Posts Tagged ‘electric cars’

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

September 16, 2014

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.”

Who’s Subsidizing the Electric Car?

September 4, 2008

Chevrolet Volt prototype

Announcements by U.S. cities of subsidy packages for new automobile plants have become commonplace, but the most recent one is fraught with irony. Last week, the city council of Flint, Michigan voted unanimously to grant several tax breaks to General Motors in connection with the construction of a facility that will produce engines for the company’s planned plug-in electric car called the Chevrolet Volt, which is expected to start production in 2010.

The deal includes a 15-year, 50 percent abatement of real property taxes on a new 500,000 square-foot plant, a 100 percent abatement of taxes on personal property (i.e. equipment) and the designation of the site as a brownfield redevelopment, which would make the plant eligible for additional state tax breaks. Flint officials have not yet released an estimate of the total cost of the package.

Flint…General Motors…electric car…subsidies—where to begin?

The typical U.S. auto subsidy story involves a foreign carmaker getting a ton of money to construct a new plant on a greenfield site in a Southern state where unions are scarce. Think of Volkswagen’s recent announcement it will open a plant in Tennessee, which follows a long string of investments by companies such as Toyota, Nissan, Honda and Hyundai in states such as Alabama, Mississippi and Texas.

The GM/Flint story, by contrast, involves a U.S.-based company investing in an established industrial area of a Northern city where the United Auto Workers is well entrenched. It is unlikely that Flint’s subsidies will match what foreign carmakers receive in the South, though it is worth noting that GM apparently intends to seek additional aid from the state of Michigan, which would presumably cover not only the engine plant in Flint but also the plant in Detroit/Hamtramck where the Volt will be assembled. GM, along with Ford and Chrysler, is seeking federal assistance as well.

There are apparently mixed feelings about GM’s plans in Flint, which calls itself the “birthplace of General Motors” and has been celebrating the 100th anniversary of the company’s founding with public events such as a parade of vintage GM cars. Yet Flint has also suffered through waves of GM downsizing that have cost the city many thousands of jobs over the past quarter-century. The travails of the city were made famous in Michael Moore’s 1989 documentary film Roger & Me.

The Volt facility, however, will create no new jobs. It will be staffed by about 300 existing GM workers in Flint, whose positions will be counted as “retained.” Flint City Councilman Jim Ananich told the Detroit News: “A lot of people still feel…General Motors owes us more than just a couple hundred jobs.”

The same argument could be made about tax revenue. It is true that GM is hemorrhaging cash—it posted a loss of more than $15 billion for the second quarter of this year—but will the property tax savings from Flint do much to rectify that mess? The tax payments would mean much more to a struggling city than to the company’s bottom line. It’s clear that GM would find a way to build the engine plant even without the abatements.

At the same time, I can understand why Flint would be willing to pay to get a foothold in a forward-looking part of GM’s operations. Subsidizing a plant that will manufacture a component for a cleaner-energy vehicle is more palatable than sinking money into conventional auto production. It should be noted, however, that the Flint plant will make the “dirty” part of the Volt—the gasoline-powered engines that will extend the range of the car beyond the 40 miles allowed by the battery-driven electric motor.

One can only hope GM is serious about the Volt. After all, this is the company that had developed an electric car—the EV1—a decade ago and declined to market it (as documented in the 2006 film Who Killed the Electric Car?). It is also odd that Vice Chairman Robert Lutz, the GM executive credited with promoting the Volt, is reported to have said privately earlier this year that global warming is “a total crock.”

I’d be a lot happier if a company without GM’s tainted track record were pioneering a plug-in electric car and creating lots of new union jobs in unsubsidized plants, but perhaps that’s something to expect not in a documentary but rather in a science fiction film.