November 13, 2016 - 8:00 pm
Nevada Treasurer Dan Schwartz is once again waving a red flag over the Faraday Future project in North Las Vegas — and his concerns can’t be so easily dismissed.
Mr. Schwartz, a Republican, was one of the more vocal critics of the $215 million tax package Nevada lawmakers passed last year to attract Faraday on the premise that the company’s proposed electric car factory would create 4,500 new jobs and generate $87 billion for the state over 10 years.
At the time, Faraday was a mysterious outfit with a curious balance sheet and an overly optimistic business plan. Its January unveiling of a “concept car” at the Consumer Electronics Show in Las Vegas didn’t help. Auto industry observers were mostly unimpressed, with Forbes magazine noting that the “comic-book style racing car” raised “far more questions” about the company’s viability.
Nevertheless, construction at the Apex factory site has been moving forward.
But Mr. Schwartz remains a skeptic, citing a letter of intent to stop work filed by AECOM, the general contractor on the project. The letter, issued in compliance with a Nevada statute governing contractors, reveals that Faraday was behind $57 million in deposits to an escrow account used to pay companies working on the factory.
“We’ve expressed concerns from the beginning that Faraday didn’t have the funds to undertake or complete this project,” Mr. Schwartz said. “Within the last several weeks, our concerns remain unabated.”
The treasurer went on to use the word “fraud” and raise questions about a “Ponzi scheme.”
While that may be a little harsh, the issues here are very real. A company that has yet to actually produce anything falling millions behind in payments to contractors doesn’t inspire confidence.
Steve Hill, the governor’s economic development chief, noted that the state won’t be handing out any tax breaks until Faraday hits certain investment benchmarks. In addition, the state won’t issue bonds to pay for infrastructure improvements until the company provides security up to the amount of the bonds.
“The state’s agreement with Faraday anticipated a range of possible outcomes,” he said, “offering Nevadans new opportunities if Faraday succeeds, while protecting the state in the event it did not.”
That’s certainly good news for state taxpayers. But it’s getting harder and harder to dismiss Mr. Schwartz’s concerns as completely unfounded.