Tesla gets $330 million in tax breaks, pledges to address infrastructure strain
The Governor’s Office of Economic Development (GOED) board voted unanimously Thursday to approve $330 million in tax abatements over 20 years for Tesla, which is planning to spend $3.6 billion to expand its Nevada Gigafactory.
Thursday’s meeting marked the first opportunity for state officials to publicly question Tesla about its proposal since details of the application were released Monday, while representatives from the electric vehicle manufacturer addressed concerns about the potential effect of bringing on thousands more workers to the expanded factory in a Northern Nevada region struggling with the growing pains of a burgeoning technology industry.
Republican Gov. Joe Lombardo, who chairs the board, questioned Tesla officials about their plans to continue partnerships with UNR and help provide child care to company employees at a yet-to-open facility at the Tahoe-Reno Industrial Park in Storey County. He also lauded the abatement process — which allows the nine voting members of the board to grant approval of major tax incentive packages — and Tesla’s continued investment in Northern Nevada.
“Hopefully this will be the model moving forward for the continued diversification of the state's economy,” Lombardo said during the meeting, adding later in comments to reporters that “this is very beneficial across the board, both in economic development and to build out the quality of life for every Nevadan.”
Representatives of Tesla, including executives Rohan Patel and Chris Reilly, expressed gratitude to the state during Thursday’s meeting.
“The reason why we want to locate even more diversified investment in Nevada is not primarily because of an investment package or because of an incentive package, it's in fact because our team really loves being in Nevada,” Patel said. “We like the state. We like the workforce. We like the things that you guys have built here.”
Reilly noted that Tesla’s total investment in the state is set to exceed $10 billion, after the company has already invested $6.2 billion in Nevada from 2014 through 2022. He also highlighted Tesla’s plans to address the local impacts of its growing operations. That includes continued investment in K-12 robotics programs and higher education courses focused on manufacturing, “hundreds of additional workforce housing units,” more carpool incentives for the company’s employees, shuttle services and a child care facility near the Gigafactory that is “planned for about 200 families.”
On top of those Tesla efforts to alleviate congestion along the Interstate 80 interchange running between the Reno-Sparks metro area and the industrial park, the Nevada Department of Transportation has plans to widen the freeway. Though the changes could take upwards of eight years to complete, the department plans to start an environment review for the project this summer.
For more on what the Tesla expansion means for the state and for the Northern Nevada region, read here.
The abatement package for Tesla — which was available to the company under the same 2014 law that landed the company more than $1 billion in tax incentives when it first pledged to build the Gigafactory in Nevada — grants them 100 percent reductions in property taxes and the Modified Business Tax (a tax on wages paid to employees) for 10 years, plus a 20-year reduction in the Sales and Use Tax rate from 7.6 percent to 5.35 percent, which leaves intact the state portion and local school support portion of the tax.
The company will also soon begin paying property taxes on the existing Gigafactory development, after portions of the 2014 abatement package expire next year.
“Tesla will begin paying an annual minimum of $53 million in real and personal property taxes and modified business taxes relating to the Gigafactory commencing July 1, 2024, and in perpetuity thereafter,” GOED officials wrote in a press release sent after the meeting.
Though Tesla was granted $330 million in abatements — and is likely set to receive another $80 million in reimbursed sales tax payments through its status as an “economic diversification district” — the company’s new capital investment is expected to generate $766 million in new tax revenue over a 20-year period, according to GOED.
That number could also rise even higher. As part of the 2014 deal, Tesla’s application rested on plans for a $5 billion investment in the Gigafactory, which grew to $6.2 billion by 2022. Patel said this year’s application was “conservative in terms of the numbers.”
“We hope to far exceed the numbers that we put in, both in terms of jobs and investment,” he said.
But even as Lombardo and other board members highlighted the Tesla expansion’s effect on economic output for the region and tax revenue for state and local governments, Sen. Dina Neal (D-North Las Vegas) has criticized the process of providing tax breaks to billionaires.
Amid calls from her and other Democratic lawmakers to delay approval of the abatements to allow more time for the public to weigh in, Lombardo told reporters after the meeting that he was not open “at this point” to granting more power to the Legislature over the abatement process, citing the part-time nature of the body.
“Significant economic decisions should be made during the interim of the legislative session, and we are unable to do that if we put that authority under the Legislature,” he said. “It gives the executive branch more ability to make decisions as they occur.”