The prospect of a Tesla Inc. factory in the Austin area has moved a big step closer to reality, after Travis County, Texas commissioners on Tuesday approved tax breaks the electric vehicle maker requested that are worth a minimum of about $14 million over 10 years if Tesla invests $1.1 billion here.
Under the terms of the deal, the amount of the tax incentives to Tesla could rise significantly if the company invests more than $1.1 billion in the manufacturing plant, which it has said will employ 5,000 people.
The amount also will rise if the agreement eventually is extended for an additional decade, as both the county and Tesla envision.
Tesla, which is based in California and is run by high-profile CEO Elon Musk, recently became the most valuable automaker in the world, with a market capitalization topping $280 billion.
Four of five Travis County commissioners voted to approve the incentive agreement Tuesday, with Commissioner Margaret Gomez abstaining.
Just prior to the vote, Gomez pushed for a week's delay to allow for more time to review the agreement, but other commissioners voiced concern that doing so might prompt Tesla to instead build the factory elsewhere.
Rohan Patel, a Tesla executive who participated in the commission's virtual meeting, was noncommittal on that question when commissioners asked him about it. However, he told them that the company had just had a call "with a governor of another state and mayor of another town to go through a whole bunch of things similar to what we have gone through now."
That prompted Commissioner Jeff Travillion, whose district includes the potential site for the factory, to say the risk of losing the project was too great.
"We are talking about a transformational project that will address poverty and opportunity in that area for generations," Travillion said.
Last week, the Del Valle school board approved a tax break for the factory that has been estimated at about $46.4 million over 10 years. The value of that deal won't change much even if Tesla invests more in the factory.
Tesla -- which hasn't said when it plans to make a decision on where to build the plant -- still could seek a taxpayer-funded grant for the project from the Texas Enterprise Fund, the state's deal-closing reserve that's aimed at providing the final carrot to swing a corporate decision. Neither Tesla nor the office of Gov. Greg Abbott have responded to questions about a possible enterprise fund grant.
The company also has been considering Tulsa, Okla., as a location for the factory, although it previously indicated that the site it's considering in the Austin area is the front-runner. The Austin site being considered is a 2,100-acre tract at Texas 130 and Harold Green Road in southeastern Travis County.
Local proponents of the Tesla project who spoke at Tuesday's meeting prior to the vote called it a potential boon for the economy and fountain of new jobs well worth the price of taxpayer subsidies.
"I think it would be a huge opportunity for a wide range of people and businesses in the Austin area," particularly amid the ongoing downturn triggered by the coronavirus pandemic, said David Stewart, chairman of the Austin Regional Manufacturers Association. "I want this opportunity for our city, and I hope you make this investment in our city."
But others criticized Tesla's corporate record on workplace safety and labor relations and pushed for more to be done to ensure potential future employees of the factory are treated and paid well.
They also urged commissioners to delay the vote for a week so that members of the public have additional time to review the deal, which has undergone revisions over the past few days as officials worked to address concerns about it.
"I guarantee you Tesla wants to come here," so the agreement shouldn't be rushed at the expense of ensuring it's as well-negotiated as possible, said Jeremy Hendricks, a representative of the Southwest Laborers' District Council.
If Tesla ends up building the factory, the Travis County incentive deal approved Tuesday calls for it to pay a minimum wage of $15 an hour to employees -- including contract employees who regularly work at the factory -- with an escalator based on consumer prices, in addition to health insurance, paid leave and other benefits.
Tesla previously has said the average annual salary would be $47,147, while the median annual salary would be $68,303.
But Nathan Jensen, a University of Texas government professor who studies taxpayer-funded incentives to corporations and is a critic of them, called Tesla's mandated minimum wage of $15 an hour -- which equates to $31,200 annually for a full-time worker -- an extremely low bar for a manufacturing company to clear.
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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