Economic Diversification: The Tesla Effect
Nevada’s economy has always been heavily dependent on travel, tourism and gaming, which account for more than 23 percent of all jobs in Nevada. When the pandemic and related restrictions hit us in 2020, it became more apparent than ever that our economy needs to diversify to provide some measure of protection against events that adversely affect our major industry.
Northern Nevada has been less affected by this crisis than southern Nevada, in part thanks to the tech boom that came about after the Tesla Gigafactory came to Storey County in 2015. Although there has been some controversy about the tax abatements granted to Tesla to entice it to locate here, there’s no denying that it has brought much-needed jobs and revenue to northern Nevada, which provided an economic safety net when travel and tourism began to struggle last year.
During early negotiations about which state to choose for the location of the Gigafactory, then-Governor Brian Sandoval took a hands-on approach, personally contacting Elon Musk and other members of Tesla management to present Nevada’s case. He also called a special session of the Nevada Legislature in which he encouraged legislators to approve the concessions that finally convinced Tesla to locate the Gigafactory in northern Nevada. This multi-billion-dollar deal would not have happened without Sandoval’s support and his direct involvement.
The Tesla Gigafactory had created 7,059 jobs in Storey and Washoe County as of June 30, 2018, and that number has increased since then. These employees are spread across the Gigafactory’s partners, including Tesla, Panasonic, and H&T Battery Components. State standards required a 50 percent in-state residency rate for qualified employees, but Tesla has achieved a 93 percent rate, and with hourly wages averaging $25.78.
The Gigafactory project supported about 17,000 direct construction jobs and 7,900 indirect jobs from 2015 to 2018 in Washoe and Storey counties. From 2015 to 2018, this construction activity generated $3.2 billion in economic output.
The Tesla Gigafactory spent $6.05 billion in capital investment as of June 2018. This includes $2.05 billion invested in construction and $3.99 billion in equipment. Operations in 2018 created an annual economic impact of $3.56 billion in Washoe and Storey counties. Additionally, operations supported about 15,300 total jobs (direct, indirect and induced) and $845.0 million in wages and salaries.
Tesla will likely generate more than the originally projected $1.95 billion in direct and indirect revenues over 20 years due to larger real property investment and higher than projected job creation. Abatements from 2015 to June 2018 totaled $240.3 million, and most of Tesla’s abatements are set to expire in June 2024. However, the majority of abatements were sourced to the local sales and use tax, which will not expire until June of 2034.
Tesla’s success in Northern Nevada has attracted companies like Switch, jet.com and Blockchains, LLC to the area, as well as providing additional economic benefits. For example, utility and transportation infrastructure investments made for the Gigafactory have made the area more competitive for future manufacturing and data center development projects.
While we’re waiting for the tourists, shoppers, sports fans, and conventioneers to return, let’s consider the consequences of our dependence on travel and tourism, and continue to look for ways to diversify our economy and bring in more businesses like Tesla.
Nevada State Bank