Tesla wants a $68M property tax break to locate its Cybertruck gigafactory near Austin

Tesla is seeking up to $68 million in property tax abatement from a Texas school district to build a factory that will be used to produce Model Y crossovers for the East Coast market as well as its upcoming Cybertruck pickup.

The application to the Del Valle School District located in Travis County southeast of Austin was made public by the Texas comptroller’s office Thursday and first reported by the Austin Statesman. The property tax abatement proposal, which the school district has agreed to consider, is one of several potential incentives deals aimed at attracting the automaker to the state. Travis County commissioners are also weighing a possible incentives package, which has yet to be made public. And if the process to approve Tesla’s factories in Nevada and New York are any guide, state incentives are also likely. 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. 

For now, the Chapter 313 application is the only public document that provides some details about Tesla’s plans. (Under the Texas Tax Code, Chapter 313 permits a school district to give property tax breaks for economic development projects.)

Here are the important nuggets of the Chapter 313 application that the school district has agreed to consider. 

  • The application is filed by Colorado River Project LLC, a new subsidiary of Tesla that was likely created to help keep its activity under wraps.
  • Tesla would receive up to $68 million property tax abatement over a 10-year period
  • In return, Tesla would agree to building a 4 to 5 million-square-foot factory that would employ more than 5,000 workers
  • About 25 of those workers are categorized as “qualifying” jobs and would be paid a minimum of $74,050, while the remaining would below that figure
  • The location southeast of Austin off of Texas 130 is a collection of parcels that equals 2,100 acres in the Austin Green development.

Tesla does not yet own the land, according to the application. The company does have an option to buy the land, CEO Elon Musk wrote Thursday in a tweet correcting a report that the company had already acquired the property.

The purchase of the land is very much dependent on those incentives, according to language in the application. Here’s a key nugget.

“For a project to succeed, it must also have an acceptable rate of return to secure the necessary capital and compete in the automobile industry against some very capable competitors that have been longstanding industry players. Therefore, local and state tax incentives serve a critical role in getting the project approved and operating successfully. This is especially critical in Texas due to the high level of real and personal property taxes relative to other states. Since school taxes are the largest component of property taxes, the Section 313 tax limitation is especially critical to create a level playing field between Texas and other states vying for this project. Therefore, obtaining the 313 limitation is a determining factor in the decision whether to locate the project in Texas.”

The timing of the application, which comes just a few months since Musk tweeted that Tesla was scouting locations for a so-called “Cybertruck Gigafactory,” illustrates the pressure the company is exerting and the speed at which the deal is coming together. If approved, Tesla said it will begin construction in the third quarter of 2020.

It also suggests that all gigafactory roads are pointing to Austin. However, the local business community steered clear of celebrating.

“While we have engaged in multiple discussions with Tesla, the company has not made a final decision regarding its next Gigafactory,” Charisse Bodisch, senior vice president, of economic development at the Austin Chamber of Commerce. “The potential location being explored is an underutilized site that is in clear need of revitalization, and it would be a perfect fit for an environmentally focused organization like Tesla. We are home to a talented and diverse workforce, and we are grateful that Austin is being considered. We will continue to make the case for why this would be a win for Tesla and for our community when it comes to job creation, economic impact and workforce development.”

. Tesla was eyeing Nashville and had been in talks with officials there. Tesla informed Nashville officials in May that the city is out of the running for its gigafactory location.

That leaves Tulsa, Oklahoma as the remaining dark horse in the race to lock in a factory that could employ thousands of workers. And while many believe that Texas is the sure winner, Oklahoma is still pushing forward.

“Tulsa is in the final running to attract Tesla’s giga-factory. We’ve pulled together a compelling, well-balanced and, more importantly, a responsible performance-based incentives package to attract Tesla to Oklahoma,” Sean Kouplen, Oklahoma’s Secretary of Commerce and Workforce Development said in an emailed statement. “Our offer not only includes the standard incentives package presented to companies interested in locating to Oklahoma, but also  financial commitments to improve local infrastructure and invest in our workforce, expanding educational programs within our academic institutions to ensure Tesla has a pipeline of qualified workers to recruit.”

Kouplen argued in his statement that Oklahoma’s central location, pro-business stance and Automotive Engineer Workforce Tax Credit would make the state the right choice for Tesla. 

“We know we can attract engineers to Tulsa. In fact we’ve already shared with Tesla thousands of resumes from qualified candidates who’d move to Oklahoma for a Tesla job,” Kouplen said. “The State, Tulsa and our community partners have rallied to demonstrate that Tesla would be a most welcome addition to our state. Tulsa Mayor GT Bynum expressed it best when he said, “Tulsa is a city that doesn’t stifle entrepreneurs – we revere them!”