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That's the way politics/business works. Tesla's first gigafactory was always destined to be built in CA, all the window dressing only served Elon's interests.

I find this stuff insanely annoying. California has a horrible business climate from a tax/regulatory point of view.

So they have to pass laws giving special breaks to get companies to locate there that otherwise would never consider it.

Of course, smaller businesses don't get these tax breaks; only giant rich companies do. Sigh.

I think it makes much more sense to reward states with better business climates; if other states see this happening and take note, perhaps they'd consider reforming their own onerous regulations and taxes, benefitting everyone rather than a few rich companies.

Dramsey. I have owned businesses in CA for over 40 years and would dispute your claim of "horrible business climate". What links can you provide to demonstrate this claim?

I operated a business in california (los angeles) for 15 years and finally left for Arizona. The taxes and regulations in California are horrible.

Moving to Arizona I saved several hundred thousands a year in reduced taxes and expenses.

We still have a home in Cali as we have family there and we go back for the summer but really the grass is actually greener on the other side.

I'm surprised to hear the grass is greener in Arizona.

@Ohmman; it's just very, very tall and full of prickles.

@Dramsey You forgot Tesla was actually STARTED in California? So were Google, Yahoo, eBay, HP, Intel, Netflix, Facebook, Oracle... What's wrong with this business climate if it could produce such a nice crop?

If you read Elon's biography he made a point to move to California/Silicon Valley after graduation because in his mind that's where things happen. Glad that he had that foresight.

@socalsam Why didn't you move to China or Vietnam? These are much cheaper places to run a business. Yes that's a good answer. Cost is only a small part of a business.

The most important thing is if your business can stay the most innovative and competitive in the industry. Califonia does provide a lot people, either in the technical or the financial field, with progressive thinking that fit exactly the need of these kind of business.

@renwo S alseT

"That's the way politics/business works. Tesla's first gigafactory was always destined to be built in CA, all the window dressing only served Elon's interests".

I don't believe that's Elon's message to other four states participating in this bid. So what's your point? Teaching others a lesson on how politics works?

Krugman correctly points out that California has had some wilderness years which neither political party had the will to address but now with a strong governor with a mandate, things are changing. Regulation breeds regulation but it isn't all bad. The totally unregulated business climate of Arizona has its problems too. Tesla and a number of other ventures have helped kick down some doors to address regulatory overreach but are not throwing the baby out with the bath water. They know they've been losing businesses to other states and want to correct this and the numbers show that is happening.

Arizona is a state that is so unregulated we might as well say zero, yet it has to pay companies to relocate here. Then there is the war among cities to give out more cheques. Come here and get a property tax exemption, a sales tax exemption on energy, a sweet deal on water, a free power substation, etc. Then do what you want because we have no consumer protection laws and won't utter a peep about pollution. If the lack of regulation is so good for business, why do we need to pay businesses to come here?

My state shot itself in the foot by continuing to block Tesla from selling cars here. If I were in Elon's position, I would never consider a state that went out of its way to make it difficult to sell my product.

A/1. I made a statement, the point is whatever you conclude it to be, based on your own intelligence, education, politics, life-experiences, biases, etc.

I honestly don't think the decision has been made yet. Tesla is playing hard ball. Good for Tesla, its shareholders and electric vehicles in general.

The purpose of open auction is to improve Tesla's negotiating positions. Gossip has its purpose too. It is to make impression that the whole auction process is just a smokescreen to turn other potential participants off.

Nothing is over untill it is over. Gigafactory will go to the highest bidder. That's how auctions work.

A/1. You are right up to a point, but there is much that goes on behind closed doors that makes it far more than just an auction. Consider SpaceX, Solar City and numerous other EM investments that are part of any horse trading or other future Tesla plans that involve state cooperation.

California is not a bad state to do business in? With 2 major exceptions (Silicon Valley and SoCal with it's large and experienced aviation industry population), perhaps someone can point out how many companies are moving here from other states, especially those in manufacturing.

Emblematic of California's dysfunction and corrupt politicians? The California "High Speed" Rail. It's what inspired Elon's Hyperloop.

