Did California try hard enough to land Tesla’s gigafactory?

October 7, 2014

 

 “This is arguably the biggest thing that has happened in Nevada since at least the Hoover Dam!”
— Nevada Assemblyman Ira Hanson, R-Sparks

john andersonEveryone I have spoken to seems miffed that California automaker and job creator, Tesla Motors, had not invited California to the bake-off challenge with other states that were vying for Tesla’s gigafactory. The lithium ion battery factory was expected to cost $5 billion and create 6,500 direct jobs. When Tesla made its announcement in February, Arizona, Nevada, New Mexico and Texas were its top choices.

California lawmakers complained about being left off the list so Telsa agreed to take another look at the state, but company leaders called California a “long shot” because it would take too long to permit the project.

Most believe California has reacted slowly to being regarded as one of the most anti-business environments in the country. The simple fact that California initially was not even on the short list should give folks in Sacramento heartburn!

Proposed California Senate Bill 1309 declared the intent to streamline the regulatory and environmental permitting. The idea was to level the playing field with the other states competing for the factory. All those other states have a box full of friendly tax policies, job training and straight cash grants to capture big job-creating factories such as Tesla’s gigafactory. Unfortunately, the Legislature adjourned without passing the proposed bill.

The big question now remains, did California do enough to make the decision hard for Telsa? The answer is simply no. Gov. Brown should have called his sister Kathleen for advice on simple mathematics, since Kathleen Brown is a former state treasurer of California. She could have helped him do the math.

The factory is expected to drive $100 billion into Nevada over the next 20 years, according to Nevada planners. That comes to $5 billion a year.

Nevada is offering $1.3 billion in tax breaks and incentives. Simple math shows substantial benefits to the state Treasury and economic ripple effects across Nevada.

Some tax watchdog groups and business columnists believe Nevada paid too much and under-estimated the advantages Nevada already had over the other states. Those incentives do appear to be dramatic. They are listed in four bills that all passed the Nevada Legislature unanimously: Tesla will pay no property taxes or payroll taxes for up to 10 years and no local sales or use taxes for up to 20 years.

It’s a fact that government can either help or hinder business. On one hand, it may over tax or over regulate. Conversely, it can create an environment in which businesses flourish. Because American business is central to a strong economic system, states that create a business friendly environment will likely experience a positive economic impact which will spill over into the lives of its citizens.

Nevada may have overpaid to play today, but I’m convinced the state will continue to see substantial dividends in the future. Now, Nevada will be the state to beat in the future.

I asked a group of people what California could do to become more business friendly, the following list is the results:

  •         Reduce red tape involved with expansion
  •         Receptive to opening new facilities in the manufacturing area
  •         Reduce or eliminate NIMBY (not in my backyard lawsuits)
  •         Non-union environment
  •         CEQA reform – This has turned into a political tool instead of something to protect the environment
  •          Protection of existing industrial lands from encroachment by non-industrial uses – We are losing critical areas to build industrial buildings
  •         Simplify incentive programs and applications. Existing programs require a CPA to complete the application
  •         Streamline permitting process. One bite of the apple by regulators unless it is a life-safety issue.
  •          Reduction in tax burden

The more businesses California can attract, the more workers will be needed. Moreover, the more positions that are filled, the healthier the economy and the higher the standard of living will be for its residents. Statistically, of the top 10 most business friendly states, only two tax the income of their residents. California is listed as 48th least business friendly state, with a tax rate from a low of 1 percent to a high of 13.3 percent.

 

California needs to get business friendly sooner than later.

 

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