Is The Tesla Gigafactory A “Race To The Bottom” For Competing States? – Video

3 years ago by Jay Cole 48


Tesla is currently soliciting incentives from California, Nevada, Texas, New Mexico and Arizona to call their new battery plant home.

Tesla Is Looking For Upwards of $500 From "Winning" US State

Tesla Is Looking For Upwards of $500 From “Winning” US State

Reportedly, Tesla is looking for at least a 10% contribution towards the cost of the plant from the ‘winning’ state;  as the facility’s total cost could reach as high as $5 billion dollars – that’s potentially a $500 million dollar perk.  On top of that, other  tax and financial incentives are also anticipated.

In response, a coalition of watchdog groups have banded together over the high profile business auction to make a stand against US states competing against each other, saying they have been “pitted into a race to the bottom” in a lose-lose scenario for both government and regular citizens.

CBS SF Bay Area filed a video report (above) on the petition that was sent to all 5 state representatives.  Also, the complete letter (via Clawback.org) that urges “complete transparency” and responsible negotiations follows.

So far the response to the letter from all the states has been … complete silence.

An Open Letter to Arizona, California, Nevada, New Mexico, and Texas Officials About Tesla Motors

There is no question that state officials should place a high priority on boosting employment and fostering economy opportunity. But recently our states have been pitted into a race to the bottom from which no real winner may emerge. Tesla Motors’ proposed “Gigafactory” – undoubtedly a valuable source of economic growth for its eventual home state – has been offered to you in an unusual public auction, with the opening bid set at $500 million in subsidies. Since Tesla has chosen to make the process public, we write as unified voices from Arizona, California, Nevada, New Mexico, and Texas to argue that our states have more to gain from cooperation than from competition.

We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike. It is time to break the harmful pattern of one state “winning” a high-profile competition, with other states left believing they need to offer even larger tax breaks to win future deals.

Overspending on Tesla – or any other company – could be a net-loss game in which fewer public resources are then available for investments in areas that benefit all employers, such as education and training, efficient infrastructure, and public safety. All state and local taxes combined equal less than 2 percent of a typical company’s cost structure, but lost tax revenue comes 100 percent out of public budgets.

What’s needed are smarter deals, recognizing that all of our states could potentially spend $500 million on other vital public services. Any agreement struck must be fully transparent – no law requires you to negotiate with Tesla or any company behind closed doors – and, furthermore, should include robust provisions for disclosing actual costs and benefits over time. Our states’ residents should feel confident that there are strict performance requirements and money-back guarantees to ensure Tesla delivers what it promises.

Tesla might even be receptive to a multi-state dialogue. The iconoclastic company, internationally known for innovation, could help chart a new path in how economic development is done. The automotive industry – with its far-flung supply chains and 50-state market – is a poster child for the idea that states are interdependent and that the main goal is the long-term growth of American jobs, not any single state’s ribbon-cutting.

We call upon our elected officials to seize this rare opportunity: talk to each other, let the public into the process, and when the time comes, strike a smarter deal that will preserve the tax base for the benefit of all.

Signed,

Diane E. Brown, Arizona PIRG
Chris Hoene, California Budget Project
Bob Fulkerson, Progressive Leadership Alliance of Nevada
Javier Benavidez, Southwest Organizing Project (New Mexico)
Craig McDonald, Texans for Public Justice
Greg LeRoy, Good Jobs First

Hat tip to Eric H!

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48 responses to "Is The Tesla Gigafactory A “Race To The Bottom” For Competing States? – Video"

  1. GeorgeS says:

    More of the “I don’t want to pay for that coalition”.

    I hear it all the time here in AZ. I especially like it when they start on my EV “subsidy”

    Next time someone starts at you about your EV “subsidy” tell them that you subsidize the mortgage payment on their fancy house.

    1. Alonso Perez says:

      That doesn’t really work if you also have a fancy big house, or if neither of you do.

      Instead, point out that for years the government gave $100K tax credits to people who bought Hummers (for weighing more than 6,000 pounds) and that, having helped pay for those monster gas guzzlers you cannot feel guilty about getting a tiny piece of it back in order to help get the US off of oil, cleaning up the air, and supporting manufacturing jobs at home, all at the same time.

    2. See Through says:

      BIG SCAM ALERT! Tesla will take tax payer money and convert that to shares for its execs and friends of Elon.

      Any subsidy should be based on actual ongoing employment at the factory, and released slowly. Giving money to this company outright will be a HUGE mistake.

