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Austin approves tax breaks for Tesla in bid for Cybertruck factory

Austin approves tax breaks for Tesla in bid for Cybertruck factory


About $14 million from Travis County, and $50 million from a local school district over 10 years

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Photo by Sean O’Kane / The Verge

Officials in Austin have approved a total of at least $60 million in property tax rebates in an effort to bring Tesla’s next electric car factory to the Texas city. Austin is one of the two leading candidates for the factory, which is where Tesla will build the Cybertruck, along with Tulsa, Oklahoma.

Travis County Commissioner’s Court, the policy-making and administrative arm of the local government, approved an agreement on Tuesday that will save Tesla around $14 million in property taxes over the next 10 years. Late last week, the Del Valle school district, which is near where the factory would be located, approved an agreement that would grant Tesla close to $50 million in tax rebates over the same time frame.

The vote was preceded by some drama over whether Tesla could wait any longer for an answer on the incentive package. Many citizens who called into Tuesday’s Travis County meeting stressed that they believe time is of the essence — especially after Musk visited Tulsa, Oklahoma on July 3rd and reports detailing the state’s behind-the-scenes efforts to offer its own incentive package.

“We have to vote today.”

“We have to vote today,” one resident said. “Time kills deals, and the longer this drags on the bigger the chance that another state puts together a package” that sways Tesla. “It is very important in my opinion that we get this done quickly, and delay tactics tend to scare me,” another said. Just before the vote, county commissioner Margaret Gomez said she had only read through half of the contract and asked for a one-week extension.

Commissioner Gerald Daugherty mentioned that the court has a “standing policy” to honor if a commissioner asks for another week. But, he said, “If another week is going to force Tesla to leave, then, I will, you know for maybe the first time, say... I’m not willing to honor that.”

The court then turned to Rohan Patel, Tesla’s senior global director of public policy, to ask if Tesla could wait another week for a decision. He responded with a roundabout answer.

“We had a call with the governor of another state and mayor of another town just yesterday to go through a whole bunch of things, similar to what we’re going through right now, so I I can’t say much more than that,” Patel said. “We have to make a decision early because these things take a long time and there’s a lot that we have to put in place. There’s a lot of money that we have to get allocated in the right ways.”

“There’s a lot of money that we have to get allocated in the right ways.”

Daugherty then asked another commissioner Jeffrey Travillion if he was willing to “gamble” that Tesla would stay at the table. “We are talking about a transformational process that will address poverty and opportunity in that area for generations,” Travillion said. “It would be difficult for me to accept that.”

The commissioners decided to vote on the agreement. It was approved nearly unanimously, with Gomez abstaining. The two agreements were approved after weeks of public meetings, though most of the details were hashed out in closed-door sessions, leaving some residents and local leaders frustrated.

“The lack of transparency has really been outrageous on this project,” Emily Timm, the co-executive director of Workers Defense, a Texas nonprofit, told The Verge in a phone call. “It seems like there’s been a an extra effort to really hide the ball on what’s going on here.”

One county commissioner, Brigid Shea, approved of the deal but agreed that transparency was an issue, and said she would propose amendments to improve the process moving forward. “It would have been, I believe, a much better process, if there had been more transparency,” she said.

Tesla CEO Elon Musk has said that tax incentives will play a role in where the factory will land, but that he’s also considering “logistics costs, access to a large workforce with a wide range of talents, and quality of life.” The company will build the Cybertruck at the factory, as well as Model Y SUVs that are destined for the East Coast of the US.

Tesla has zeroed in on a 2,100 acre site near the Austin-Bergstrom International Airport, and the company has an option to buy the land for $5 million. The company would spend $1.1 billion building a 4 to 5 million square foot factory that would employ around 5,000 workers, according to documents submitted to Travis County last month. It would pay those workers an average salary of about $47,000, with benefits and stock options, with minimum pay starting at $15 per hour. It would not employ a unionized workforce.

The salary and minimum pay figures have been a sticking point for many citizens, local union representatives, and worker’s rights advocates during the recent public meetings. In response, the Travis County commissioners revealed two concessions on Thursday. One is that Tesla has agreed to escalate the $15 per hour minimum wage annually with the Consumer Price Index (specifically the “trailing 10-year compound annual growth rate”). Another is that food and janitorial service workers at the factory will also be paid at least $15 per hour.

Even with the tax breaks, Austin stands to benefit from the property tax that Tesla would bring with the factory, as much of the proposed site is largely unoccupied. Travis County currently only receives about $6,400 per year from a sand and gravel mining company that operates on the property. But Tesla would pay closer to $880,000 per year, or $8.8 million over the first 10 years, as long as it keeps up with the investment and hiring milestones required by the contract.

Tesla has also agreed to put 10 percent of the county’s tax rebate back into the local community. “Tesla consistently emphasized their desire to invest in the community, especially as it related to job training and workforce development (to include Huston-Tillotson University and Del Valle schools), public transportation, and affordable housing,” the county commissioners wrote in the agenda for Tuesday’s meeting. “Travis County had as its goal creating a long-term philanthropic partnership with Tesla, not just a transactional agreement to be reviewed once a year.”

Last Thursday, Del Valle school district approved an agreement that would allow Tesla to pay property tax on just 20 percent of the factory’s assessed value, which will save the company about $50 million. That agreement was passed in a 7 to 1 vote, with board member Susanna Woody saying she didn’t “feel comfortable with this process,” which also largely happened behind closed doors. “I felt like it was ‘get it done this way or [Tesla] will move somewhere else,’” Woody said.