Storey County could lose 80 percent of its anticipated Tesla tax windfall in bill proposed by Sen. Gansert and backed by Gov. Lombardo
By Ray Hagar, Nevada Newsmakers
When Nevada landed the Tesla Gigafactory in 2014 amid national fanfare, part of the deal included $1.25 billion in tax breaks for the electric-car manufacturing giant.
Those breaks included a 10-year abatement for Tesla on property taxes and the modified business tax (MBT) for Storey County, home to the Tahoe-Reno Industrial Center.
That’s where Tesla, Switch, Google and other global Fortune 500 companies have plants or factories that have changed the economic fate of Northwestern Nevada, including Reno, Sparks, Fallon, Fernley and other locations.
.
That abatement — estimated to be worth as much as $50 million annually — is set to expire at the end of 2024. And Storey County, about 30 miles east of Reno and Sparks, plans to use their tax windfall on a number of delayed maintenance projects.
One of those is its water supply system, a relic from the fabled Virginia City Comstock Lode era, first built from ductile iron in 1857. The offices of the county government in Virginia City are also in need of upgrades. They are housed in a courthouse built in 1876, immediately after the great fire of 1875 destroyed much of the famous silver-mining town.
Other needed improvements — almost too many to mention — are planned and are expected be financed with the anticipated Tesla windfall, county officials have said.
Some observers say that tax money from Tesla won’t necessarily lift Storey County into the 21st century, but if it can leap forward to the 20th century, that would be a big improvement.
“That (Tesla tax money) is going to enable us to do things like (repair) our water system in Virginia City, Gold Hill and Silver City,” Storey County Manager Austin Osborne said this week on Nevada Newsmakers.
“We’re operating on a water system that was built in the 1850s, and it’s our only source of water,” he told host Sam Shad. “There’s no well water. There’s nothing else we can rely upon. And we have often times, weekly geysers, blowouts, boil-water notices, conserve-water notices because the system is so antiquated and falls apart.
“And our Public Works Department of eight people is working on that constantly, trying to keep that thing patched and put together. It’s a catastrophe waiting to happen,” Osborne said.
“Our roads, we don’t have curbs and gutters,” Osborne continued. “We don’t have roads that are built to any kind of DOT (Nevada Department of Transportation) standards. They’re rural roads. They’re three inches of pavement put on top of dirt with no drainage. That needs to be addressed, as well, in order for us to be able to provide for our communities with issues such as like safety response.”
Storey County estimates it has $600 million, over 10 years, of deferred maintenance but currently operates on a $25 million annual budget.
“We have $150 million just in five years of absolute critical infrastructure like water, roads and flood control that need to be addressed,” Osborne said. “You’re not going to be able to fix those kind of problems on a $25 million budget.”
Proposal to cut Storey County’s projected pie
While Storey County looks forward to the tax windfall from the end of the Tesla abatement, the payoff is not secure. Other government entities also want a cut from Storey’s future tax collections and appear to have the support of Gov. Joe Lombardo.
Some officials from other local governments say most employees at the Tahoe-Reno Industrial Center (TRI or TRIC) don’t live in Storey because the county has little housing. Instead, most commute from Reno/Sparks or Fernley and Fallon.
“About 80 percent for the people that work at the TRI Center live with us and commute back and forth,” Sparks Mayor Ed Lawson said recently on Nevada Newsmakers.
Certainly, the TRI giant industries have boosted the entire region’s economy. Yet officials from neighboring cities and counties have decried the strain that Storey County’s roaring economic engine has placed on their housing costs, schools, roads, hospitals and other quality-of-life issues.
The strain may get worse in the coming years.
Telsa recently announced a massive, $3.6 billion expansion of its sprawling Gigafactory at TRI, including the construction of a new electric semi-truck factory.
“We could have 50,000 jobs in Storey County and we take the bulk of that pressure because they are going to come live with us,” Lawson said. “In Reno and Sparks, we have the all of the services, the hospitals, the doctors, the specialist you need.
“Mainly with infrastructure, we put all the burden on Reno and Sparks, not just infrastructure like roads and sewers but also mental-health services and some of the social services that we do,” Lawson continued. “That infrastructure needs to be there.”
