Nevada bets USD1.3b on Tesla to push economy beyond gaming

Tesla Motors associates work on the Model S electric car at the company’s factory in Freemont, California

Nevada casinos, the state’s largest industry, took in USD11.2 billion in the year that ended in July. Now lawmakers must decide whether to wager as much as $1.3 billion on a project that could help wean the state from its reliance on slot machines and roulette wheels.
Lawmakers were to begin meeting in a special session yesterday to consider tax write-
offs for Tesla Motaketors Inc. to build the world’s largest lithium-ion battery plant near Reno. The incentives could be worth $700 million to $1.3 billion over 20 years, depending on how much Tesla spends on the so-called gigafactory, according to state documents.
Manufacturing accounted for 4.1 percent of Nevada’s total output in 2013, compared with 12.5 percent of the U.S. gross domestic product. With 6,500 jobs, Tesla would bring $101.6 billion in economic activity to Nevada over 20 years, the state demographer said in a report. That compares with a gross state product of $132 billion last year.
“This changes the perception of Nevada from just being tourism and real estate,” said Robert Lang, who teaches urban affairs at the University of Nevada at Las Vegas. “Nevada has been making a disciplined effort to pursue this plant.”
The effort culminated on the steps of the statehouse Sept. 4, when Governor Brian Sandoval and Tesla Chief Executive Officer Elon Musk said they’d struck a deal to bring the 465,000-square-meter factory to a business park east of Reno.
In exchange, the state would write off property and business taxes for 10 years and sales taxes for 20 years. Tesla would also receive tax credits of $12,500 per permanent, full-time job, and of 5 percent for the first $1 billion in spending on the plant and 2.8 percent for the next $2.5 billion in spending.
California, New Mexico, Arizona and Texas also competed for the project, for which Tesla expects to spend $10 billion within 15 years.
Nevada would partially offset the cost of the tax breaks by reducing incentives for filming in the state to $10 million from $80 million, and by eliminating $125 million in breaks for people who work at home.
The legislature’s approval is needed to formalize the agreement. In making the announcement, Sandoval, a Republican seeking a second term, was accompanied by Democratic leaders of the state Assembly and Senate.
Steve Hill, director of Sandoval’s economic-development office, said he expects the deal to pass with bipartisan support. Assembly Speaker Marilyn Kirkpatrick, a North Las Vegas Democrat, also expressed optimism.
Nevada’s proposed tax breaks for Palo Alto, California-based Tesla rank as the 12th-largest such deal in the U.S., according to the Washington-based nonprofit Good Jobs First, which is critical of corporate tax breaks. Washington state offered the largest package last year to Boeing Co. – valued at $8.7 billion – to keep work on the new 777X jetliner in Seattle.
Other companies may demand incentives to move to Nevada, Hill said.
“We would be open to that,” he said in an interview. “We’ve been on a push to diversify our economy in conjunction with gambling and mining.”
Gambling and hospitality accounted for 17 percent of Nevada’s gross state product last year, while mining accounted for 6 percent, according to the Bureau of Economic Analysis.
In metropolitan Las Vegas, gambling revenue and visitor volume were up in June from a year earlier.
It was the reverse in the Reno area, according to a University of Nevada at Las Vegas economic report. Gambling in Reno has been on the decline because of competition from American Indian casinos in Northern California, said Stephen Brown, a UNLV economist. James Nash, Bloomberg