      1. Ambulator says:

        Or any company.

  2. Kevin says:

    Good. The government has no business subsidizing private industry. Furthermore it is appalling that California would be willing to consider making exceptions to its environmental policy and procedures to win an electric car company. Selling out your principals and citizens aside, am I the only one that sees the irony in that? While this is an interesting project it is completely wrong for a part of our government to provide the extremely rich with incentives that would never be considered for a small to medium company.

    1. SeattleTeslaGuy says:

      Easy, one-sided, populist answer. Keeping a state economy going and growing is a good thing. I’m not suggesting the states give the farm away but being antibusiness is very much long term lose. Not only would there be 6500 jobs but there will be drag business from the plant activities, housing for the employees and families, increased retail and so on. Other businesses will look to the the cluster of expertise the plant brings and site there as well. Finally, this is part of the new economy – better to have that sited in your back yard, not someone elses.

      1. Kevin says:

        While I am all for economic expansion and the creation of jobs wasting $500 million of tax payer dollars to subsidize a private company is absurd and is a perfect example of why our entire government is in our current situation to begin. If you can’t build a business that is profitable on your own without government funds (and Tesla has never once turned an actual profit based on the GAAP that every other company reports using) then you should fail. Capitalism works by the survival of the fittest not through the government handing out tax payer money to the already super rich so that they can make more, or in this case, any money.

  3. ffbj says:

    Well I think Tesla knows what they are doing, and the states in question know what it’s worth to them. Asking for money up front is like asking or expecting a dowry from the family of the bride. The watchdogs groups are like the skinflint uncle warning the family not to give to much to the prospective groom.

  4. Ocean Railroader says:

    I think they should base the amount help a company gets based off of how much in taxes it’s new workers are going to bring in. Along with how much funds it’s going to save by not having people on welfare and unemployment. Also under this policy a company like Walmart should not get any help if it’s workers have to be on food stamps and medicaid programs to work at the company. In that in reality I don’t blame the workers but view this as a form of cooperate welfare.

    If Tesla is really going to create 6500 jobs then if we are going to help them then those jobs better not need any food stamps and medicaid to support them.

  5. FFY says:

    According to the video, Elon said speed was more important than financial incentives. And then he asks for *half a billion* in incentives upfront plus ongoing tax breaks. He’s certainly playing the game well.

    1. sven says:

      Elon also played the game well with Solar City’s new solar panel Gigafactory. He chose NY state because Solar City wouldn’t have to pay any taxes whatsoever for ten years under the Start-Up New York initiative!!! “Now, businesses can operate 100% tax-free for 10 years. No income tax, business, corporate, state or local taxes, sales and property taxes, or franchise fees.” After ten years, the start-up is free to leave for greener pastures in other states.

      http://startup.ny.gov/

  6. MDEV says:

    Smell Kock brothers on this

    1. ESepulvedaBlvd says:

      Sorry, son.

      This is Leftist v. Leftist-er.

      Enjoy the show.

      1. Trace says:

        Hey Dad! There haven’t been any leftists since the Soviet Union collapsed. Stop reading those yellowing John Birch pamphlets and join the 21st century.

        Koch Bros. are masters at Barnum style Orwellian doublespeak.

        1. ESepulvedaBlvd says:

          Sorry, son.

          Libertarian/Populist here.

          Limbaugh? Corporate shill. George Soros (fingerprints and money all over at least one of these groups)? Leftist

          1. Trace says:

            Oh! A libertarian! I see. The political religion your devoted to enforces the use of those false dichotomies, or adherence the economic perfection house of cards dogma (which doesn’t resemble feudalism at all, so everybody stop saying that!) comes crashing down.

            I get it.

  7. Ralph says:

    Not to rain on the joint letter parade, but hasn’t this been decided already? Forbes reported: “Tesla has broken ground outside Reno, Nevada, for the first potential site of its $5 billion gigafactory plant. It has long been rumored that Reno stood the best chance of becoming a gigafactory semi-finalist”.

    1. See Through says:

      The clearing of weeds and sage bushes near Reno was only to make some stir, and show a few slides during quarterly meeting.

  8. Anthony says:

    As much as I want Nevada to get the first GF, I do have problems with the 300-500M in benefits Nevada could possibly offer Tesla.