Krugman is disingenuous at best as usual. Anybody know how the stock market has done in the last year? How about companies like Facebook? California has been the recipient of massive tax gains from Silicon Valley companies' employees who have cashed out or exercised options. Our politicians count on the trend continuing, spend the money and when things change (surprise!) we're back in trouble. Silicon Valley is saving California but is not representative of the whole state.

Krugman should step out of his leaning Ivory Tower when it comes to health insurance. My rates went up 24% last year, 250% in the last 5. Talking to a friend who's a doctor and another who works for an HMO (both are Democrats and not opposed to Obamacare), rates and reimbursements will have to go up a lot to cover the increased costs.

TM/Elon are in a great position and whether they are purposefully pitting state against state or just letting them go after each other with concession, as a stockholder, I really don't care. Just get the factory started already!

California has closed the gap in terms of who gets 'picked' but I doubt a final decision has been made IN FAVOR of California. IMO TM is ready to get started in Nevada and is seeing if Cali can come up with more concessions (call them what you like but they are concessions). IMO both states will eventually have a Gfactory as more than one will be needed.

I may be wrong but I still think Nevada has the best chance of being first with Cali now being second. Up until recently I thought it would be Nevada, Texas then #3 in Cali.

Right, "especially those in manufacturing"... and textiles and footwear and horse-shoeing.

A bit of politics is tugging this thread a bit off point, and although AZ may offer some moderate business incentives, the political climate there makes it a hard place for some to even think about doing business. Seems the only "things" well regulated in AZ are people seeking a better life from a Mexico and Central America.
But....that's another story, and no replies necessary.

Too bad the distance for shipping giga batteries west from NY make the east coast a non-starter. We here have some unbelievable business incentive programs and a hugely available, skilled, workforce coupled with amazing tech hubs.

@oildeathspiral Your two exceptions happen to account for the largest portion of California's economy and what the country needed the most. High tech, internet, medical reasarch, aerospace and entertainment happen to be what this country are relied on to be competitive in this global economy. I don't think that old industries like apparel, auto, oil, steel making, or whatever the green grass guy's business is, can support the high standard of living of Americans too much longer. The rest of the world can do all of them and some even better and cheaper than us already.

I expect the first announced location will be a decoy to expedite a deal on the real location. They may even break ground at the first location if they need to.

I heard that Elon Musk wants to power a significant portion of the factory using solar. There's no place sunnier than AZ. It has 3 of the top 5 cities with most sun. And it has plenty of cheap land and labor.

City % sun

Yuma, Arizona 90
Redding California 88
Phoenix, Arizona 85
Tucson, Arizona 85
Las Vegas, Nevada 85
El Paso, Texas 84
Fresno, California 79
Reno, Nevada 79
Flagstaff, Arizona 78
Sacramento, CA 78
Pueblo, Colorado 76
Key West, Florida 76
Albuquerque, NM 76+

http://www.currentresults.com/Weather/US/average-annual-state-sunshine.php

Nevada makes the most sense for the GF. Short distance from TM factory by rail, low taxes, no state personal income tax.

Still, I would prefer that Tesla pay incremental $ to increase production at existing battery factories.

You might have noticed that some manufacturing is coming back to the US (ie. Apple), but please don't think it's because of cheap labor. It's because of advances in robotics. However, they still need someone to guard the factory door. Whoopee, Texas here we come.

There is some interesting coverage of the Gigafactory location issue at www.transportevolved.com. They assert, the last time I checked, that construction had begun at Reno about a month ago and was terminated just yesterday.

@renwo: Dramsey. I have owned businesses in CA for over 40 years and would dispute your claim of "horrible business climate".

Hey, really? Me too! Not for 40 years, admittedly; some friends and I ran a small consulting company for about 10. The number of hoops we had to jump through just to deliver contract software was ridiculous.

What business are you in?

What links can you provide to demonstrate this claim?

Seriously? The idea of California as a state with onerous business regulations and taxes is honestly foreign to you? Well:

This article on the best and worst states for business says:

[California] is a state that continues high personal income tax rates and regulates with a very heavy hand. Its top, marginal tax rate of 33 percent is the third-highest tax rate in the industrialized world, behind only Denmark and France. This situation creates a bias against savings, slows economic growth and harms competitiveness.

Or how about this: The Economist Ranks California One of the Four Worst States for Small Business

I mean, this isn't exactly a secret. California has lots of advantages, mainly a good climate and educated work force. Not much else, though.

