California lawmakers, who have fallen head over heels for Tesla Motors, once again are wooing their fickle sweetheart.
Palo Alto-based Tesla, which sells high-end electric cars out of its Fremont assembly plant, has long been prized as a source of high-tech, well-paying, energy-efficient jobs in California.
Now, Gov. Jerry Brown and two state senators – one a Republican, the other a Democrat — are working to entice Tesla to build its newest manufacturing facility in California, instead of going outside the state. It’s the latest in a long string of efforts in Sacramento that so far have managed to keep Tesla in the Golden State.
Gaines said measures may include investment and tax credits, job training, an expedited CEQA process and an accelerated permitting procedure, indicating that some particulars may be hashed out in conversations between Tesla and the Governor’s Office of Business and Economic Development, or GO-Biz.
Newly introduced legislation, SB 1309 by Senate Leader Darrell Steinberg, D-Sacramento, and Sen. Ted Gaines, R-Rocklin, aims to ensure that California can compete with other states vying for the $5 billion Tesla battery manufacturing plant by promising future “financial incentives” and an easing of “regulatory and environmental processes” to benefit the company’s latest mammoth construction project.
“In order to ensure that California can compete in terms of its business climate with other states bidding to site major clean energy facilities, it is necessary this act take effect immediately,” according to the bill. The precise details of those incentives, and which environmental rules would be eased, are not spelled out.
Tesla founder and CEO Elon Musk said last month that California was an “improbable” contender in the competition to land his company’s new lithium-ion battery “gigafactory” because the state’s “circuitous project-approval process could take too long.” The 10-million square foot factory, expected to run at full capacity by 2020, could employ as many as 6,500 workers — but Musk ranked Nevada, Texas, New Mexico and Arizona above the Golden State on an early shortlist of potential building sites.
The legislation leaves unclear exactly how the state might seek to lure Tesla’s most recent venture, instead expressing the legislature’s “intent” to take action on the issue in the future. But Gaines said measures may include investment and tax credits, job training, an expedited CEQA process and an accelerated permitting procedure, indicating that some particulars may be hashed out in conversations between Tesla and the Governor’s Office of Business and Economic Development, or GO-Biz.
“We have a strong commitment to do everything in our power to create good-paying jobs, and to attract and retain clean industry,” Steinberg said in a press release.
GO-Biz’s conversation with Tesla is ongoing, according to Gaines and GO-Biz spokesperson Brook Taylor. Tesla did not respond to request for comment.
“Levy noted that companies all too often play cities, counties and states off each other in order to secure the most lenient business conditions — a strategy Tesla has been known to espouse.
Gaines, Steinberg and other legislators will have plenty of cues from the past to help formulate their latest efforts — this isn’t the first time the state has courted Tesla.
In 2009, then-Gov. Arnold Schwarzenegger and Treasurer Bill Lockyer permitted a fledgling Tesla to get a sales tax break on manufacturing equipment for its Model S sedan, which saved the company $31 million. Similar deals in 2012 and 2013, also engineered at the state Treasurer’s office, saved Tesla an additional $59 million.
Published reports reveal that Tesla received $10 million from the California Energy Commission to build its Model X vehicle in Fremont and $8.6 million in consumer rebates for its cars from the California Air Resources Board (ARB). Tesla also sought more than $26 million in funds from the Public Utilities Commission’s Self-Generation Incentive Program, a request which was still pending in late April.
Finally, Tesla has sold millions of dollars in zero-emission vehicle credits from the ARB, earning nearly $130 million in 2013 alone by hawking the credits to other automakers, according to the company’s annual financial report.
The net economic impact of keeping the company in California, however, remains uncertain.
Economist Stephen Levy, director of the Center for Continuing Study of the California Economy, contended that the fate of a single company is insufficient to make or break the entire state’s economic outlook, but acknowledged that Tesla has brought prestige, clean energy research and well-paying jobs to California since its inception in 2003.
Levy cautioned against state overspending in negotiations with major corporations, like Texas’ decision in April to offer the automaker Toyota $40 million in exchange for moving around 4,000 jobs to Plano from Torrance, Calif. Instead, Levy suggested that a combination of regulatory reforms and workforce aid would constitute a more economically sound strategy for luring jobs to the Golden State.
“I generally don’t think excessive direct subsidies are a good policy,” Levy warned. “On the other hand, making the regulatory permitting process more efficient (and) faster is important for everybody. If Tesla is the magnet that spurs regulatory permitting relief, that’s good.”
Still, Levy noted that companies all too often play cities, counties and states off each other in order to secure the most lenient business conditions — a strategy Tesla has been known to espouse.
“It makes sense from any company’s point of view to put as many players in play as possible,” Levy said, noting that competition between cities and states for jobs can descend into a harmful “race to the bottom.”
Gaines suggested the construction of Tesla’s “gigafactory” near Fremont or elsewhere in the state would carry positive side effects beyond the advertised 6,500 jobs, indicating that favorable business and consumer activity generated by such a project would outsize any associated costs and could serve to economically reinvigorate an entire region.
“I don’t think that we’re ever going to match a Texas, Arizona, Nevada,” Gaines said. “Their cost of living is lower. But what we can do is pay attention, and put a package together that makes it more palatable (for Tesla) to stay.”
Ed’s Note: Connor Grubaugh is a Capitol Weekly intern from UC Berkeley, where he majors in political economy.