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Texas county gives thumbs-up to tax breaks to lure Tesla factory

Bob Sechler, Austin American-Statesman on

Published in Business News

Manufacturing jobs in Texas most recently paid just over $47,000 annually on average prior to the coronavirus pandemic, according to figures from the U.S. Bureau of Labor Statistics.

"These (incentive agreements) are generally very bad policy, and it is a particularly bad idea for low wage jobs," Jensen said in an e-mail exchange this week.

He said research has shown that at least three-quarters of taxpayer-funded incentive agreements go to companies that would have invested in a particular region without them.

"I know people get excited about hearing the name Tesla," Jensen said. "But this is a company with a reputation for fleecing taxpayers (through its pursuit of incentive deals) and offers low-wage manufacturing jobs" in return.

Still, others said the cutting-edge electric vehicle maker's presence in the area will fire the imaginations of local young people.

"Remember, Tesla has the cool factor" that will spur students to get interested in science-related fields, said Norris Sebastian, director of career and technical education at the Del Valle school district, speaking during Tuesday's commission meeting. "The positive outcomes for the community and the county and the students cannot be overstated."

The county's agreement calls for at least 50% of Tesla's employees of the factory to be Travis County residents, although a county spokesman said earlier this week that the criterion for measuring that benchmark -- such as the timing and length of residency -- haven't been worked out.

 

Under the agreement, the county will rebate to Tesla 70% of the property taxes it pays for county maintenance and operations for the first $1.1 billion it invests in the factory. The incentive will increase to a 75% rebate of those taxes for investment between $1.1 billion and $2 billion in the factory, and then to 80% for any amount above $2 billion.

Tesla must invest $1.1 billion in the factory within the first five years. It will get no rebate if it falls 75% short of its required investment or jobs in any year, according to the agreement. In addition, a breach of the contract by Tesla will trigger a "clawback" of the prior two years of tax rebates.

Travis County has estimated that, based on a $1.1 billion investment by Tesla, the deal will generate $8.8 million in new tax revenue for it over the initial 10 years, even with the rebates to the company. If Tesla invests more in the factory, the amount of new county revenue also will rise, along with the amount of Tesla's rebates.

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