Lawson and others have asked the Legislature and Lombardo to help.
“So we are looking for some help,” Lawson said at the beginning of the 2023 Legislature. “We are looking for some legislative help in the future.”
This week, Senate Minority Leader Heidi Gansert, R-Reno, introduced legislation that would split Storey County’s Tesla tax windfall — giving Storey County 20 percent and affected neighboring counties or cities 60 percent. The last 20 percent would go to the state “to promote statewide economic development,” according to the Nevada Independent.
Gov. Lombardo has been negotiating with Storey County officials about the deal, Gansert said during an interview on Nevada Newsmakers Thursday.
A critical part of the deal would be that the state would help Storey pay for its many infrastructure needs, she said.
“You know, I don’t think anybody wants to hurt Storey County,” Gansert said. “This is actually about trying to make sure Storey gets significant revenue to help them.”
“So it’s really about the impact regionally, not just in a single county, and that’s how that bill was designed,” Gansert told Shad. “And again, I’m sure it will evolve, but it’s really trying to make sure that those counties, those areas which are the most impacted, have resources.”
Gansert noted the bill is in its infancy and is open for changes. The final version, however, must be approved in committee hearings and general floor votes in both the Assembly and State Senate before Lombardo may sign it into law.
“This is preliminary,” she said. “I’m not sure if it’ll move forward or not. But I do know that the governor’s office wants to look at resetting any project moving forward that has that type of (regional) impact.”
Lombardo is looking toward the future, Gansert said. He wants to establish a regional concept for the major industrial projects that have a regional impact.
“I think that’s why the governor’s office wanted this bill,” Gansert said. “I think they see so many other projects on the horizon and they recognize that we have some counties that don’t bear the impact as far as population and housing and schools and things like that. And so they want to have a more regional approach as far as how that’s going to work.
“And I think that’s why they wanted the bill this (legislative) session,” she added. “And they’re working to make sure Story County gets the resources that they need and that their liabilities are paid off and that they’re in a very good position.”
Deeper expenses for Storey County
Storey County’s financial burden goes deeper than its 19th-century water system, dusty roads and old, creaky buildings.
The developers of the TRI complex, Roger Norman Sr., and Lance Gilman, built and paid for roads and other necessary infrastructure projects for the industrial park to attract their Fortune 500 and global company residents. Yet that came with the stipulation the county would eventually pay back the developers and take ownership of the infrastructure, Osborne said.
“We have to buy the roads and the drainages and the fire stations,” Osborne said. “It isn’t just dedicated to us and we maintain it.
“We actually have to pay it back over 50 years,” Osborne continued. “That’s $48 million that we owe for USA Parkway. That interchange that you see over I-80, they (developers) bought that and we have to pay that back, including the part that is in Washoe County. We maintain the stoplights and all the other infrastructure along that as well. The fire station, all that stuff.”
Storey County took that deal because in the pre-Tesla days, the county was near-destitute, Osborne said.
“It was a good deal because at the time, Storey County had nothing,” he said. “We were going to be carved up and dissolved and given to our neighboring counties. We had folks that were able to come into town, Roger Norman, for example, and said, ‘I’ll put in all your infrastructure up front. I’ll get you guys off the ground so you can generate tax revenues.”
Another issue is paying off the $30 million pipeline that pumps Washoe County waste water to TRI, called “grey water ” — untreated water from sinks, showers and washing machines — and used for industrial purposes by the businesses there, Osborne said.
The sewage pipeline to TRI also, “saved Washoe County ratepayers $150 million and having to build a new plant that would meet effluent discharge requirements into the river,” Osborne said.
Storey County officials told Lombardo about the cost of the sewage pipeline during the current negotiations, Gansert said.
“So I can tell you this pipeline’s been brought up as a liability, and that’s something that would have to be covered,” Gansert said. “I mean, absolutely it has to be covered. I’ve never heard any numbers about the other side, like saving money for Reno-Sparks. I’ve never heard that. So I don’t know how to respond to that part.
“But I do know Storey County has been asked for all their liabilities (by the governor),” Gansert said. “What does it cost for roads? We know about effluent pipeline. What else is out there? And then, what else do you need?
