Tax Breaks and Inequality

December 16, 2014 by

inequality_graphicReport: Development Subsidies Fuel Economic Inequality by Enriching Billionaires and Low-Wage Employers

Washington, DC, December 16, 2014—Taxpayer subsidies awarded to corporations by state and local governments, supposedly to create good jobs and growth, are instead fueling economic inequality by going to companies that are owned in whole or part by billionaires, and to low-wage employers.

Indeed, about one-third of the individuals in the Forbes 400 are linked to 99 taxpayer- subsidized companies, including every one of the 11 wealthiest individuals and all but two of the richest 25. Subsidies have also gone to 87 companies that pay low wages. More than $21 billion in taxpayer dollars have been awarded to these two sets of firms. Seven retailers appear on both lists.

Those are the major findings of Tax Breaks and Inequality, a report published today by Good Jobs First, a non-profit resource center on economic development based in Washington, DC. The report is available at  www.goodjobsfirst.org/taxbreaksandinequality and was funded by the Nathan Cummings Foundation.

“Inequality has many causes, and now we can say development subsidies are among them,” said Good Jobs First Executive Director Greg LeRoy. “Subsidies are being awarded to large, profitable companies controlled by billionaires such as Warren Buffet’s Berkshire Hathaway while we have too many communities that really need the help.”

Tax Breaks and Inequality is a “mash-up” of Good Jobs First’s Subsidy Tracker database with two lists of companies: firms linked to members of the Forbes 400 list (the wealthiest Americans) and major low-wage employers.

“This year, Forbes highlights those said to have built fortunes entirely on their own rather than through inheritance, yet our research shows that many of the billionaires got assistance from taxpayers,” said Philip Mattera, Good Jobs First Research Director and lead author of the report.

The members of the Forbes 400 control or are otherwise closely linked to 99 large corporations that have been awarded more than $19 billion in cumulative subsidies, as documented in Subsidy Tracker. Five of the 99 firms have been awarded more than $1 billion in subsidies, including Intel ($5.9 billion), Nike ($2 billion), Cerner ($1.7 billion), Tesla Motors ($1.3 billion) and Berkshire Hathaway ($1.2 billion). The average subsidy total for the group, which is limited to those firms receiving $1 million or more, is $196 million.

Among the individuals on the Forbes 400 linked to one or more of the 99 highly subsidized companies are every one of the 11 wealthiest individuals and all but two of the top 25. These include Bill Gates, whose $81 billion fortune comes mainly from his holdings in Microsoft, which has been awarded $203 million in subsidies; Warren Buffett, whose $67 billion net worth derives from Berkshire Hathaway, which has been awarded $1.2 billion in subsidies; Larry Ellison, whose $50 billion net worth comes from Oracle, which has been awarded $18 million in subsidies; the Koch Brothers, each worth $42 billion from Koch Industries, whose subsidies total $154 million; and four members of the Walton Family, each worth more than $35 billion from Wal-Mart Stores, which has been awarded more than $161 million in subsidies.

Inequality is also caused by the long-term stagnation and even the decline of wages in real terms for many low- and middle-income workers. Here, one would hope that the billions spent on economic development would help raise living standards for typical families. But instead Tax Breaks and Inequality finds dozens of large low-wage companies being subsidized.

Eighty-seven such companies have each been awarded more than $1 million in state and local subsidies, for a total of $3.3 billion. Retailers dominate the list, with 60 firms awarded more than $2.6 billion in subsidies. Twelve firms in the hospitality sector (restaurants, hotels and foodservice companies) account for more than $245 million in subsidies. The low-wage companies with the most in subsidies are: Sears ($536 million), Amazon.com ($419 million), Cabela’s ($247 million), Convergys ($202 million), Starwood Hotels & Resorts ($166 million) and Wal-Mart Stores ($161 million).

Eight companies, seven of them retailers, are both linked to members of the Forbes 400 and pay low wages: Sears, Amazon.com, Wal-Mart, Best Buy, Bass Pro, Meijer, Menard, and Allegis Group.

