An Open Letter to Arizona, California, Nevada, New Mexico, and Texas Officials About Tesla Motors

by

For Immediate Release August 25, 2014

Contact: Diane E. Brown (Arizona) dbrown@arizonapirg.org (602) 252-9227
Chris Hoene (California) choene@cbp.org (916) 444-0500
Bob Fulkerson (Nevada) bfulkerson@planevada.org 775-348-7557
Javier Benavidez (New Mexico) javier@swop.net 505-315-3596
Craig McDonald, (Texas) craig@tpj.org 512-472-9770
Greg LeRoy goodjobs@goodjobsfirst.org 202-232-1616 x 211

An Open Letter to Arizona, California, Nevada, New Mexico, and Texas Officials About Tesla Motors

There is no question that state officials should place a high priority on boosting employment and fostering economy opportunity. But recently our states have been pitted into a race to the bottom from which no real winner may emerge. Tesla Motors’ proposed “Gigafactory” – undoubtedly a valuable source of economic growth for its eventual home state – has been offered to you in an unusual public auction, with the opening bid set at $500 million in subsidies. Since Tesla has chosen to make the process public, we write as unified voices from Arizona, California, Nevada, New Mexico, and Texas to argue that our states have more to gain from cooperation than from competition.

We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike. It is time to break the harmful pattern of one state “winning” a high-profile competition, with other states left believing they need to offer even larger tax breaks to win future deals.

Overspending on Tesla – or any other company – could be a net-loss game in which fewer public resources are then available for investments in areas that benefit all employers, such as education and training, efficient infrastructure, and public safety. All state and local taxes combined equal less than 2 percent of a typical company’s cost structure, but lost tax revenue comes 100 percent out of public budgets.

What’s needed are smarter deals, recognizing that all of our states could potentially spend $500 million on other vital public services. Any agreement struck must be fully transparent – no law requires you to negotiate with Tesla or any company behind closed doors – and, furthermore, should include robust provisions for disclosing actual costs and benefits over time. Our states’ residents should feel confident that there are strict performance requirements and money-back guarantees to ensure Tesla delivers what it promises.

Tesla might even be receptive to a multi-state dialogue. The iconoclastic company, internationally known for innovation, could help chart a new path in how economic development is done. The automotive industry – with its far-flung supply chains and 50-state market – is a poster child for the idea that states are interdependent and that the main goal is the long-term growth of American jobs, not any single state’s ribbon-cutting.

We call upon our elected officials to seize this rare opportunity: talk to each other, let the public into the process, and when the time comes, strike a smarter deal that will preserve the tax base for the benefit of all.

Signed,

Diane E. Brown, Arizona PIRG

Chris Hoene, California Budget Project

Bob Fulkerson, Progressive Leadership Alliance of Nevada

Javier Benavidez, Southwest Organizing Project (New Mexico)

Craig McDonald, Texans for Public Justice

Greg LeRoy, Good Jobs First

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11 Responses to “An Open Letter to Arizona, California, Nevada, New Mexico, and Texas Officials About Tesla Motors”

  1. PROGRESSNOW NM Says:

    Reblogged this on PROGRESSNOW NM and commented:
    State leaders from five Southwestern states join together in an open letter about Tesla’s $500+ million ask for public help.

  2. Robert Fahey Says:

    So the states should put their heads together and agree on . . . what exactly? “We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike.” I’ve read that several times but still don’t know what it means.

