Tesla numbers cast doubt on rosy Faraday projections
Lawmakers are currently in a special session in Carson City to consider a series of tax abatements and subsidies and new government programs for Faraday Future, an electric-car company that has never produced a car and that is bankrolled by a Chinese billionaire.
Gov. Brian Sandoval and Governor’s Office of Economic Development chief Steve Hill are using promises of thousands of jobs and tens of billions in economic impact to try and lure politicians into supporting the giveaways.
Project supporters present those numbers on summary sheets as an already fulfilled prophecy, but actually the numbers are just rosy projections based on numerous assumptions, including hypothetical “indirect” and “induced” jobs.
Reality, however, rarely fits the best-case scenarios touted by rent-seeking businesses.
Just over one year ago, for example, Tesla and Sandoval came to lawmakers with a virtually identical pitch. If lawmakers would provide $1.3 billion in tax abatements and subsidies, said Sandoval — hawking a study by Applied Economics — jobs and investment would flood in, stimulating economic impact in the tens of billions.
In 2015, the same crew projected that handouts to Tesla would create 700 project jobs and over $1 billion in capital investment. Additionally, construction jobs in 2015 were projected to number 3,793. (See Figure 1.)
Just one year later, however, lawmakers no longer need rely on projections. On Tuesday, Grant Thornton accountants submitted a Tesla Gigafactory Compliance Audit Report to the state, showing that the reality differs wildly from the rosy projections given lawmakers.
Rather than the 700 employees projected and the $1-billion-plus investment legislators were promised, the Gigafactory project employed just 24 new qualified employees and invested just $186 million from Oct. 17, 2014 to June 30, 2015. Likewise, the 3,793 construction jobs promised for 2015 have turned into just 1,348.
That’s merely 3.4 percent of the qualified employees and only 18.3 percent of the capital investment projected:
Now the same company that created the Tesla projections, Applied Economics, has created a similar report for Faraday Future. It has virtually the same cover, template and rosy projections.
And Sandoval and Hill are presenting the new Faraday projections with the same assurances that they gave to the Tesla numbers — now shown to be grossly inaccurate.
Lawmakers considering tax giveaways for Faraday shouldn’t be swayed by pie-in-the-sky projections.
Tesla’s actual numbers serve as a stark reminder that relying on rent-seekers’ rosy scenarios — concocted to justify letting politicians pick winners and losers — is not a taxpayer-friendly proposition.
Victor Joecks is executive vice president of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. For more visit http://npri.org.