Local legislators defend Tesla tax deal

State legislators for this area defended their votes last week during a special session called by the governor to pass tax abatements for the Tesla lithium battery gigafactory near Reno.

The Legislature unanimously voted to give Tesla a 20-year abatement on sales taxes and 10-year abatement on property taxes. The company states its plant, building batteries for affordable electric cars, will employ 6,500 workers, the construction will employ 3,000 workers. Tesla agrees to employ at least half of its work force from Nevada.

“I think the governor and Steve Hill from the economic development group did a great job in negotiating. It’s my understanding they really negotiated hard for that deal, we were fortunate to get it and I believe there’s enough things in the bill to protect us. They don’t get until they give,” said Nevada District 36 Assemblyman James Oscarson, R-Pahrump.

“Any time we can diversify from the two major things we have going on, mining and gaming and hopefully diversify into manufacturing, 5 million square feet of manufacturing space is nothing to sneeze at,” Oscarson said.

State Sen. Pete Goicoechea, R-Eureka, said the deal was already brokered by the governor and U.S. Sen. Harry Reid, D-Nev. The Legislature wanted to make sure they could get as much on the record to protect local governments as possible.

“Technically, under the legislation now anybody can make the same request that Tesla did by investing $3.5 billion, they can ask for those same abatements. We were just trying to get some stuff on the record,” Goicoechea said.

Under existing statute neither gaming nor mining can apply for abatements, for say, a $3.5 billion mine or a $3.5 billion mega resort, he said.

The Nevada Constitution requires a 2.2 percent sales tax. The bills create an economic diversification district in Storey County, site of the project, the state will give that sales tax to the district which reverts it to the company, Goicoechea said. Tesla also receives $193 million in transferable tax credits that were being used by the film industry or home office premiums used by the insurance company, after they meet employment and building requirements, he said.

Nye County Commissioners occasionally grumble about abatements granted to the new 110-megawatt SolarReserve plant scheduled to open in December. State law allows a 45 percent abatement on property taxes and a total abatement on sales taxes for renewable energy projects. The Nye County Assessor’s Office reported in fiscal year 2013-2014 the county collected $1.3 million in property tax from the SolarReserve project and $599,803 was remitted to the state renewable energy fund. The Nevada Department of Taxation reported $14.4 million in sales taxes were abated in the construction of the project that would have come to Nye County over a three-year period.

“The argument on that bill, and I didn’t support it, Nye County wasn’t at the table negotiating what portion of that sales tax they were going go give up, or property tax. That’s the big difference in this one. Storey County was totally on board with giving it up,” Goicoechea said.

Assistant County Manager Joni Eastley said she had a neutral position in testifying before the state renewable energy director when SolarReserve asked for their abatements, because they were only asking for something they were entitled to under state law.

“My complaint was the state Legislature allowing companies to apply for abatements on the taxes that would directly benefit county governemnt but substantially leaving the state and the school district whole when they’re not the ones providng the services,” Eastley said.

“Although I have some apprehensions, I do think the deal will be positive for the State of Nevada. There will be a lot of construction work there in the next few years, we’re already seeing a surge in the price of homes in Fernley and Reno,” Goicoechea said. “All of a sudden people know this is coming, there could be 10,000 jobs there. I think it could be positive for the state but the proof is in the pudding.”

Goicoechea said the plant will be the third largest building in the world, measuring 123 acres just on the ground floor.

“You don’t take a chance on something like that, you have some long-term tax abatements but again the host county agreed to it. It’s problematic to say no,” he said.

Senator Reid took credit for energy policies that led Tesla to choose Nevada for its lithium battery plant. In 2007, Congress passed an energy bill that created a program supporting makers of advanced technology vehicles, that enabled Tesla to get a $465 million loan guarantee for a California plant. Reid engineered U.S. Senate passage of President Barack Obama’s economic stimulus package in 2009 that awarded $28.4 million to Rockwood Lithium, the nation’s only lithium mine in Silver Peak in Esmeralda County.

A 2012 report by the Nevada Bureau of Mines and Geology reported gross proceeds of $18.4 million from lithium production, all from the Rockwood Lithium plant, an increase of 80 percent from 2011. The lithium is extracted from underground brines below the Clayton Valley playa, not like gold which is extracted from ore.

Rick Perry, administrator of the Nevada Division of Minerals, said the Rockwood Lithium plant has 75 employees and 10 contract employees.

Cyprus Mines began the Silver Peak lithium mine in 1966, which was the world’s dominant producer. In the late 1980s lithium brine operations began in Chile and Argentina, which now dominate the market, according to the Bureau of Mines and Geology report. China also produces lithium. In 2012, the U.S. imported 2,980 tons of lithium and exported 1,430 tons, the report states. Lithium-based, rechargeable battery sales accounted for 22 percent of the global lithium market.

Since there is only one producer in the U.S., the report kept actual production figures confidential, but a 1998 Securities and Exchange Commission report quoted by the bureau said 12 million pounds of lithium carbonate and 5 million pounds of lithium hydroxide were produced that year.

The Bureau of Mines and Geology report also quotes Industrial Minerals which in July 2008 reported remaining lithium reserves to be about 44,000 tons. Industrial Minerals also reported Rockwood Lithium Inc. was upgrading and doubling the lithium carbonate production capacity at Silver Peak at a cost of $75 million.

Goicoechea said a requirement to buy a percentage of lithium from Nevada mines wasn’t written in the legislation passed by the special session but could be considered in the regular 2015 session.