“Subsidies are certainly not the main cause of growing inequality,” LeRoy points out in a policy chapter. “But subsidizing billionaires and low-wage companies is a strong facial connection that our Subsidy Tracker now enables us to make.”

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GJF’s Analysis of GASB’s Proposed Standard for Tax Abatement Disclosures

November 3, 2014 by

For Immediate Release October 31, 2014

Contact: Greg LeRoy 202-232-1616 x 211

Good Jobs First Releases Analysis of GASB’s Proposed Standard for Tax Abatement Disclosures

Washington, DC—Good Jobs First today issued its analysis of the Governmental Accounting Standards Board’s (GASB) proposed new accounting standard for economic development tax subsidies. Using the umbrella term “tax abatements,” for property, income, sales and other tax expenditures, GASB’s proposed new standard will for the first time require state and local governments to report how much revenue they lose to economic development subsidies.

Good Jobs First’s overview page about GASB and the “Exposure Draft” is at www.goodjobsfirst.org/gasb.  That page also links to a detailed summary and critique of the proposed standard at http://www.goodjobsfirst.org/gasb_analysis .

“We applaud GASB for finally ending their long, conspicuous silence on this issue, which costs taxpayers an estimated $70 billion per year,” said Greg LeRoy, executive director of Good Jobs First. “We consider this absolutely tectonic news in the long history of economic development incentive reform. There are many laudable aspects of the proposed new standard. However, we also have many concerns about the draft standard, especially because it could miss many forms of economic development tax spending.”

The Good Jobs First analysis lays out five different tax-based subsidies that might elude GASB’s definition, including tax increment financing (TIF), personal income tax diversions, sales tax diversions, payments in lieu of taxes, and so-called performance-based incentives. It also questions GASB’s decision not to call for project-specific disclosure or for the reporting of future-year obligations.

“Taxpayers and public officials now have until January 30 to file comments with GASB,” said LeRoy.  “We hope everyone concerned will take the time to read our analysis, look at the draft standard, and file comments.”

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JPMorgan Chase Abandons $1 billion NYC Subsidy Effort

October 29, 2014 by

When The New York Times reported that JPMorgan Chase was seeking close to a billion dollars in incentives to build a new trophy headquarters on Manhattan’s Far West Side, the idea seemed too audacious to be true. As it turns out, it was. The New York Times reports that JPMorgan has abandoned its plan to develop two towers in Hudson Yards and will keep its headquarters in two buildings located at 270 Park Avenue and 383 Madison Avenue.

The de Blasio administration has cause to celebrate the apparent success of its decision not to provide huge economic development subsidies to wealthy corporations for uncertain job promises. New York City Deputy Mayor Alicia Glen responded to JPMorgan’s decision by stating: “This is an outcome that validates our approach, and our belief that these deals often come down to factors that have nothing to do with taxpayer subsidies.” This is a truth that Good Jobs First has been documenting for years.

Just prior to the collapse of the deal with JPMorgan Chase, a group of labor unions and government accountability advocates organized under the banner of the Committee for Better Banks and was about to issue a report detailing the history of abuse of taxpayer subsidies by JPMorgan Chase in New York City.

JPMorgan Chase (previously Chase Manhattan) is a poster child in New York City for the waste of lavish subsidies in return for failed job creation promises. In 1988, after threatening to leave New York City for offices in New Jersey, Chase Manhattan was offered an unprecedented package of city tax subsidies, worth over $200 million in property and sales tax breaks as well as infrastructure payments, to relocate 5,000 of its employees to 4 Metrotech Center in Brooklyn. JPMorgan has not paid any property taxes for 4 Metrotech for the past 25 years, a savings of over $170 million. Additionally, it has benefitted from over $37 million in sales and other tax benefits.

