Business Facilities names Tesla Deal of the Year
Electric-car pioneer Tesla’s 5-million-square-foot lithium battery Gigafactory moves the Reno-Sparks region into the top tier of advanced manufacturing leaders.
Tesla’s $5-billion Gigafactory—the most hotly contested economic development project in years—has earned the Economic Development Authority of Western Nevada (EDAWN) the Gold Award in Business Facilities’ 2014 Economic Development Deal of the Year competition.
The ground at a site in the Tahoe-Reno Industrial Park is prepared for the foundation of Tesla’s five million square foot Gigafactory, which will be one of the largest buildings in the world. (Photo: teslamotors.com.)
The largest lithium battery production plant in the world will rise on a site near Reno, NV, creating 13,614 direct and indirect jobs—with $1.6 billion in economic impact for the region—in the next two years alone [the projection for 20 years approaches $40 billion in direct impact and $100 billion in overall impact]. The plant is expected to create nearly $370 million in direct annual wages during the next 20 years.
Nearly 13,000 construction workers will be employed on the project and related development; about 3,000 of them already are busy building the 5 million-square-foot, solar-powered Gigafactory, which from the air will look like the largest mirror on Earth due to the photovoltaic panels that will cover its roof.
Overall, Tesla’s Gigafactory is expected to lift state employment by two percent and regional employment by 10 percent, a tremendous windfall for Nevada, a state that took one of the biggest hits from the housing market collapse in the Great Recession.
Landing Tesla’s mega-project was a team effort involving EDAWN, Storey County, the Governor’s Office of Economic Development and the City of Reno.
A DEAL THAT “CHANGES THE WORLD”
When the deal was announced in September, Gov. Brian Sandoval declared that the Gigafactory not only will be an advanced manufacturing game-changer for the region, but a development that will “change the world.”
“Tesla will build the world’s most advanced battery factory in Nevada, which means nearly $100 billion in economic impact to the Silver State in the next 20 years,” Gov. Sandoval said. “I am grateful that Tesla saw the promise in Nevada. These 21st century pioneers, fueled with innovation and desire, are emboldened by the promise of Nevada to change the world. Nevada is ready to lead.”
EDAWN President and CEO Michael Kazmierski called Tesla’s decision a “once-in-a-lifetime” event.
“Rarely in the world of economic development does a single event change a community so much, so quickly,” Kazmierski said. “This single event will move Reno-Sparks, as a metropolitan area, into the top 100. We will no longer be the ‘best kept secret’ as a great place to live, work and play. More projects will follow Tesla as they come to see the real Reno-Sparks.”
Just about every state in the Southwest, from Texas to California, threw its hat into the ring when Tesla founder Elon Musk announced that the electric carmaker’s new battery plant would be big enough to supply the entire automotive industry.
Nevada’s winning bid included an unprecedented $1.25-billion incentives package that will guarantee Tesla a 100-percent sales tax abatement for 20 years, worth an estimated $725 million; a 100-percent modified business tax (payroll tax) abatement for 10 years; property tax abatements for 10 years; transferable tax credits worth approximately $195 million; and discount electricity rates for eight years.
The state also has committed to approximately $100 million in infrastructure improvements to support the Gigafactory. NV will purchase the right of way needed to link Interstate 80 and U.S. Highway 50 to the plant site at the Tahoe-Reno Industrial Park in Storey County.
In return, Tesla promised that 50 percent of the employees at the new battery plant will be recruited from the local workforce. The company also has agreed to make a direct contribution of $37.5 million (beginning in August 2018) to K-12 education, as well as $1 million in funding for advanced battery research at UNLV.
Tesla has committed to invest $3.5 billion in manufacturing equipment and other property in Nevada (reportedly about a third of what the carmaker is planning to spend overall in the U.S.). The Gigafactory aims to produce 500,000 battery packs annually by 2020, employing more than 6,500 workers with an average wage of $25/hour.
Tesla’s initial five-year investment in the Gigafactory is expected to be augmented by an additional $5-billion expenditure for replacement equipment over the next 10 years. Scheduled to be operational by the end of 2016, the plant expects to achieve at least a 30-percent reduction in the production cost for lithium-ion batteries that will be installed in drones, toys and grid energy storage devices as well as electric cars. At full capacity in 2020, the plant will produce cells capable of generating a total of 35 gigawatts/hour of power annually and battery packs generating 50 gigawatts/hour per year.
“The Gigafactory is an important step in advancing the cause of sustainable transportation and will enable the mass production of compelling electric vehicles for decades to come. Together with Panasonic and other partners, we look forward to realizing the full potential of this project,” Tesla Founder, Chairman and CEO Musk said at the site selection announcement last fall.
HOW THE DEAL CAME TOGETHER
The fact that Nevada is home to one of the few active lithium mining operations in the U.S. helped its application for the Tesla project, but state officials said the key factor was the availability of land in northern Nevada for the mammoth facility, which requires a minimum of 300 acres and may eventually expand to cover 1,000 acres. In addition to the Industrial Park, Tesla initially was offered three other sites in northern NV to consider for the project, including the Reno Technology Park, the Reno-Stead Airport and a site in Fernley, NV.
The Nevada team also made the case that the Silver State’s logistics advantage would save the carmaker at least $300 million over 20 years. The team actually deconstructed a lithium battery and priced the shipping costs of each of its components to support this claim.
Project Impact Estimates
Direct economic impact of $40 billion, indirect impact of $60 billion (20 years)
6,500 jobs directly created, 16,000 jobs indirectly created
Direct wages of $370 million, indirect wages of $955 million (20 years).
Prior to the Tesla deal, the record incentive package offered in Nevada was the $89 million deal given to Apple to put its data center in Reno. Reno, which bills itself as “The Biggest Little City in the World,” is busy planning a future beyond casino gambling: the city has laid down a marker that intends to be one of the leading high-tech hubs in the U.S.
Startup Row in Reno is a string of e-Commerce ventures that is drawing from an overflow of techies flocking to Apple’s new data center. One example is Zulily, an e-Commerce firm that sells home decor and women and children’s clothing, which is doubling the size of its warehouse and hiring 600 people. Reno also is vying to become a leading test center for drones.
To lure new high-tech ventures, Reno is emphasizing its proximity to Silicon Valley (the city is a four-hour drive from San Francisco) and the fact that NV has no corporate or inventory taxes. The seeds for a high-tech future were planted a decade ago, when a Microsoft licensing unit and an Amazon distribution center chose to locate in the Reno area.
By Business Facilities Editorial Staff
From the January/February 2015 issue
Project Title: Tesla’s Gigafactory
Entered By: Economic Development Authority of Western Nevada