Thinking In and Out of the Box: The Art and Science of Economic - PowerPoint PPT Presentation

Thinking In and Out of the Box: The Art and Science of Economic Impact Analysis

Tesla Overview Tesla was founded in 2003 by Silicon Valley entrepreneurs who wanted • “to prove electric vehicles could be awesome.” Over 6,000 employees, over 125 stores and service • locations worldwide, and cars on the road in 37 countries Tesla factory is a 5,500,000 square foot facility • located in Fremont California that was formerly the a joint venture facility between General Motors and Toyota Models • The Tesla Roadster • 2008; 0-60 mph in 3.7 seconds; 245 miles per charge • Model S • 2012; 0-60 mph in 4.2 seconds; 265 miles per charge • Model X • To be introduced in 2015 as a crossover SUV • page 2

Tesla Platform and Pow ertrain Model S Model X page 3

The Tesla Deal Tim eline • October 2013 – Tesla calls – 5 million square foot battery manufacturing plant the “Gigafactory” – $5 billion initial investment in facility: $1 billion in building, $4 billion in equipment • An additional $5 billion in planned replacement equipment over a subsequent 10 year period – 6,500 direct jobs on the site with an average wage of $27 per hour with an excellent benefit package – Construction employment of approximately 4,500 construction and installation workers over a three year period – Looking at the western United States including Nevada page 4

The Gigafactory “Giga” comes from the 2020 projected • plant capacity: 35 gigawatt-hours (GWh) per year in individual cells and 50 GWh per year in battery packs Will produce more lithium ion batteries • annually than were produced worldwide in 2013 Will produce enough lithium ion batteries • to outfit 500,000 cars per year There are nearly 7,000 lithium ion cells (size of AA battery) in the Tesla • Model S chassis Tesla estimates by the end of the year one the Gigafactory will drive down the • cost of its battery pack by more than 30 percent page 5

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The Tesla Deal Tim eline • October 2013 – Tesla RFI (Request for Information) – Grants, Incentives and Abatements, Training – Site: 300-500 acres • Existing structures, former use, previous occupants, current zoning, building size (square feet) – Transportation • Closest highway and railway to Fremont, CA – Timeline estimates for the permitting process – Power • Cost of 300MW of power demand • Natural gas rate for large industrial use – Water • Availability and cost of 250,000 gallons per day page 7

The Tesla Deal Tim eline • October 2013 – Tesla RFI (cont.) – Environmental Health and Safety – Incidence Rates for Natural Disasters • Earthquakes, tornadoes, hurricanes, floods, landslides, blizzards, sinkholes, drought – Labor Force • Size and availability – Most common industries – Education • November 2013 – GOED distributes (RFI) to Regional Development Authorities (RDA’s) in northern and southern Nevada • Two sites in the South and three in the North page 8

The Tesla Deal Tim eline • December 2013 – Tesla team visits both southern and northern Nevada • January 2014 – bad news – Over 20 years Nevada’s “off the shelf” incentive package is $650 million behind New Mexico – Over the same period Nevada’s labor cost is $250 million higher than Texas or New Mexico – $900 million overall page 9

The Tesla Deal Tim eline • February 2014 – Modeled Northern Nevada’s logistics advantage • $300 million advantage over Texas or New Mexico • $600 million to go => Special Legislative Session page 10

The Tesla Deal Tim eline • March 2014 – Applied Economics is commissioned to study expanding Nevada’s statutory abatement and incentive programs • Boundaries: – Could not touch general fund – Must be performance based with accountability and clawbacks • Deal rules and guidelines: – “Don’t fall in love with the deal” » Set up hard and fast boundaries you won’t cross – “Earn the last look” » Best service and quality » Be responsive » Have the best business environment » Overcome obstacles » Remove roadblocks page 11

The Tesla Deal Tim eline • April 2014 – Deal bargaining and brinkmanship – Still $600 million behind New Mexico and $400 million behind Texas – Series of offers and rejections • Power costs and the rate rider • 100 percent abatements • Free land • $21 million Catalyst grant • $42 million road to California • Economic Diversification District • May 2014 – Meeting water demands page 12

