In the competition for business expansion and job creation, there’s a new energy in the US, as a host of smaller states have improved their respective tax climates and incentive programmes. These changes have allowed them to be recognised as superior locations by corporate decision makers. It’s a high stakes game, of course, and those decisions are occasionally played out in high-profile ways. Tesla surprised many last year when the company selected Nevada for its gargantuan battery plant. The plant will employ thousands of workers, a prize that virtually every US governor was pursuing.
The little guy
At the time, there was steady speculation Texas, with Rick Perry at the reins, would eliminate the competition by adding tens of millions of dollars or more to the negotiation. Texas has long enjoyed its reputation as a pro-business state, capturing a substantial number of high-profile projects in the last few years.
New Mexico is among the best examples in the US of smaller and lesser-known states that are clearly in a position to compete for projects
Then there was California, which said it wouldn’t yield to Governor Perry or anyone else. Despite its reputation as a difficult place for business, California came to play. Those who were watching closely were shocked at the legislative gymnastics the state proposed to allow special exceptions for Tesla’s team.
But tiny Reno, Nevada surprised in a big way, with an overall incentive package north of $1bn. The package included a mix of tax breaks, cash and special accommodations to get construction underway immediately. Reno’s proposal was impressive, but its close proximity to Tesla’s engineering team and its California auto factory may have given the city the edge it needed over its competitors.
One other state on Tesla’s shortlist was New Mexico, which few pundits had picked to win. What many didn’t realise is Tesla has a history with the southwestern state. Tesla initially selected New Mexico for its first manufacturing plant in 2007, before reversing the decision and building the factory in California. The company decided it needed to be close to the design team and company headquarters.
Since then, New Mexico has been quietly going through a transformation, with dramatic improvements to its business climate. While New Mexico is sometimes overshadowed by its better-known neighbours to the east (Texas) and to the west (Arizona), it has developed a compelling case for manufacturers.
Incentive influx
New Mexico is already home to factories with multi-billion dollar investments from companies such as Intel and Urenco, as well as factories for Sennheiser and Tempur-Pedic. That’s because when manufacturers choose to locate in ‘the Land of Enchantment’, particularly the state’s largest city, Albuquerque, they will find a pathway to many benefits. These include zero state corporate income tax if electing the Single Sales Factor, 95 percent exemption from real and personal property taxes, no inventory tax, industrial electricity rates averaging 6.1 cents per kWh, and no tax on electricity or other consumables used in the manufacturing process.
Furthermore, Albuquerque is located on the Burlington Northern Santa Fe transcontinental rail line, with two interstate highways and Albuquerque International Sunport. At the time of press, the New Mexico Legislature was even considering establishing a $50m job creation fund to incentivise expanding employers. This comes at a time when Arizona and Texas are debating major cutbacks to their incentive programmes.
New Mexico is among the best examples in the US of smaller and lesser-known states that are clearly in a position to compete for projects. The state is nimble, in good financial shape, and hungry for new jobs and investment from expanding employers. There’s a reason Reno and Albuquerque were on Tesla’s short list. Perhaps they should be on yours, too.