Faraday Future Backs Out of $216M Nevada Tax Deal

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By Brenna Goth

Faraday Future is leaving behind almost $216 million in Nevada tax incentives after dissolving a deal to bring an automobile manufacturing facility to North Las Vegas.

The update to the Nevada Governor’s Office of Economic Development (GOED) Board last week is a blow to the vision of the state as a center of electric car production. A historic $1.3 billion tax incentives deal with Tesla, Inc., though, continues to move forward.

Faraday broke ground last year on a 900-acre facility expected to employ thousands of people. But the California-based company said in July it was putting its North Las Vegas project on hold in favor of renovating an existing building in its home state.

A recent letter to the GOED confirmed Faraday no longer has a Nevada project that qualifies for tax incentives. Faraday paid back about $16,000 in abatements to the state, according to Brian Baluta, communications director and project manager for the GOED.

The state will also disburse roughly $620,000 maintained in a Department of Taxation trust fund to several entities impacted by the tax deal, including Clark County, North Las Vegas, and the state of Nevada, Baluta told Bloomberg BNA.

Both the Faraday and Tesla incentives have drawn criticism, including from Nevada Treasurer Dan Schwartz (R). He called for an audit this year to look at job creation, among other data. That report is underway with a presentation targeted for January, Lori Hoover, an executive branch auditor, told Bloomberg BNA.

New Tenant?

It’s unclear what will happen to Faraday’s hundreds of acres of land at Apex Industrial Park.

The company’s new California factory will accelerate the start of production, representatives told Bloomberg BNA in a statement. But Faraday still owns the Apex site and “remains committed to Nevada for its long-term manufacturing plans,” it said.

Lawmakers approved one of the state’s biggest incentive packages to attract the company to North Las Vegas. The project was eligible for up to a full abatement of local sales and use taxes for 15 years and a 75 percent property and excise tax abatement for a decade. Faraday also could have received up to $38 million in transferable tax credits.

Government and economic development groups will now be looking for the right tenant for the site, Baluta said, adding that there’s already been interest.

Additionally, another qualified project could receive the incentives earmarked for Faraday, Baluta said.

“We expect to see movement there in the near future,” he said.

Tesla Project Continues

Meanwhile, Tesla continues work on its $5 billion “gigafactory,” a manufacturing plant for battery packs. Its location in Sparks is just east of Reno.

The Legislature passed about $1.3 billion in incentives for the project in 2014, the biggest deal in Nevada history. Lawmakers approved property tax and employer excise tax abatements for 10 years, as well as a local sales and use tax abatement for 20 years.

Tesla is also eligible for up to $75 million in transferable tax credits for employees and up to $120 million for capital investments.

The factory is already operating, and the phased project is about 30 percent done, according to Tesla’s website. It expects the gigafactory to be the world’s largest building. The company didn’t immediately respond to requests for comment.

Tesla receives quarterly transferable tax credits if compliance audits determine the company is eligible. The company had accrued almost $60 million in transferable tax credits through December 2016, according to a May report.

Some of those tax credits came under fire last year when Tesla sold them to the MGM Grand Las Vegas Hotel and Casino.

To contact the reporter on this story: Brenna Goth in Phoenix at bgoth@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

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