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December 20, 2014

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Heller: Margins tax would undermine Tesla bid

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AP Photo/Scott Sonner

Sen. Dean Heller laughs with reporters Monday, Aug. 11, 2014, after meeting with a transportation roundtable sponsored by the Association of General Contractors at Granite Construction in Sparks. Among other things, he discussed efforts to lure Tesla Motors’ $5 billion lithium batter plant to Nevada.

SPARKS — U.S. Sen. Dean Heller warned Monday that a proposal to fund education by taxing corporations would undermine efforts to persuade Tesla Motors to build a $5 billion battery plant in Nevada.

The Republican senator believes Nevada is well-positioned in the bidding war with Texas, California, New Mexico and Arizona to lure the electric-car maker whose "gigafactory" would bring an estimated 6,500 jobs. He cited the state as the only place where the California-based company has done site work to prepare to build, but Tesla has plans to break ground in one or two other states as well.

Heller attended a transportation round table sponsored by the Association of General Contractors in Sparks at Granite Construction, which helped prepare the dirt pad last month at an industrial park east of Sparks.

He would not say whether he thinks Gov. Brian Sandoval should call a special legislative session to put together an incentive package to compete with the other states, as some business leaders have advocated.

But the margins tax on the November ballot, which has support from teachers unions and others, would eliminate one of Nevada's big advantages over its neighbor to the west, he said.

"We will have a higher corporate income tax than the state of California," Heller said. "That wouldn't be good for Nevada."

The 2 percent tax on businesses that earn more than $1 million would raise an estimated $700 million to $800 million annually, to be spent on K-12 education.

Supporters of the tax say increased spending on education is critical to attracting business to Nevada.

"We hear from a lot of businesses that say they want to invest in Nevada but they're not sure about our education system, especially whether higher education institutions can handle their needs in term of research," said Ruben Murillo, president of the Nevada State Education Association, adding that Texas also has a margins tax on corporations.

Tesla is keeping its options open as five states seek to attract its plant. Texas and California especially have more financial resources to offer.

Nevada economic development laws allow several incentive programs, from abatements on personal property, sales and business taxes to sales tax deferrals. But any changes or additions would require legislative action, and biennial Legislature won't convene again until Feb. 2, 2015. That looks to be past Tesla's timetable.

CEO Elon Musk, speaking to Wall Street analysts July 31, said he expects the winning state to cover "maybe 10 percent" of the factory's cost — the $5 billion figure is the cost through 2020. He said a final site would be selected "in the next few months."

Given that schedule, it would take a special legislative session by the end of the year to make changes targeting the factory, Ray Bacon, executive director and longtime lobbyist for the Nevada Manufacturers Association, told the Reno Gazette-Journal.

The governor would have to call the session, and he's not talking.

Assembly Speaker Marilyn Kirkpatrick, D-North Las Vegas, and Assembly Minority Leader Pat Hickey, R-Reno, told the newspaper that Nevada already seems to be a strong candidate without sweetening the pot.

"We are constrained by the Constitution to just give money," Kirkpatrick said. "We don't have a checkbook such as Texas has. A special session does us no good."

The state's site about 200 miles from Tesla's Palo Alto, California, headquarters is near the Union Pacific railroad and significant lithium deposits, in a right-to-work state with no income tax and abundant solar and geothermal power resources.

"Nevada can't compete with California or Texas in terms of financial incentives, but we're attractive on merits, or why else would Tesla have broken ground and considered Nevada a top contender?" Hickey said.

Heller said he doesn't know if Nevada could win the competition without offering additional incentives. He said he will leave it up to Sandoval to decide if a special session is needed "and stand behind the governor with whatever he does."

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