  3. Offgridman Says:

    This is so ridiculous
    – no law requires you to negotiate with Tesla or any other company behind closed doors –
    Except for the nondisclosure agreements signed by the various parties.
    Tesla is simply working within the business and legal environment that is already here. Are you going to blame them for trying to make the best deal possible in order to be profitable within an existing market?
    Another thing is that all of the states that have seen development and site work will end up getting Gigafactory’s, just because Reno is the only one that has been discussed in the media, do you really think it is the only one. Musk has made it quite obvious that in order to supply the needs of Tesla, the home storage of his solar company, and the battery packs they will be selling to the other automotive manufacturer’s that are to scared to invest in EV development themselves, there are going to be several Gigafactory’s. The only thing that the states are competing for now is to see who will be first.
    Within 20-25 years everyone is going to be driving electric cars, and at least 50% of our individual homes are going to have solar power with storage capacity, not only because the oil and natural gas will be about used up, but because getting our energy directly from the sun is so much cheaper. Even the federal and state governments have realized this, why else would there be all of the mandates and regulations pushing people towards renewable energy and electric cars?
    At that time it will be Tesla that is the leading automotive manufacturer, if the big three even survive or are remembered.
    This will not be because of the government regulations, but because Tesla is the only car maker recognizing that the fossil fuels are running out and we need to do something different other than being concerned with the yearly or quarterly profits.
    If you truly want good jobs for all get behind America’s conversion to renewable energy. Wind, solar, hydro sources, and Geothermal will give our country energy security that keep all of the jobs here and avoid the expense of the oil wars our country has spent over the past forty years. Then there will be so much reasonably priced energy that the other industries will stay here also and be able to afford to pay decent wages.
    It is just silly that you are trying to fight against one of the few companies that is trying get us to that clean and prosperous future because they are dealing with the current corrupt political environment in the only way possible. If you want things to change get rid of the politicians that made it this way and quit supporting the dirty industries that pay them off to maintain the status quo.

    • Greg LeRoy Says:

      Thanks for such a thoughtful comment, but if it is true, as you write that: “…there are going to be several Gigafactory’s. The only thing that the states are competing for now is to see who will be first,” then why should any state pay Tesla a dime? It would be paying Tesla to do what it is already planning to do, a taxpayer-funded windfall for the company, which is the all too-often criticism Good Jobs First makes of so many such deals. Also, for the record, Good Jobs First does support good jobs in U.S. renewable energy development; in fact, we published the first analysis of job quality issues in three green jobs sectors in 2009. See “High Road or Low Road: Job Quality in the New Green Economy on our publications page: http://www.goodjobsfirst.org/publications Greg LeRoy, Good Jobs First

      • Offgridman Says:

        “Why should any state pay Tesla a dime”
        In the first place the states aren’t paying anything, agreeing to temporary tax concessions, or in the case of California promising to fast track environmental reviews from the normal 3-5 years so that construction or development of the factory can start next year. In order for Tesla to start sales of its third model that is supposed to be more economical in price and still have a decent range around 200 miles in 2017 they need to be producing their own batteries. In order for that to happen construction on the Gigafactory has to start in early ’15.
        Yes there will be more battery factories, but with a construction time of close to two years and needing to rebuild capital to fund them the next one may not be started for 3-5 years. So in order to have the jobs and the residual investments in the state from the first factory the states have plenty to compete over.
        But as I said in the first comment, it makes no sense that you are criticizing for thriving in the current political and market conditions due to their superior product, service, and treatment of employees the Tesla company. Have you even checked out the surveys of those current employees in California, or the analysis by the department of labor on the pay scales and benefits received? Tesla takes very good care of their employees compared to most other companies, with an emphasis on hiring veterans and people in the reserves.
        What you suggest for the states to collectively bargain isn’t going to happen under our current political situation, and even if it did it would just mean a delay in building the Gigafactory. That will mean a delay in many thousands of jobs from construction, factory employees, and all the residual jobs and services that need to be provided. Also a delay in getting long range economical EV’s being available for people, with the side effects of continuing oil consumption, and the pollution and other issues that comes with it.
        If you want to change the current political system and make it so that our market system is more fair for people on all levels I will be 100% behind you. But in attacking the one company that is trying to do things right for their employees, our country, and the environment within the current system I think you are very wrong.