“So I think all those questions are outstanding and the governor’s office is working closely and specifically with Storey County to ask them all these questions to make sure that they get the resources that they need,” Gansert continued.
The Tesla-tax-sharing bill would have advantages for Storey County, Gansert said. The amount of the current abated taxes is about $50 million annually, she said.
“So we have a county that has a $20-million general fund that potentially would have $50 million. Right? And they have 4,400 people living in Storey County,” she said. “And the (TRI) center has their roads and their infrastructure.”
Storey County’s cut of the $50 million annual total in Tesla property and modified business taxes under the proposed bill would be $10 million, Gansert said. Plus, the state would help take care of Storey County’s infrastructure issues.
“So that’s at least $10 million a year, which is 50 percent (of Storey’s current annual budget) and (with the state) taking care of these liabilities,” she said. “So I think Storey County could be served very well by an agreement if they can take care of their liabilities and they can have a general fund that’s 50 percent or more than they already have.”
Yet Osborne said Lombardo’s office is way off with its $50 million annual projection for the Tesla tax windfall.
“Well, the tax money we’re getting, which is significant, is not as much as people think,” Osborne said. “We keep hearing in the community that it’s $100 million coming to Storey County or even $50 million.
“It’s nothing that significant,” Osborne said. “It’s more like $15 million, $16 million or $18 million could be coming our way, which to us, is a lot of money. But to our neighboring counties, that probably wouldn’t necessarily be that impactful.”
Washoe County, Reno and Sparks have already cashed in with various sales taxes and other revenues from the businesses at TRI in Storey County, Osborne said.
“So you look at Washoe County, for example, their budget grew the seven years before the Gigafactory had come into town, roughly by about $5 million, which was about a 12 percent growth,” Osborne said, without citing a source for the data.
“And then the seven years after the Gigafactory came in, their budget grew by over $100 million,” Osborne said. “It was almost a 225-percent increase. And that’s their budget alone. In Reno and Sparks, the cities have similar patterns in their growth in their budgets.
“The reports from either the governor’s office or other Tesla impact economic reports in the region show there’s been $17 billion worth of spending in Northern Nevada from employees, construction, construction contracts, people buying their Chevys and Fords and going out to dinner, everything,” Osborne said.
He said most of that money is spent outside of Storey County since it has little in the way of retail sales, hotels and homes.
“You know, the whole induced impact to the region is translated to $119 million worth of tax revenue, too, whether it’s the state through the MBT (modified business tax) or through the local municipalities, like Reno or Sparks and Washoe into their budgets,” Osborne said. “This is benefiting the region and all of us.”
This is not the first time this issue has reached state lawmakers in Carson City. A bill proposal from the 2017 Legislature, sponsored by then-Assemblyman Skip Daly, D-Sparks (now a state senator), sparked controversy because it could have forced Storey to pay impact fees to Washoe County — for infrastructure and educational costs.
Yet it fell flat, partially because Storey County mounted a strong lobbyist pushback with lawmakers.
Impact on Lyon County
Major industrial developments are currently being planned for Lyon County. Yet Shad wondered if the Lyon County officials would be willing to live with the infrastructure strain if they had to give away 80 percent of its property tax and modified business tax revenues, like Storey County may be forced to do, under this proposal.
Gansert said that in Lyon County’s case, it would probably receive 80 percent of that tax revenue with the state getting the other 20 percent.
“So, you know, right now, the bill is a proposal, but really it’s about 20 percent goes to the host community and then another 60 percent is for the impact on the community,” Gansert said. “And I can tell you Lyon County has been one of the most impacted counties of all counties because of all regional growth of the Tahoe-Reno Industrial Center. And so Lyon County, if they were a host county and they continue to grow like they have grown, they would get 80 percent.”
She called Storey County’s status “very unusual.”
“Storey County is very unusual because they have not had growth in population and they have about 10 people who work at Tesla,” she said.
“Lyon County, on the other hand, if they were to host a large project, they would have the 20 percent for that and then they would get another 60 percent because people probably would live in Lyon County because they have housing and because they have room to grow in Lyon County
Watch this episode of Nevada Newsmakers.
See the upcoming schedule for Nevada Newsmakers.
