Tesla Gigafactory surges past Nevada tax break benchmarks despite bumpy ride

Benjamin Spillman | Reno Gazette-Journal

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Private spending in the fourth quarter of last year at Tesla's Nevada Gigafactory surged past an important capital investment benchmark tied to state tax incentives.

That’s according to the latest tax incentive audit from the Nevada Governor’s Office of Economic Development, which landed as the company's stock was tumbling over investor worries about everything from the balance sheet to CEO Elon Musk's emotional outbursts.

'Tesla is an outstanding partner for Nevada'

During the fourth quarter of last year, the Gigafactory added 832 employees and $459 million in capital investment.

MORE: Tesla whistleblower claims rampant theft, drug dealing at Nevada Gigafactory

That brought total employment to 3,249 and total capital investment to $3.7 billion. That’s more than the $3.5 billion minimum capital investment benchmark state officials set in 2014 when the Legislature approved a subsidy package worth $1.3 billion over 20 years to entice Tesla to build in Nevada.

The capital spending plus another $402 million the company reported spending during the first half of this year means construction investment at the Gigafactory has surpassed $4 billion, roughly the amount it cost Wynn Resorts to build Wynn and Encore properties in Las Vegas.

Tesla also claimed that by surpassing a 20 gigawatt hour annualized run rate in July it became the largest battery factory in the world, "by a significant margin."

The 2018 spending also suggests employment at the Gigafactory has continued to increase significantly since the end of the reporting period for the latest state audit.

In addition to capital investment and full-time employees, the Gigafactory employed 1,332 construction workers in the fourth quarter, bringing total construction worker employment to 13,743.

The average hourly wage of full-time employees for the project is $34.97, higher than the $22 per hour officials set as a benchmark in 2014.

MORE: Former Tesla employee from Sparks accused of 'sabotage' countersues

The fourth quarter numbers, which represent totals from Tesla and Gigafactory partner Panasonic, qualify the companies for $23.3 million in transferrable tax credits on the quarter and increases the total amount of qualified credits so far to $167 million.

Paul Anderson, executive director for the Office of Economic Development, praised Tesla for hitting benchmarks and for its other investments in Nevada, such as a pledge to spend tens of millions of dollars for science and robotics programs in Nevada schools.

“Tesla is an outstanding partner for Nevada, from surpassing their performance benchmarks at the Gigafactory to their $37.5-million pledge in support of science and robotics programs at our schools, they’ve done everything they said they would do and more,” Anderson said. “We’re very proud to have Tesla as a member of the Nevada family.”

Although Anderson suggested the latest figures show Nevada’s tax-subsidized investment in the Gigafactory is paying off, others questioned the wisdom of tax breaks targeted to specific companies.

Taxpayers are 'picking up the slack'

Both conservative and liberal policy advocates said they want the factory to succeed but not at the expense of taxpayers who are on the hook for growth-related costs.

“We can want Tesla to succeed and we can want them to pay their fair share of taxes and not get away with robbing the store, which is what they are doing,” said Bob Fulkerson, co-founder and state director of the Progressive Leadership Alliance of Nevada.

Fulkerson said everyday taxpayers are picking up the slack for Tesla and Panasonic when it comes to paying for schools, roads, public safety and other costs associated with development.

“One thing we can do is stop pouring gasoline on the fire. No more tax giveaways to anybody,” Fulkerson said. “Until workers who live here can afford to buy and rent here we should not be jacking up the housing by bringing more corporations in here with tax breaks.”

Michael Schaus, spokesman for the Nevada Policy Research Institute, a conservative policy organization, said the state should apply tax breaks more evenly.

“With every gift of transferable tax credits, and every tax break along the way, hardworking Nevadans are reminded that Tesla gets special deals from government that the rest of us simply don’t have access to,” Schaus said in written statement. “Lawmakers should be looking to lower everyone’s tax burden in the name of economic growth — not just that of the politically-connected.”

MORE: Elon Musk calls this year 'the most difficult and painful' of his career

The glowing state audit figures come as Tesla’s stock is straining from the weight of outsized expectations, balance sheet questions and increasingly erratic behavior from Musk.

Questions about Tesla remain

Beginning Thursday evening when the New York Times posted an interview with a tearful Musk who suggested he was struggling with fatigue and burnout, the stock fell from about $335 to about $292 per share on Monday, a decrease of more than 12 percent.

Since then it’s recovered some of the loss, but questions about Tesla remain.

The company has struggled to meet ambitious production goals while dealing with blowback to Musk’s intemperate posts on Twitter.

In recent weeks Musk has accused a rescuer of Thai children stranded in an underwater cave of being a pedophile after the rescuer rebuffed Musk’s offer of a specialized submarine for the rescue effort.

More recently, Musk tweeted without documentation that he had secured funding to take the company private at $420 per share.

Am considering taking Tesla private at $420. Funding secured. — Elon Musk (@elonmusk) August 7, 2018

That tweet reportedly landed Musk in hot water with the Securities and Exchange Commission which regulates publicly traded companies.

In addition to criticism of Musk’s Twitter persona and Tesla’s balance sheets, the company is coping with at least two prominent whistleblower cases, both with Gigafactory ties.

In one case, whistleblower Martin Tripp of Sparks, a former Gigafactory employee, accused Tesla of shipping batteries with dangerous manufacturing flaws and mistreating him when he reported the problems. Tripp’s complaints also include allegations Tesla officials improperly accused him of threatening workplace violence.

Tripp and Tesla are suing each other over the dispute.

In another complaint, former Tesla security worker Karl Hansen has accused the company of improperly spying on employees and seeking to suppress reports that another Gigafactory worker was dealing in illegal drugs.

Both Tripp and Hansen are represented Stuart Meissner, an attorney who specializes in SEC whistleblower cases.

Tesla officials have denied the allegations of both former employees.

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