Nevada Gambles with $5 Billion

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As Tesla Motors searches for industrial sites for their planned “gigafactory,” an eager Nevada presents an economic incentive for the mega deal that makes state history. The question remains: how this gamble will play out for Nevada? It may take a decade before that’s known.

Apart from just the tax incentives, Nevada and Tesla were drawn together by resources. Nevada is looking at the deal as what they hope to essentially be a grain of sand in the Silicon Desert.

The point behind the factory being made in the first place is to mass-produce powerful batteries, so that electric-based transportation can become a more viable, affordable, and efficient option.

Governor Brian Sandoval (NV) signed a package of bill September 11, 2014, that gave Tesla Motors $1.3 billion in tax breaks. Those tax breaks include up to 20 years of tax exemptions from sales, payroll, property taxes, and $125 million in tax credits that Tesla can sell to other companies. The car company will also receive $8 million in electricity discounts.

On the positive end, the factory is promised to create 6,500 jobs, of which half are meant to be Nevadans, unless there aren’t enough qualified workers from Nevada. However, no matter who winds up working, there will be a Nevada, tax-paying citizen.

Although Tesla was only searching for the state where the factory would stand to aid with about 10% of the factory’s costs, Nevada offered two and a half times that expected contribution.

Not only was the economic incentive attractive to Tesla, the Nevada site is also close to a large lithium supply, a necessary element for the car batteries. There is also a draw towards constructing at the Nevada site because it’s close to headquarters for Tesla.

It may seem like a bad deal for Nevada, but Tesla CEO, Elon Musk, has promised to give $7.5 million per year to Nevada’s education system for five years.

Tesla won the great deals from Nevada, mainly because of the ability to disclose or agree to non-disclosure of information, not only because Tesla played states against each other. The secrecy also excludes taxpayers.

Interestingly, Tesla is potentially not the only company available to reap benefits of the law, because laws cannot be specifically written for a company. However, the legislation is well tailored to set parameters for Tesla to be eligible for the tax breaks. The company in question must spend at least $3.5 billion in materials and equipment over a decade.