Nevada’s gift to Tesla that just keeps on giving
Across political lines, there’s a growing sense among Americans that the game is rigged when it comes to the economy. And one has to imagine that little things — such as sweetheart “economic development” deals for multi-billion-dollar corporations — contribute to that perception.
Nearly a decade after Nevada lawmakers approved an unprecedented incentive package aimed at luring Tesla to the state, the Legislature’s actions are proving to be the gift that keeps on giving for the world’s most highly valued automaker.
Tesla’s planned $3.6 billion expansion to its Northern Nevada Gigafactory has apparently qualified it for a new set of abatements under the 2014 law. The Governor’s Office of Economic Development (GOED) is set to make details public ahead of its upcoming March 2 board meeting, but the abatements will likely total in the hundreds of millions of dollars.
News of the forthcoming deal with Tesla has reenergized calls by lawmakers for more legislative oversight of GOED’s actions. Sen. Dina Neal (D-North Las Vegas), for example, told The Nevada Independent she plans to introduce a bill that would lengthen the amount of time lawmakers and the public have to review such deals.
It isn’t the first time the executive branch’s corporate giving has come under scrutiny by lawmakers who feel left out of the process. In 2019, a bill was put forward to create a legislative committee focused on reviewing such incentive packages — but it was vetoed by then-Gov. Steve Sisolak.
Apparently, governors from both parties rather enjoy the ability to dole out abatements with little legislative oversight or scrutiny.
The upcoming deal with Tesla will, undoubtedly, serve as even more fodder for those who are skeptical of GOED’s practices. However, it should also call into question the apparently bipartisan belief that “economic development” requires handing out hundreds of millions of dollars in incentives to billionaires in the first place.
After all, in this instance we’re talking about abatements being given to an already well-established company in Nevada thanks to what was, back in 2014, one of the largest incentives packages in American history. Is Tesla — which has already invested billions into making its Nevada factory a main hub for future production — really hinging its expansion on new incentives?
It seems irrefutable that Tesla’s investment in the Gigafactory will have an economic impact on Northern Nevada — in much the same way its previous $6.2 billion investment sparked a regional explosion of economic growth. Indeed, one can argue that the incentives from 2014 have been rather successful in generating the kind of economic boom promised by its advocates, well-reasoned arguments against such corporate welfare notwithstanding.
However, it’s no longer 2014. The economic and corporate environment used to justify that initial round of abatements and tax credits has changed. We’re not luring a new company to the region with these abatements … we’re merely handing out hundreds of millions of dollars to a highly profitable corporation that already has every commercial reason imaginable to expand its operations in the state.
Geographically, Northern Nevada has always been a natural fit for Elon Musk’s automaking ambitions, with massive lithium deposits sitting (literally) right in the region’s backyard. Moreover, the billions of dollars previously invested by Tesla indicate a clear long-term plan to expand the Gigafactory’s capabilities and scope. At this point in the company’s relationship with the state, abandoning its investment in Northern Nevada would represent a tremendous sunk cost for Musk — not to mention substantially higher capital costs associated with relocating those Nevada operations somewhere else.
In other words, public incentive packages are realistically not going to be a make-or-break deal for the automaker’s future plans in the state — which makes 2023 quite a bit different than when lawmakers felt compelled to bribe Musk with a massive corporate handout.
Before GOED blindly doles out hundreds of millions of dollars in new abatements, it seems prudent to at least consider asking what possible “need” there is to incentivize a company that already has persuasive reasons to expand.
The only real argument for extending such abatements would seem to be that the 2014 law allows it — and Tesla, apparently, has enough capital to trigger yet another decade of preferential treatment from that original sweetheart deal.
As a result, for Nevada businesses and entrepreneurs that lack such political and financial wealth, “economic development” looks decidedly like a game that only well-connected billionaires are invited to take part in.
Entrepreneurs, small business owners and struggling startups, in contrast, face plenty of obstacles in their day-to-day battle for survival in Nevada — including some of the nation’s highest business formation fees and most onerous licensing requirements. And they do so without the kind of government-sponsored favors so often enjoyed by billionaires running subsidy-addicted corporations.
No wonder ordinary people feel like the economic game might be rigged.
Michael Schaus is a communications and branding expert based in Las Vegas, Nevada, and founder of Schaus Creative LLC — an agency dedicated to helping organizations, businesses and activists tell their story and motivate change. He has more than a decade of experience in public affairs commentary, having worked as a news director, columnist, political humorist, and most recently as the director of communications for a public policy think tank. Follow him at SchausCreative.com or on Twitter at @schausmichael.