Nevada lawmakers consider giving Tesla $1.3 billion in tax breaks for 'gigafactory'

By Sandra Chereb

CARSON CITY Nev. (Reuters) - Nevada lawmakers convened in a special session on Wednesday to consider tax breaks and other incentives worth an estimated $1.3 billion to clinch a deal hammered out by Governor Brian Sandoval with Tesla Motors Inc to build a massive battery factory in the state.

The Senate and Assembly convened separately to hear testimony and to debate four bills granting tax abatements and other benefits negotiated by Sandoval and his economic development staff with the California-based electric car maker founded by billionaire Elon Musk.

Sandoval, in authorizing the special session in a state on the mend from what he termed the worst economic crisis in its history, said the factory would give Nevada the opportunity to attract new types of business and provide jobs, innovation and new technology.

The governor and his economic team say the package of measures would generate $100 billion in economic benefits to the state over 20 years, and stimulate a high-tech business climate.

Senate Majority Leader Mo Denis, a Las Vegas Democrat, said one bill, dealing solely with tax abatements, will be introduced in the Senate.

The lower chamber was to consider three bills involving reduced utility rates, letting Tesla sell its car directly to the public, and eliminating or reducing tax exemptions for other industries to help pay for the Tesla deal, which overall is valued at an estimated $1.3 billion.

Denis said he expects the package of bills to be approved, adding that lawmakers are in agreement with the Republican governor on job creation efforts.

"It's been bipartisan enough to get to his point," he said.

Musk said last week that the $5 billion lithium-ion battery factory that Tesla will build with Panasonic Corp in northern Nevada's Storey County will be the largest in the world once completed, and is critical to Tesla's goal of mass- producing its next generation of electric cars within three years.

The session was expected to continue into Thursday.

Skeptics urged lawmakers to proceed slowly. Bob Fulkerson with Progressive Leadership Alliance of Nevada said he feared the deal could open the floodgates for other companies seeking similar tax breaks.

"While some subsidies may be warranted, the deal on the table appears far too generous and far too risky," Fulkerson told Assembly members.

Other opponents said the state should not be picking "winners and losers" in economic development.

Under Sandoval's proposal, the company would get sales tax exemptions estimated at $725 million through June 2034 and save more than $300 million in payroll and other taxes through 2024, according to figures published by the governor's office.

Tesla also would receive $75 million in tax credits for up to 6,000 jobs created, and $120 million in tax credits for meeting state investment thresholds of $3.5 billion. The company has said it expects to spend $10 billion in Nevada.

For its part, Tesla said it would contribute more than $37 million over five years to Nevada's education system.

The 5-million-square-foot (464,515-square-meter) plant east of Reno would mean 3,000 construction jobs and 6,500 jobs once in operation.

Studies released by the governor's economic development office estimated the project would create an additional 16,000 indirect jobs and boost the region's gross domestic product by 20 percent.

(Reporting by Sandra Chereb; Editing by Cynthia Johnston, Daniel Wallis, Ken Wills and Eric Walsh)

[Image via Agence France-Presse]