Despite the generous subsidy, the firm never achieved its promise to retain 5,000 employees at Metrotech and create 1,450 jobs. In 1999, Chase Manhattan cut 10% of its New York City workforce when it fired 800 employees and relocated thousands of other workers to Florida, Texas, and Massachusetts. Current full-time permanent jobs at 4 Metrotech Center in Brooklyn are approximately 2,500, less than half of what was originally promised. Since the financial crisis of 2008, JPMorgan has cut about 12% of its citywide workforce.  The New York City Industrial Development Agency recaptured about $100,000 in subsidies from the bank, and its agreement with the city for its Brooklyn location is set to expire in 2015.

What has been less clear to the public is the enormous benefit JPMorgan receives for one of the buildings it currently owns located at 270 Park Avenue. Although it was originally intended to provide incentives to industrial firms seeking to expand in New York City, the Industrial and Commercial Incentive Program (ICIP) is widely criticized for providing excessive subsidies to non-industrial firms. JPMorgan Chase is currently at the midpoint of a 12-year property tax exemption through ICIP for its property at 270 Park Avenue, valued at about $100 million.

Clearly, JPMorgan understands well how to shake the tree for government subsidies. In May 2014, the New Jersey Economic Development Authority offered JPMorgan Chase approximately $225 million in tax credits to retain 2,600 employees in Jersey City. Advocates have called this deal “mind-boggling.” Similarly, Good Jobs First has documented in Subsidy Tracker subsidies received by JP Morgan in 13 states. JPMorgan Chase received $25 billion in bailout assistance (later repaid) from the federal government through the Troubled Assets Relief Program (TARP).

It is too early to know whether the collapse of this particular subsidy deal signals a truly new approach to economic development policy in New York City. However, it is certainly worth commending the de Blasio administration for not bowing to JPMorgan’s original demand. And perhaps it can be a lesson to economic development officials nationwide that taxpayer subsidies are not required to maintain a rich business environment.

Kansas City Missouri Weighs Proposal to Cap Property Tax-Based Subsidies

October 14, 2014 by

Cerner's Subsidized Campus

The Kansas City, Missouri city council will take up a familiar issue in the coming weeks:  How much revenue should be devoted to economic development endeavors?  KCMO Mayor Sly James has proposed a limit on the amount of property tax available to subsidize development in the city.  His proposal, under consideration but not yet approved by the council, would cap the amount of property tax available for use as a subsidy at 50 percent of the total property value for any given project.

Property tax abatements and tax increment financing are commonly employed subsidies in the Kansas City area.  The Tax Increment Financing Commission and the Planned Industrial Expansion Authority both retain the power to approve subsidies that capture up to 100 percent of the total property tax value of a project.  Other taxing jurisdictions that rely on property taxes to fund public services – school districts, counties, and fire districts are shorted revenue by these diversions.

If approved, Mayor James’ proposal would cap these subsidies by prohibiting the KCMO city council from approving any deals made by the economic development entities in which more than 50 percent of the property tax is diverted from public coffers.  The Mayor’s reform proposal comes just a year after the City Council approved one of the largest tax increment financing deals in history for Cerner Corp., which stands to receive a $1.6 billion subsidy for the expansion of its corporate campus in South Kansas City.

Wasteful, inequitable subsidy awards are a predictable result when tax revenues are spent by special economic development authorities before even making it to state and local general funds.  Mayor James’ proposed cap is a good first step to ensure that at least some of the public’s money is reserved for public purposes.

 

Audit of Texas Subsidies Reveals Lax Oversight, Enters Gubernatorial Debate

October 8, 2014 by

A new audit of the controversial Texas Enterprise Fund is casting deep doubts on economic development practices in Texas and has become a key issue the current gubernatorial race.