    The problem is that NV is a very weird state from a population standpoint. 73% of the population of the state lives in the Las Vegas area, Reno has 17%, and 10% is rural. Most of the tax base is also in the south (casino taxes, sales taxes, gas taxes — Nevada has no income tax), the north has Mining taxes, but those are constitutionally capped at 5% (all other taxes are higher) and have extremely generous deduction policies so mining companies can sometimes pay zero taxes despite running highly profitable gold mining operations in Northern Nevada. In fact, under a previous Governor, the state Taxation Department had zero staff qualified to perform mining tax audits, so there was no one to audit the tax returns of the mining companies, giving them a free ride. Imagine if there were no auditors for your IRS tax return!

    So this 300-500M that comes out of the state budget over the next 10-20 years comes disproportionally out of the pockets of Southern Nevadans. Most of the benefits accrue to the northern part of the state: the Reno area gets 6500 jobs, and mining resources like Lithium and other materials will also be found in northern or central Nevada.

    If Reno wants the GF so bad, let them sacrifice their budgets, their schools, police, fire, their way of life. Leave us southerners, who wont see much of the benefit, to fix our broken schools, underfunded mental health care, and roadways desperately in need of expansion due to 30 years of unparalleled growth.

  9. pjwood says:

    Where were these people when the sports stadiums went up on the municipal dime?

    1. Stimpacker says:

      +1

      We taxpayers are constantly bombarded with news of our dollars being used to fund some private industry (most notably sports arenas). The excuse then was jobs and economic growth.

      They complain when jobs go overseas.
      They complain when foreign goods enter our market (tariffs on solar panels, steel).

      So what’s so different about this?

      Always some loud minority in America screaming anti-American rhetoric – “you can’t sell here”, “you can’t build here”. Heck here in California, they even scream “you can’t grow here”.

      But oh hey, guess what? For all their screaming, they want it too.
      “I want gas stations, just not next to my house”
      “I want to eat veggies/fruits, just don’t take water from my fish”
      “I want tax dollars to go to my favorite cause, so don’t waste any on Tesla”

      They don’t get that the $500 million is an investment. The state gets way more back over the long term. Unlike other subsidies!

    2. Spec9 says:

      +100

      I was just about to rant on this. In Minnesota the tax-payers are paying 1/2 for $1Billion stadium where the Vikings will play 8 games a year.

      Ridiculous. Why are we subsidizing those millionaire players (and billionaire owners)?

      An EV biz that will create jobs, reduce oil imports, reduce greenhouse gases, reduce the trade deficit, generate its own clean energy, and reduce local pollution is EXACTLY what should get incentives.

  10. Alonso Perez says:

    This is kind of complicated.

    On the one hand, Musk is playing hardball. Starting site work and then stopping is a huge political pressure tactic, akin to a drug dealer giving that first free dose. It places politicians in a risk scenario where they can be blamed for having “lost Tesla”, if they don’t comply with Tesla’s wishes, complete with video of the site work.

    This kind of sucks because Tesla is already being painted as a company that depends on massive government subsidy, and hence is inherently not competitive. As Tesla seeks to go mass market, a “government motors” image will play against it more strongly, since buyers will no longer be hard-core EV fanatics.

    Sometimes I think Musk is too smart for his own good. This could be one such time.

    But, on the other hand, there is always the threat of China, for example BYD, getting massively into the EV market at low cost. If that happens Tesla will need every conceivable advantage, given that it will never be able to pay Chinese wages in the US. Tesla is also aware that, in the real world, even Walmart gets subsidies (which is incredible considering it is a net job reducer wherever it competes with existing retail), so they practically have a fiduciary duty to use every subsidy trick in the book.

    At the end of the day each state is going to have to look at the business case and determine the net present worth of having the GF in the state. If the fiscal math isn’t substantially positive, they should reject the deal. That is, the GF should produce enough revenue by being present that it more than offsets any funding, tax breaks, and infrastructure cost Tesla gets.

    Surely Tesla has already done the math and thinks that $500 million will result in a slight net positive to the state, probably counting every indirect effect they can think of. The states need to look at the math and the assumptions very closely.

    1. sven says:

      “Surely Tesla has already done the math . . . probably counting every indirect effect they can think of.”

      You mean like the creative math Tesla used when they included the $300 per hour saved by a CEO for the time saved by not having to go to a gas station in their comparison of lease and opetating costs between the Model S and an ICE vehicle?

      1. See Through says:

        +5. Tesla has already said it clearly, it is looking for the best deal for itself.

  11. scott franco says:

    Well, California should do the following:

    1. Raise taxes in general, and especially business taxes, to the highest or near highest in the USA.

    2. Promote an overregulated and otherwise business unfriendly environment in the state.

    3. Slap “penalty” taxes on the “rich”, in other words, punish wealth creators in California.

    That should get this whole Tesla factory stopped in a hurry.

