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Tesla Gigafactory competition a ‘race to the bottom?’

By David R. Baker

Ever since Tesla Motors last year announced its intention to build a $5 billion “Gigafactory” for advanced batteries, states have scrambled to land the prized project.

The competition only intensified when Tesla in February named its four leading contenders: Nevada, Arizona, New Mexico and Texas. California, Tesla’s home base, quickly muscled its way onto the list. And while the electric automaker has broken ground on a “potential” Gigafactory site near Reno, the other states haven’t given up, cobbling together packages of tax breaks and other incentives. San Antonio’s offer is reportedly worth $800 million.

Now a coalition of public policy groups in those states wants everyone to take a deep breath and reconsider.
In an open letter issued Tuesday, the coalition argues that by showering Tesla with tax breaks, each state risks losing money that could be better spent on things that benefit all businesses — like good schools and roads:

“There is no question that state officials should place a high priority on boosting employment and fostering economic opportunity. But recently our states have been pitted into a race to the bottom from which no real winner may emerge. Tesla Motors’ proposed ‘Gigafactory’ — undoubtedly a valuable source of economic growth for its eventual home state — has been offered to you in an unusual public auction, with the opening bid set at $500 million in subsidies. Since Tesla has chosen to make the process public, we write as unified voices from Arizona, California, Nevada, New Mexico, and Texas to argue that our states have more to gain from cooperation than from competition.”

Tesla CEO Elon Musk insists that he isn’t trying to benefit his company at the expense of the states. “Tesla is not going to go for a deal that’s unfair to the state or unfair to Tesla,” he said during a July conference call with Wall Street analysts. “We want to make sure it’s compelling for all parties.”

But the coalition, which includes the non-profit California Budget Project, said state officials should discuss their offers with each other — and the public — rather than getting stuck in a game of one-upsmanship. Since one state would eventually get the facility while the others would not, it’s unclear how that process would work. The open letter doesn’t delve into that.

We call upon our elected officials to seize this rare opportunity: talk to each other, let the public into the process, and when the time comes, strike a smarter deal that will preserve the tax base for the benefit of all.

The other groups to sign the letter are Arizona PIRG, the Progressive Leadership Alliance of Nevada, the Southwest Organizing Project (based in New Mexico), Texans for Public Justice and Good Jobs First.