Over the course of Governor Rick Perry’s term in office, over a half-billion dollars in subsidies have been awarded to over 100 companies. New revelations from the recent audit raise questions as to whether recipients were adequately vetted and monitored.

moneybagsAmong the major findings:

  • Nearly half of the money awarded, some $223 million, went to 11 recipients that failed to file an application or make specific job creation promises.
  • Texas Attorney General Greg Abbott, a candidate for Governor, denied public access to application records on TEF subsidy recipients. Oddly, the audit revealed that some applications which the Attorney General’s office claimed were exempt from freedom of information laws never actually existed.
  • Because of the failure to adequately document the process of awarding subsidies, the Auditor concluded that, “It was not always possible to determine how the [Governor’s] Office made awarding decisions.”
  • The Auditor specifically criticized the practice of “self-reported information that recipients submitted” to determine compliance.
  • A January 2013 report to the legislature gave a misleading impression about subsidies by reporting promised job creation from TEF recipients. The actual rate of job creation, 73 percent, was omitted. Such oversights led the Auditor to conclude that “The Office also did not consistently provide decision makers with complete and accurate information.” Worse, the report ignored requirements to inform the legislature about the median wages of subsidized jobs and the number of jobs providing health care benefits to employees.
  • TEF subsidy agreements frequently failed to adequately define full-time job creation, despite requiring it from subsidy recipients. And some subsidy recipients weren’t required to meet job-creation benchmarks before receiving grants.
  • The Governor’s Office fell short on recapturing some $3.8 million in subsidies from 23 recipients whose contracts were terminated and could have collected some $14.5 million through clawbacks from firms failing to meet job creation goals.
  • State law requires that both the Texas Speaker of the House and the Lieutenant Governor be notified about changes in subsidy contracts. But the audit reveals lapses in notifying these parties about changes in subsidy contracts.

GASB Finally Prepares to Step Up! And Who is GASB, You Ask?

October 7, 2014 by

For many years, we at Good Jobs First have criticized GASB—the Governmental Accounting Standards Board, or “GAZ-bee”— for failing to require state and local governments to disclose economic development subsidy spending in a uniform way.

It appears that’s finally about to change, and if it does, it will be hard to overstate the significance of the news.

As the group that has been successfully shaming states and cities to disclose on subsidies all these years, with our 50-state and 50-locality “report card” studies, and as the group that has been collecting all the public data—and also lots of previously unpublished data—in our Subsidy Tracker database, we are intimately familiar with the irregularities and gaps that exist in these vital public records. And we have long shown how to fix them in our model legislation.

First, a quick primer on GASB: it is the public-sector counterpart to the Financial Accounting Standards Board, or FASB, which issues private-sector accounting rules. Each body oversees its respective set of rules, which are constantly under review and improvement, known as Generally Accepted Accounting Principles, or GAAP.

Adhering to GASB, cities, counties, states (and other government bodies such as school boards and sewer districts) must account for their finances in conformity to GAAP if they want to receive ratings from the major credit ratings agencies (Moody’s, Standard & Poors, Fitch), which they must earn if they wish to sell bonds.

The same is true for corporations of all kinds if they wish to satisfy shareholders, sell debt, or even get foundation grants. Indeed, Good Jobs First’s auditors have to certify us as GAAP compliant in our annual financial statement. All of which is to say: the influence of GASB and FASB is enormous and ubiquitous; they are the arbiters of sound United States bookkeeping standards that protect investors, taxpayers, and consumers every day. (Both are part of the non-profit Financial Accounting Foundation.)

Now, GASB is preparing rules that say: to meet GAAP, governments will have to publish an annual accounting of the revenue lost to economic development subsidies. The proposed wording of these rules has not been issued; all we have are board-meeting minutes of a low-profile process spanning more than two years, as GASB gathers information and debates how best to achieve this new standard.

GASB is using the term “tax abatement” as an umbrella term (not just specific to local property tax exemptions) but “a reduction in taxes… in which (a) one or more governmental entities forgo tax revenues that [an individual] taxpayer otherwise would have been obligated to pay and (b) the taxpayer promises to take a specific action that contributes to economic development or otherwise benefits the government(s) or its citizens.” This would appear to also cover state corporate income tax credits and state or local sales tax exemptions, but apparently not tax increment financing.

As part of that process, GASB even commissioned a survey that included citizens groups, county board members and bond analysts. Tellingly, the bond analysts said they are most keen to see both current and future-year costs. For cities like Memphis, where we recently found that Payments in Lieu of Taxes (or PILOTs) cost the city almost one-seventh of its property tax revenue, such losses are apparently becoming bigger concerns for bond investors.

