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EDITORIAL: Risky Tesla incentives speed to passage

Lawmakers put the pedal to the metal last week in passing a $1.3 billion tax incentive package for Tesla Motors, incentives that will speed the construction of a massive battery plant east of Reno. Calls for legislators — even those by legislators — to slow down were ignored.

In exchange for 10 years of freedom from property and payroll taxes and 20 years of sales tax breaks, as well as subsidized electricity and expedited construction of a new highway, Tesla has promised to employ up to 6,500 people at the $5 billion factory by 2018. It’s an incredibly optimistic business plan for a company that sells precious few high-priced electric cars. Tesla is betting on the plant’s economies of scale to reduce the prices of its models and make the vehicles more marketable to typical households, and Nevada is gambling that the factory will shift the state’s economic diversification efforts into overdrive.

There was no stopping this legislation. Despite plenty of evidence that tax abatements and credits never deliver the economic boost their champions tout, Gov. Brian Sandoval and lawmakers were eager to take a leap of faith in last week’s special session. The bills were passed unanimously, and Gov. Sandoval quickly signed them into law.

Buckle up, Nevada. We wish lawmakers and the governor took more time to study the plan, gauge public support and openly question Tesla officials about their plans. Company executives provided no testimony, and the legislative process had all the transparency of a brick wall. It’s not a coincidence that closed doors and crony capitalism are BFFs. Nevada’s tax breaks equate to hundreds of thousands of dollars per job.

That said, at least the state took some steps to ensure Tesla meets its end of the bargain. As reported by the Review-Journal on Friday, Department of Taxation Executive Director Chris Nielsen told lawmakers the state would verify that 50 percent of Tesla’s construction and factory workers are Nevadans (although Tesla can use waivers for some job classifications), and that annual compliance audits would ensure investment and hiring benchmarks are met. The state will be able to reduce tax abatements and credits if Tesla fails to deliver the kind of investment and employment numbers it has promised.

Meanwhile, Southern Nevada lawmakers will be monitoring transportation funding especially closely to make sure the new road to benefit Tesla, linking Interstate 80 and U.S. Highway 50 at a cost of more than $100 million, won’t come at the expense of badly needed Las Vegas Valley highway projects. Department of Transportation Director Rudy Malfabon assured lawmakers and members of the Regional Transportation Commission of Southern Nevada that Clark County projects would not be shoved aside to benefit Northern Nevada economic development.

Southern Nevada lawmakers have heard such promises before. Local officials will have be vigilant, if not obnoxious, in the coming years to make sure those assurances are honored. Northern Nevada has free-flowing traffic because Southern Nevadans, historically, haven’t received a share of highway funding proportionate to their population.

Welcome to Nevada, Tesla. Or should we say, you’re welcome, Tesla.

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