Thursday, October 04, 2018

Reno is a Tesla town

Elon Musk's cars are as much a presence here as in the San Francisco Bay Area. This charging station sits behind a modern suburban motel.

Reno made itself a Tesla town by welcoming the Gigafactory, Tesla's giant battery manufacturing facility 20 miles east of town. With the sprawling, secretive plant are supposed to come 6500 good jobs. Tesla enthusiasts write as if the car maker were the Second Coming.

Reno, a city just four hours away from Silicon Valley, has been home of Tesla’s Gigafactory – a city whose economy once chiefly relied on the low-wage casino industry, where bankruptcy and crime were frequent and unpredictable. Hit hard with the housing crash and recession, Reno fell into hard times in 2010 with a 14 percent unemployment rate. Once home to mostly thrifters and passersby, Reno’s outlook started to change with talks of Tesla’s plans for technological revitalization. Startups and incubators have been popping up to attract more millennials, new murals are being painted onto derelict walls, all are response to the hope that Tesla will be able to inject into the local economy sustainable, higher-paying jobs.

There are plenty of skeptics. The Verge examined soberly whether the state's offerings to Musk could pay off for anyone except the capitalist:

Over the next 20 years, Tesla could take in nearly $1.3 billion in tax benefits for building its Gigafactory in Nevada, according to projections from the state, as hires are made for the factory locally and from around the country. Assuming Tesla meets its obligations under the deal, it will spend 20 years free from sales tax, and 10 years free from property tax, while it receives millions of dollars more in tax credits.

... The potential windfall for a state is alluring. A manufacturer requires suppliers. Entice the company to come to you instead of someplace else, and maybe an entire industry will crop up to work near the first business. Suddenly, you have many more jobs than what you first paid for, and a revitalized service industry may grow to attend to the larger population. Those people pay their taxes, and in the end, the benefits could outweigh the bargain given out. This idea has guided the thinking behind tax incentives, and helped build the deals into the behemoth they are today. The Tesla deal is just the latest example: Nevada estimates that the factory will bring 6,500 "direct" jobs but 22,700 "total" jobs to the state.

... A deal may bring more jobs, but it might also create other financial consequences, like a need for stronger infrastructure to service a town increasingly populated by factory workers. Ultimately, the deals "aren’t a huge money-maker" for a state, [Upjohn Institute for Employment Research economist Timothy] Bartik says, even if jobs are created. It’s not yet clear what those secondary changes will look like for the Gigafactory, but the state’s report mentions that more jobs will be needed to support "significant construction related to transportation and utility infrastructure as well as employee housing." The people filling those jobs, the report points out, "would generate sales and property taxes at the full unabated rate."

So maybe Tesla's arrival is a glorious boon to Reno -- and maybe not. Residents will see.

Meanwhile, campaigning in Reno, knocking on doors, we learn that residents feel their city is changing. There are more cars, more people, more traffic, higher rents, more homelessness -- but yes, the economy is booming for many. Reno's experiment with trying to become the site of a new industrial economy is a work in progress. Disruption is keenly felt, though without yet a conclusive verdict on its benefits and costs and on who pays those costs.

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