Governor Brian Sandoval of Nevada signed a package of bills on September 11 to provide Tesla Motors $1.3 billion tax breaks as reward for the company choosing to build its $5 billion Gigafactory in the state. The facility might eventually provide 3,250 Nevada jobs 20 miles east of Reno along interstate 80.
Sandoval said the agreement has “changed the trajectory of our state forever” during the signing ceremony at the capitol. The ceremony came after the state legislature and senate unanimously passed four bills in a two day special session just for Tesla. The Republican governor told Reuters, “Nevada has announced to the world–not to the country, but to the world–that we are ready to lead.”
Tesla’s founder and CEO Elon Musk vigorously played off California and four other western states over a six month period for the most lucrative incentive deal.
While half the jobs should be reserved for Nevada residents, Tesla negotiated broad “waivers” that could easily change the requirement. Assuming that the Tesla Gigafactory actually hires 3,250 Nevada residents at a cost of $1,538,000 per job, the “deal” appears to be the most egregious crony capitalism shakedown of government in American history.
Reuters stated that to “clinch the deal”, Sandoval promised that tax credits and other incentives would be available for up to 20 years. The biggest slurp at the taxpayers’ trough gives Tesla sales tax exemptions that will last for 20 years, a perk estimated to be valued at $725 million.
Given that Nevada has no personal or corporate income tax, the Gigafactory will operate essentially tax free to produce batteries for government subsidized cars.
The Tesla green car company is still alive and collecting its $7,500 per vehicle federal tax credit after competitors VPG, Bright Automotive (electric delivery vans), Carbon Motors (clean diesel-powered police cars), Aptera Motors (three-wheeled electric cars), Coda Automotive (inexpensive electric sedans), and Fisker Automotive (plug-in hybrid sports cars) filed for bankruptcy.
The key difference in Tesla’s survival appears to be that the company located in California and was able to sell the tax credits it received from the state of California for producing zero emissions vehicles to other automakers that aren’t so clean. At up to $35,000 per vehicle, it was a windfall that kept the company alive, according to Gartner analyst Thilo Koslowski. “At the end of the day, other carmakers are subsidizing Tesla,” Koslowski told the Los Angeles Times.
Nevada thinks the tax free Gigafactory will be key to Nevada’s efforts to revitalize its economy after being crushed by the mortgage meltdown and the Great Recession.
“This is arguably the biggest thing that has happened in Nevada since at least the Hoover Dam,” which was a spectacular Depression-era project on the Colorado River that employed thousands and has been providing cheap hydro-electric power to the state since the 1930s, said Assemblyman Ira Hansen, a Republican from Sparks, according to news wire reports.
To subsidize Tesla, both houses of the Nevada state legislature approved a provision phasing out and eliminating 1970s-era tax credits for insurance companies, which backers said would free up about $125 million over five years beginning in 2016 for transferable tax credits to Tesla. The package would also gut a program approved just last year giving tax credits to the film industry, freeing up about $70 million for Tesla. Lawmakers also agreed to buy rights-of-way to build connecting roads from I-80 and U.S. 50, at a project cost estimated to be $43 million, to improve access to Tesla’s industrial park.
The governor’s office estimates that the 5 million-square-foot factory will immediately create 3,000 construction jobs, 6,500 factory jobs and 16,000 indirect jobs once the project is completed.
Tesla’s VP of business development Diarmuid O’Connell said the factory is crucial to the company’s mission of mass-producing affordable electric cars within three years. “We’re looking forward to getting going,” O’Connell said at the signing.