How desperate are the states in the US Southwest for a Tesla Gigafactory? Maybe a little too desperate, according to the California Budget Project. CBP says that the five states that are vying for the new big battery plant from Tesla and Panasonic are really in a "a race to the bottom from which no real winner may emerge." The CBP issued an open letter to leaders in those states that called for "greater openness in the process, strong accountability measures, and cooperation – not competition – among the states."

Basically, what CBP is saying is that Tesla is trying to get too good a deal from whichever of the five states (Texas, Nevada, New Mexico, California or Arizona) will be picked for the Gigafactory to be built (well, the first one, at least). We have known for a long time that these states are fighting amongst themselves, and the CBP says that even though the Gigafactory is "undoubtedly a valuable source of economic growth for its eventual home state," since the public bidding process starts at $500 million in subsidies, the five states 'have more to gain from cooperation than from competition." After all, Tesla has made it clear that it needs the Gigafacatory to make its cheaper EV a reality, so CBP is suggesting that the states communicate with each other so that no one offers too many tax breaks in the "harmful pattern of one state 'winning' a high-profile competition." The $500 million could be better spent on other things, CBP argues, and wonders if Tesla would be "receptive to a multi-state dialogue." Your Houston News notes that Tesla is asking the states "not to discuss their offers, and states aren't talking."

Tesla did not have anything more to add to AutoblogGreen, but the company has said that an official announcement on the location of the first Gigafactory is coming toward the end of this year. For now, you can read CBP's open letter in full below.
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An Open Letter to Five States' Officials About Tesla Motors

The announcement earlier this year by Tesla Motors that it planned to establish a major electric-car battery factory in one of five western states has set off a bidding war among officials in these states. Yesterday, CBP Executive Director Chris Hoene joined with leaders at Good Jobs First and peer organizations in the other states to direct an open letter to state officials calling for greater openness in the process, strong accountability measures, and cooperation - not competition - among the states.

August 25, 2014

There is no question that state officials should place a high priority on boosting employment and fostering economic opportunity. But recently our states have been pitted into a race to the bottom from which no real winner may emerge. Tesla Motors' proposed "Gigafactory" - undoubtedly a valuable source of economic growth for its eventual home state - has been offered to you in an unusual public auction, with the opening bid set at $500 million in subsidies. Since Tesla has chosen to make the process public, we write as unified voices from Arizona, California, Nevada, New Mexico, and Texas to argue that our states have more to gain from cooperation than from competition.

We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike. It is time to break the harmful pattern of one state "winning" a high-profile competition, with other states left believing they need to offer even larger tax breaks to win future deals.

Overspending on Tesla - or any other company - could be a net-loss game in which fewer public resources are then available for investments in areas that benefit all employers, such as education and training, efficient infrastructure, and public safety. All state and local taxes combined equal less than 2 percent of a typical company's cost structure, but lost tax revenue comes 100 percent out of public budgets.

What's needed are smarter deals, recognizing that all of our states could potentially spend $500 million on other vital public services. Any agreement struck must be fully transparent - no law requires you to negotiate with Tesla or any company behind closed doors - and, furthermore, should include robust provisions for disclosing actual costs and benefits over time. Our states' residents should feel confident that there are strict performance requirements and money-back guarantees to ensure Tesla delivers what it promises.

Tesla might even be receptive to a multi-state dialogue. The iconoclastic company, internationally known for innovation, could help chart a new path in how economic development is done. The automotive industry - with its far-flung supply chains and 50-state market - is a poster child for the idea that states are interdependent and that the main goal is the long-term growth of American jobs, not any single state's ribbon-cutting.

We call upon our elected officials to seize this rare opportunity: talk to each other, let the public into the process, and when the time comes, strike a smarter deal that will preserve the tax base for the benefit of all.

Signed,

Diane E. Brown, Arizona PIRG
Chris Hoene, California Budget Project
Bob Fulkerson, Progressive Leadership Alliance of Nevada
Javier Benavidez, Southwest Organizing Project (New Mexico)
Craig McDonald, Texans for Public Justice
Greg LeRoy, Good Jobs First


