by Hugh Jackson, Nevada Current
“I can tell you with 100% certainty that the Tesla truck factory in the latest expansion was set for Texas and would not have been here in Northern Nevada but for the abatements,” Tom Burns, the executive director of the Governor’s Office of Economic Development told state lawmakers last week.
Burns made that statement during a hearing on a bill to rein in GOED’s power to approve multi-million dollar tax breaks for new or expanding companies – such as the $412 million in abatements GOED rubber-stamped for Tesla earlier this year – on its own, without legislative approval or oversight.
Burns during the hearing also sneered at the suggestion that tax breaks were needless – that companies make location decisions based on economic and market factors far larger and more important than tax breaks. He cast aside “the thought” as “mystical” and “unsubstantiated.”
Burns should tell that to Lance Gilman. Gilman is the brothel owner in Storey County who also developed the industrial park where Tesla and other companies have located. Gilman was reportedly at the heart of the talks leading up to Tesla’s 2014 announcement that it was coming to Nevada. And probably no individual Nevadan has made as much money from Tesla’s arrival; the state paid $43 million to buy land from Gilman and build roadwork in Gilman’s industrial park.
Earlier this year, Gilman gave an interview to the Los Angeles Times, in which, according to the Times, Gilman…
…brags that he foresaw friendly business rules and access to major trucking routes and trains would draw Tesla and other companies that needed big tracts of cheap land.
“…He promises that a grading permit can be had in seven days here, and a building approval in 30 — all without going before a planning commission: “Where in the United States can you do that?”
The lack of red tape, not subsidies, helped Gilman close deals to bring industry here, he insists.
Burns’s aggressive rejection of the idea that companies would come to Nevada without tax breaks and/or publicly subsidized incentives might also come as news to Tesla itself.
When Burns along with Gov. Joe Lombardo and other other GOED board members rubber-stamped the new round of tax breaks for Tesla in March, Rohan Patel, senior director of public policy at Tesla, said the company was expanding in Nevada “not primarily because” of the tax breaks.
“It’s in fact because our team really loves being in Nevada,” Patel said. “We like the state. We like the workforce. We like the things you guys have built here.”
That might be dismissed as mere spin, someone saying something because it’s what their organization wants the public to hear.
But then, so might Burns’s contention that tax breaks are crucial to company location decisions. After all, if people, particularly state legislators, determined that tax breaks for relocating or expanding companies were largely unnecessary, what, really, would be the point of the organization Executive Director Burns executively directs?
The idea that companies are going to go where they decide to go anyway, even without tax breaks, is not “mystical,” as Burns contends. It’s been the subject of academic and policy research in the U.S. and elsewhere for decades. Nor is it, as Burns asserted, “unsubstantiated.”
Some of that research, which was briefly referenced by a legislator during the committee hearing while Burns was testifying, concluded between 75% and 98% of the time, companies would have made the same location decision without being offered tax breaks or other incentives.
A charitable view is that Burns, who up until a few months ago was an insurance executive, is unaware of one of the most commonly debated subjects surrounding his new profession.
A less charitable view is that when Burns dismissed, flatly and with malice, the notion that tax breaks aren’t as crucial to company location decisions as people in his profession nationwide insist they are, it was just bluster.
In any case, the audacity of Burns claiming “with 100% certainty” that the latest Tesla deal wouldn’t have happened if not for Nevada’s tax breaks warrants attention.
So I emailed Burns and asked what his “100% certainty” is based on.
For instance, is there any correspondence, documentation, or other tangible evidence in which anyone with Tesla declares the company would not be expanding in Nevada but for the abatements?
Burns’s executive assistant (who I had cc’d) quickly replied to say the questions had been forwarded to GOED’s director of communications, who as of Thursday morning had not responded.
One of the other economic development officials at the legislative hearing, Mike Kazmierski of the Economic Development Authority of Western Nevada, told lawmakers “I was here for Tesla 2. In the room, they were going to Texas, and we turned them around by offering the same abatements.”
So I emailed Kazmierski and asked when he was “in the room” (all Aaron Burr-like), why did Tesla need to be “turned” away from Texas by Nevada?
After all, at the March meeting when GOED approved “Tesla 2,” board members repeatedly said they had no alternative but to approve the abatements because they were already in state law. Why would Tesla need to be “turned,” and how could Nevada even turn them, since GOED didn’t offer any more than what was already on the table in existing state laws – abatements Tesla already knew it would be getting?
Unlike Burns and GOED, Kazmierski did respond. “Tesla is very secretive of their discussions with the state and as a highly publicized, publicly traded company that should be no surprise to you,” Kazmierski wrote, adding that he is under a nondisclosure agreement “and anything specific I say about them they must approve.”
He reiterated his praise of the impact of tax abatements, without which “there would be 10’s of thousands fewer advanced manufacturing jobs in the state, filled 90% by Nevadans.”
“A fact you refuse to acknowledge or value,” Kazmierski added.
“So, I guess you will just have to believe me and the Director of GOED…when we say no incentives, no Tesla, and no great jobs,” Kazmierski said.
Couple Kazmierski’s statement with the director of GOED’s avowal of “100% certainty,” and finally, the mystery is solved: Nevada’s tax breaks are necessary because the people whose job it is to champion and dole out tax breaks say tax breaks are necessary.
We can’t blame them. For one thing, nobody wants to think their job doesn’t matter as much as they think it does.
But there’s another, even more important reason we shouldn’t be too hard on Nevada economic development officials and like-minded politicians for their almost cult-like devotion to the power of tax abatements and other economic development incentives.
Conventional wisdom at the public’s expense
For decades, top-down thinking, where if we enrich companies then prosperity will befall everyone else, has been a mostly bipartisan foundation of economic development policy at all levels of government, particularly among state and local officials. It’s deeply ideological. But it’s become so ingrained, so common – so “common-sense” – that those officials are blind to their own ideology.
That ideology’s grip on the imagination of policymakers in Nevada has always been profound. Tax breaks for millionaires and billionaires who don’t need tax breaks? Check. Government’s highest calling is to help people, not by helping them, but by helping business? Nothing more loudly screams “the Nevada way.”
There is an alternative. Economic development groups and their political and business backers could marshal their formidable collective resources to reform systemic policies and practices that make life harder for working people than it needs to be. Unaffordable child care, unaffordable housing, poverty-level wages, erratic working conditions, skimpy or non-existent health, sick leave, vacation and retirement benefits, ruthless banking options, a dearth of public transit, a profit-driven court system, one of the nation’s most thread-bare safety nets — all those destabilize the workforce and erode the purchasing power of the consumer core of working Nevadans, which in turn hinders, to borrow a term, economic development.
Those barriers to prosperity and well-being also block performance in one area that every economic development organization in Nevada and the nation unanimously agrees is a top priority, education.
If anything is “mystical” and “unsubstantiated,” it’s the need for Nevada to give tax breaks to millionaires and billionaires.
But that doesn’t matter as long as belief – faith – in that need reigns as conventional wisdom.
This article was originally published in Nevada Current and is republished here under a Creative Commons License.