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November 20, 2017

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Decoding the Faraday special session


Steve Marcus

Nevada Governor Brian Sandoval, center, Dag Reckhorn, left, global vice president of manufacturing for Faraday Future, and Steve Hill, director of the Governors Office of Economic Development, are shown during a news conference at the Sawyer State Building in Las Vegas Thursday, Dec. 10, 2015.

Sandoval, Faraday News Conference

Dag Reckhorn, left, global vice president of manufacturing for Faraday Future, and Nevada Governor Brian Sandoval applaud during a news conference at the Sawyer State Building in Las Vegas Thursday, Dec. 10, 2015. Reckhorn and the governor discussed plans for the Faraday Future electric-car factory in the city of North Las Vegas. Launch slideshow »

After months of speculation, mystery and intrigue, Faraday Future is finally coming to Nevada — so long as the Legislature signs off.

On Thursday, state officials outlined specifics of that deal, which includes $215 million in tax abatements and incentives for the company. Now, the matter is slated to head to a special session of the Nevada Legislature next week, when the body will need to put its stamp of approval on the deal to make it final.

Here, we hope to answer some of your questions about Faraday, the special session and what exactly has been hiding behind the curtain over the last year.

What is a special session? What will happen?

Nevada has a part-time legislature that only meets once every two years. That means that the governor has the prerogative to call a special session of the Legislature “on extraordinary occasions.” Gov. Brian Sandoval hasn’t yet, but he is expected to call a special session for Wednesday, Dec. 16.

The governor will have to officially call the special session, where he will tell why he’s calling the session and delineate what the Legislature is allowed to consider — and what it isn’t. Sandoval’s office has been receiving numerous calls over the last week asking the governor to allow other matters to be heard during the session as well. However, Sandoval has repeatedly indicated that he wants it to be a one-issue session.

On the day the governor decides, legislators, lobbyists and others will gather in Carson City for a marathon session. Bills will be introduced, bills will be voted on, and the governor, presumably, will sign them, all in a matter of one to a few days.

Who is Faraday, what do we know about them, and why do we care?

Faraday is a super-secret electric car company backed by a Chinese billionaire named Jia Yueting. It’s become somewhat less secret over the last month and, more specifically, the last two days when Jia officially announced that he was a founder and investor in the company. (Legal documents from the California Secretary of State's Office had linked Faraday to Jia’s tech conglomerate, Leshi Internet Information & Technology, but the company wouldn’t publicly acknowledge any affiliation until now.)

Though Jia has been called the “Chinese Elon Musk,” officials with Faraday have repeatedly denied that they’re trying to compete with Tesla. “We don’t compare ourselves,” said Faraday’s vice president of manufacturing Dag Reckhorn. But they are creating an electric car, one they hope will be at least semi-autonomous in its first model and eventually be fully autonomous.

Here’s the part we’re less clear about. Faraday wants their car to be like your Apple Watch — seamlessly interconnected with your other devices. They also want it to be like Uber, where you can summon an autonomous car.

Right now, the company has its tech headquarters in the Silicon Valley, research and design in Los Angeles, and offices in Dusseldorf, Germany, and Beijing. And it soon may have a manufacturing plant in North Las Vegas.

What’s in the package?

There are four prongs: tax abatements, tax credits, a workforce training program and infrastructure improvements.

The biggest part of the package is a new tax abatement program. All companies coming to Nevada can apply for certain tax abatements from the state. Last year, the Legislature created a larger tax abatement program for companies that spend more than $3.5 billion in the state, specifically for Tesla.

Faraday is a smaller project, building a $1 billion manufacturing plant, and so the state hopes to create a mid-tier abatement program that Faraday could take advantage of. If it were approved, Faraday would receive $175 million in abatements over 15 years. What happens if Faraday were to go bust? The deal is structured such that Faraday only gets the rebate once it spends all of its promised $1 billion.

Faraday will also receive, subject to legislative approval, transferrable tax credits for hiring full-time employees, $9,500 a year for each, up to 4,000 jobs. The one stipulation is that the average wage of jobs must be at least $22 an hour.

There’s two other parts to the package: infrastructure improvements and a workforce innovation program.

The state plans to spend roughly $35 million for infrastructure to pump groundwater to the site and another $35 million to build a rail hub. Funding for those projects require the the Legislature to modify a bill it passed earlier this year. The state will also use about $50 million from the Highway Trust Fund to widen the road next to Apex and build a flyover entrance ramp to the park, which doesn’t need legislative approval.

The last part is what the state is calling the “Workforce Innovations for the New Nevada,” or WINN Fund. It’s a $3 million training program. The idea is to provide grants to community college and other educational institutions to train workers, in this case, to train 4,000 auto assembly workers. The program will be expected to train up to 800 workers a year.

What is Apex anyways?

Apex Industrial Park is 18,000 acres of developable land near Nellis Air Force Base on Interstate 15 where it joins U.S. 93. Since Apex opened 20 years ago, it has grappled with a lack of infrastructure, namely water. North Las Vegas initially hoped that an 18-mile pipeline would be built to Apex, for an estimated cost of about $100 million, but the state found that project too pricey, at least for the time being. The state announced earlier this week that another futuristic enterprise, Hyperloop Technologies, is coming to Apex, too. Hyperloop Tech plans to build an open-air test of a high-speed transportation system made up of near frictionless pods traveling through low-pressure tubes dreamed up by Tesla’s Elon Musk. Eventually, the company plans to connect Los Angeles and Las Vegas by Hyperloop, transporting freight and people.

What does it mean for the regional economy?

If everything goes according to plan, it would be a good thing for Clark County and Nevada.

Faraday is supposed to directly create 4,500 jobs, with 13,000 other jobs expected to be created indirectly. Over two decades, Faraday is expected to have an $85 billion impact on the economy and generate $750 million in tax revenue. That revenue will be relatively evenly split among the state’s General Fund, which will receive $230 million, local government revenue, which will receive $270 million, and K-12 education revenue, which will receive $260 million. Faraday is also projected to increase the gross regional product of Clark County by up to four percent.

Could all this go belly up?

Probably not. Sandoval knows how to count votes, and he wouldn’t bring a deal of this magnitude forward without knowing he has the backing of the Legislature — or at least 50 percent plus one vote of it.

At the same time, there’s some uncertainty with any new company, and the state recognizes that. Faraday is entering a tough market — one that’s so far been dominated by Tesla — and many electric car companies have tried and failed to bring a product to market. At the same time, Faraday has hired a team that draws from automakers across the globe like Tesla and BMW.

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