Large infrastructure projects such as stadiums and factories are often disincentived by local governmentsupport and policies. The Tesla Gigafactory 2 plant in Buffalo, N.Y., is no exception, with Gov. Andrew Cuomo providing a lot of support and much help in Getting Tesla out of the Model 3 production woes. In Cuomo’s plan, Tesla’s Gigafactory 2 is an important part of revitalizing manufacturing in upstate New York, where the state spent $1 billion on plant construction and assembly of related equipment. But the state’s investment in the plant has depreciated by $884 million, the Wall Street Journal reported Thursday.
So what does that mean? That means the state’s investment in Gigafactory 2 has fallen by $884 million from initial estimates.
Why is this happening? First, Gigafactory 2 doesn’t belong entirely to Tesla in a harsh sense, nor does it belong to the state’s public property. Instead, it is owned by a non-profit entity called Fort Schuyler Management Corp., which is run by officials from New York State Polytechnic University and other New York State institutions.
It is reported that the investment in Gigafactory 2 is only a pre-plan to revitalize manufacturing in upstate New York, originally Cuomo plans to build several high-tech projects in other areas of the north. Fort Schuyler said the writedowns were only technical adjustments to the books and could not be based on book value.
“The economic value of these assets comes from Tesla’s investment and employment, and Tesla is going to New York State, not the company,” Said Doug Grose, president of Fort Schuyler Corporation, said in a statement. “
What he meant was that when Tesla struck a deal with the group and reached an agreement with the state government, it agreed to meet a number of conditions related to employment and community investment. If these conditions are not met within the specified time frame, Tesla will face penalties.
Specifically, Tesla agreed to hire 1,460 people at Gigafactory 2 by April 2020. If that number is not reached, Elon Musk will have to pay $41.2 million in fines to the agencies. On top of that, Tesla agreed to spend $5 billion on New York State’s operating expenses and capital to meet a ten-year rent of $1 a year (you can’t wrong).
So far, Tesla has employed 730 full-time employees at Gigafactory 2 and 43 contract workers, but said it plans to meet its employment obligations in time to avoid fines. Given the public release of Tesla’s Solar Roof V3 and the ever-expanding Supercharger network, that seems likely.