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.”