    Oh, wait, we have already done all of those things.

    And son-of-a-gun, Tesla never said that California was in the run for this factory.

    Problem solved!

    1. See Through says:

      Scott, wake up! Elon clearly said in last quarterly call that CA is in the race too. Just recently, some California assemblyman was at the Tesla factory to discuss the matter.

      Elon is creating a rat race here.

      1. scott franco says:

        If you mean that he is using California as a pawn in this game, then good. Go go elon.

    2. FFY says:

      If taxes and regulations were as important factors as you claim, Silicon Valley and the vibrant economies in Southern CA wouldn’t exist. The fact is that there are many other factors. The “wealth creators” profit, among other things, from good infrastructure, a well-educated workforce, and a healthy and attractive environment, all of which depend to some extent on public spending. So obviously they should pay their fair share of taxes, and not expect Californian standards at the cost level of a developing country. Apparently Musk himself doesn’t have much of a problem with CA, given that he started Tesla here. He’s just playing a game in an attempt to offload as much of the cost of his enterprise as possible to the tax payer.

      BTW, it is true that Texas is doing quite well, but that is to a large part due to the oil, even though Rick Perry likes to claim it’s all thanks to his policies. 😉

      1. scott franco says:

        “If taxes and regulations were as important factors as you claim, Silicon Valley and the vibrant economies in Southern CA wouldn’t exist.”

        You have negated your own argument. Silicon valley was created BEFORE the massive lurch left in California, and indeed, since California raced to the top of the tax heap and massively increased regulations, the economy here has both slowed down considerably as well as in the process of being passed up by other states.

        California government is RUINING the state of my birth. Idiots from New York and other “progressive” states came here, converted us to a socialist economy, and now I am close to leaving. This is backwards. The idiot socialists should be leaving instead.

        1. FFY says:

          Well, as someone living in Silicon Valley, I can tell you we are doing quite well. The region is as strong as it ever was under the “socialists” (do you even know what that word means?).

        2. Spec9 says:

          No, not really. Google, Facebook, and others are relatively new companies. Silicon valley has continued to grow long since the days of National Semi, HP, & Fairchild.

          1. Spec9 says:

            Oh . . . and there is this company called ‘Tesla’ that is pretty new.

  12. scott franco says:

    That letter is so unbelievably stupid, I think it deserves a point by point rebuttal. My comments [in line]

    An Open Letter to Arizona, California, Nevada, New Mexico, and Texas Officials About Tesla Motors

    There is no question that state officials should place a high priority on boosting employment and fostering economy opportunity. But recently our states have been pitted into a race to the bottom from which no real winner may emerge. Tesla Motors’ proposed “Gigafactory” – undoubtedly a valuable source of economic growth for its eventual home state – has been offered to you in an unusual public auction, with the opening bid set at $500 million in subsidies. Since Tesla has chosen to make the process public, we write as unified voices from Arizona, California, Nevada, New Mexico, and Texas to argue that our states have more to gain from cooperation than from competition.

    [This is exactly what Elon/Tesla wanted, and it is right and proper. The high tax/business punishment states like California and New York should COMPETE against the other states in the Union. They made the bad government decisions, and this is how they pay for them. Its why Texas is now generating %30 of the new jobs in this country.]

    We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike. It is time to break the harmful pattern of one state “winning” a high-profile competition, with other states left believing they need to offer even larger tax breaks to win future deals.

    [No, the business negative states need to realize that their anti-business policys are hurting them and their citizens. Tesla clearly values lower taxes and less regulation over any one time handout from the states. Indeed this is why Nevada, Texas, New mexico and Arizona are on the top list for Tesla factories. New York and California are NOT.]

    Overspending on Tesla – or any other company – could be a net-loss game in which fewer public resources are then available for investments in areas that benefit all employers, such as education and training, efficient infrastructure, and public safety. All state and local taxes combined equal less than 2 percent of a typical company’s cost structure, but lost tax revenue comes 100 percent out of public budgets.

    [The 2 percent figure may be true (I doubt it), but far more important is the huge red tape involved with setting up any business in California, as well as the taxes on your employees, which may not be calculated as a “business expense”, but makes it more difficult for businesses in California to recruit new workers]

    What’s needed are smarter deals, recognizing that all of our states could potentially spend $500 million on other vital public services. Any agreement struck must be fully transparent – no law requires you to negotiate with Tesla or any company behind closed doors – and, furthermore, should include robust provisions for disclosing actual costs and benefits over time. Our states’ residents should feel confident that there are strict performance requirements and money-back guarantees to ensure Tesla delivers what it promises.

