Nevada Approves Tesla’s $1.25 Bil Incentive Package

Despite some opposition from both sides of the political aisle, Nevada lawmakers approved, and Gov. Brian Sandoval signed into law a $1.25 billion package of incentives meant to complete the deal that will bring Tesla Motors’ $5 billion Gigafactory to a state more traditionally known for gambling.

“It doesn’t get any bigger than this,” said the governor, as he signed the bill late on Thursday, following a unanimous vote in favor of the package by the state legislature he had called into special session. “This is some of the most important legislation that’s hit this state in perhaps our history.”

The Gigafactory is certainly set to be the biggest manufacturing project in the history of the Silver State – at least if it lives up to expectations. Tesla founder and CEO announced the project earlier this year as a way to produce the next generation of lithium-ion batteries. Working with Japanese partner Panasonic, Tesla hopes to become the world’s largest producer of lithium packs and, in the process, drive down costs substantially.

That would be critical to the California maker’s plans to produce a $35,000 battery-electric vehicle, dubbed the Model III, that could compete with conventionally powered vehicles, both on price and range. That’s less than a third the price of a fully-loaded Tesla Model S.

(Tesla’s Musk hints of new deal with Toyota. Click Here for more.)

At the time the project was announced, Musk said he expected Tesla to receive a $500 million incentive package, and a flurry of bids came in from states hoping to win the deal. While Texas, California and New Mexico were among the most likely contenders, Nevada had become the apparent front-runner in the final weeks.

The state’s aggressive push can be put into perspective considering the serious problems it faced in the most recent recession, with unemployment peaking at 14.5%, noted state economic development chief Steve Hill. “It wasn’t that long ago we were suffering through one of the worst recessions in Nevada history,” he noted last night.

The Gigafactory is expected to bring Nevada an initial 3,000 construction jobs, with the plant slated to employ 6,000 permanent workers once it gets up to full speed. And with the additional work that will be created supporting the factory and its employees, Nevada officials have projected the state will get more than 20,000 jobs and $100 billion added to its economy over the next two decades.

“We have changed the trajectory of this state, perhaps forever,” Gov. Sandoval declared late Thursday.

(Racers, Plug in Your Engines! The battery-powered Formula E race series launches this weekend. Click Here for a preview.)

That argument helped the governor and Hill overcome initial opposition to what is now the largest incentive package ever put together by Nevada, and reportedly one of the biggest in U.S. history.

While the final vote was unanimous, the measure did have its critics. And while Tesla comes out the winner, a number of other businesses lose in the process. To help finance the aid package, Nevada lawmakers voted to take away incentives that had been used to draw a number of insurance companies to the state, as well as subsidies for the movie industry.

(The technology for tomorrow’s safer cars could raise questions about privacy and security. Click Here to find out more.)

With the stroke of his pen, Sandoval ensured that Tesla will pay no property and payroll taxes for the next decade, and no local sales or usage taxes for another decade. It will receive a significant discount on electricity, and $195 million in additional tax credits were contained in the four separate bills that make up the package.

The state did include a clawback clause that would let it recover some of its incentives if Tesla doesn’t meet its promised goals.

“We are really excited to get going on this project,” Diarmuid O’Connell, Tesla’s vice president for business development, said, “It means so much for our mission, which is to catalyze sustainable transportation by creating a mass market for electric vehicles.”