Special session on Tesla Motors deal heads to Day 2

The special legislative session to bring Tesla Motors’ battery factory to Nevada was set to resume today with the Senate taking up the legislation containing the vast majority of the tax abatements worth up to $1.1 billion over the next 20 years.

While the Assembly moved forward, plowing through three of the four bills designed to implement the $1.3 billion deal to bring the gigafactory to Storey County, the Senate was stalled all day as the legislative legal team worked on final wording of the tax abatement bill.

The hang-up involved the legality of the plan to rebate the voter approved 2 percent sales tax contained in the Nevada Constitution. The original plan was for Tesla to pay the tax to the state, which would send the money to Storey County which would rebate it to Tesla.

The legislation gets around the legal problem by allowing creation of special economic diversification districts and dedicating sales tax dollars to the support of those districts — effectively enabling Storey County to direct the tax collections back to Tesla’s factory.

The so-called gigafactory has been touted as employing 6,500 workers at salaries averaging more than $25 an hour and generating up to 16,000 other jobs in the communities surrounding Storey County’s Tahoe Reno Industrial Center 15 miles east of Reno.

But, in order to get the plant, the deal with Tesla essentially gives away any direct tax benefits to the state for 10 years and any sales tax revenue for 20 years. Gov. Brian Sandoval and Steve Hill, head of the Governor’s Office of Economic Development, say it’s still a great deal for Nevada because of the indirect economic benefits it will bring.

Sandoval said an independent study of the impact the plant would have indicates it would generate about $100 billion in economic impact over the next 20 years.

There were numerous questions from Assembly members over the energy discount rates for the company in Assembly Bill 1, worth anywhere from $3.8 million to $6.8 million. Tony Sanchez of NV Energy and Paul Townsend of the governor’s office of energy told lawmakers that translates to just $1.84 a year in added energy costs for residential customers in Sierra Pacific Power’s service area.

AB2 took a lot less time to review.

That measure exempts Tesla from the law requiring auto manufacturers to sell through licensed car dealerships instead of selling directly to people. The exemption in the measure only exempts the makers of 100 percent electric vehicles, not hybrids and other such vehicles.

Representatives of the auto dealers argued for an amendment allowing that exemption to apply only to auto makers licensed in Nevada before January 2016 — pretty much limiting the exemption to Tesla.

AB3 would take away from a small number of insurance companies a tax credit for locating their businesses in Nevada and giving it instead to Tesla.

Taxation Director Chris Nielsen testified that credit costs the state about $30 million a year and has been in place for more than 40 years. He said in 2012, for example, that benefit was split among just a dozen insurance companies.

Hill said his best estimate is that each of the jobs in those companies is costing the state $19,000 in tax breaks.

“Something that lasts for 43 years or longer is not an incentive. In our view it is a subsidy,” Hill said.

No final vote was taken on any of those three bills.

Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas, said she wanted to give members time to absorb the impact of each bill before a vote on them expected today.

She adjourned the Assembly until 9:30 a.m. after advising members the Senate bill needed to complete the package would be available “in a bit.”

Like the Assembly, the Senate planned to take up the bill in a committee of the whole. According to Majority Leader Mo Denis, D-Las Vegas, the Senate will take up the measure “promptly” at 9 a.m. before adjourning for the night.

Legislative leaders expected to approve the package of tax breaks and other incentives by Thursday night or Friday. The leader of the Assembly’s Republicans, Pat Hickey, was among those predicting it would pass by an “overwhelming” margin, according to the Associated Press.

Even opponents conceded it was unlikely they’d stop the huge corporate giveaway, which they say won’t benefit typical middle-class Nevadans.

“All the lobbyists for various interests say that unless you have a hand in the Tesla deal, it’s not good for you,” said Bob Fulkerson, state director for the Progressive Leadership Alliance of Nevada.

“But everybody then also says that it’s a done deal,” he told The Associated Press on Wednesday night.

The package also drew criticism from some conservatives, including Lee Hoffman, a retired miner and chairman of the Elko County Republican Party, who said the Legislature was in effect picking “winners and losers” by extending the tax breaks exclusively to Tesla Motors Inc.

“They will benefit one specific company, one specific industry at the expense of other businesses, other taxpayers, other consumers,” Hoffman testified from Elko.