(Correction – Article has been updated to correct specifics related to bond issuance and payment clarification)
Rivian Automotive (NASDAQ:RIVN) revealed Monday that the Joint Development Authority (JDA) of Jasper, Morgan, Newton & Walton Counties will issue what is known as “phantom bonds” to assist electric vehicle maker, Rivian (RIVN) in the construction of a manufacturing plant in the state.
As there is currently no law in Georgia to allow for municipalities to provide direct tax abatements on property, these “Phantom bonds” are a way to incentivize manufacturers to build in the state. Per a Rivian spokesperson, “There is no cash trading hands. There is no movement of money.”
The structure of the bond is for $5B. However, Rivian has the ability to require the JDA to issue additional bonds for a higher value, up to $15B.
As collateral for the bond issuance, Rivian will deed the real estate property to the JDA, who will in-turn lease the property back to Rivian. The EV maker will then submit rental payments. The payments will count as the rental payment and also payment on the bond.
Rivian is scheduled to begin construction on the plant near Atlanta, Georgia in early next year, having designated the site as its second factory by the end of 2021. The electric vehicle manufacturer has committed to investing $5 billion in the plant and aims to hire over 7,500 employees as the facility gradually scales up production to a peak capacity of 400,000 vehicles per year.
There has been some political pushback on the project, even as the automaker secured $1.5 billion from both the state and local areas.
The incentives package happens to be the largest ever in the state, offering various perks like tax credits, abatements, and subsidies. Back in July, the Georgia Supreme Court turned down an appeal from locals who were against the bond package, choosing not to take up the case.
Rivian will pay a minimum of $300 million in lieu of property taxes to the counties' Joint Development Authority until 2047. These payments are expected to increase should the company surpass its $5 billion investment threshold.
Shares of RIVN are up 0.86% in pre-market trading Tuesday morning.