Editorial: Bets placed on Tesla, Faraday looking like long shots

Rendering of Faraday Future plant at Apex.

There was an interesting quote in the Las Vegas newspaper recently from Steve Hill, executive director of the Governor’s Office of Economic Development (GOED), the office that gives your money to others in hopes that they will create jobs, improve the economy and generate more tax revenues. Sounds a bit 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?

Treasurer Dan Schwartz

Hill’s comment came in response to concerns raised by Nevada Treasurer Dan Schwartz about the ability of Chinese-backed company Faraday Future to actually finance a proposed $1 billion electric car factory in North Las Vegas.

In a special session lawmakers agreed — at the urging of Gov. Brian Sandoval — 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 the Apex industrial park.

Schwartz, who had just returned from a trip to China, told the Los Angeles Business Journal that he had doubts about whether Faraday Future’s billionaire backer, Jia Yueting, could raise the money needed. Schwartz said the state is asking the company to put up $70 million to ensure Nevada’s infrastructure investment.

“I spoke with several members of the Chinese corporate and financial communities who are familiar with and know Leshi (Jia’s Chinese company) and Mr. Jia,” Schwartz told the Journal. “What they all agreed on is he doesn’t have the money. … If you look at the financials, (Jia) isn’t making any money. He certainly isn’t making any money to fund a billion-dollar car facility.”

Hill told the Journal Nevada taxpayers should be protected so long as Faraday puts up the $70 million to secure the state’s general obligation bonds to pay for infrastructure.

The Faraday deal was a replay for the special session in which lawmakers agreed with Sandoval’s plan 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.

So far Tesla is coming up short on its projections.

Tesla planned 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.

Hill has been quoted in the press as saying the risk for taxpayers is minimal, though he admitted the state could have to pay for the promised Tesla infrastructure improvements.

Tesla has until 2024, to invest its promised $3.5 billion. The company is still losing money on every electric car it sells.

As if those gambles were not risky enough, just this past week the GOED doled out another $400,000 to rooftop solar panel installer SolarCity, even though the company nearly two months ago laid off 550 workers and stopped installation work in Nevada because the Public Utilities Commission changed the rate structure for solar customers, making such installations financially unfeasible.

This brings to $800,000 the amount of tax money handed to the company out of a promised $1.2 million. The company’s stock has fallen from more than $60 a share to less than $20. Both Tesla and SolarCity are helmed by billionaire Elon Musk.

Whenever lawmakers and the governor gamble with our tax money, we are the ones left holding the marker. Perhaps, they should just bet on black. The odds might be better.

A version of this editorial appeared this past week in many of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record. It ran as a column in the Elko Daily Free Press.

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14 comments on “Editorial: Bets placed on Tesla, Faraday looking like long shots

  1. Bruce Feher says:

    Perhaps the best way for government to help businesses develop jobs would be for them to reduce the money spent on over coming all the obstacles the bureaucrats come up with that make it very difficult to open a business.
    I do not envy the entrepreneur that wants to start even the smallest company today. Rules, regulations, statutes, ordinances, etc. Then you have to deal with the Federal Government, State, County and Local officials often with conflicting requirements. At best,these costs add nothing to the bottom line except, of course, to keep government workers employed.

  2. Isn’t that what they call a level playing field?

  3. Patrick says:

    Crazy I tells ya; all this talk of regulations being unneeded, or acting as a roadblock to new businesses.

    Tell me a Bruce, how would YOU deal with the questions brought on by new technology? Should cloning humans be and the development of this technology he unregulated? How about self driving cars? Same? How about drones, or robots Bruce, no regulations there either?

    Ten thousand and one new businesses with a hundred never before used technologies and people act as if even considering the legal and moral impacts, and regulating the new businesses to deal with the issues that will be raised by them is somehow some master conspiracy to “make” government bigger.

    Geez!

  4. Bruce Feher says:

    To borrow a word from Patrick….GEEZ!
    I would guess you are employed in the public sector Patrick. If you read what I wrote again I think you will see no mention of eliminating all regulations, etc.
    Should you care, why don’t you see what a private sector business person has to go through to say, open a basic business in Las Vegas, how about a pizzeria?
    Then preach to me!

  5. Patrick says:

    It’s true Bruce that you did not suggest that all regulations be eliminated.

    And no I’m am gainfully employed in the private sector and I understand how rules make, earning as much as possible, difficult. I have in fact owned a pizzeria in Las Vegas albeit some years ago, and I have to tell you, it wasn’t tough at all to do what the rules required.

    So I guess now I get to preach a little.

    If people acted reasonably, and with regard to the other people in the world, we’d need a lot fewer rules/regulations.

    Because people are too stupid, or greedy, to do so, we have to have a rule, nd consequences for breaking those rules, in place so that when people act in intentionally stupid, or greedy ways, ignoring the rights of other people, something can be pointed to as evidence that society does not tolerate that stupidity or greed. Otherwise, you’d have nothing but stupid greedy people out there ruining things for everyone.

    And the more opportunities that there are for stupid greedy people to cause problems for everyone else, the more laws we need.

    Get rid of stupid, greedy, unreasonable people, who have no respect for others, and I’m all for getting rid of regulations and rules.

  6. I Pol Pot tried that.

  7. Patrick says:

    Anyone tried a world without rules yet?

  8. T says:

    Sidetracking back to the focus of this article, the Governor’s Office of Economic Development (GOED). Why in the hell should Nevada tax payers be on the hook for any of these billionaires wet dreams. As stated these ventures do not make a dime if you take out the free cash via the hard working suckers of Nevada. I experienced the Faraday fantasy at the CES as those in attendance were treated to an empty shell of a pipe dream in the form of toy car mock-up while actual companies filled the convention center with actual products. Tesla and Elon Musk have long proven that they do not exist without the handouts, their profits and goals are the handout. if any cash is to be thrown about it should be towards proven businesses who have already paid their dues in Nevada.

  9. Steve says:

    Today’s “nyp-crisis-moment”

    35-year-old man kills 14 members of his own family, including seven children and his parents, before killing himself.

  10. […] story noted that total number of jobs at the site is also below projections. Tesla said it would employ 700 workers by the end of 2015 and hire another 1,000 in 2016, the number of jobs is said to be closer to 300 […]

  11. […] in Nevada by offering $1.2 million in taxpayer money to create new jobs — $800,000 of which was already paid out when the PUC altered the playing field for solar panel firms and SolarCity responded by laying off […]

  12. […] Nevada lawmakers in a special session in 2015 on blind faith alone agreed to dole out $215 million in tax abatements and credits to entice Faraday Future to build an electric care factory at Apex in North Las Vegas, […]

  13. […] Gov. Brian Sandoval, the state Legislature meeting urgently in special session agreed to dole out $215 million in tax abatements and credits to entice Faraday Future to build in Nevada. The state also promised $120 million in […]

  14. […] to insiders, at $180,000. That’s even higher than the high-end Tesla, which is getting $1.3 billion in tax exemptions and credits for promising to build a battery plant in Northern […]

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