Nevada’s Tesla Gigafactory Gamble: Plenty Of Bullet Points, Not A Lot Of Details

As Nevada prepares to hand Tesla Motors Inc. (NASDAQ:TSLA) the largest corporate tax incentive deal in the state’s history, the public remains largely in the dark about the details of the $1.25 billion package aside from a two-page list of bullet points. The $5 billion electric-car battery "Gigafactory," it says, will bring $100 billion worth of economic growth to the state over two decades, lower Nevada’s unemployment rate by two percentage points and create 22,000 jobs, including 6,500 direct hires.

And yet with so little to go on except for a brief menu of benefits provided by Gov. Brian Sandoval to the media, the Legislature is expected to hold a special session next week to approve the deal even as critics from left and right are asking questions that have not been answered. Where, for example, did the $100 billion estimate come from? How did the state come up with the 22,000 figure for jobs growth? How did the total value of tax incentives mushroom from $500 million to $1.25 billion in just a week?

“There’s no way of knowing how they came up with these numbers,” Philip Mattera, research director at Good Jobs First, a policy research group that tracks corporate tax subsidies, told International Business Times by phone on Friday. “Let’s hope lawmakers calm down next week and begin asking serious questions.”

Jennifer Cooper, spokeswoman for the Nevada Governor’s Office of Economic Development, told IBTimes by email that the numbers come from two unnamed independent economic analyses.

“Those reports will probably be available in the next few days,” she added. But with the Legislature widely expected to approve the deal in the next few days, that doesn't leave much time to find out how the governor’s office concluded that $1.25 billion in tax abatements and credits will yield an eightyfold rate of return ($100 billion) over two decades.

There appears to be little opposition in the state Legislature to this math. State Sen. Don Gustavson, R-Sparks, who represents the district outside Reno where the Gigafactory will be built, told the Reno-Gazette Journal on Wednesday that he wanted “to see some numbers” and expressed concern that if Nevada was too generous to Tesla then other companies seeking relocation to the tax-haven state would want similar concessions.

"I know that many of you are asking yourselves the same question: 'Is this agreement good for us?' I can answer that today, and say emphatically, 'Yes, this meets the test,'" Gov. Sandoval said during Thursday's event in the captial Carson City announcing that Nevada was picked by Tesla for the location of the factory.

If any significant opposition comes from next week’s special session, it could come from lawmakers from the southern part of the state, around Las Vegas, as they watch their northern neighbors benefit more from the deal.

Most of the skepticism is coming from outside groups, like Nevada Policy Research Institute President Andy Matthews, who in a strongly worded letter on Thursday said Nevada was “betting hundreds of millions of taxpayer dollars on an unproven enterprise.” “In contrast to the profound intelligence operating within free markets,” he continued, “government attempts to pick economic winners and losers are inherently benighted and unfair.”

Leigh McIlvaine, a Portland, Oregon, based researcher for Good Jobs First who has been following Tesla’s efforts to extract the best incentive package from the five states that had been vying for the factory (Texas, New Mexico, Arizona, Nevada and California) says she’s skeptical about the number of people the factory will directly hire.

“We’ve been hearing these reports that Tesla has been shopping around the 6,500 jobs number,” she said. “We’ve been skeptical of that number all along. It’s a battery factory. It will not have the same economic impact as an automotive factory because there are fewer suppliers.”