Shakedown

On August 18, a reporter asked U.S. Sen. Harry Reid about Question 3, placed on the ballot by citizen signatures to create a business tax. The reporter mentioned Tesla as one corporation that might be affected. Reid perked up, focusing on Tesla instead of the actual question.

“Well, I wouldn’t start counting the jobs in Tesla right now, anyway, so—we’ll see,” Reid said. “I’m not sure they’re not playing us for a—.”

He did not finish the sentence, halting as though he thought he was going too far.

“I appreciate very much the governor’s keeping me informed of what’s been going on with Tesla,” he continued after a long moment’s thought. “He’s tried very, very hard, and I’ve told him and I’m telling each of you I support what he’s done. We’ve done things to help with the passage for Tesla. We’ll have to wait and see, but I’m not going to start counting the jobs until it happens.”

The jobs at stake are no small prize. The battery plant—some reporters obediently use Tesla’s PR term “gigafactory”—may employ up to 6,500 people. From five state semi-finalists, the corporation chose a site in Storey County, Nevada, though the legislature must still consent and approve the payoff in abatements and incentives.

However incautious Reid was being, he was (almost) telling local residents something they weren’t getting from other local sources. That is helpful to his constituents, because there is a version of reality that doesn’t make it into the Truckee Meadows because of news coverage laced with PR and boosterism—though a few reporters, notably Ed Pearce of KOLO, have been skilled at cutting through the rose-colored fog.

For instance, on July 25, KRNV ran a Van Tieu story denying, on the say-so of Storey County developer Lance Gilman, that workers at the Tesla site had suddenly been laid off, as rumored. On July 30, KOLO ran an Ed Pearce story confirming, on the say-so of several of the workers themselves, that they had been laid off from work at the Tesla site.

Pearce is an exception, though. Most local news coverage of Tesla has an upbeat spin putting both Nevada and Tesla in the best possible light. When word got out that a dirt pad had been created at the Tesla site in Storey County, it was first reported locally. Carefully ignoring the sudden end to the pad work, it was spun to mean Nevada had taken the lead. From there it went national by wire service, the original spin intact.

But outside the state, the abruptness of the worker layoffs in Storey County made some analysts believe that Tesla was taking a new look at California and had called off the work in the Silver State for the time being to focus on the Golden State, an interpretation that went untouched in Nevada journalism but turned out to be true. Tesla then spent weeks looking at California.

The Reno Gazette-Journal awarded the factory to Nevada on Aug. 1, using just enough weasel words to hang by its fingernails in case the decision went the other way: “Reno area has Tesla gigafactory—but can we keep it?” By contrast, the transportation industry website Long Tail Pipe reported, under the headline “Gigafactory says goodbye to Reno, California has closed the gap.”

This happened time and again as the Tesla story unfolded, Tesla developments inside the state being cleaned up for positive presentation to the Nevada public while outside they were reported more realistically. When a deal between Panasonic and Tesla to join together on the battery plant was announced, no one we could find inside Nevada reported the limitations. Outside? Barron’s: “Panasonic Corp committed to help [Tesla], but part of the deal remains missing: the financing plan.” Barclays: “Panasonic would invest only $200-300mn initially.”

Of course, shielding the public from reality involves more than just screening breaking news. It also means avoiding enterprise reporting. Rigorous scrutiny of the Tesla project has been lacking in Nevada, so the implications of the Tesla project for workers, the environment, taxpayers, quality of life, and other factors are unknown.

Tesla wants a half-billion dollars to award the plant. For California or Texas, that’s chump change. For Nevada, it might be crippling. The state budget for the current fiscal year is $3.2 billion. The subsidies for Tesla would be a whopping 15.6 percent of that. The governor is offering them more than twice that figure, so it will be at least 31 percent.

Nothing like this is envisioned in state law, so the Legislature had to be called into special session to authorize it. Some business leaders who have never been known to speak favorably of welfare when given to humans are supporting it for a needy billion dollar corporation, but that sentiment is not unanimous. Opposed businesspeople are seldom quoted, though it’s not as though they are hard to find. Industrial Properties of Nevada owner Mark Glenn: “But I am totally against those corporate subsidies for the big guys when everyone else is paying their way.”

Nevada has not had a lot of luck with special sessions to accommodate specific individual corporations. In 1926, a special session was held to smooth the way legally for construction of a Clark County hotel that was never built.

In 1984, a special session was held to amend state law for Citicorp to build a credit card center in Las Vegas. The law was changed, the center was built, and Citicorp then tried to distance itself from association with Las Vegas by making the address that appeared on all those credit card invoices “The Lakes, Nv.” instead of “Las Vegas.” When hard times came, the center closed.

