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c.2014 San Antonio Express-News
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By Neal Morton
RENO, Nev. -- On a sunny May morning, wild horses grazed on the sparse patches of grass that grow on a massive industrial park just 9 miles east of "The Biggest Little City in the World."
About 100 companies, including manufacturers Alcoa and James Hardie, call the Tahoe-Reno Industrial Center home. Still, 30,000 acres remain open for development on the site, which spans more than 150 square miles.
Some of the horses drank from a mostly dry flood basin, but one fed near dusty billboards that advertise several ready-to-build pad sites.
One of them could be the future location of Tesla Motors Inc.'s planned lithium-ion battery plant.
Economic development officials here talk in hushed, almost superstitious, tones about Project Daniel -- the codename given to Tesla's $5 billion "gigafactory."
Across Reno, though, the news that the Silicon Valley-based electric-car maker may select Nevada for the project excites conversation among other manufacturers, at unemployment offices and even in high school hallways.
Tesla's consideration of their city has given some residents and community leaders a much-needed cause for hope -- after Indian casinos in California began cutting into the area's gaming industry and the implosion of the housing market dealt a blow to the local economy.
Aside from Nevada, Tesla has named four other finalists for its planned factory, including Texas, Arizona, New Mexico and its home state of California.
However, experts and people involved in the site selection have said that San Antonio and Reno are the strongest contenders for the project.
Similarities between the two cities are striking.
Both boast a diverse manufacturing sector that makes up about 8 percent of the economy.
Both enjoy an abundance of average annual sunshine -- a plus for Tesla's plan to power the gigafactory with a sprawling solar-panel array and wind turbine farm. Reno and San Antonio also have welcomed a migration of workers from California looking for a cheaper cost of living.
From January 2009 until March last year, Reno's jobless rate stubbornly remained in the double digits but fell to 7 percent in April. In contrast, San Antonio's unemployment rate peaked at 8.1 percent in summer 2011and declined to 4.4 percent last month.
Certainly, Reno's workforce could use the 6,500 jobs that Tesla expects to create with its plant.
"If you look at the total employment in comparison between Reno and San Antonio, we're a quarter of the size, so we feel a little bit like David in this scenario," said Mike Kazmierski, head of the Economic Development Authority of Western Nevada.
"Given that, we're excited to even compete at this level," he added, "and our track record is that we usually win when a company gets serious about this location."
Local professors, high-tech engineers and job seekers echoed Kazmierski's enthusiasm. Still, each acknowledged the threat that South Texas poses to their region's courtship with Tesla.
At Tesla's annual shareholders meeting last week, Chairman and CEO Elon Musk reiterated his unusual plan to move forward with at least two locations for the gigafactory -- possibly three -- just in case one of the sites encounters regulatory delays.
Bloomberg News reported Tesla would go so far as "creating a foundation" in each state before it announces a final location by the end of this year.
A spokeswoman for Tesla declined to comment on potential locations in Nevada, but said the company will share more information about the first location this month.
Apart from keeping from the project on schedule, the strategy potentially could help the company secure bigger economic incentive packages from the competing state and local governments.
San Antonio-area officials already have offered incentives valued at nearly $800 million, according to two people familiar with the package.
If it comes down to money, Ray Bacon, executive director of the Nevada Manufacturers Association, didn't have much hope for his state. He noted Nevada's constitution prohibits monetary gifts to private corporations.
"When the state was formed, people were afraid the mining guys would rob the state treasury," Bacon said. "So if we're talking half-a-billion dollars and up, Nevada just doesn't have it. That's not an option.
"If it's about how much a state gives, we'll lose pure and simple."
In 2011, Nevada Gov. Brian Sandoval attempted to increase the state's ability to compete for corporate expansions and relocations with the creation of the Nevada Catalyst Fund, a $10 million program similar to the Texas Enterprise Fund.
Lawmakers sought to increase that amount to $13.5 million last year -- but that's still a fraction of the more than $100 million that Texas Gov. Rick Perry has available in this state's "deal-closing" fund.
The Texas Legislature initially pumped about $300 million into that program in 2003, after the governor's office and leaders in Bexar County successfully wrangled together enough in public subsidies to convince Toyota to build its multibillion-dollar truck plant on the South Side.
Since then, Perry has used the fund to award more than $500 million in grants to corporations such as Apple, Caterpillar and most recently Toyota, for the relocation of its Torrance, California, headquarters to Plano.