  4. Greg LeRoy Says:

    If Tesla has its way, one state will spend at least half a billion dollars. In public finance, spending through the tax code is known as making a tax expenditure, and that could include corporate income tax credits or property tax abatements or sales tax exemptions or all three. (Mortgage interest deductions and grocery sales tax exemptions are other forms of tax expenditure; they span personal as well as corporate taxes.) One big reasons states have not cooperated in the past is that 99+% of such competitions are staged privately under the “prisoners’ dilemma” system I lay out in chapter 2 of The Great American Jobs Scam. This rare public auction is a chance for the states to cooperate (and we know of no reason why it would slow the process and could easily make a case for it expediting things). Regarding the issue of fairness: as we documented in our June 2013 study “Megadeals,” the number and cost of extremely expensive deals has spiked since 2008; we believe that is making fewer resources available to small and entrepreneurial businesses who continue to suffer the most in the protracted recovery. Putting so many eggs in so few corporate baskets is also risky; for example, the State of Michigan had a bad experience massively subsidizing another automotive battery venture, A123 Systems, which went bankrupt. PS: we made no criticism of Tesla’s product or employee relations; please do not misrepresent us.

    • Offgridman Says:

      I didn’t say that you criticized Tesla’s product or employee relations, it was part of a general comment that you are attacking a company that is doing those things right. However part of your sites stated purpose is to protect or promote good jobs and pay, and since in your original treatise you didn’t state one way or the other your opinion on Tesla’s employee relations there is no way to know your opinion..
      Perhaps we are going to have to agree that we have different opinions on this situation. You think that blaming Tesla for thriving in the current political and market environment is going to change things. I just don’t see it that way, yes the system needs to be changed, but slowing down or stopping or trying to change Tesla’s business dealings isn’t going to change the root problem, only changing out the politicians that are in the pay of corporate America and changing the laws that allow those payments will do it in my opinion.
      Have a great day and I wish you all good fortune with changing the root problem of our country’s political and economic mess, but think you are going about it wrong by blaming Tesla.

      • Offgridman Says:

        A PS for myself too. You state the concern of to much control being in one corporate basket to the detriment of others in the industry and the small and entrepreneurial players. Doesn’t it seem that Tesla is trying to do just the opposite of that. Since the start of the company one of the stated goals has been to encourage EV development and expansion by all of the auto makers in order to correct the environmental problems caused by gas cars. However this past spring with the other companies doing so little towards making reasonably priced fairly long range EV’s they opened up their entire patent portfolio on battery design and electric drive systems. Offering free use and saying they will not go after anyone for patent infringement if they will just help make more EV’s available on the market. To me this seems like it is the total opposite of trying to keep all of the eggs in one corporate basket, but none of the American auto makers will take advantage of this situation, and actually issued statements that they had no current plans to do so.

  5. California’s plan to woo Tesla ‘Gigafactory’ fails in legislature | Daily Digest News Says:

    […] SouthWest Organizing Project, Texans for Public Justice  and Good Jobs – signed an open letter expressing these […]

  6. Tesla passes on New Mexico, but golden parachutes abound « Watchdog.org Says:

    […] Politically, Gov. Susana Martinez will take a hit. Her supporters will say it’s unfair, and there’s some truth to that. Opponents from the left criticized the Martinez administration from opposite angles: You’re not doing enough, cried Senate Democrats while, just a few days before the Tesla decision, a group of liberal social welfare organizations chastised states in contention for potentially giving away the store. […]

  7. Editorial: Tesla passes on New Mexico, but golden parachutes abound « Capitol Report | New Mexico Says:

    […] Politically, Gov. Susana Martinez will take a hit. Her supporters will say it’s unfair, and there’s some truth to that. Opponents from the left criticized the Martinez administration from opposite angles: You’re not doing enough, cried Senate Democrats while, just a few days before the Tesla decision, a group of liberal social welfare organizations chastised states in contention for potentially giving away the store. […]

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