Assembly Speaker Marilyn Kirkpatrick, a Clark County Democrat, doesn’t flatly say no, but did say she thought subsidies for Tesla are a mistake. “We don’t have a checkbook such as Texas has,” she said. USA Today characterized her as believing that Tesla should be satisfied with the state’s lower taxes, worker’s injury insurance premiums, fast permit processing, and quality of life.

Quality of life?

Perhaps Kirkpatrick was referring to the state’s education system, which bounces along the bottom of most national rankings, or its high suicide rate, or soak-the-poor tax system. Or the state’s ranking for prenatal care, homicide against women, tobacco use, tobacco-related death, alcohol- and drug-related death, firearms death, childrens’ health, mental health, health generally, rate of working people in poverty, toxic releases, child immunizations, reading skills, dropout rate (on both high-school and college levels), infectious disease, and crimes of all types. Some claims about Nevada are subjective. But these kinds of factors are established by empirical proof so conclusively that a local cliché has become popular—“Nevada’s high in everything you want to be low in and low in everything you want to be high in”.

All of this is a reminder of how tight-fisted the state has been when it comes to human needs, of how serious and deep—and expensive—are the state’s problems and how little it can afford to subsidize loaded businesses. It has been more generous in paying corporations to come to Nevada and compete with local businesses, as with Scheels in Sparks and Cabela’s in Verdi. But that kind of payoff is penny ante compared to what is demanded by Tesla. Going into special legislative session to pay a mammoth corporation a mammoth amount to come to the state would be quite a departure.

Politicians in five states pandering to a huge corporation set in motion a bidding war that pit them against each other. Initially, Tesla named four states as candidate states—Arizona, New Mexico, Nevada, Texas. California wasn’t on the list, but Gov. Jerry Brown, stung when large corporations departed the state for Texas, saw Tesla as a way to demonstrate the state’s appeal. Losing occasional small businesses to Nevada was only an irritant, but losing Toyota to Texas was major. Brown went to work with a vengeance.

In June at Fremont, he took a test drive in a Tesla Model S with state Treasurer Bill Lockyer in the passenger seat, then talked solar and rockets with Tesla CEO Elon Musk. In July, he signed legislation providing welfare for Tesla. In August, it was announced that Brown was considering suspending provisions of state law that normally require state and local government to review new development projects to address environmental threats. He also wanted to allow Tesla to go ahead with construction on its own timetable and mitigate environmental damage later, plus shield the corporation from lawsuits. Those were outside a governor’s authority and may be why the California deal fell through.

Meanwhile, back in Nevada, Gov. Brian Sandoval on his belly to Telsa may not be dignified, but it sends a powerful message to state agencies, including environmental officials: Don’t get in Tesla’s way.

Tesla portrays itself as environmentally sensitive. Solar and wind power generation are planned for the battery plant. CEO Musk says the right things about the need to “reduce carbon output and stave off a catastrophe.”

But one of the demands he made of the state governments is less regulation than other corporations must face, including environmental regulation. In California, he pushed for suspension of provisions of the California Environmental Quality Act. This is a supposedly green corporation that doesn’t want to obey anti-pollution laws. “It would be no small irony if Tesla turned up its nose at California, where it sells a third of its electric cars, because the state proved to be too green,” the Los Angeles Times noted last week—and when California didn’t come across, Tesla turned to a state without such protections.

Nevada residents in particular have an interest in maintaining enforcement of its environmental laws and regulations. For one thing, the Nevada Legislature has enacted fewer environmental protections than most states, so it becomes more important to enforce those that exist. For another, the state pays a high price for its government’s lack of vigilance. In June, as usual, Nevada placed high—sixth—on an annual list of toxic releases in the 50 states, with carcinogens and toxins that foster developmental disabilities in prominent play.

Tesla chose a Nevada site for the factory that will foster sprawl. The site is 16.6 miles from the nearest city, which is Sparks—and that’s just the distance from the factory gate to the city limits. Cargo vehicles driving 33 miles every workday to transfer and shipping points in the Truckee Meadows will burn up a lot of petroleum. The factory can reduce that factor for its 6,000-plus workers by creating shuttles, but workers who drive anyway will still contribute.

There is a wide assumption in the local business community that Tesla will import most workers, fostering growth and putting more strain on the limited local resources, particularly water.

Interestingly, given the green personality cult surrounding Musk, a lot of environmental activists are so bewitched by the notion of Tesla’s electric cars that they let slide both its suspicious wish for special treatment under environmental law and the hazard for taxpayers. An example of these blinders is Gas2, a green website (“Green cars that don’t suck”) that has been almost gleeful over the competition by the states to screw taxpayers: “It’s been fun watching each state inch ahead only to be overtaken—at least in the news—with promises and offers from another. We previously put our money on a table in the Silver State. But then Arizona inched forward with personal invitations to Elon Musk, easy access to raw materials, and pending legislation to change the state’s franchise laws. And now it’s Texas’s turn.” Given how much of Nevada’s revenue is paid by the working poor, environmentalists seem less than sympathetic to workers.

