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Breaking: Tesla CyberTruck TeraFactory Could Receive $60M+ In Tax Breaks If It Builds Plant In Travis County

by Eva Fox June 18, 2020

Breaking: Tesla CyberTruck TeraFactory Could Receive  $60M+ In Tax Breaks If It Builds Plant In Travis County

Featured image: Casgains Academy - Stock Market Investing/YouTube

Tesla's new Cybertruck factory has already attracted a lot of attention as states and counties continue to struggle for the opportunity to get thousands of jobs. The Del Valle Independent School District is considering an incentives deal that could potentially save the California automaker up to $68 million on its property tax bill over 10 years if it brings a major assembly plant - and thousands of jobs - to Travis County. 

According to the agreement, published on Thursday, June 18, Tesla is supposed to build a 4 million- to 5 million-square foot facility that would eventually employ 5,000 or more workers on a site just off Texas 130 in Southeast Travis County. If the Del Valle school board approves the agreement and Tesla moves forward with the factory on the site, construction could start in the third quarter of this year, according to documents filed with the Texas Comptroller’s Office, Statesman reports.

The Travis County Commissioners Court is also considering a separate incentive agreement with Tesla, although the terms of this deal have not been made public and it has not yet been approved by the commissioners court.

The proposed Tesla incentives deal with the Del Valle school district is a Chapter 313 agreement. That refers to Chapter 313 of the Texas Tax Code, which allows state school districts to grant a property tax break for an economic development project. The state is then required to repay the school district for the amount of property tax it gives up in the agreement.

The Travis County site is a roughly 2,100 acre property in the Austin Green development, at Texas 130 and Harold Green Road. The property is currently a sand and gravel mining site owned and operated by Martin Marietta, according to documents filed with the comptroller’s office.


Source: countymapsoftexas.com

“To continue to meet increased demand and provide new products, an additional manufacturing facility is required in the United States,” Tesla said in its application. The company says eight states were identified as “viable contenders” for the facility, which the company wants to locate in the central U.S.

“The current focus is on Oklahoma and Texas as potential locations for the new facility,” Tesla said.

A potential incentives deal with the Del Valle school district will be a key factor in deciding where to locate the facility, Tesla said in its application for the Chapter 313 agreement.

“Local and state tax incentives serve a critical role in getting the project approved and operating successfully,” the company said. “This is especially critical in Texas due to the high level of real and personal property taxes relative to other states. Since school taxes are the largest component of local property taxes, the Section 313 tax limitation is especially critical to create a level playing field between Texas and other state vying for this project. Therefore, obtaining the 313 limitation is a determining factor in the decision whether to locate the project in Texas.”

Austin Chamber of Commerce official Charisse Bodisch said local economic development officials have had multiple discussions with Tesla executives about possibly bringing the factory to Travis County.

“While we have engaged in multiple discussions with Tesla, the company has not made a final decision regarding its next Gigafactory,” said Bodisch, senior vice president, economic development at the chamber. “The potential location being explored is an underutilized site that is in clear need of revitalization, and it would be a perfect fit for an environmentally focused organization like Tesla.”

Auto manufacturing jobs typically pay about $35 an hour, or $65,000 to $75,000 a year — and that’s at the low end of the range, according to Austin economist Angelos Angelou. Engineering, administrative and other jobs associated with the plant could be expected to pay much higher, he said.

“It would bring thousands of good-paying jobs — non-union jobs — at a time when the economy needs new jobs, and it provides for further diversification of our economy,” he said.

Angelou said that if Tesla does in fact choose the Austin region for its next factory, it would be “a great win for Texas and Austin.”


Source: Tesla

Terms of the deal

Based on the property value estimates in the Chapter 313 application, the proposed incentives deal with the Del Valle school district would potentially give Tesla a tax break of about $68 million over the 10 years of the deal. The Chapter 313 agreement works by capping the property value the district can use for the Tesla site when it collects maintenance and operations tax. Under the terms of the state tax code, the project’s value would be capped at $80 million.

The Del Valle school district’s effective millage rate -- the amount a property owner plays per $1,000 of property value -- for collecting maintenance and operations tax is 1.31%, according to the documents filed with the comptroller’s office.

At that rate, the $80 million cap on the Tesla property means the company’s annual bill from the district for maintenance and operations tax would be $1.048 million. Over 10 years, that would be a total of $10.48 million.

Based on the actual estimated value of the property over that same 10 years, Tesla would have paid $78.59 million in maintenance and operations tax -- an estimated savings of $68.1 million for the company.

The estimated value of the Tesla property varies from year to year, starting at $432.1 million in 2023, the first effective year of the deal, rising to a high of $773.3 million in 2026 and then dipping to $484.5 million in the final year of the agreement in 2031, according to documents filed with the comptroller’s office. The documents do not explain what criteria was used to create those estimated property values, or what would lead to the variation in the values.

Chapter 313 of the Texas tax code requires that a qualifying project create and maintain at least 25 qualifying jobs with a salary that is 110% of the average weekly wage for manufacturing jobs in the county where the job is located. For this project that would equate to an annual salary of $74,050, according to documents filed with the comptroller’s office. The documents do not detail the proposed annual wage for the 5,000 additional Tesla jobs -- the vast majority of the workforce for the facility -- that the company would bring to Central Texas.




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