As Nevada lawmakers prepare to vet a $335 million incentive package aimed at attracting a Chinese-backed electric carmaker to the state, Gov. Brian Sandoval is seeking to reassure them that it was worth their while.
Faraday Future is expected to get up to $215 million in direct tax abatements and credits for building a $1 billion plant in North Las Vegas, the governor said. But the company is expected to bring state and local governments $760 million in tax revenue over 15 years for a 3-to-1 return on investment. Faraday’s total economic impact on Nevada over that period is projected to be $85 billion, mostly through wages paid to an estimated 4,500 employees and workers in 9,000 more indirectly created jobs.
“Before I accepted the terms on behalf of Nevadans, and agreed to the extraordinary necessity of a special legislative session, I had to ask myself one simple question,” the Republican governor said at a ceremony Thursday in Las Vegas, where the deal was formally announced. “Does this agreement work for Nevada? Is this agreement good for Nevada? The answer was a resounding yes, yes, yes.”
But while lawmakers unanimously passed a $1.3 billion incentive package last fall to land a $5 billion Tesla Motors battery factory outside of Reno, the latest incentive package could face resistance among a bloc of newly elected, anti-tax Republicans who voted against abatement major bills this spring, even though they generally lost their battles.
One lawmaker, freshman Republican Assemblywoman Shelly Shelton, wrote an editorial Wednesday chastising the governor for bringing forth the deal after backing a tax increase on businesses this spring.
“When the ‘investment’ in Faraday comes before us,” Shelton wrote in the conservative Nevada News and Views website, “the Legislature will likely fold like a cheap suit to the whims of the Governor and will, once again, violate the constitution, their oaths, and the will of Nevadans by adding yet another welfare company to the state rolls.”
Sandoval will ask lawmakers to create a middle tier of tax breaks — something more that the existing general abatements and less than the Tesla package aimed at luring investments of $3.5 billion or more. He’ll also seek tweaks to the law that would make it easier to finance infrastructure improvements including a rail port and water service at Apex Industrial Park, Faraday’s planned home.
Victor Joecks of the conservative Nevada Policy Research Institute derided the proposals as handouts to Faraday that were hypocritical in light of the recent tax package.
“If lower taxes are good for out-of-state billionaires, they’re also important for Nevada’s small, medium and large businesses,” Joecks said.
But Robert Lang, an urban affairs professor at UNLV and a senior fellow at Brookings Mountain West, said Faraday, like Tesla, is too big to measure against small businesses.
“At this scale, the incentive package is custom,” Lang said. “In return, the state gets people employed who pay taxes.”
He added that auto plants in particular often attract suppliers to move nearby, further upping the job count.
Sandoval has suggested he’ll convene the Legislature before Christmas because the company wants to break ground in January, but he hasn’t publicly set a date or issued the proclamation that would formally set the process in motion. Legislative staffers, however, are drafting legislation.
Legislative leaders in both parties described the deal as an important opportunity for Nevada, but aren’t making direct pronouncements that it will pass.
“I’m confident that the Nevada Legislature will thoroughly review the current proposal and do what is best for Nevadans,” said Republican Assembly Majority Leader Paul Anderson. “Getting Nevadans back to work and training them for careers of the future is a unifying goal that we can all get behind.”
Senate Democratic leader Aaron Ford said his caucus would review the forthcoming bills with an eye toward whether the jobs would mainly benefit Nevadans — particularly among the very diverse populace of North Las Vegas. But as a sponsor of a program that offers tax credits to filmmakers who bring business to Nevada, he generally supports strategic incentives.
“They’re ways you can induce companies that wouldn’t otherwise be here to come,” Ford said. “We have to utilize our resources to attract business.”
Economic development officials say the plant would be a step toward a more resilient, economically diversified “New Nevada” rising from the ashes of a devastating downturn. That vision involves a state less dependent on lower-paying casino jobs, replete with high-tech jobs and home to businesses shaping the future of transportation.
“The New Nevada is about Nevada being relevant in industries that are at the cutting edge and will be important for decades,” said Steve Hill of the Governor’s Office of Economic Development, pointing to successful efforts to attract Tesla, Hyperloop Technologies and now Faraday. “We’ve had some exceptional announcements, and this is the apex.”