By Angelo Young - As Nevada prepares to hand Tesla Motors Inc. NASDAQ:TSLA the largest corporate tax incentive deal in the state’s history, the public remains largely in the dark about the details of the $1.25 billion package aside for a two-page list of bullet points. The $5 billion battery Gigafactory, it says, will bring $100 billion worth of economic growth to the state over two decades, lower the state’s unemployment rate by two percentage points and create 22,000 jobs, including 6,500 direct hires.
And yet with so little to go on except for a brief menu of benefits provided by Nevada Gov. Brian Sandoval to the media, the state’s legislature is expected to hold a special session next week to approve the deal even as critics from left and right are asking questions that have not been answered. Where, for example, did the $100 billion estimate come from? How did the state come up with the 22,000 figure for jobs growth? How did the total value of tax incentives mushroom from $500 million to $1.25 billion in just a week?
“There’s no way of knowing how they came up with these numbers,” Philip Mattera, research director at Good Jobs First, a policy research group that tracks corporate tax subsidies, told International Business Times by phone on Friday. “Let’s hope lawmakers calm down next week and begin asking serious questions.”
Jennifer Cooper, spokesperson for the Nevada Governor’s Office of Economic Development, told IBTimes by email that the numbers come from two unnamed independent economic analyses.
“Those reports will probably be available in the next few days,” she added. But with the legislature widely expected to approve the deal in the next few days, that doesn't leave much time to find out how the governor’s office concluded that $1.25 billion in tax abatements and credits will yield 80 times a rate of return ($100 billion) over two decades.
There appears to be little opposition in the state legislature to this math. State Sen. Don Gustavson, R-Sparks, who represents the district where the Gigafactory will be built, told the Reno-Gazette Journal on Wednesday that he wanted “to see some numbers” and expressed concern that if Nevada was too generous to Tesla then other companies seeking relocation to the tax haven state would want similar concessions.
But Democrat Senate Minority Leader Pay Hickey, the top opposition-party leader in the state, appears to be fully behind Republican Gov. Sandoval’s plan. He was seen Thursday posing with a red Tesla Model S and applauding Tesla CEO Elon Musk’s appearance at Thursday’s press conference in Carson City announcing the package.
"I know that many of you are asking yourselves the same question: 'Is this agreement good for us?' I can answer that today, and say emphatically, 'Yes, this meets the test,'" the governor said during the event.
If any significant opposition comes from next week’s special session, it could come from lawmakers in the southern part of the state as they watch their northern neighbors benefitting more from the deal.
Most of the skepticism is coming from outside groups, like Nevada Policy Research Institute President Andy Matthews, who in a strongly worded letter on Thursday said Nevada was “betting hundreds of millions of taxpayer dollars on an unproven enterprise.” “In contrast to the profound intelligence operating within free markets,” he continued, “government attempts to pick economic winners and losers are inherently benighted and unfair.”
Leigh McIlvaine, a Portland, Oregon, based researcher for Good Jobs First who has been following Tesla’s efforts to attract the best incentive package form the five states that had been vying for the factory (Texas, New Mexico, Arizona, Nevada and California) says she’s skeptical about the number of people the factory will directly hire.
“We’ve been hearing these reports that Tesla has been shopping around the 6,500 jobs number,” she said. “We’ve been skeptical of that number all along. It’s a battery factory. It will not have the same economic impact as an automotive factory because there are fewer suppliers.”