A city getting ‘Tesla’d’

Tesla’s battery factory brought high-paid tech jobs to Nevada — but is soaking up huge tax breaks that critics say have seriously depleted public services

By Rory Carroll  /  The Guardian, SPARKS, NEVADA

Mon, Jul 09, 2018 - Page 8

When Nevada enticed Tesla to set up a gargantuan battery factory in the desert, America’s gambling capital seemed to have hit the jackpot.

The factory would have a state-of-the art 510,967 sq meter facility — reputedly the world’s biggest building by footprint — and promised to generate tens of thousands of jobs, as well as investment worth US$100 billion.

Cities around the so-called Gigafactory in northern Nevada lined up to reap the bonanza. No longer dusty, provincial versions of Las Vegas, these municipalities would become innovative makers of lithium-ion batteries for electric cars and partners in Elon Musk’s vision of a clean-energy revolution. That was the pitch.

IMPOVERISHED RESIDENTS

These days many residents in Sparks — a sunbaked, low-rise city of 100,000 people located 20 miles from the factory — express humbler dreams: food, shelter, health care.

“I’m not used to living this way,” said Katherine Pope, 69, a retired administrator who rents a small motel room and relies on food donations. “I can’t afford to move. Many times I can’t afford meat.”

Another impoverished resident, a 70-year-old unemployed transcriptionist with a thyroid condition, faces a recurring dilemma.

“Food or medicine, it’s one or the other.”

A rent increase may soon compel another grim choice: sleep in her battered 1997 Saturn or in a homeless shelter.

Down by the Truckee river you find others who feel cast out — families who have moved into trailer parks, which are packed to capacity, and people sleeping rough.

“A year ago I was the caretaker of an apartment building and my wife was a caregiver. Then I lost my job. We couldn’t afford to rent anywhere so now we live here,” said Kevin McCullough, 48, who like his partner, Pixie, was sunburned from outdoor living. Home is a tent by riverbank reeds.

Such testimony conflicts with the official narrative that Sparks is booming — awash with jobs, money and newcomers. But you hear it from a largely hidden underclass which is paying a price for the boom. Some have a term for it: “Tesla’d.”

DEPLETED RESOURCES

One complaint is that tax credits given to Tesla — and to a lesser extent other tech companies — deplete public services, resulting in potholed roads, overcrowded schools and insufficient affordable housing.

The other is that the tech worker influx has sent rents rocketing, tipping residents on fixed incomes, especially seniors, into penury.

That was not the pitch in 2014 when Nevada beat rival bids from California and New Mexico to land the Gigafactory. It did so with exemptions from sales-and-use, property and general business taxes for 10 to 20 years, adding up to an estimated and unprecedented US$1.4 billion. The previous record, to lure an Apple server farm, was US$88 million.

Brian Sandoval, the Republican governor, hailed the deal as transformative for a region still limping from the great recession.

Today the factory sits behind a fenced swath of desert known as the Tahoe Reno Industrial Center (TRIC), which also hosts Google, Switch and Panasonic, among others, and bills itself the world’s biggest industrial park.

Tesla’s “alien dreadnought” — Musk’s words — dominates. It is unfinished but already produces around 3,000 battery packs per week for Tesla’s Model 3 sedan. Thousands of workers and contractors have moved to Sparks and nearby communities, a boon for local hotels, landlords, builders, plumbers, electricians, taxi drivers and other service providers.

A Tesla spokesperson said the company was investing in local education, including a high school manufacturing development program and a US$37.5 million plan to promote science, technology, engineering and mathematics.

Tesla receives credits based on jobs created, Ron Knecht, Nevada’s state controller, said in an interview. “They’re reaching their benchmarks significantly faster than expected.”

Current Tesla projections suggest the credits are justified even if the ultimate cost is unclear, said Knecht. “If it pans out the way it looks, it’ll certainly be good for the economy. The state may break even but we’ll never really know.”

A Republican, Knecht’s job is to protect taxpayers’ money. Figures from his office, supplied under a mandate for transparency in corporate welfare, show how much tax abatements reduced potential revenues for local authorities last year. In the case of Tesla it was US$68.7 million.

Credits to Musk’s company will soak up most of a tax revenue excess Nevada was due to record this year.

The state compensates local government, said Knecht. Had Tesla never come there would have been nothing to tax, so the cost/benefit remains murky. “You can get numbers all over the place.”

‘NET ZERO’

Here’s one number that applies to Sparks: zero.

Stephen Driscoll, the city manager, said despite surging population growth and increased strain on police and fire departments and schools, his annual budget had increased from US$65 million to US$70 million in the past two years — about the level of inflation. “So I’m at net zero.”

Critics of the system say there is no doubt who ultimately pays.

“It’s the working stiffs,” said Bob Fulkerson, of the Progressive Leadership Alliance of Nevada.

Schools in Washoe county, which includes Sparks, are overcrowded and deeply in debt, so much so that voters in 2016 approved a sales tax hike to help plug the gap. Even so, fresh budget cuts could eliminate bus routes for nearly 4,000 elementary and middle school students in an effort to save US$550,000.

Meanwhile, home owners have seen values soar — but not property taxes, which are capped. Plumbers, electricians and builders have bountiful job options.

“The factory is a good thing,” said Omar Alvarez, 28, a building contractor who earned US$18 an hour plus generous benefits at Tesla’s factory. “Well, as long as you actually work there.”

Residents on fixed incomes, in contrast, are facing surging rents, driving some to destitution and the brink of homelessness.

Trailer parks which were half-empty two years ago are now jammed, said Alicia Siever, who manages the River’s Edge RV park. Motels and shelters have also filled.

“I get depressed. All humanity has left the area,” said Pope, who used to work in an architect’s office. Her US$700 per month ground-floor motel room is a dramatic comedown from her previous apartments.

“But I’m grateful this place exists,” Pope says.

The unemployed transcriptionist declined to be named lest identification sabotage her last-ditch attempt to avoid eviction. Asked to name unaffordable luxuries, she replied: “Ice cream. Bacon. A movie ticket.”

A troubling question now hovers over Sparks. Is Tesla itself a winner or loser?

Having bet on the Gigafactory, the city’s fate hinges on the company’s success, said Richard Daly, business manager of Laborers’ Union Local 169. “Growth problems are better than recession problems.”

But a spate of setbacks — layoffs, a churn of executives, “autopilot” car crashes and a suit against a whistleblower — has put pressure on the firm. “Giving so much to Tesla was risky,” said Eloy Jara, another labor leader.

“If they fail it could really hurt.”