Tesla has been trying to decide if it would build its new plant for Cybertrucks and Model Ys in Tulsa or Austin, Texas, for a little while now. This has involved a creepy statue, in addition to the usual pleads from local officials who are sure this factory will boost the economy. Tesla hasn’t made a final choice, but Austin is looking better and better.
If you were wondering whether tax abatements had anything to do with it, you’d be correct. Nothing has been handed out yet but Tesla has got the tax abatement wheels in motion.
From Bloomberg today:
The company has filed an application with an Austin-area school district in Travis County seeking a tax abatement, according to publicly filed documents.
“Tesla is evaluating the possible development, design, and construction of an electric vehicle manufacturing plant in Travis County,” the company said in the filing. The 2,100-acre site under consideration is currently a ready-mix concrete facility owned by Martin Marietta Materials Inc. Construction is proposed to start in the third quarter of this year pending all required approvals.
“The current focus is on Oklahoma and Texas as potential locations,” the filing said. Tesla said its ability to win a school tax abatement from the Del Valle School District will weigh heavily on its plant location decision. “This is especially critical in Texas due to the high level of real and personal property taxes relative to other states,” it said.
Local tax abatements obviously aren’t just common in Texas but everywhere in the United States, a tried-and-true tactic local governments use to try and win new investment in their area, even if studies have shown for years that they don’t really work. Still, they exist. And a company like Tesla would be foolish not to pursue them, especially in a state like Texas that has them encoded in state tax code.
A few more details on that in the Austin American-Statesman:
Based on the property value estimates in the Chapter 313 application, the proposed incentives deal with the Del Valle school district would potentially give Tesla a tax break of about $68 million over the 10 years of the deal. The Chapter 313 agreement works by capping the property value the district can use for the Tesla site when it collects maintenance and operations tax. Under the terms of the state tax code, the project’s value would be capped at $80 million.
The Del Valle school district’s effective millage rate — the amount a property owner pays per $1,000 of property value — for collecting maintenance and operations tax is 1.31%, according to the documents filed with the comptroller’s office.
At that rate, the $80 million cap on the Tesla property means the company’s annual bill from the district for maintenance and operations tax would be $1.048 million. Over 10 years, that would be a total of $10.48 million.
Based on the actual estimated value of the property over that same 10 years, Tesla would have paid $78.59 million in maintenance and operations tax — an estimated savings of $68.1 million for the company.
The Statesman also has this wholly unsurprising detail:
And personal relationships will also play into the decision, he said.
“Musk has a great relationship with [Republican Gov. Greg Abbott] and has been warmly welcomed by the Austin real estate community,” [Site selection consultant John Boyd] said.
The factory would be the fourth, in addition to its Fremont, California, factory, its Shanghai one, and also one in Berlin that hasn’t started production yet. I’m also guessing there’s a nonzero chance that because Austin is considered a “cooler” city than Tulsa that is one deciding factor in Elon Musk’s mind.