Nevada Legislature Working Through Incentive Bills To Benefit Tesla Factory Proposal

The Nevada Assembly passed the Energy Rate Rider Program, which reduces power bills for a company and power customers pay for it. The approved bill extends the period of time the reduced prices are available from 5 to 10 years. The bill will now move on to the Nevada Senate.

The bill governing the Economic Development Rate Rider Program allows a company to reduce the cost of up to 25 megawatts of electricity. Tesla anticipates using more than 300 Megawatts of electricity for its proposed battery plant. 

Speaking last week at the announcement of a preliminary agreement with the State of Nevada on tax credits and other incentives, Tesla Motors CEO Elon Musk said the battery factory will be entirely energy self-sufficient, "like a battery," using wind, solar and other renewable energy. However, it will take time to install those resources. The energy cost reduction bill will help Tesla pay for energy until the renewable resources are developed.

Three other incentive bills are moving through both houses, the Assembly recessed. The Nevada Senate continued discussion on the most controversial, a 23-page bill worth up to $1.3 billion in tax credits and reduced sales taxes, business and licensing costs. 

The bill requires a company to show $3.5 billion worth of new investment in the state over a 10 year period. There were many questions about accountability for reaching the investment demands. The bill requires claw-backs of incentives if investments are not made within 10 years. In that case the company would owe the state money.

Senator Mark Hutchinson asked, "At the end of the day if we don't get these performance-based thresholds, we will have to go after them through the Attorney General's offices, is that correct?"

Nevada Tax Director Chris Nielsen said the company would be on the hook for the money plus interest, can't do business in the state and could eventually get a Sheriffs Office involved to stop operation.

"We have had companies time to time that haven't met the threshold and we will bill them (for the taxes) plus interest. But sometimes they go defunct, and you can't get blood from a turnip," Nielsen said adding that is less of a risk with a bigger company like Tesla.

However, the Senate bill puts that accountability for reporting partially in the hands of the company itself. According to the bill, any company receiving the incentives pays for its own certified public accountant to produce reports for the state.

The reduction of the insurance tax credit in the Bill led to cautionary details in terms of accountability. 

"That (insurance tax credit) program was put in place in 1971, prior to when we had accountability measures in place," Hill said.

The problem with that he said, is that the state doesn't know how many jobs are created or the economic benefit. There is no limit to the incentive program. It has grown to $26 million this year and is anticipated to grow to $30 million next year. 

Hill estimated that the insurance tax credit is offering $19,000 per job. "That is based on information we have but it is not complete," Hill said.

Senators were less concerned with potential loss of jobs with the insurance tax credit reduction and more concerned with the reduction of the new film tax credit in the state.

"I want to keep this in the real context and the impact to people when you just wipe that out," said Senator Patricia Spearman, asking how many jobs film and insurance incentives have created.

"The jobs that are created are temporary in many cases," said Nevada Economic Development Director Steve Hill of the film credits. By the end of the month there will be five productions using the credits worth $5.9 million in tax credits. 

Senator Aaron Ford estimated the film tax credit is already responsible for 3,000 jobs and asked if the film credit could be restored in the next legislative session.

"Please apply for the film tax credit, there is money in there now," Hill responded. "That money is available. We have not received additional applications. I can't commit to refunding the bill. I can't cash that check. The conversation weather to refund should include discussions about how effective those programs are."

Despite the questions about jobs, senators were not planning on holding up the bill. Speaking to reporters during lunch recess, three senators said the reduction of the tax credits for film sets a bad precedent that will impact small business state-wide. But they were not willing to amend the bill to re-fund the film tax credits. "That would blow the bill up," said Senator Ford.

The senate reconvened at 2:13 PM.