"Your state does a much better job keeping everyone on the same team and moving in the same direction," Bacon wrote in an email.
Sandoval's office did not respond to multiple requests for an interview.
It's unclear whether Nevada, a state well-known for its casinos, can gamble with the Catalyst Fund for the gigafactory.
In February, a conservative think tank filed a lawsuit to stop the state government from awarding tax dollars to private companies such as Tesla.
A lawyer for the Nevada Policy Research Institute, a Las Vegas-based free-market and limited-government advocacy group, told local media "that three times voters in Nevada have turned down ballot questions to allow the state to give money to private companies."
Following the lawsuit, the Reno City Council reversed course on a Catalyst Fund-backed subsidy that it planned to offer for a Massachusetts firm's expansion in Reno.
"Now that the NPRI case has been filed, we want to circle back with the (Governor's Office of Economic Development) to make sure we are not writing checks we can't cash," an attorney for the city told the Reno Gazette-Journal.
Local and state officials would not discuss what incentives they might offer Tesla, but Kazmierski of EDAWN downplayed the importance of the Catalyst Fund.
He noted that only two or three projects in the region have benefited from that program.
"It is an issue, but it is not significant in our view," he said. "If you're trying to make a difference, it's important to have a fund like that, much like the (Texas Enterprise Fund) that allows you to compete and just kind of push companies over the line at the end of negotiations.
"Most companies don't go somewhere for incentives," he added. "It is part of our package, but we have a pretty strong one already ready."
The heart of that package seems to sit within the 107,000-acre Tahoe-Reno Industrial Center.
While snow still dotted the rocky hills that surround TRIC in late May, the region enjoys more than 300 days of sunshine per year, potentially a nearly constant source of power for the gigafactory, which Tesla hopes will cut the cost of lithium-ion batteries by at least 30 percent.
Two rail companies, Union Pacific Railroad and BNSF Railway, haul shipments in and out of the industrial park twice a day, which would offer Tesla enough competition to drive down delivery costs of hefty battery packs to its electric-car factory four hours away in Fremont, California.
TRIC supplies its tenants with millions of gallons of water sourced from underground aquifers and has access to recycled water from the Truckee River that it pumps into the park for cooling processes and other uses.
A battery plant within TRIC also would have to wait less than four hours for resources to arrive from North America's only commercially active lithium mine, located in Silver Peak, Nevada.
There, Rockwood Lithium pumps brine rich with lithium into dozens of man-made lakes and, much like salt farms, waits for the sun to evaporate most of the water, leaving bounties of the valuable chemical, said Esmeralda County Commissioner Nancy Boland.
"Lithium is used in prescriptions for mental illness," she said. "Maybe that's why people are so happy here."
Considering Tesla's accelerated timeline -- Musk hopes to start producing batteries by late 2016 -- perhaps TRIC's most attractive quality is how quickly occupants can start work there.
"We can do the permit process in one day," Kazmierski said. "It doesn't matter how much money you have on the incentive side," he added. "Speed-to-market is one of our strengths."
On its website, TRIC offers a more conservative estimate.
It promises building permits for manufacturers in 30 days or less, thanks to the necessary use permits and zoning already in place.
As of last week, Storey County, in which TRIC operates, did not appear to have issued any permits for Project Daniel nor had the city of Reno -- which governs another potential site for the gigafactory.
About 15 miles north of City Hall, a former military airfield remains mostly empty.
The Reno-Stead Airport, as it's now called, includes about 3,500 unused acres that officials hope to redevelop. The Reno Tahoe Airport Authority currently is reviewing a handful of proposals for the project, which would make about 2,400 acres available for industrial and commercial use.
Speculation over the site has been intense. A blogger recently posted a comparison of the Reno-Stead Airport and Tesla's own rendering of the gigafactory.
The similarities included a mountain range that borders the airport to the north, a "dark lobster claw shape" of land that could house Tesla's solar panel and wind-turbine farm, and neighboring residential areas.
"We have an awful lot of land, with a great location and a board (of trustees) that's really committed to developing it," said Brian Kulpin, a spokesman for the airport authority.
He declined to confirm rumors that Tesla had toured the site on multiple occasions, simply saying, "We've had a lot of interest from a lot of companies, big and small."
"Fighting the past"
Northwestern Nevada's convenient logistics, abundance of resources and cheap land may have wooed Tesla to the negotiating table, but Michael Hicks, an economics professor at Ball State University in Muncie, Indiana, said one key factor could make or break the deal.
