Numerous
articles have been written about economic development projects, the process and
incentive negotiations. Among the latest is the Elon Musk and Tesla $5
billion capital investment and 6,500 jobs announcement to be located in
Nevada. Fortune magazine
and Peter Elkind did an outstanding job describing the timeline and
interviewing key players. I realize that this is somewhat dated, but it
still worth a few words.
This article
is fascinating for several reasons. The first one is the sophistication of the
Tesla team. The second one is several states at various times told the Tesla
team we cannot honor your request. The third is the level of detail in the
article. Fourth is the intense competition from seven states. Finally, the
article gives a very good understanding of what this type of economic
development is.
And what is
economic development in this article? It is a zero sum game, you either win or
lose. You do not get a trophy for second place. Economic development in part is
about improving citizens lives and providing opportunities to do so. One of the
best ways? A good job with a cutting edge company and/or in a leading industry.
Economic development in this area is about competition or how do I ensure my
community continues to make the cut. After all, it is about elimination, not
about inclusion. Economic development is about analysis. The Tesla team kept
asking or increasing the incentive demands. As some point, each state or area
said no, our best deal is on the table. Economic development is about
justification. The Tesla team would not have considered any area that did not
make business sense. Incentives are icing and cannot make a bad deal good.
Finally, economic development is not always about the biggest incentive package
winning. At least not this this case.
It is worth
noting that Elon Musk, COB and CEO of Tesla, in 2007 negotiated a lucrative
deal with New Mexico staff to build an auto assembly factory. Tesla then
promptly abandoned New Mexico when California offered a richer incentive
package. The Tesla team later said the New Mexico site would not work. Frankly,
I find that hard to believe. Generally, by the time a sophisticated company
team gets to serious incentive negotiating, the business case for the project
in a specific location has been satisfied. In fact, I think the project was
likely unworkable, not the New Mexico site. As you read the Fortune article, you will
see the facility was built in California, experienced numerous production
challenges and almost went into bankruptcy.
As you read
the article, note the high level of sophistication of the Tesla team. They
started out with an Excel spreadsheet covering 90 issues like labor
availability, environmental issues, infrastructure needs, etc.
Additional Links:
Fortune
Magazine article
Tesla
Project Description
Nevada Project, Incentive and
Proposed Legislation Summary.
Economic Impact Analysis
http://diversifynevada.com/documents/Full_Tesla_Summary_Report_Analysis_Letters.pdf
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