Lawmakers in Texas just gave Tesla and its CEO Elon Musk another incentive to locate its next factory there.
Commissioners in Travis County, home to Austin and the possible next Tesla factory, approved Tuesday property tax breaks worth at least $14.7 million — and potentially more — over 10 years. The incentives are on top of $46.6 million in property tax abatement that the Del Valle School District Board approved earlier this month.
News of the approval pushed Tesla shares 3.5% higher in after-hours trading.
The agreement, which the Austin Statesman first reported, is the latest carrot dangled in front of Tesla in hopes of landing the automaker's next factory, which is slated to assemble the all-electric Cybertruck and the Model Y for the East Coast market.
There are, of course, conditions to such an arrangement.
Under terms of the agreement with Travis County, Tesla must invest $1.1 billion in the new factory within the first five years. In exchange, Travis County will rebate 70% of the property taxes Tesla will pay. Once Tesla's investment in the factory eclipses that $1.1 billion mark, the property taxes rebates will increase to 75%. Any investments in the factory beyond $2 billion, will give Tesla 80% in property tax rebates.
Travis County has estimated that a $1.1 billion investment by Tesla would generated $8.8 million in new tax revenue over a 10-year period, a figure that takes into account the property tax rebates.
If Tesla fails to hit the investment goal or if its falls 75% short of its jobs requirement in any year, the company won't receive any property tax relief. The county will also have the ability to recoup tax rebates if Tesla breaches its contract.
The incentives packages has been approved quickly, illustrating the thirst by local governments to find ways to create new jobs, a point that Tesla is keenly aware of. The company has pointed to unemployment statistics in Travis County as part of its presentation, a figure that popped to more than 12% in April from 2.2% a year earlier.
Musk tweeted in March that the company was “scouting” locations to build a new U.S. gigafactory that will produce the Cybertruck and Model Y crossover.
Initially, Tesla was eyeing Nashville, but the focus quickly turned to a location east of Austin as well as land in Tulsa, Oklahoma. Lawmakers in Oklahoma have offered up their own incentives package, although details of what the state is offering has not been made public.
Tesla has promised Texas officials it will employ at least 5,000 people. About 25 of those workers are categorized as “qualifying” jobs and would be paid a minimum of $74,050, while the remaining would be middle income jobs with an annual salary of $47,147.
If the process to approve Tesla’s factories in Nevada and New York are any guide, state incentives are also likely. The company could, for instance, seek a taxpayer-funded grant from the Texas Enterprise Fund. There are other beneficial rewards Texas could offer Tesla such as allowing the automaker to sell directly to consumers, a method that is prohibited in the state.