States Need to Strike Smarter Deal with Tesla Motors Inc (TSLA) on Gigafactory: Budget Watchdogs

Tesla Motors Inc (NASDAQ:TSLA) is expected to select the final site of its proposed $5 billion gigafactory over the next few months. The electric car manufacturer is considering five states including Arizona, California, Nevada, New Mexico and Texas to become the home of its huge battery factory.

The government officials in these states do not want to miss the invaluable economic growth that Tesla Motors Inc (NASDAQ:TSLA) would bring—the gigafactory is expected to create 6,500 jobs by 2024. They are developing incentive packages in the form of tax breaks to ensure that the electric car manufacturer would choose their state to be the home of the gigafactory.

Budget watchdogs wrote an open letter to the officials of the five states acknowledge the fact that the gigafactory of Tesla Motors Inc (NASDAQ:TSLA) is “undoubtedly a valuable source of economic growth,” but they warned that “no real winner may emerge” because they are competing into a race to the bottom. They urged state officials to strike a smarter deal with the electric car manufacturer.

According to the budget watchdogs, Tesla Motors Inc (NASDAQ:TSLA) is offering the economic growth opportunity from its gigafactory to the state in an “unusual public auction with the opening bid set at $500 million in subsidies. They emphasized that their states have “more gain from cooperation than from competition.

“We call upon you to communicate and cooperate across state lines to strike a fiscally responsible deal that is fair to residents and businesses alike. It is time to break the harmful pattern of one state “winning” a high-profile competition, with other states left believing they need to offer even larger tax breaks to win future deals,” wrote the budget watchdogs in the five states.

The budget watchdogs also emphasized that any agreement struck with Tesla Motors Inc (NASDAQ:TSLA) should be transparent, and should include robust provisions from disclosing actual costs and benefits over time.

According to them, “Our states’ residents should feel confident that there are strict performance requirements and money-back guarantees to ensure Tesla delivers what it promises.”

In addition, the budget watchdogs think that Tesla Motors Inc (NASDAQ:TSLA) might even be receptive to a multi-state dialogue. The suggested that electric car manufacturer could help create a new path for economic development. They pointed out that the auto industry is a poster child for the idea that states are interdependent and the main goal is the long-term growth of American jobs.

The Good Jobs First, a national policy center in Washington D.C. dedicated in promoting corporate and government accountability in economic development led the writing of the open letter urging government officials in the five states to strike a smarter deal with Tesla Motors Inc. (NASDAQ:TSLA).

A related report quoted Chris Hoene, executive director of California Budget Project, who recently stated, “This process is so crazy. Tesla is in the driver’s seat on this, and five governors are falling over themselves. The gigafactory is a big fish to land, but it’s a pretty high price to pay.”

Tesla Motors Inc (NASDAQ:TSLA) did not consider California as one of the potential location for the gigafactory, but was eventually included after state officials proposed legislative actions such as new tax breaks and changes in regulations that could accelerate construction and reduce costs.