WIND POINT — Mike Kazmierski, president and CEO of the Economic Development Authority of Western Nevada, on Tuesday stood in front of a crowd of Racine County elected officials and community leaders and told them: “You’ve got a tiger by the tail and you don’t even know it.”
Since it was announced in 2017 that the Foxconn Technology Group would build a manufacturing campus in Mount Pleasant, many people have speculated as to how the development will impact the community.
Kazmierski was one of several Nevada officials who came to The Johnson Foundation at Wingspread last week to give some insight on how the Reno area handled the Tesla Gigafactory development underway there and how it compares to the Foxconn project.
“We were at 14 percent unemployment or thereabouts, three years before the Tesla project and we made a concerted effort to grow our advanced manufacturing in the region and made it a top priority,” Kazmierski said. “We put a lot of energy into that. We were very successful for three years and then we landed Tesla and what that did was accelerate our growth even after that.”
The Economic Development Authority of Western Nevada is a nonprofit organization that works with public and private entities to increase economic development in the region, similar to the Racine County Economic Development Corporation.
In 2014, to lure Tesla to Reno instead of New Mexico, Arizona or Texas, the State of Nevada put together a tax incentive package worth roughly $1.3 billion in abated taxes over the next 20 years and “the land was essentially gifted to the company,” Kazmierski said.
“It was a tradeoff for highway funds and support, in exchange for the land pieces that was then donated by the developer,” Kazmierski said. “Of the $1.3 billion … half of that, over $700 million, is in abated manufacturing taxes that states like Texas don’t even charge. What we did was brought ourselves down to a level playing field with other states when we abated, for a period of time, those taxes on manufacturing equipment.”
In exchange, Tesla promised to invest a minimum of $3.5 billion in manufacturing equipment and property in the state.
The deal Wisconsin made in 2017 to get Foxconn was worth $2.85 billion in tax credits and Foxconn promises to invest $10 billion in the project.
Location, location, location
One noticeable difference between the two developments is the location.
The Tesla Gigafactory is located in a business park in Sparks, Nevada, just outside Reno, that is 102,000 acres, roughly 159.4 square miles, and that property is shared with other businesses.
Foxconn plans a manufacturing campus in a 4-square-mile area along Interstate 94 north of Highway KR, west of Highway H and south of Braun Road and eventually extending north to Highway 11.
While there have been eminent domain concerns brought up through the process of building the Foxconn campus, Kazmierski said the community has to make a decision.
“The decision is, is this good for the community in the long term, and is this going to change the economic development of our community in the long term?” Kazmierski said. “Or are we going to let one person or one small piece of land ... hold the community hostage? That’s a judgment decision that has to be made by the community.”
Constructing the Gigafactory
The Foxconn campus is in the early construction stages and is estimated to create 10,000 construction jobs but there will likely be other construction jobs related to other businesses and homes coming to the area as a result of Foxconn.
One of the main concerns regarding construction is in regards to the hiring of local workers and businesses. Construction officials in Reno say there will be enough business to go around.
The Gigafactory, consisting of one building, currently has a 1.9 million square foot footprint, according to Tesla’s website and when it is fully completed it plans to have a 5.8 million square foot footprint, and could be the largest building in the world by footprint.
In comparison, the Foxconn campus plans to house 20 million square feet in several buildings.
Aaron West is CEO of the Nevada Builders Alliance, the largest construction association in Nevada that represents roughly 800 contractors.
“We quickly figured out that (the Tesla Gigafactory) required its own set of resources and all the contractors that were worried about not getting some of the Tesla action, they’re all busier than they want to be right now,” West said.
West added the electrical contract for the Gigafactory was roughly $5 million.
“There are very few guys who have the resources and the financial backing to be able to front the payroll for weeks on end while they’re trying to finish out that phase,” West said. “There’s going to be plenty (of Foxconn work) to go around … at the end of the day, we can’t build anything fast enough.”
Where to house people
One of the largest issues related to the Tesla project, Nevada officials say, was housing.
As people came into the area to build the facility, the need for housing, or at least temporary housing, became a more immediate issue.
Local leaders here have also been discussing the lack of housing to meet the demands of Foxconn, during construction and afterward. For example, the City of Racine hasn’t had a new multi-unit apartment development since the 1990s.
West said that when Tesla announced it was coming to Reno, the community was just coming out of the 2008 recession and there were many abandoned houses, foreclosed houses, and apartments that officials originally thought may have been enough to fill the demand.
But they were wrong.
“Now we’re trying to play catch up and we’ve been trying to play catch up for the last three years … in terms of trying to build enough units to keep up with demand,” West said. “Developers, I think, they missed their timing in terms of what they thought it was going to take to bring a project to market.”
An interesting corollary effect is that housing prices have risen in Reno as the supply becomes low.
“What we’re seeing is a tremendous amount of demand that’s driving prices up to higher than they were during the last boom cycle but it’s all driven by demand,” West said, adding the increase in housing is not like the housing bubble that burst in 2006.
“It’s all driven by job creation and the lending standards are as tight as they’ve been. You have to work now to get a house,” West said.
But since Tesla came to Reno, Kazmierski said the area has added roughly 10,000 jobs a year and, of that number, about 3,500 are primary jobs related to Tesla.
“Tesla has only been a fraction of that,” Kazmierski said, adding Tesla, unofficially, has about 6,000 jobs and more technology jobs are coming. “We’re at the point where we’re attracting block chain companies, not the Bitcoin kind but the actual block chain companies that build the next level of internet. We have a lot of advanced robotic work going on because of advanced manufacturing that we didn’t have before.”
“There’s very few guys that have the resources and the financial backing to be able to front the payroll for weeks on end while they’re trying to finish out that phase. There’s going to be plenty (of Foxconn work) to go around… at the end of the day, we can’t build anything fast enough.” Aaron West, CEO of the Nevada Builders Alliance