Nevada lawmakers to consider huge tax breaks for Tesla



By Sandra Chereb

CARSON CITY, Nev., Sept 10 (Reuters) – Nevada lawmakers on Wednesday will consider controversial tax breaks estimated at up to $1.3 billion for Tesla Motors Inc to build its $5 billion battery factory in the state.

Assembly Speaker Marilyn Kirkpatrick promised scrutiny of the legislation, which has drawn criticism from both ends of the political spectrum, at a special session around noon PDT (1900 GMT).

“It’s exciting that a company such as Tesla has chosen Nevada,” said Kirkpatrick, a North Las Vegas Democrat. “But the devil is in the details.”

Republican Governor Brian Sandoval last week called Nevada’s winning bid against four other states a monumental moment. He said it would change Nevada’s economic climate and spur $100 billion in economic benefits over the next 20 years.

The agreement the state hammered out with Tesla Chief Executive Officer Elon Musk is among the largest tax subsidies in the nation.

Sandoval said the state’s investment would pay off at an 80-1 ratio, which critics say is wishful thinking.

“We think the 80-1 multiplier is disingenuous, and if that’s wrong, what else is wrong?” said Bob Fulkerson, executive director of the Progressive Leadership Alliance of Nevada.

“Local governments are going to have immediate financial costs of public safety, trash collection, schools,” he said, “and existing residents and taxpayers are going to have to pay for that.”

The conservative group Americans for Prosperity slammed the agreement as corporate welfare.

“This deal amounts to nothing more than a tax handout for a politically connected billionaire,” AFP State Director Daryn Iwicki said in a statement.

He noted that Tesla officials had said the size of the incentives was not the main reason they chose Nevada for the factory.

Musk has said the factory where it will build lithium ion batteries in partnership with Panasonic Corp is crucial to Tesla’s goal of mass marketing its next generation of electric cars by 2017.

As part of the plan, 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.

Tesla would also receive $75 million in tax credits for up to 6,000 jobs created, $120 million for meeting state investment thresholds of $3.5 billion, and reduced utility rates.

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

Sandoval, who took office in 2011 when Nevada’s economy was crushed under the weight of recession, has made job creation and economic development a cornerstone of his administration.

He has called the Tesla factory a catapult to attract high-tech industries and diversify Nevada’s economy.

Sandoval said the 5-million-square-foot plant east of Reno would mean 3,000 construction jobs and 6,500 jobs once in operation. His office said it would spur an additional 16,000 indirect jobs and boost the region’s gross domestic product by 20 percent.

(Editing by Cynthia Johnston, Curtis Skinner and Lisa Von Ahn)