Charlie Harper: Georgia Makes Big Investments In Electric Vehicle Future

Charlie Harper

Friday, June 3rd, 2022

As is no longer new news, Hyundai has decided to expand its presence in Georgia in a big way.  Already a major employer in West Georgia with its subsidiary Kia, Hyundai will be constructing its first dedicated electric automobile and battery manufacturing facility on about 3,000 acres off Interstate 16 west of Savannah.  

The announcement solidifies Georgia as a major player – perhaps the major player – in future electric vehicle production.  The state now boasts a future plant for a major start-up, with Amazon backed Rivian building its first all-new EV factory east of Metro Atlanta.  Korean manufacturer SK innovation is investing $2.6 billion in Jackson County in North East Georgia to make batteries for Ford and Volkswagen, with the first 1,000 of planned 2,600 Georgians already on the job.

These three projects represent $13 billion in total investment for Georgia’s manufacturing base.  That’s 18,600 high wage next generation jobs for Georgians.  To further punctuate the point, those are jobs for rural Georgia’s future.

Georgia’s competition for these factories has expanded beyond our usual regional competitors.  In the recent past we’ve lost automobile plants to South Carolina (Volvo) and Alabama (Mazda/Toyota).  One of the reasons Georgia wasn’t considered as a finalist for the latter was that Georgia didn’t have a suitable site that allowed for immediate development.  

Georgia addressed those concerns by purchasing the Bryan county site one year ago through a multi-county Joint Development Authority.  Both Automotive plants will be using JDA’s which allow the state to expedite issues surrounding planning and zoning to ensure an efficient development timeline.

Georgia is now competing with the world for these kinds of projects.  Arizona and Texas were cited as possible finalists for Georgia’s prizes, with Mexico also a strong contender for new manufacturing centers.  

Georgia, as always, brought its A game to the negotiations and put eye-popping incentive packages on the table.  The details of the Hyundai incentive package have not been released, but the Rivian inducement has.  The headline number is $1.5 Billion in incentives.

What must be understood about this number is that the state isn’t writing Rivian (or Hyundai) a check for this amount.  Actual cash outlays from the state include purchasing the site ($111 Million), extending a rail line ($21 Million) and road improvements including a new interchange on I-20 ($52 Million).  

The state will also supply a worker training center and a workforce training program.  As a reminder, the state funds worker training through the technical college system for many other industries, large and small, through Georgia’s High Demand Career Initiative.  

Most of the package involves discounting future taxes that wouldn’t be collected if there was no plant to begin with.  In fact, the property taxes Rivian will pay over the next 25 years - $300 Million – is approximately 18 times what the current land is adding to local coffers. 

The bulk of the incentives comes from Georgia’s “Mega Project Tax Credit”.  This program allows tax credits based on future salaries to employers who create or expand jobs in Georgia.  

What is important to understand here, is that the jobs must actually be created, maintained, and meet both projected salary levels and hiring minimums over the life of the project.  If the jobs aren’t created, the tax credits are not earned.  In fact, there are “claw back” provisions allowing Georgia to take credits back if the project is not maintained at projected levels.

Georgia estimates that the 7,500 Rivian jobs will create an additional 7,978 indirect jobs with a total income of $1 Billion annually, or $25 Billion over the life of the project.  Presuming these Georgians pay 5% of their incomes in state income taxes, that’s $1.25 billion in future income taxes alone to offset the $1.5 Billion total package.  Add in Rivian’s $300 million property tax commitment, and the taxes generated cover the incentive program before even considering motor fuel taxes and fees paid by the trucks servicing the plant, sales and property taxes paid by the workers, etc.

Critics of incentive programs like this don’t like to see the details, and don’t like to talk about the fact that the program is open to all job creators – present or new.  They want you to think that the state is giving away your money.  

That’s not how it works.  Georgia makes big investments.  The returns generated are jobs for the next generation of Georgians and a return of tax dollars from a stable and growing economy.