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  • 63 Comments
      CeeJayABG
      • 3 Months Ago
      ... and as of 1544EDT it looks like Nevada wins.
      bluepongo1
      • 3 Months Ago
      http://teslamondo.com/2014/09/04/gig-protesters-dont-read-much/
      purrpullberra
      • 3 Months Ago
      I am VERY suspect of this group for coming out JUST NOW on this issue. It positively REEKS of opportunist anti-Tesla propaganda. I'm certain these people will be found to be folks who have shorted Tesla stock. They have never said a word about this before. And on top of that they step on their own reasoning, if it is beneficial then to lose the factory is a pure loss. If they won't do enough to get the 2nd one they lose THAT too. How is it helpful to not get the Gigafactory? What way can California specifically 'spend' $500 million in a better way? They have no answer because the answer is --it's worth it to offer that much if not more-- there isn't a further question. It is worth it. Period. And who trusts California government to 'spend' that money in a better way than Tesla would? And, Why? Where is their answer to those questions? And why come out against Tesla, now? Until I hear about those issues this CPB-thing stays in the land of nutjob anti-Tesla BS. Nothing more.
      Levine Levine
      • 3 Months Ago
      The People's Republic of California is the least competitive of all the candidates for Tesla's battery factory site. The socialist State's militant labor unions, numerous high taxes, general anti-business climate, and voluminous oppressive regulations have made California the clear winner as the worst state in the Union to do business and for workers to have high-wage manufacturing jobs. The CBP report is fully aware of the uncompetitive ranking of Socialist California as it trails dead last among the candidates. Essentially, the CBP report is a sneaky attempt to persuade other States to reduce incentives so as to make California's candidacy viable. Socialism relies on deceptions to perpetuate a fraud on the people. The PR of California is no exception.
        jphyundai
        • 3 Months Ago
        @Levine Levine
        I am in complete agreement with that statement. For Tesla to survive as a car company, they should not do business in California.
        purrpullberra
        • 3 Months Ago
        @Levine Levine
        Interesting idea, about the sneaky attempt. But how can such incompetent people (labor unions, regulators, the CPB and legislators) pull off such a complex scheme? And how is Tesla such a raging success, and Apple and Google, Oracle and all of Hollywood, how do they fake their wild success? We know it is IMPOSSIBLE to be a success in California. So explain all the 'socialist' success, please. Can you? We all know about Cali's failures, explain the success.
          purrpullberra
          • 3 Months Ago
          @purrpullberra
          PBJhyundai: It's news to you because you live in a self-imposed, LIE FILLED bubble that has no connection to reality. Their gross margins are twice GM's and getting better is one concrete example that you have no come back for. The order books are filling up faster and faster, another fact that can't be denied. Every car maker in the world is in awe of Tesla and is studying how they've been so successful. You'd be less of a worthless troll if you stuck to pimping your favorite, Hyundai, Mr. PBJ. They are something to be proud about and they are a great force. But I'm afraid you're just a sad troll and absolutely NO ONE thinks you make any sense at all.
          purrpullberra
          • 3 Months Ago
          @purrpullberra
          PBJhyundai: It's news to you because you live in a self-imposed, LIE FILLED bubble that has no connection to reality. Their gross margins are twice GM's and getting better is one concrete example that you have no come back for. The order books are filling up faster and faster, another fact that can't be denied. Every car maker in the world is in awe of Tesla and is studying how they've been so successful. You'd be less of a worthless troll if you stuck to pimping your favorite, Hyundai, Mr. PBJ. They are something to be proud about and they are a great force. But I'm afraid you're just a sad troll and absolutely NO ONE thinks you make any sense at all.
          jphyundai
          • 3 Months Ago
          @purrpullberra
          Tesla is a raging success? That is news to me. The economy is up, car sales are up, and Tesla is not making money. How is that a ragin' success? If the economy drops, Tesla will likely lose even more money then go out of business.
          jphyundai
          • 3 Months Ago
          @purrpullberra
          Tesla is a raging success? That is news to me. The economy is up, car sales are up, and Tesla is not making money. How is that a ragin' success? If the economy drops, Tesla will likely lose even more money then go out of business.
      Spec
      • 3 Months Ago
      Manufacturers have been playing the "race to the bottom" game for DECADES . . . why does it only become an issue when an EV company decides to play?
        Jim
        • 3 Months Ago
        @Spec
        Manufacturers and pro sports teams...
        Ricardo Gozinya
        • 3 Months Ago
        @Spec
        People have been making an issue of it long before this, for years. It's more a matter of nobody listening, because the wants of big business must be served above all else.
      BipDBo
      • 3 Months Ago
      In the corporate world, this is called "price fixing" and we've decided to make it a crime.
      Spec
      • 3 Months Ago
      That navel-gazing Michigan cracks me up every time.
      PeterScott
      • 3 Months Ago
      This is pretty much par for the course when corporations choose which state they are locating factories in.
        Letstakeawalk
        • 3 Months Ago
        @PeterScott
        People (especially the wealthy) also choose to live in states which give them tax breaks and incentives...
      Kevin Gregerson
      • 3 Months Ago
      This really isn't about a race to the bottom as it is getting the ideal space for the ideal price. The more support Tesla can get the more budget they can free up for Salary, expansion, margins, etc. If I were one of these states, I'd pass a heck of a deal only requiring that they meet certain revenue and hiring requirements which would end up paying back into the state anyways.
      archos
      • 3 Months Ago
      So the state with the weakest hand and biggest hurdles to overcome wants other states to be less competitive and for Tesla to consider more than one spot. Are they serious? This is something you scribble on some paper and throw down a wishing well (if you're a Cali politician). It isn't something you say out loud.
      danfred311
      • 3 Months Ago
      I imagine that only cali and nevada could win. The others were just there to push the costs down. The shorter transport the better. Coming all the way from texas is a hike.
      Rex Seven
      • 3 Months Ago
      Not that I care that much, but are these tax break deals constitutional? How do they square with "equal protection under the law" as in the 14th amendment? Unless any business building a new factory could get the same deal (which they can't) it's obviously against the constitution. Not that it matters anymore. Just trying to point out another instance of blatantly ignoring that document.
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