Business & Real Estate

Tesla reportedly chooses Nevada for big factory; California falls short

California’s campaign to land Tesla Motors Inc.’s 6,500-employee battery factory has failed, with northern Nevada emerging Wednesday as the apparent destination.

The Associated Press and other media, quoting anonymous sources, said Tesla has chosen a site near Reno for its much-coveted $5 billion “Gigafactory,” capping a multi-state beauty contest that dragged on for months.

Tesla and Nevada Gov. Brian Sandoval confirmed that a “major economic development announcement” would be made Thursday at the state Capitol in Carson City. “We continue to work with the state of Nevada and we look forward to joining the governor and legislative leaders (Thursday) in Carson City,” Tesla spokeswoman Liz Jarvis-Shean said in an email to The Sacramento Bee.

The disclosure came a little more than a month after Tesla acknowledged that it broke ground earlier this summer at an industrial park a few miles east of Reno. The developer of the park, Lance Gilman, told The Bee in an email that he plans to attend the announcement in Carson City.

Tesla insisted a month ago that it hadn’t finalized a decision regarding the Reno site. Elon Musk, chief executive of the Palo Alto electric-car manufacturer, said then that the company would continue to evaluate other locations and might break ground at multiple spots before reaching a conclusion.

An anonymous source told AP on Wednesday that Tesla still plans to prepare another site for construction – either as a backup in case Nevada falls through, or as a second factory. Jarvis-Shean told The Bee that “discussions with other states in the process are ongoing.”

Officials in the Reno area were careful not to start celebrating. “There’s no news until the press conference,” said Mike Kazmierski of the Economic Development Authority of Western Nevada. “Other than that, I think everybody’s pretty excited.”

Officials throughout California were left disappointed. Gov. Jerry Brown had made Tesla a priority, and the Legislature considered a package of regulatory and financial incentives for the battery factory. However, lawmakers adjourned over Labor Day weekend without acting on the bill.

The bill’s co-author, Sen. Ted Gaines, R-Roseville, said legislators were considering a streamlining of the California Environmental Quality Act, plus assorted investment-tax and job-training tax credits.

Tesla, he said, was making additional demands “that I think were beyond what California could do.”

He declined to spell out those demands, but added, “We tried to do everything we could. … I felt like we made a great effort.” Gaines co-authored the bill, Senate Bill 1309, with Senate President Pro Tem Darrell Steinberg, D-Sacramento, although details of the incentives were never written into the legislation.

Even as lawmakers left town, Brown administration officials expressed hope they could make a deal with Tesla. “The administration continues to engage in productive conversations with Tesla and remains optimistic that we can reach an agreement that meets our common goal of adding jobs in California,” the governor’s senior adviser Mike Rossi said in a prepared statement Saturday.

On Wednesday, as news filtered out that Tesla had chosen Reno, the governor’s office put out a timeline spelling out the administration’s efforts to make a deal with the company.

Brook Taylor, spokesman for Brown’s economic development office, said in a prepared statement, “No other state has added more jobs than California since the recovery began, and we’ll continue to work closely with businesses, including California-based Tesla, that want to grow here.”

The list of possible California sites pitched to Tesla included Mather Business Park east of Sacramento. Also in the mix were locations in the northern San Joaquin Valley, which are reasonably close to Tesla’s vehicle factory in Fremont.

“It would have been a game changer” for the Valley, said economist Jeff Michael of the University of the Pacific in Stockton.

Michael said he wasn’t surprised California lost, given the comparatively low cost of doing business in Nevada.

“The regulatory environment and the cost environment of California – they’re a challenge,” Michael said. Among other things, Nevada has no state income tax.

The Bay Area Council, a business advocacy group, said it hopes Tesla’s selection of Reno will spawn “a robust supply chain” of manufacturers and other support companies in the Sacramento and San Joaquin regions.

Earlier this year, Tesla acquired a small industrial site in Lathrop for a parts factory.

Tesla originally said California wasn’t a contender for the battery plant at all and listed four states as finalists: Nevada, New Mexico, Texas and Arizona. But Brown’s office of economic development, stung by the departure of several big companies to Texas, made a big push for the Tesla plant. In recent months, company officials said California had made considerable progress and was being considered after all.

It wasn’t immediately clear what sort of financial incentives Nevada is offering Tesla. Musk said earlier this summer that he expected the winning state to contribute around 10 percent of the facility’s cost. That would come to around $500 million. Until now, the largest tax incentive ever granted by the state of Nevada was $89 million, over 10 years, for an Apple Inc. facility near Reno.

According to the Gazette-Journal, the governor plans to call the Nevada Legislature into special session next week to vote on incentives for Tesla.

Gaines said he hopes California lawmakers and policymakers can use the Tesla experience as a basis for enacting broad-based reforms to the state’s regulatory and tax structure.