Business
1:54 pm
Thu September 4, 2014

Tesla Deal Faces Questions From Both Left, Right In Nevada

Elon Musk is chairman and CEO of Tesla Motors Inc.
Credit Tesla Motors

Updated on Sept. 10 at 3:20 p.m.

Tesla Motors decision to choose Nevada as the site of its new $5 billion battery factory has been met with excitement from most if not all lawmakers, economic development officials and the governor.

But some political organizations on both sides of the isle are questioning the need for Nevada to use the state’s coffers to subsidize a multi-billion corporation. They also question the economic benefits the plant will have on Northern Nevada.  

“We join in the excitement surrounding the selection of our great state as the site for Tesla’s massive new manufacturing facility,” said Bob Fulkerson, executive director of the Progressive Leadership Alliance of Nevada. “But our enthusiasm is tempered by hard, as yet unanswered questions surrounding the deal.”

In a two-page letter sent to Nevada lawmakers Wednesday, Fulkerson urged that Tesla be held accountable for “creating family-wage jobs with Nevadans first in line.” He said to deter outsourcing, all of Tesla’s tax break should require direct employment and be pegged to employment levels.

If the electric car manufacturer fails to reach or maintain 6,500 employees, Fulkerson wrote those requirement would allow for property and sales tax exemptions to be scaled back.

Fulkerson also questioned the 80 to 1 payoff that Gov. Brian Sandoval “has touted as our gamble-free return on investment.” He called on the Legislative Council Bureau to provide an independent analysis of that claim, because if the 80-1 figure is incorrect, “what else is being fudged in the economic analysis?”

The Nevada Legislature is considering Sandoval’s deal with Tesla to build its battery factory at the Tahoe-Reno Industrial Complex in exchange for almost $1.3 billion in tax breaks. Those tax breaks will essentially allow Tesla to operate tax free in Nevada for nearly a decade.

“We at PLAN support taxpayer investments in education and infrastructure because they benefit all employers, Fulkerson said. “They avoid putting a lot of eggs in any one corporate basket, reducing our risk if the plan doesn’t work out.”

Fulkerson said the Tesla subsidy package was 14 times larger than any prior deal in Nevada history. So, it deserves “14 times more caution and safeguards to protect taxpayer.”

The liberal-learning PLAN is not alone in urging lawmakers to slow their consideration of the $1.3 billion in tax incentives. PLAN  on Wednesday was joined by unions, teachers and environmentalists in their questioning the need to approve the plan in the next few days.  

Meanwhile, the right-leaning Nevada Policy Research Institution described the Tesla proposal as unconstitutional.

“It’s very exciting when any company chooses to do business in Nevada, so it’s puzzling why (Sandoval) would go to such extraordinary lengths to promote the business interest of one wealth investor, Elon Musk,” said Geoffrey Lawrence, director of research and legislative affairs for NPRI.

Musk is chairman and CEO of Tesla Motors, which announced in February that it would build a factory to make lithium batteries for its electric cars. Nevada was put on the short list, along with California, Texas, New Mexico, and Arizona in June.

“Why would lawmakers want to take from poor and middle-class families to subsidize a billionaire making cars for millionaires?” said Lawrence. He claimed that most Nevadans won’t be able to afford a Tesla.

Currently, a 2014 Tesla Model S has a sticker price between $69,000 and $93,400. Musk’s battery factory near Reno would allow mass-produce batteries for Tesla’s Model 3, which is expected to be ready for market in 2017 with a price of $30,000.

Lawrence added that aside from the many economic and principled reasons to avoid state subsidies, the Nevada Constitution already prohibits taxpayer subsidies to private companies.

Lawrence said NPRI has already sued the Governor’s Office of Economic Development for violating the constitution’s gift ban to prevent the state’s “Catalyst Fund” from issuing $1.2 million to SolarCity Inc. Litigation in the case is ongoing, Lawrence said. Musk is also chairman of SolarCity.

TAX BREAKS FOR SWITCH?

Sandoval’s open ended proclamation leaves the door open for other companies, such as Switch Communications, to ask lawmakers for tax breaks and abatements for their projects during the special session.

“Don’t entertain this foolishness,” Fulkerson said. “Keep the focus on Tesla alone.”

Ralston Reports' Jon Ralston said Wednesday on Twitter that Switch is trying to insert bills to reduce sales taxes to build a $750 million data center in Southern Nevada, and a $200 million facility in Northern Nevada.

Ralston reported Switch was worried about competitive issues with Arizona, which recently lowered its sales tax abatement threshold for data centers.

DID SAN ANTONIO OUTBID NEVADA?

Is it a case of sour grapes? That's for others to decide.

But, San Antonio's economic development president says his city's bid for Tesla's battery factory was superior to Nevada's. Mario Hernandez told the San Antonio Express-News that his bid was better and it didn't even include additional incentives from the state of Texas.

"We feel strongly that San Antonio was under serious consideration and that we are better prepared for future economic development recruitment projects of this scale because of the work undertaken to attract the Tesla facility," Hernandez, president of the San Antonio Economic Development Foundation, said in a Summary of Tesla Motor Project and Final Decision obtained by KNPR. 

In his memo, Hernandez said the city's package addressed all of Tesla's needs - providing a world-class site of over 1,000 acres with rail service, along with the entire infrastructure needed to bring the project to full operation. He declined to discuss "dollar figures," but said he was "confident that the financial package was highly competitive when compared to the one described by Nevada."

"We believe that the next present value of the San Antonio package exceeded Nevada's," Hernandez said.