Gov. Brian Sandoval announced Thursday that Nevada won a high-stakes battle with four other states for Tesla Motors' coveted battery factory, but the win comes with a hefty price tag -- up to $1.3 billion in tax breaks and other incentives over 20 years that state lawmakers still must approve.
Sandoval revealed terms of the deal he negotiated with the electric car maker at a Capitol news conference attended by Elon Musk, CEO of California-based Tesla. The governor called it a "monumental announcement that will change Nevada forever.''
Sandoval didn't mention the total value of the package and his remarks seemed intended to pre-empt critics who will see it as too generous.
"Is this agreement good for us?'' the governor asked. "This agreement meets the test, by far.''
Musk told the audience that Nevada didn't offer the biggest incentive package among the five states that tried to lure the factory, though he didn't specify which did among California, Texas, Arizona, New Mexico and Nevada.
The most important considerations were not incentives, he said, but rather a high confidence that the factory will be ready by 2017, followed by assurances that batteries can be produced cost efficiently.
Gigafactory confirmed for Nevada. pic.twitter.com/1vGucDJ8fY — Tesla Motors (@TeslaMotors) September 4, 2014
Later, Musk told reporters that Tesla would stop looking for another state as a backup, as the company had said it would do in case Nevada did not come through. "Nevada is it,'' he said.
Sandoval will call a special legislative session as early as Wednesday to approve the package.
Tesla's choice for the facility takes it a big step closer to mass producing an electric car that costs around $35,000 and can go 200 miles on a single charge. That range is critical because it lets people take most daily trips without recharging, a major barrier to the widespread adoption of electric vehicles.
The "gigafactory,'' as Tesla calls the project, would bring down the cost of batteries by producing them on a huge scale. The facility would be approximately 10 million square feet, equivalent to about 174 football fields, and be located at an industrial park about 15 miles east of Sparks, a Reno suburb founded as a railroad town more than a century ago.
The ultimate cost of the incentive package to Nevada taxpayers depends on how much economic activity the factory generates. On the low end, it could be worth $865 million, according to Steve Hill, executive director of Sandoval's Office of Economic Development.
Hill projected the factory would generate $100 billion for Nevada's economy and directly or indirectly create 22,000 new jobs over two decades. That includes an estimated 6,500 permanent jobs at the factory and a peak of 3,000 construction jobs leading up to the opening of the $5 billion plant in 2017.
In an apparent reference to his office's projections of how much economic activity the plant would create, Sandoval said that for every $1 Nevada gives up, the project will produce $80 in economic impact.
"Even the most skeptical economist would conclude that this is a strong return (on investment) for us,'' Sandoval said.
The largest subsidy for an auto-related plant was $1.3 billion that Chrysler received in 2010 to build an assembly plant in Michigan, according to the research group Good Jobs First, which tracks large incentive packages by states.
The group's executive director, Greg LeRoy, said Sandoval's projections of job creation and return on investment for the Tesla factory were implausibly rosy.
He called the 80-to-1 return on investment assertion "off the charts false'' and said the factory would create no more than about 10,000 permanent, non-construction jobs outside the factory.
The package Nevada offered includes a 100 percent abatement of sales and use taxes for 20 years and a 100 percent abatement of real property tax, personal property tax and payroll taxes for 10 years. Those provisions are worth an estimated $675 million to $1.1 billion, depending on the size of investment. The other major component of Nevada's package is tax credits worth $195 million over 20 years.
Even given those tax breaks for Tesla, Hill estimated the project would generate approximately $1.9 billion in tax revenue for all levels of government -- state, local and school districts -- over 20 years.
Tesla has done excavation and other preparation work at the Tahoe Reno Industrial Center, where it plans to build the factory, but had not publicly committed to building in Nevada until it tested what economic incentives other states offered.
On Thursday morning, at least a half-dozen road graders, bulldozers and dump trucks were again working at the industrial park behind locked gates.