The Tesla Deal Tim eline • June 2014 – Deal moves forward again – Tesla expands land size to 1,000 acres and starts moving dirt – Apparent agreement is reached and “Discussion Topics Outline” is presented to Governor and senior cabinet members • July 2015 – Done Deal? – Impact analysis is revised to reflect new information • Wages to be near $60,000 per year with gold/ platinum benefit plan • State Demographer provides supporting REMI analysis – Special Legislative Session schedule for July 21 st – July 18 th Elon Musk describes a necessary restructuring and asks for 10 percent of the cost of the factory up front ($500 million) page 13

The Tesla Deal Tim eline • July 2014 – Done Deal? (cont.) – Restructure $500 million requirement using IDRB’s • Accountant's say no, those will show up on the books – Tesla requests General Obligation Bonds • Nevada says no – July 25 th conversations break down and grading stops • August 2014 – Putting it back together – “Radio silence” for the first two weeks of the month – Closing the gap • Repurpose the film tax credit and the home insurance office tax credit to establish $195 million in transferable tax credits • With $300 million commitment from Panasonic at Tesla’s July 31 st board meeting – August 28 th Steve Hill and Diarmuid O’Connell strike a deal page 14

The Tesla Deal Tim eline • September 2014 – Labor Day – On September 1 st Governor Sandoval and Elon Musk finalize Tesla coming to Nevada – Formal announcement is made September 3 rd • Including $1.3 billion incentive package and $100 billion economic impact – State Legislature goes into Special Session on September 10 th and adjourns 48 hours later with unanimous approval of the Tesla deal page 15

20 Year Econom ic Im pact Analysis Regional Multipliers Direct Indirect Induced Total Jobs 6,500 3,374 3,015 12,888 Floor Payroll (Billions) $6.7 $3.6 $2.5 $12.7 Output (Billions) $37.5 $8.6 $6.8 $52.9 Supply Chain Development/Migration Clustering National Multiplier Direct Indirect Induced Total Jobs 6,500 7,814 8,402 22,715 Ceiling Payroll (Billions) $6.7 $9.8 $7.6 $24.1 Output (Billions) $37.5 $36.6 $22.8 $96.9 page 16

20 Year Econom ic Im pact Analysis Direct Indirect Induced Total Regional Multipliers Jobs (1.98) 6,500 3,374 3,015 12,888 Payroll (Billions) $6.7 $3.6 $2.5 $12.7 Output (Billions) $37.5 $8.6 $6.8 $52.9 National Multiplier Jobs (3.49) 6,500 7,814 8,402 22,715 Payroll (Billions) $6.7 $9.8 $7.6 $24.1 Output (Billions) $37.5 $36.6 $22.8 $96.9 page 17

20 Year Tax Revenue Im pact 1 Tax Revenue 2 Abatements Difference Direct Indirect Total $459.6 $776.1 $1,235.7 $1,299.2 -$63.5 Regional Multipliers $459.6 $1,486.6 $1,946.2 $1,299.2 $647.0 National Multipliers 1 In Millions of Current Dollars 2 Net of Abatements Over 20 years based on national multipliers the Gigafactory will generate: – $447 million in state General Fund revenue – $986 million in local government revenue – $513 million in K-12 education revenue page 18

20 Year Build-out Sum m ary Regional National Equipment Multipliers Multipliers Construction Installers Jobs 12,888 22,715 4,538 1,306 $54,626 $58,331 $46,312 $57,639 Annual Wage Nevada Job Growth 1.2% 2.1% Reno MSA Job Growth 7.3% 12.9% Nevada Wage Growth 1.5% 2.9% Reno MSA Wage Growth 8.8% 16.6% Nevada GRP Growth 2.2% 4.1% Reno MSA GRP Growth 14.3% 26.2% page 19

Governors Office of Econom ic Developm ent Bob Potts Research Director 702-486-0609 bpotts@diversifynevada.com page 20