State approves tax incentives for Google, lithium company amid promise to raise threshold for future tax breaks

Nevada’s economic development board has signed off on a combined $33 million worth of tax incentives for a Google data center and a lithium battery mining operation, even as state leaders promise to tighten up requirements for tax abatements.

Amid unanimous approval of the two applications during the Wednesday meeting of the Governor’s Office of Economic Development (GOED) board, GOED Director Michael Brown said he planned to bring recommendations to the board — composed of Gov. Steve Sisolak, other elected leaders and several business representatives — at its next meeting in December raising the threshold level needed for new or expanding businesses to receive tax abatements.

Approval of the applications come despite Sisolak’s past concerns with the state’s system for tax abatements and incentives, which he has criticized in the past as attracting too many low-wage jobs without opportunity for advancement. He said Wednesday that he decided to accept the incentive application after doing his “due diligence” on the proposal amid the state’s highest-in-nation unemployment rate.

Initial ideas include raising the wage requirement from 100 percent of state average wage to 125 percent, increasing the requirement of in-state employment from 75 to 90 percent, and potentially adding additional requirements for health insurance coverage. 

“I think a company that receives a public abatement should demonstrate a larger commitment to the state and its residents,” Brown, a former top mining executive said during the meeting. “I came from an industry that had robust corporate social responsibility plans, as we meet with new applicants we are pressing them. We want to see a larger commitment to the state if you’re going to get an abatement of state tax dollars.”

Brown said the higher thresholds for incentives would not apply to applications currently in the pipeline or that might come up during the board’s next meeting in December. But his comments on Wednesday follow on promises previously made by Gov. Steve Sisolak, who chairs the GOED board and last year promised major changes to the tax incentive and abatement system. 

Former Gov. Brian Sandoval oversaw the current economic development board’s restructuring in 2011, transforming it into a mechanism by which hundreds of companies received abatements on sales and use taxes, property taxes and payroll taxes as long as they met certain capital investment, jobs created or minimum hourly wage targets.

But since his election in 2018, Sisolak has taken a more cautious approach toward the state’s system of tax abatements, ordering a temporary halt on new or pending applications last year amid a search for a new GOED director and criticizing the current structure as attracting too many low-wage jobs that “don’t have any room for advancement.

A Nevada Independent assessment last year estimated that roughly 13,000 employees of businesses that have received state tax incentives were paid low enough to qualify for Medicaid.

But Sisolak nevertheless said Wednesday he would support the application of the Google subsidiary company, Design, LLC for $25 million in abatements for a large data center to be built in Storey County’s Tahoe-Reno Industrial Park (which houses the Tesla Gigafactory). The $600 million project is expected to be completed by 2021.

Sisolak reiterated the state’s dire economic outlook amid fallout of the COVID-19 pandemic, saying the proposed project would generate more than $94 million in direct and indirect tax revenue over the next 20 years, while employing nearly 2,700 construction workers to help construct the estimated $433 million project.

“It's no secret that I've had reservations over some of our existing abatement programs,” he said. “I don't make these decisions lightly. It's also no secret that the current structure of our state economy has once again put us in a position of being the state most impacted by this national crisis. Trust me, I'm aware of this reality, and my goal is to work towards breaking the cycle and creating more stability for a state moving forward.”

Sisolak moved to accept the application on a provisional basis, based on Google agreeing to committing professional certificate training programs offered for free to Nevada students and educators. 

He also announced that the company was planning a $600 million expansion of its existing Henderson data center. The GOED board previously approved $25 million in tax abatements for Google’s $600 million data center in Henderson in late 2018.

Members of the board also voted unanimously to approve the incentive application made by Lithium Nevada Corp., which is in the process of designing and permitting a lithium mine and processing facility in rural Humboldt County.

In its application, the company said it planned to hire 113 people at an average wage of $37.84, with an expected $103 million spent on equipment. 

The lithium company will receive a total of $8.6 million in tax abatements, including a partial sales tax abatement worth $5 million, a $3.3 million property tax abatement and about $225,000 in payroll tax abatements. Per its application, it expects to bring in more than $65.8 million in new local and state tax revenue.

Wednesday’s meeting was just the second GOED Board meeting of the 2020 calendar year, following a June meeting that primarily focused on economic recovery plans.