GASB will have a three-month comment period on its proposed rules starting next month (November).

For all the cost-benefit debates featuring inflated ripple-effect claims that beg the more fundamental issue of cause and effect, we have always said: the only thing that can be said for sure is that development subsidies are very expensive, so costly that they undermine funding for public goods that benefit all employers. Therefore, at the very least, taxpayers have the right to know the exact price of every deal and every program (and the outcome of every company-specific deal). GASB now appears to be moving to make some form of standardized disclosure of tax-break costs a reality for reporting periods after December 15, 2015 (and sooner on a voluntary basis).

Some important details remain to be clarified. Based on the board minutes, it appears that GASB will propose giving governments the option of disclosing individual deals or only programs costs in the aggregate (the latter option would be far inferior). We’ll know for sure when the draft standards are published sometime this month. Good Jobs First will publish a detailed analysis of the draft when it comes out.

But for now, the big picture is simply huge: the body that effectively controls how taxpayer dollars are accounted for is finally catching up to the Wild West of record-keeping known as economic development incentives.

California Bans a Tax-Break Commission

September 17, 2014 by

For Immediate Release September 17, 2014
Contact Greg LeRoy 202-232-1616 x 211

Good Jobs First Congratulates California for First-Ever Ban of Consultant Commissions on Job Subsidies

Washington, DC – Good Jobs First today congratulated the State of California Governor’s Office of Business and Economic Development (“GO-Biz”) for the first-ever effective ban in the United States of consultants receiving percentage commissions on a major economic development tax-credit program. It also criticized the prominent tax-consulting firm led by G. Brint Ryan of Texas for seeking to overturn the ban.

“This is historic good news for taxpayers and for the economic development profession, and a teachable moment for the public about a questionable practice,” said Greg LeRoy, executive director of Good Jobs First. “We expect it will provoke a backlash from site location and tax-break consultants who may threaten to blacklist California and any state that follows suit, but California is in a strong position to withstand such threats. The best thing that could happen is that many more states adopt the same rule.”

The California ban was installed in emergency regulations issued by GO-Biz on August 8 that became law August 18. It covers one program: the California Competes Tax Credit, a discretionary program totaling about $150 million gearing up for its second competitive round this month. The regulations allow consultant fees, but state in part: “Any contingent fee arrangement must result in a fee that is less than or equal to the product of the number of hours of service provided to the applicant and the industry standard hourly rate for such services.”

LeRoy’s 2005 book The Great American Jobs Scam explicitly called for site location consultants, especially those who negotiate tax breaks, to be registered and regulated as lobbyists so that success fees, a.k.a. commissions, would become illegal. “For decades, secretive site location consultants have profited greatly by orchestrating the economic war among the states, sometimes pulling down commissions of as much as 30 percent of the discretionary subsidies they win for their corporate clients,” explained LeRoy. “They have used confidentiality agreements and the unwritten threat of blacklisting to keep their business practices low-profile. California has just violated this etiquette that is so lucrative for some tax-incentive consultants.”

The California regulations were quickly challenged in a lawsuit by Ryan, the large Texas-based tax services firm that was described at length in the New York Times’ December 2012 series “United States of Subsidies.” Its founder G. Brint Ryan, is a major political donor in Texas and his firm helps fund TexasOne, the organization behind Gov. Rick Perry’s job-piracy trips to other states that Good Jobs First has criticized for their unprecedented levels of political partisanship.

“We congratulate California for a gutsy reform that should inspire many states to follow suit,” concluded LeRoy.

Good Jobs First is a non-profit, non-partisan resource center promoting accountability in economic development. Founded in 1998, it is based in Washington, DC.

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North Carolina Conflict of Interest Controversies

September 16, 2014 by

As odd as it sounds, North Carolina’s ethics law allows high-level state appointees to serve on the boards of for-profit

Secretary Sharon Decker

Secretary Sharon Decker

corporations. Such officials are prohibited, however, from taking actions that might create a conflict of interest with their official duties. Sharon Decker, the state’s secretary of commerce, is taking advantage of that law but is ignoring what many observers see as an obvious conflict.

