Nobody should blame Tesla Motors for seeking big bucks from the state of Nevada in exchange for building its $5 billion “gigafactory” in an industrial park not far from Reno.
As the company’s vice president of communications and marketing, Simon Sproule, was quoted as saying in Forbes magazine, “Any publicly traded company has a fiduciary responsibility to get the best deal for its investment. It’s the responsibility of management to look for the best financial arrangements for the company. I really would describe it as business as usual.”
Indeed, it is. And there’s plenty of precedent. Nevada in 2012 gave Apple Computer tax abatements worth $89 million over 10 years for setting up a data center and office in Reno. According to Automotive News, the state of Tennessee paid $580 million to land a $1 billion Volkswagen factory in that state. And back in 1993, the state of Alabama offered Mercedes-Benz a tax-incentive package worth $253 million to land a factory there.
As a result, companies have grown used to a buyer’s market. That’s probably why — although site-preparation work is underway in Reno — Tesla is saying it may still build its gigafactory in California, Texas, New Mexico or Arizona instead. Indeed, Tesla CEO Elon Musk said in a conference call with investors this month that the final decision rests on incentives.
“It made sense to have multiple things going in parallel,” Musk said, according to a report in Autonews.com. “Before we actually get to the next stage of pouring a lot of concrete, we want to make sure we have things sorted out at the state level, that the incentives are there that make sense and that are fair to both the state and to Tesla.”
And what might fair be? Forbes reported Tesla wants whatever state is selected to put up 10 percent of the cost of the factory, or $500 million. (For the record, that’s about 7.5 percent of Nevada’s $6.6 billion general-fund budget.)
Gov. Brian Sandoval and the head of his economic development office, Steve Hill, say negotiations are ongoing with Tesla. But some in the business community are eager for the state to hand over the cash. Ray Bacon, executive director for the Nevada Manufacturers Association, was quoted in the Reno Gazette-Journal as endorsing a special session if necessary.
“If things have to be done legislatively, February [2015, when the next Legislature is scheduled to convene] is too late,” Bacon told the newspaper. “It’s gotta be a special session.”
And again: “If it’s $20 million or $30 million, that’s doable. If it’s $300 million, a special session for sure,” Bacon said.
Bear in mind Bacon’s group is a part of the Coalition to defeat the Margin Tax, organized to fight the Education Initiative (also known as Question 3) that would impose a 2 percent tax on business revenue in Nevada. His group, and the others in the coalition, would never dream of asking for a special session to tax business to raise money for schools. But give away money to a niche, private, for-profit auto company, where the most affordable vehicle will sell for around $35,000? We can’t get to Carson City fast enough.
Bacon, as well as Nevada’s junior senator, Dean Heller, and even Sandoval were heard to worry that voter approval of the tax might jeopardize Tesla’s selection of Nevada for its factory. Yes, better to escape to low-tax havens such as California or Texas! Oh, wait.
Musk wants a fair deal, so let’s give him one. Tesla builds its plant, and pays all its taxes, just like (most) every other business. In exchange, the state and local jurisdictions protect it — if somebody breaks in, we’ll send the cops; if it catches on fire, we’ll send firefighters. If Tesla gets sued, the company can use our courts and business-friendly laws to defend itself. And Northern Nevada’s outdoor beauty should make attracting workers easy.
But the company shouldn’t get a single tax dollar, not while the state has the moral and legal obligation to educate children, take care of the mentally ill, build and maintain roads and keep bad guys in prison.
That sounds like a fair deal to me.
Steve Sebelius is a Review-Journal political columnist who blogs at SlashPolitics.com. Follow him on Twitter (@SteveSebelius) or reach him at 702-387-5276 or SSebelius@reviewjournal.com.