Tesla Motors’ desire to build a “gigafactory” that would employee 6500 people has set off a competition among a handful of states, including California, with state officials considering incentives to benefit the electric car producer and convince Tesla to choose their state.

This week two Open Letters were produced that took different positions on addressing the competition and the debate on incentives.

The California Budget Project joined forces with similar progressive-leaning groups in other states considered by Tesla for the factory to suggest, rather than competition, there should be cooperation among the states while discouraging the use of big money incentives to lure the company.

In contrast, the Bay Area Council responded a couple of days later with an Open Letter to California state officials disagreeing with the California Budget Project approach and encouraging officials to make an investment to secure the cutting edge technology for the state and the multiple job opportunities that come with it.

Below both Open Letters are re-printed in the order they were dated.

An Open Letter to Five States’ Officials About Tesla Motors

August 25, 2014

There is no question that state officials should place a high priority on boosting employment and fostering economic opportunity. But recently our states have been pitted into a race to the bottom from which no real winner may emerge. Tesla Motors’ proposed “Gigafactory” — undoubtedly a valuable source of economic growth for its eventual home state — has been offered to you in an unusual public auction, with the opening bid set at $500 million in subsidies. Since Tesla has chosen to make the process public, we write as unified voices from Arizona, California, Nevada, New Mexico, and Texas to argue that our states have more to gain from cooperation than from competition.

We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike. It is time to break the harmful pattern of one state “winning” a high-profile competition, with other states left believing they need to offer even larger tax breaks to win future deals.

Overspending on Tesla — or any other company — could be a net-loss game in which fewer public resources are then available for investments in areas that benefit all employers, such as education and training, efficient infrastructure, and public safety. All state and local taxes combined equal less than 2 percent of a typical company’s cost structure, but lost tax revenue comes 100 percent out of public budgets.

What’s needed are smarter deals, recognizing that all of our states could potentially spend $500 million on other vital public services. Any agreement struck must be fully transparent — no law requires you to negotiate with Tesla or any company behind closed doors — and, furthermore, should include robust provisions for disclosing actual costs and benefits over time. Our states’ residents should feel confident that there are strict performance requirements and money-back guarantees to ensure Tesla delivers what it promises.

Tesla might even be receptive to a multi-state dialogue. The iconoclastic company, internationally known for innovation, could help chart a new path in how economic development is done. The automotive industry — with its far-flung supply chains and 50-state market — is a poster child for the idea that states are interdependent and that the main goal is the long-term growth of American jobs, not any single state’s ribbon-cutting.

We call upon our elected officials to seize this rare opportunity: talk to each other, let the public into the process, and when the time comes, strike a smarter deal that will preserve the tax base for the benefit of all.

Diane E. Brown, Arizona PIRG
Chris Hoene, California Budget Project
Bob Fulkerson, Progressive Leadership Alliance of Nevada
Javier Benavidez, Southwest Organizing Project (New Mexico)
Craig McDonald, Texans for Public Justice
Greg LeRoy, Good Jobs First

Open Letter regarding Tesla Gigafactory

August 27, 2014

An “open letter” penned this week by the California Budget Project and other so-called “budget watchdogs” from states competing to secure the proposed Tesla Gigafactory misses the mark. The letter suggests that California and the other states are in a “race to the bottom.” We couldn’t disagree more.

California is in an important race to become a national, if not global hub, for an exciting new generation of advanced automobile manufacturing and energy storage. The latter aspect hasn’t received much attention, but will have huge economic impacts across many other industries and for the state. You don’t accomplish that without taking some reasonable degree of risk or making an investment in your future. And you don’t accomplish that by failing to compete with others who are happy to open their doors to an innovative company like Tesla.

We applaud Gov. Jerry Brown and his Administration for taking an active role in the negotiations, and for putting California squarely in the running after Tesla indicated early on that the Golden State wasn’t even on its initial list of potential sites. This is just the kind of role that government can and should play in advocating for the state and facilitating new and emerging industries. That Tesla and its products align with the state’s objectives on climate and energy makes this a strategic priority for California.

Securing Tesla will further demonstrate that California is back in business and is serious about creating good-paying middle-class jobs. In addition to the 6,500 jobs the Gigafactory will generate, the facility will support a vast ecosystem of suppliers and others that employ thousands more workers. Such manufacturing facilities are highly prized for exactly the jobs and economic spillover effect they create.

The long-term strategic, economic and environmental benefits to California of winning Tesla’s Gigafactory will put us in a race to the top.

Jim Wunderman
President and CEO
Bay Area Council