Tesla will seek one-year break on job commitments

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Tesla cites the coronavirus pandemic as the reason

BUFFALO, NY

Tesla, which operates a factory in South Buffalo built and equipped with almost $1 billion in state taxpayer money, will ask state officials for a year-long break on its job and financial commitments.

The company disclosed this Wednesday night in its quarterly filing with the SEC, citing the coronavirus pandemic as the reason. The state offered up the one-year break, but still will need to approve Tesla’s request once they send it over.

Tesla has an operating lease with the Research Foundation for the State University of New York for the vast manufacturing facility at Riverbend by the Buffalo River. Tesla uses the factory, which it calls Gigafactory New York, for “the development and production of our Solar Roof and other solar products and components, energy storage components and Supercharger components..”

Tesla was to have employed in Buffalo 1,460 workers by the end of this month. Tesla already reported to the state that it had met this obligation.

But the state’s SUNY arm has not responded to Freedom of Information law requests from News 4 Investigates to provide documentation that proves Tesla met the job goal.

Tesla was able to meet this goal in large part by hiring temp agency workers. Still, Tesla is required to sustain those jobs for a five-year period.

“Under the terms of the operating lease arrangement, we are required to achieve specific operational milestones during the initial lease term; which include employing a certain number of employees at the manufacturing facility, within western New York and within the State of New York within specified periods following the completion of the manufacturing facility,” Tesla reported to shareholders.

“We are also required to spend or incur $ 5 billion in combined capital, operational expenses and other costs in the State of New York within 10 years following the achievement of full production.”

The state can impose a $41.2 million penalty each year Tesla fails to meet any of the benchmarks, including the job goals, cited in the agreements.

“Furthermore, if the arrangement is terminated due to a material breach by us, then additional amounts might become payable by us,” Tesla reported.

None of that will matter now, at least for 2020.

Tesla said state government officials provided the company with guidance “that all obligations relating to investment and employment targets under certain of its projects, including our obligation to be compliant with our applicable targets under such agreement on April 30, 2020, may be deferred for a one year period upon such agency’s approval of an application for relief by the
obligor.”

“As we temporarily suspended most of our manufacturing operations at Gigafactory New York pursuant to a New York State executive order issued in March 2020 as a result of the COVID-19 pandemic, we intend to apply for and expect to be granted such deferral. Moreover, as we had exceeded our investment and employment obligations under this agreement prior to such mandated reduction of operations, we do not currently expect any issues meeting all applicable future obligations under this agreement,” the company stated in its 10Q report filed with the SEC.

“However, if our expectations as to the costs and timelines of our investment and operations at Buffalo or our production ramp of the Solar Roof prove incorrect, we may incur additional expenses or substantial payments to the SUNY Foundation.”

Empire State Development, the state’s economic development agency, provided the following statement: “The COVID-19 pandemic and resulting shutdowns to save lives, has upended businesses across the globe and in New York State.  To help mitigate those impacts, and provide reasonable and fair accountability, we are considering delaying job creation requirements tied to economic development programs for 12 months.  This allows companies an opportunity to resume their job creation targets established before the crisis struck.”

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