Tesla CEO Elon Musk Says Nevada Is A 'Get Things Done State' For $5B Battery Factory

Updated: Sept. 5 at 7:20 a.m.

Nevada has won the five-state competition for Tesla Motors Inc.'s $5 billion battery factory.

Gov. Brian Sandoval will ask state lawmakers next week to approve the multi-billion dollar deal to bring the Tesla battery factory to Nevada, which will see the state basically collect little to nothing in taxes from the company for a decade and cost as much as $1.1 billion.

In announcing the deal Thursday on the steps of the Capitol Building in Carson City, Sandoval called it a "monumental announcement that will change Nevada forever and set in motion the creation of thousands of new jobs."

Sandoval said if approved by the Legislature, Tesla would also pump billions of dollars into the state’s still fragile economy.

“This is a Nevada victory,” Sandoval said. “We knew this was an opportunity that we had to go for. We took this chance.”

Sandoval acknowledged the concerns over the size of the Tesla deal, but assured lawmakers and “even the most skeptical of economists” that the return on investment would be strong for Nevada. He said the return on investment would be $80 dollars for Nevada for every dollar of new investment.

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On top of the expected financial returns, Sandoval said the deal would immediately create 3,000 construction jobs. Once the factory was completed, it would employ  6,500 people earning on average $25-per-hour, and create 16,000 indirect jobs in the community. He said the battery factory would have a $100 billion economic impact over the next 20 years.

“These are jobs in Nevada for Nevadans,” Sandoval said.

The proposed incentives include sales and use and property tax breaks along with hiring and investment tax breaks. Tesla will also receive investment tax credits for up to $3.5 billion invested in its new factory. And  

According to the Governor’s Office of Economic Development, $40 billion of the economic impact will be tied directly to the battery factory. Sandoval said the factory will add 4 percent to Nevada’s gross domestic product and 20 percent to the region’s gross domestic product once it’s up and running.

For its part, Tesla will pay the state public education system $7.5 million a year for five years to help offset the impact of the workers and their families on the local school districts.

Elon Musk, chairman and CEO of Tesla, thanked the governor and lawmakers for partnering with the Tesla to bring the factory to the state. Musk, who flew to Reno from London for Thursday's announcement, said Nevada didn’t offer the biggest incentive package when it came to the deal for the battery factory.

“This is not just about incentives,” Musk said. Nevada is a “really get things done state. That was a really important part of the decision.”

Musk said the factory would be shaped like a diamond, and would produce its own energy.

Now that the announcement has been made, Sandoval and his economic development team must convince lawmakers to pass five bills in a special session beginning Wednesday.

Some of the details of the proposed tax breaks include:

Up to 100 percent abatement of sales tax until June 30, 2024, up to 100 percent abatement on real estate property, personal property and modified business taxes until June 30, 2024.

There is also a one-time $12,500 transferable tax credit per permanent full-time job on the site for up to 6,000 jobs, with an average wage of $22 per-hour.

Tesla will also receive an investment tax credit worth 5 percent of the first $1 billion in investment, and 2.8 percent for the next $2.5 billion in investment. Lawmakers will also have to clarify Nevada law that Tesla will be able to sell its cars in Nevada without a franchise agreement.

Analysts praised the Tesla deal, while political groups questioned the deal’s constitutionality.

John Boyd, president of The Boyd Company Inc. in Princeton, N.J., said Telsa’s decision was “epic news.”

“This is the holy grail of economic development,” Boyd told KNPR in a phone interview Wednesday. “This is what economic development officials have been striving for … the project of the decade. It will develop new technologies that will transform the Northern Nevada economy.”

Boyd, who operates a site selection firm, said Tesla’s choice of Reno would have a “major boost” to the hospitality industry, the airport, with more flights and better flights. He said the region will also experience a “migration of hourly workers … to work in the factory.”

Geoffrey Lawrence, Nevada Policy Research Institute's director of research and legislative affairs, called the Tesla deal a "corporate gift package" that should concern all Nevada taxpayers.

"Why would lawmakers want to take from poor and middle-class families to subsidize a billionaire making cars for millionaires?" Lawrence said.

Chris Sieroty is a producer with KNPR’s State of Nevada. Follow him on Twitter @sierotyfeatures and @KNPRnews.

The Tesla Motors Deal by the numbers

What Tesla receive from Nevada:

$700 million - 100 percent abatement of sales and use taxes for 20 years.

100 percent - Abatement of real property, personal property and payroll taxes for 10 years.

$195 million - In tax credits: $125 million in investment tax credit and $70 million in jobs transferable tax credit.

Total: $865 million to $1.3 billion, depending on Tesla’s investment in its battery plant.

What Nevada receives from Tesla:

6,500 - Jobs with an average rate of $25 per hour.

3,000 - Construction jobs to build plant by 2017.

22,500 - Projected new jobs directly and indirectly from plant for 20 years.

$5 billion - Estimated economic impact yearly for next 20 years, a total of $100 billion, which is more than 3 percent of the state’s gross product.

$1.9 billion - Estimated tax revenue

Source: Nevada Office of Economic Development

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