    [Yes, California needs that$500 millon to finance trains to nowhere and pay for their ripoff state pension system.]

    Tesla might even be receptive to a multi-state dialogue. The iconoclastic company, internationally known for innovation, could help chart a new path in how economic development is done. The automotive industry – with its far-flung supply chains and 50-state market – is a poster child for the idea that states are interdependent and that the main goal is the long-term growth of American jobs, not any single state’s ribbon-cutting.

    [No, Tesla is a business, not a social engineering enterprise. They consider low costs and ease of doing business, then they turn that around and offer their lower cost resulting products to American, and yes, world, consumers. I would further say that supporting states that have their economic and business environment in order does more to help America than ANY social engineering project ever has, or can]

    We call upon our elected officials to seize this rare opportunity: talk to each other, let the public into the process, and when the time comes, strike a smarter deal that will preserve the tax base for the benefit of all.

    [I’d call on states that are considering following California and New York down the social engineering highway to reconsider and look at the results. The Texas economy is strong and now generates %30 of the new jobs in the USA. California and New York are leading up the rear and falling further behind every day.]

    1. sven says:

      Didn’t you hear? Elon and Solar City are building their solar panel Gigafactory in New York.

  13. Spec9 says:

    Yes, of course it is. That’s the way it has been for decades.

    Why is it that now when an EV company tries to play the game, they no longer want to play? They did it for paper mills, conventional car factories, airliner manufacturers, appliance makers, etc. . . . but NOW they decide not to play?

    Hmmm. :-/

  14. Priusmaniac says:

    What I find surprising is not Tesla trying to get the best conditions up to the last moment but rather the fact that there would be a cooperation between states against that while in the same time there is never such a move against an oil company or a traditional car company. There is also never a call to stop tax payers money being spend on clean up of oil spills or on oil road securing and the associated war spending. Is this yet another symptom of oil addiction being taken for a standard fact that has to be no matter what?

    1. See Through says:

      No one really created a rat race among states publicly, like Tesla is doing. It is acting as if this is the only company in the world the states should care about. Whoever has heard of these shenanigans of 3 or 4 ground breaking, for a ‘may be’ battery factory?
      Nissan is already operating there Smyrna battery factory. Did we hear so much talk about all the states running against each other?

      1. Stephen says:

        Hav you heard of Boeing?

        1. Priusmaniac says:

          Exactly, but also Coca Cola, Disney, Ryanair, Fedex and many others. Here the only difference is that Elon is smart enough to know that if you move ground you spend a bit but you make it feel so much more real to the decision makers that it likely pay.

  15. Astroturfing says:

    This smells of astroturfing to me. Scratch the surface a little and see what oil companies and automobile makers and sellers are financing these people.
    “Texans for Public Justice”? Yeah sure, buddy. “Texans in the pocket of ExxonMobil” more like it.

  16. CherylG's_DirtyLittleSecret says:

    Well, if Tesla doesn’t like any of the offerings, they can do what Burger King is doing. Move corporate to Canada……eh!

    http://fivethirtyeight.com/datalab/burger-king-might-save-8-1-million-by-moving-to-canada-whats-the-whopper-equivalent/

    1. Phr3d says:

      too true, and sad..
      +1 to astroturf as well.

    2. Priusmaniac says:

      There are still many states left, just in case.

  17. Rich says:

    Climbing on my soap box.
    This whole thread is disheartening.

    Action:
    Media sound bite delivered to the masses. The sound bite is irresponsible, biased, and lacks context.

    Result:
    People buy into sound bite posing a news and immediately jump into a political frenzy, completely forgetting what’s important.

    Review of relevant information:
    1) Huge incentives are given to large corporations as a matter of SOP.
    2) Tesla is taking on the largest most powerful corporations on the planet. God Bless them for it.
    3) Tesla is forcing competition into the BEV space. God Bless them for it.
    4) Tesla is building a near NET Zero manufacturing plant and will recycle all of its byproducts. God Bless them for it.
    5) The economic gain to the Gigafactory area will be more than just 6000 people employed. God Bless them for it.

    For those that need a counter sound bite “Tesla GOOD, Oil addiction BAD.”

    1. Rich says:

      Reply should have been in reply to a thread above, not to forum.