The only reason Tesla's building cars in California is because they got a giant manufacturing facility dirt cheap.

@Dramsey - couldn't agree with you more. Its funny, those that actually have run a business in california seem to know what a terrible business climate it has. I mean the weather is great but if you are trying to run a small business and don't have the luxury of being a multibillion dollar corporation, who can get special consideration from the government, you are going to get screwed with fees, taxes and BS fines.

Between the state of california, city of los angeles the amount of nonsense I had to deal with from idiot government employees whose only job was to try to find more and more ways to screw us, and try to take money from us was too much to bear. I finally sold my business and relocated my family.

Glad to be gone. California, great place to visit (certain areas) just glad I'm not living there anymore.

@socalsam Why didn't you move to China or Vietnam? These are much cheaper places to run a business. Yes that's a good answer. Cost is only a small part of a business.

@carlk - Sure carl. What a fantastic idea. how could I be so foolish and not see the folly of my decision to relocate to a state where I have better quality of living than what I had in california. I mean, forget the fact that living in Scottsdale affords me the ability to not have to sit in the 405 in traffic on a a 1:00 on a tuesday afternoon. I mean, moving the vietnam is certainly the smarter decision. Way to post a logical comment.

Look- I lived in Cali for over 3 decades. The weather is great. But between the traffic, the high cost of living, the congestion and the fact that much of southern california is deteriorating into a 3rd world country, i was glad to get out.

If all you know is the golden state, then you are unaware that there is a world outside of california that is a lot less dysfunctional, less oppressive and offers a better opportunity to raise a family.

11% state income tax???? couple that with federal taxes, city taxes permits, fines- no thank you.

California- great place to visit- still have tons of family there, hell, we kept a home there for the summer. but Im happy Im not living there full time.

Ah, @socalsam, you are forgetting the real reason we are all here in CA...

We kill mosquitos here before they are born. I guess that makes me "pro choice".

I spent time in AZ when I got my masters - not going back, sorry @AR.

There'll likely be two Giga-winner states.

I see nothing cynical about how Elon motivates states to participate in an economically productive, problem-solving, and hopeful new enterprise.

These giga factories will yield greater tax revenues than the incentives cost.

Landing a Tesla factory in your state is financially and politically a no-brainer.

To be a governor and not try hard to bag this one is like a dereliction of duty.

IIRC, Tesla/Elon said some time ago that they would break ground at the first Gigafactory site in June They said that after that they might break ground at an additional site or sites. However, the decision on which site to develop first would would be made before the end of the year.

There are some suspicions that the June groundbreaking occurred in Reno at the construction site mentioned by kmmcdonald above.

My take-away: if they do groundbreak at two sites,both might be developed to completion, but one of them will be pushed to completion first.

@socalsam

No I've called Texas and Indiana home but I wouldn't want to live anywhere else than here in California. Not only it's a great place to live but there are also such great opportunities and open minded people that it's hard to find in most other places. Being able to become an early adapter of Tesla, both the car and the stock, is just one of the examples of the benefit of living here. Neither would not happen if I did not wonder into one of the first Tesla stores in the country while going to Santana Row for dinner. Neither would these happen if I lived around close minded EV haters too. Paying a little more taxes, which do come back to help most of us, is really a small price to pay compares to the benefit of living here.

Yeah too many people and bad traffics but that's only because there are too many people who think like me. There is no good way of preventing people from coming here other than bidding up the housing price to a prohibitive level for new comers. Many people, especially those brilliant and ambitious young people, are still not turned away because of that. Take a stroll down Castro street in Mountain View or SOMA in San Francisco you would think the entire Stanford and MIT graduating classes are relocated here. No it may not be ideal for old f... like us but I still love living and working in this high energy environment.

I find it weird that certain people who took cue from the so called "news" would jump on any opportunities to bash California's economy while never mention those poorest of the poor red southern states. A lot of hypocrisies, or perhaps some jealousies, are going on here. It's typified by no other than the biggest California basher Rick Perry who revealed in a recent interview that he's considering moving to California after his term ended and "who wouldn't want to live in California?". What about the high taxes and dysfunctional government now?

http://www.dallasnews.com/news/politics/state-politics/20140617-could-te...


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