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Tesla requesting $412 million in new tax relief package, approval scheduled for Thursday

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by April Corbin Girnus, Nevada Current

Tesla is asking the Governor’s Office for Economic Development to approve $412 million in additional tax abatements and reimbursements for expanding their Northern Nevada gigafactory.

The electric car company’s request comes with a requirement of $3.5 billion in capital investments, as well a promise to invest in housing, transportation and child care for their employees.

The size of the package, which was not previously known, became public with the publishing of the car company’s tax abatement application Monday morning — three days in advance of a GOED meeting where a board of three elected officials and six appointed private-sector business people are expected to vote on the incentive package.

The estimated $412 million package is split across three taxes; $330 million is directly abated:

$66.6 million in sales taxes over 20 years$17.5 million in modified business tax over 10 years$246 million in personal and real property tax over 10 years

MBT and property taxes are both abated at 100%. The sales tax abatement sets for Tesla a reduced rate of 5.35% — essentially abating the prevailing county sales tax rate but not the state’s local schools support tax.

Additionally, $81.4 million in sales tax over 20 years would be reimbursable through an “economic diversification district” program setup by the 2014 legislation authorizing the original Tesla abatement package.

If approved, the tax package will constitute the third largest assistance package in Nevada’s history, after the initial $1.3 billion for Tesla and the $750 million in public financing for what would become Allegiant Stadium.

Tesla last month announced plans to build an electric battery manufacturing facility and a high-volume semi-truck factory projected to bring $3.6 billion in capital investment over a decade and 3,000 new jobs with an average wage of $33.49 per hour.

An explanation as to how that average wage was reached was not provided among the documents made public Monday. Companies seeking tax abatements through GOED are required to submit such a breakdown showing the types of positions and the hourly wages associated with them. However, companies can request that the document remains confidential from the public as “a trade secret or other confidential proprietary information,” a request Tesla made to GOED.

According to the Tesla abatement application, the $3.6 billion in capital investments breaks down to $1.6 billion in building improvements and $2 billion in equipment. Similar to the wage information, a detailed breakdown of construction labor and equipment has been deemed “a trade secret or other confidential proprietary information” and is being kept from public scrutiny.

State law requires that 50% of all employees and 50% of construction workers on a tax-abated project be Nevada residents. Tesla states in its application that “approximately 90%” of current employees are local residents and were before they began working for the car company.

Tesla currently employs 10,521 people.

Some lawmakers, including state Sen. Dina Neal (D-North Las Vegas) and Senate Majority Leader Nicole Cannizzaro, last week called on GOED to delay this week’s meeting until the abatement package could be fully vetted. However, Gov. Joe Lombardo’s Chief of Staff Ben Kieckhefer indicated the meeting will go on as planned.

Neal has expressed concern about the lack of legislative oversight on such a large tax abatement package, as well as a need for the state to address Northern Nevada’s ability to sustain the rapid growth.

Perhaps in response to such criticisms, Tesla indicated in a letter attached to its application that the company is “committed to working with leading local developers on agreements to accelerate hundreds of incremental workforce housing units across the northern Nevada region.”

The letter does not elaborate further.

But last week, Kieckhefer and state Treasurer Zach Conine presented a bill that would allow the state’s existing Infrastructure Bank — which is designed to provide low-interest loans to projects of societal good that might have difficulty finding private funding — to fund workforce housing projects. The bill specified that areas aligned with high-dollar economic development projects abated through GOED would be prioritized.

Tesla in its application also said it will be working with a childcare provider to open a facility at the Tahoe-Reno Industrial Complex that operates “seven days per week with schedules that align to Gigafactory Nevada shifts.” Employees will receive a discounted rate.

Tesla said it will pilot “new carpool options where employees can carpool together with a Tesla vehicle at no cost to them.” A letter of support from My Ride to Work states the company has worked with Tesla and Panasonic to transport “thousands of employees” to TRIC from within a 100-mile radius of the Reno-Sparks area.

Finally, Tesla noted it has invested $37.5 million into K-12 robotics and sustainability programs across Nevada and promised to continue that investment, though it did not attach a financial amount to the promise. Additionally, it promised to host hundreds of teachers for tours and hire over 50 high school graduates every year through its Manufacturing Development Program.

Tesla estimates the expansion project will bring $395.5 million in direct new tax revenue and $370.5 million in indirect tax revenue over the 20 year tax abatement period.

The letter further states the company’s original gigafactory project, which in 2014 received an unprecedented $1.2 billion in tax abatements and other incentives — resulted in $6.2 billion in capital investments.

Tesla claims that for every $1 in tax incentives, $10 in economic activity was generated.

Tesla also included in its application letters of support from the Economic Development Authority of Western Nevada (EDAWN) and the University of Nevada Reno.

Nevada Current
Nevada Currenthttps://www.nevadacurrent.com
Nevada Current is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Nevada Current maintains editorial independence. Contact Editor Hugh Jackson for questions: [email protected]. Follow Nevada Current on Facebook and Twitter.

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