There was an interesting quote in this morning’s paper from Steve Hill, executive director of the Governor’s Office of Economic Development, the office that gives your money to others in hopes that they will create jobs, improve the economy and generate more tax revenues. Like playing roulette.
“Trying to predict whether a company is going to succeed or flourish, or even say what they’re going to do is … you’re going to be wrong at times, maybe as often as you’re right,” Hill was quoted as saying.
Or perhaps you’re going to be wrong every time?
The story raised questions about whether the Chinese-backed company Faraday Future actually has the wherewithal to build a proposed $1 billion electric car factory at the Apex industrial park.
In a special session lawmakers agreed to dole out $215 million in tax abatements and credits to entice the company to build its factory in Nevada, though at the time it did not even have a prototype vehicle. The state also promised $120 million in infrastructure that includes water, rail and road improvements that may include widening I-15 and improving the freeway interchange near Apex.
It was a replay for the special session in which lawmakers agreed to provide $1.3 billion in tax exemptions and credits to Tesla Motors if it invests $3.5 billion in a new battery factory east of Sparks. The state also agreed to spend $100 million to build a highway linking the site to U.S. Highway 50 in Lyon County.
Today a website called Seeking Alpha has a piece questioning whether that deal too is iffy.
It points out that Tesla had promised to reach agreements with all sub-suppliers by the end of 2014. It has none. Tesla promised to have the first two phases of construction complete by the end of 2015 and have a third phase underway. Only one phase is complete. It had projected spending $1 billion by now but has spent only $400 million. It also said it would employ 700 workers by the end of 2015 and hire another 1,000 in 2016. Only 300 are employed. (That figure was noted by the Nevada Policy Research Institute in mid-December.)
Today’s newspaper story quotes Nevada Treasurer Dan Schwartz’s comment to a Los Angeles business publication on the Chinese backer of Faraday.
“If I were to sum it up, it’s the emperor’s new clothes,” Schwartz told the business journal. “If you look at the financials … he certainly isn’t making any money to fund a billion-dollar car facility.”
But Hill today told the newspaper the risk for taxpayers is minimal, though he admitted the state could have to pay for the promised infrastructure improvements.
The Seeking Alpha piece, under the pseudonym Montana Skeptic, says, “Nevada received no lien on Tesla’s free land. And, under the Incentive Agreement, Nevada has no right to recover any part of the $113 million land and roadway benefit if Tesla fails to meet the promised capital expenditure and employment targets.”
Under that incentive agreement Tesla has until June 30, 2024, to invest its promised $3.5 billion. Skeptic questions whether Tesla will still be a going concern by then.
Whenever lawmakers — at the urging of Gov. Brian Sandoval — gamble with our money, we are the ones left holding the marker.