Nevada offers Tesla up to $1.3B for battery plant

SCOTT SONNER, Associated Press JUSTIN PRITCHARD, Associated Press

CARSON CITY, Nev. (AP) — Nevada Gov. Brian Sandoval asked state legislators on Thursday to approve tax breaks and other incentives worth up to $1.3 billion over 20 years to bring Tesla Motors’ battery factory to the state.

Tesla wants to build the massive factory at an industrial park near the Reno suburb of Sparks — as long as lawmakers agree to the package Sandoval negotiated with the electric car maker.

Sandoval announced terms of the deal Thursday at a Capitol news conference attended by Elon Musk, CEO of California-based Tesla. The governor will call a special legislative session as early as Wednesday to approve the package.

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The ultimate cost of the package to 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.

“We think it is a real good deal for Nevada, a deal Nevadans can be proud of,” Hill said Thursday.

Tesla’s choice of Nevada over California, Texas, Arizona and New Mexico 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.

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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 running by 2017. That is when Tesla hopes to introduce its Model 3, which will be about half the price of Tesla’s only current offering, a luxury sedan.

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.

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.

The other major component of Nevada’s package is tax credits worth $195 million over 20 years.

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Those credits were a Jobs Transferable Act credit of $12,500 per employee, worth $70 million; and an investment tax credit worth $125 million.

Hill said the state would pay for those credits by cutting an existing film tax credit from $80 million to $10 million, and phasing out a home office credit used by insurance companies to the tune of $125 million.

The package also calls for Tesla to contribute $37 million to K-12 education — approximately $7.5 million a year for five years — as a bridge leading up to full production at the plant in 2018 when the other credits kick in. Tesla also agreed to spend $1 million for battery research at the UNLV, Hill said.

To resolve one other sticking point, Sandoval pledged that Nevada would tweak its laws to ensure that Tesla can sell cars at dealerships the company owns.