Decker has been serving on the board of Family Dollar Stores, one of the country’s largest chains of deep-discount retailers. That part-time post pays her more (nearly $150,000 last year) than her official salary ($136,000). Being a Family Dollar director these days is more challenging than usual. The company, responding to concerns about its financial performance, agreed a few months ago to be acquired by its rival Dollar Tree. But then the biggest dollar-store chain of all, Dollar General, made its own offer.

The situation remains unresolved, but it is likely that any change in ownership of Family Dollar will jeopardize jobs at the company’s headquarters in Matthews, North Carolina. In other words, Decker, whose duties include promoting job creation, might very well be taking steps in her private position that reduces employment in the state.

Decker’s situation creates serious questions about the policy of allowing high-level economic development officials to sit on corporate boards. On one hand, those officials are responsible for protecting North Carolina jobs and for representing the state’s interest in negotiations with companies. On the other hand, as directors they are responsible for maximizing profits of corporations.

Decker is not the first high-level official whose close relationship with a private company has caused public concern. For 14 years when Gov. McCrory was Charlotte’s mayor, he was also a manager at Duke Energy. The recent coal ash spill caused by the company raised questions about whether the Governor was still advancing the interests of the company.

There is another troubling aspect of this story. The Economic Development Partnership of North Carolina, a newly created private arm of the Commerce Department, is about to start its operation. Its employees will follow the same ethics rules as legislators and executive branch officials, meaning that they could end up in similar positions to McCrory and Decker.

The next time they meet, North Carolina legislators might want to consider whether it’s time to overhaul the state’s conflict of interest rules.

Nevada (for Tesla): Birthplace of the Tax Credit-Capture Zone

September 16, 2014 by

September 12, 2014

Greg LeRoy, executive director of Good Jobs First, today released the following statement about Nevada legislation for the Tesla “gigafactory” project.

“We are struck by several aspects of this massive subsidy package, which we price at $1.287 billion, or the 12th largest in U.S. history.

“Despite months of rhetoric about 6,000 jobs, the fine print actually does not require Tesla Motors itself to create any specific number of jobs in order to be eligible for the tax credits and abatements. Apparently, the bulk of hiring could be at suppliers.

“The only project requirement to trigger all but one the tax breaks is a total of $3.5 billion in capital investment over 10 years—and that figure covers capital expenditures by Tesla (the so-called ‘lead participant’) and all of its co-located suppliers (named along with Tesla in the bill as ‘participants’). [trigger on pages 2 and 8] [definitions on pages 6 and 7]

“In a scheme we have never seen before, ‘lead participant’ Tesla is entitled to all of the refundable tax credits (up to $195 million) even when the hiring or the capital expenditures generating those credits are made by the other ‘participant’ suppliers. Effectively, this would make the massive industrial campus CEO Elon Musk envisions a Tesla Tax Credit-Capture Zone. [pages 16 and 17] And $120 million of the refundable credits is tied to the $3.5 billion in capital expenditures; only $75 million is tied to hiring. [page 3]

“We also note that the bill requires that only half of the temporary construction workforce and half of the permanent manufacturing workforce be Nevada residents. This supports our argument that a Reno-area facility will likely draw its workforce heavily from nearby California. California could become a huge winner here, with lots of job-creation benefits and no economic development subsidy costs. And the residency requirement, even as low as it is, can be waived. [pages 9 and 11]

“The disclosure requirements for reporting of tax credit transactions and other project activities have numerous problems and grant too much final authority to the Governor’s Office of Economic Development to withhold information from the public.

“The big winners in this deal are Tesla Motors and possibly the state of California. In the history of high-stakes economic development poker games, Nevada will go down as the birthplace of the Tax Credit-Capture Zone.”

Tesla: New Technology, Same Old Subsidy Charade

September 9, 2014 by

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.

powered by subsidies

 

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 ProjectProgressive 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.


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