Early in the process of Tesla dancing Nevada around, local workers got a taste of what a Tesla presence might be like.

“They came in and hired a lot of our people,” said one Operating Engineers official who did not want to be named. “They [the workers] did not get what they were told they would get.” Some of the workers quit steady jobs to join Tesla and then were quickly laid off. Spouses of some of the workers similarly quit jobs to get in on the ground floor at Tesla and soon found themselves out of work in spite of their willingness to work seven-day, 84-hour weeks.

“The promises were we’d have three to five years of work on the job,” Thon Alsdorf told Pearce. “I was told to quit my job,” heavy equipment operator Kody Kleckner told him. “My wife quit her job, and now we’re just out of luck.”

It left a bad taste in the mouths of some workers in western Nevada. Local labor unions are believed now to be researching Tesla’s worker relations record elsewhere, though one union leader said, “We haven’t, because it just seems like so much of it is pretty quiet and secretive.” If information on the corporation is difficult to come by, it’s in keeping with much of Tesla’s M-O.

Websites where Tesla workers comment on their workplaces are a wash. Most comments are anonymous, and they are both pro and con.

In January, the United Auto Workers launched an organizing campaign at the Tesla Fremont plant. On at least a couple of occasions, once at a Fremont plant opening, the other in a meeting with union members, Musk called himself “neutral” on the issue of unions. But if that is truly his stance, he has failed to enforce it on his executives. “The mere fact that our labor force could be unionized may harm our reputation in the eyes of some investors and thereby negatively affect our stock price,” read a 2013 Tesla annual report. “Additionally, the unionization of our labor force could increase our employee costs and decrease our profitability, both of which could adversely affect our business, prospects, financial condition and results of operations.” Some neutral.

In February, Labor Union Report pointed out that when Tesla narrowed down its list of candidate states for the battery plant, it limited the initial list “to states that have low union membership.”

Tesla has been aided by relatively one-sided press coverage. Local news entities have barely mentioned workers and some national coverage has carried an anti-union bias, as with Yahoo Finance reports: “What unions would do to Tesla.” “CAN THE UNIONS BREAK TESLA?”

In 2012, Musk told a UAW group that his own lack of a life might be expected of workers: “Right now we’re working six days a week. Some people are working seven days a week—I do—but for a lot of people, working seven days a week is not sustainable. The factory is operational seven days a week but most people we only ask to work six days a week right now and, obviously, we want to get that to a more reasonable number. I think people can sustain a 50-hour work week. I think that’s a good work week. If you’re joining Tesla, you’re joining a company to work hard. We’re not trying to sell you a bill of goods. If you can go work for another company and then maybe you can work a 40-hour work week. But if you work for Tesla, the minimum is really a 50-hour week and there are times when it’ll be 60- to 80-hour weeks.”

“It’s not clear to state officials … what exactly Tesla is looking for from California, other than an offer it can use to wring more concessions from the other states competing for the factory,” the Los Angeles Times observed last month.

The necessity to move fast is an old high pressure sales technique: “I’ve got another buyer who is very interested if you don’t act now.” Musk keeps emphasizing speed: “Time is important here. The faster we can do this, the faster we can reduce carbon output and stave off a catastrophe.” Maybe. But he may also want to get his deal with a state from its leaders before opposition develops from residents, and Sandoval is pushing legislators for speed for the same reason. Two weeks ago a joint statement from organizations in all five states called on Tesla to “strike a fiscally responsible deal that is fair to residents and businesses alike.” Further, “But recently our states have been pitted into a race to the bottom from which no real winner may emerge.”

In Las Vegas, columnist Steve Sebelius wrote, “Musk wants a fair deal, so let’s give him one. Tesla builds its plant, and pays all its taxes, just like (most) every other business. In exchange, the state and local jurisdictions protect it—if somebody breaks in, we’ll send the cops; if it catches on fire, we’ll send firefighters. If Tesla gets sued, the company can use our courts and business-friendly laws to defend itself. And northern Nevada’s outdoor beauty should make attracting workers easy. But the company shouldn’t get a single tax dollar, not while the state has the moral and legal obligation to educate children, take care of the mentally ill, build and maintain roads, and keep bad guys in prison.”

Sen. Reid said, “Elon Musk, I know him. I’ve spoken to him on many, many occasions, and he is a brilliant man. That’s probably an understatement. But he’s in it to make money, and he’s going to take this Tesla project where he can make the most money.”

There has been talk of a working arrangement between Tesla and Apple, which has a big stake in battery production in the future. The two corporations have been in talks. Wired magazine has pointed out that Apple has such huge revenue reserves that in an agreement with Tesla, Apple could pay for the battery factory itself. Of course, that would require Tesla execs to be grownups, pay their own way, and pass up the chance to pay for the factory with public school or health care money from Nevada.