by April Corbin Girnus, Nevada Current
March 2, 2023
A senior representative from Tesla told the state’s top economic development board Thursday that the electric car company wants to expand its Nevada footprint “not primarily because” of the generous tax incentive package available to them.
“It’s in fact because our team really loves being in Nevada,” said Rohan Patel, senior director of public policy at Tesla, to the Governor’s Office of Economic Development (GOED) board. “We like the state. We like the workforce. We like the things you guys have built here.”
That love, of course, did not stop Tesla from requesting — and receiving with unanimous approval — $412 million in tax abatements and reimbursements over the next 20 years. That amount is in addition to the $1.2 billion in tax abatements and other incentives lawmakers approved for the company in 2014.
Patel also told the GOED board that “there is not a state or country that I’m aware of that has not reached out to me personally or to my team to try and be competitive in terms of landing this type of investment.”
Thursday’s meeting unfolded with the understanding that it was a mere technicality. More than one GOED board member acknowledged that the tax abatements are entitlements written into state law.
“I went through the statute that was created by the Legislature (in 2014) and it’s very clear on the process,” said Josh Reid, director at Fennemore Law Firm and one of the six private sector representatives who sit on the board. “When the GOED staff brings to the board a project that meets these criteria, the Legislature said this board shall pass and approve the abatements.”
The biggest criterion is making $3.5 billion in capital investment. Other requirements include employing a workforce that is at least 50% in-state residents and offering a certain level of health insurance.
Tesla in January announced plans to build an electric battery manufacturing facility and a high-volume semi-truck factory adjacent to its existing battery facility at the Tahoe-Reno Industrial Complex. They project their expansion 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.
Questions about impact
Storey County Manager Austin Osborne told the GOED board the rural county will soon reap the benefits of the initial 2014 deal, as two of its three abatements sunset. According to GOED, Tesla will begin paying an annual minimum of $53 million in property tax and modified business taxes beginning July 1, 2024. The company will continue to benefit from an additional 20 years of sales tax abatement related to its first facility.
With their share of that money set to start coming in next year, Storey County hopes to address some critical infrastructure needs, including its nearly 150-year-old courthouse that cannot accommodate criminal trials, forcing the county to use facilities in Carson City, and an even older water supply system serving rural residents.
Osborne said he welcomes continued partnership with Tesla, saying the county will benefit from the new Tesla project too — once those abatements begin to sunset in a decade. The Storey County Commission also expressed support for the project via a letter submitted with the Tesla abatement application.
Hopefully this will be the model moving forward for continued diversification of the state’s economy.
– Gov. Joe Lombardo
Notably absent Thursday was support or comment from representatives of the adjacent counties that will no doubt be impacted by the project. TRIC is located in Storey County, but it is adjacent Washoe County that is expected to feel the biggest strain from the increased growth brought on by the industrial center.
The only publicly voiced opposition to the tax package came from long-time Northern Nevada progressive activist and organizer Bob Fulkerson, who said the new round of subsidies would bring on pain that local governments are “woefully underprepared” to handle.
“Thousands of new residents coming here with a promise of great factory jobs,” he said. “Rents continue to skyrocket, forcing more locals from their homes. Unmet child care and health care needs are going to be exacerbated. Additional demand for our abysmal transit and more cars on our clogged roadways. More kids flooding our already overcrowded and underfunded schools.”
Lombardo defends deal
Storey County is the third least populated county in Nevada. Its population — currently around 4,000 people — has remained relatively flat by Nevada standards over the past decade, growing just 2.3% between 2010 and 2020, according to the U.S. Census.
Osborne said the county is working to increase housing opportunities within its borders, though no applications for housing development have been filed yet. Tesla representatives have also stated they are actively working on developing workforce housing opportunities within the region, though they have not said where exactly such projects might be located.
Similarly, the company has promised to “continue its investment” in K-12 robotics programs but declined to attach a real figure to that commitment.
A Tesla representative said the company will report on both of those efforts, as well as others, as part of its required annual third-party audit and report.
According to GOED, the Tesla expansion could create an annual economic impact estimated at $2.2 billion or $38 billion over the next 20 years and generate $209 million in annual wages by 2030.
If this is the model for economic development — to give away our tax dollars to billionaires who don’t need it — I think that’s a bad model frankly.
– Bob Fulkerson
Since details of Tesla’s intent to request additional tax abatements began to emerge, GOED has been criticized by key state legislators as having too much power. Democratic state Sen. Dina Neal, who chairs the senate revenue and economic development committee, has promised to introduce legislation to address concerns about oversight of tax abatements.
Republican Gov. Joe Lombardo, who chairs the GOED board and has promised to prioritize pro-business policies during his administration, praised the new Tesla deal in comments during Thursday’s meeting.
“Hopefully this will be the model moving forward for continued diversification of the state’s economy,” he said.
Lombardo briefly acknowledged concerns about the region’s ability to keep up with housing, transportation and education needs in the face of additional growth at TRIC and said “it is the state’s responsibility to ensure we are addressing those items.”
His words received immediate pushback from critics of the deal.
“I think it’s a sham, frankly,” Fulkerson said during a second round of public comments after GOED approved the package. “If this is the model for economic development — to give away our tax dollars to billionaires who don’t need it — I think that’s a bad model frankly.”
What Tesla will receive
The estimated $412 million package is split across three taxes; $330 million will be 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 portion of sales tax.
Additionally, $81.4 million in sales tax over 20 years will be reimbursable through an “economic diversification district” program setup by the 2014 legislation authorizing the original Tesla abatement package.
The tax package constitutes 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.
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