He produces an annual scorecard that grades each state on the health of its manufacturing industry.
Hicks considers several measures, including tax climate and sector diversification, but he said human capital far outweighs the rest when a manufacturer starts its site-selection process.
"Human capital is much more centrally important to manufacturing and employment," Hicks said. "A couple generations ago, there was room for a lot of on-the-job training and manual activity.
"A high school diploma is no longer sufficient," he added. "In 2006, that was the last year where half of manufacturing (and) production employees had a high-school diploma or less."
In his report, Hicks found only 38 percent of Nevadans had completed high school or higher, compared to 49 percent in Texas. And while Nevada awarded just four associate's degree per 100 people, Texas produced 25 such certificates out of every 100 residents.
Reno officials quickly dismiss the report, and EDAWN commissioned an independent study last year that ranked the Washoe County School District near the top in the nation for college readiness and percentage of graduates who took an Advanced Placement exam for college credit.
Still, WCSD Superintendent Pedro Martinez not ignore the perception that schools in the region suffer from a statewide problem.
"We're worried because we're getting more employers that are interested in the area," said Martinez, who oversees the education of about 65,000 students.
"Sometimes people will wonder about the schools . . . because Nevada historically has just had very bad statistics as a state," he said. "It's getting better, but we're having to fight the past."
To combat that poor perception, the school district, community college and the University of Nevada at Reno have spent the past five years working furiously to create a seamless job-training pipeline.
At the district level, Martinez and his administration copied the success of the district's career and technology academy for high school students, and embedded similar programs within each of the nine traditional high schools.
Students involved in engineering courses, for example, design schematics for robots, weld metals in advanced labs and build international award-winning space rovers.
The community college, armed with millions of dollars in federal workforce grants, offers customized training programs to help workers develop new skills and take management positions in factories.
And at UNR, faculty at the college of engineering designed a one-semester course to educate existing public-school teachers about engineering.
The college also hired a department liaison that invites more business executives to the campus, and it recently hosted its first "Innovation Day," in which graduating seniors present their final projects and entrepreneurial ideas to industry leaders.
"It's a strategic vision to partner with the industry in as many ways as possible," said Emmanuel "Manos" Maragakis, dean of the college of the engineering. "This is a relationship you cannot create overnight, but (the industry) understands the vision. We're not where we want to be, but we're much stronger than before."
'Work to be broke'
Education leaders echoed area manufacturers, admitting the region should have nurtured that relationship long before the Great Recession and collapse of the local gaming industry.
In the heart of downtown, it's not unusual to see police officers taking statements from drunks and homeless people on the curbs outside dilapidated motels and numerous pawn shops that operate across the street from casinos.
University students and young professionals mostly avoid the area, except on the weekends when taverns and galleries frequently host beer and wine crawls.
Aside from the poor perceptions dogging the region, Kazmierski said Reno's second-biggest hurdle to economic development is its urban core.
"We have the potential to be a great city, but you can't have a great city without a great downtown," he said, nearly quoting San Antonio Mayor Julián Castro verbatim.
Developers have re-energized a 1.5-mile road stretching from the Truckee River that winds through downtown to the barren lot of a demolished shopping mall. Midtown, which resembles Southtown in San Antonio, houses pricey restaurants, boutique shops and new apartment complexes that young workers quickly fill.
But as officials wait for that development to trickle north into the urban core, Steven Alcid walks every morning from a weekly motel in downtown to an unemployment office south of Midtown.
The 60-year-old meets with career counselors to retool his resume, applies for several jobs each week and uses free telephone and computers to hunt for temporary positions.
Alcid used to take a 45-minute bus ride each day to a Dell warehouse at TRIC, where he earned $22 an hour before the company shuttered there four years.
"Now I work to be broke," Alcid said. "I can do manufacturing. I can do warehouse work, but where? I compete with too many people."
He did not recognize Tesla's name, but the moment Alcid heard "electric-car maker," he grew as excited as the economic development officials courting the company.
Aclid previously studied auto technology and business management, but said he may look into training programs at the community college to prepare for a potential job at Tesla.
"It'd be great to see them in Stead," he said. "I can't afford a car, but a bus goes straight to the airport.
"Six thousand jobs, you said? There's got to be one for me."
Express-News archives, Researcher Michael Knoop and Data Editor Joseph Kokenge contributed to this report.