Economic Development Rate Rider electric program from 5 to 10 years

DIRECT SALES

  • Clarify that manufacturers that exclusively produce electric passenger vehicles and have not engaged in a franchise with a dealer in the State may engage in retail sales of those vehicles

*Repurposing of Existing Tax Credits

  • Reduce Film Tax Credit program from $80 million to $10 million
  • Sunset the Home Office Tax Credit program at a value of $125 million over the first five years

About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.

About David Herron

David Herron is a writer and software engineer living in Silicon Valley. He primarily writes about electric vehicles, clean energy systems, climate change, peak oil and related issues. When not writing he indulges in software projects and is sometimes employed as a software engineer. David has written for sites like PlugInCars and TorqueNews, and worked for companies like Sun Microsystems and Yahoo.

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