LOS ANGELES — Plans for a $1 billion electric car factory in North Las Vegas are a credit positive for Clark County and Nevada, according to Moody's Investors Service.
Faraday Future, based in Gardena, Calif. and backed with funding from a Chinese billionaire, is an early-stage venture that unveiled a concept car on Jan. 5 and expects to produce vehicles in two years.
Nevada Gov. Brian Sandoval approved a $390 million incentive package on Dec. 20 to convince the startup car company to build its factory in North Las Vegas, a city that came close to insolvency in 2014.
The state beat out California, Georgia and Louisiana as the site for the factory, which is touted as bringing 4,500 factory jobs and 6,700 construction jobs, Moody's analyst Pat Liberatore said in the credit outlook published Thursday.
Proximity to California, access to supply chains through freeways and the availability of enough land at Apex, a vacant industrial park, to build the 300 million square foot factory, were cited by Faraday spokeswoman Stacey Morris in selecting the city.
"The incentives were important, but they weren't the only factor," Morris said.
The state will provide $216 million in tax credits and abatements and issue up to $175 million in general obligation limited tax bonds to support the project.
A pledge of revenues from related tax increment or special district areas will support debt service on the LTGO bonds, which will be used to finance infrastructure improvements including water and other utilities.
Those revenues could fall short of projections if the project is delayed or the company fails, Liberatore said.
Faraday has 500 employees in Gardena, in Los Angeles County's South Bay region, and in Silicon Valley, according to Morris. It has been very close-mouthed about the make-up of its management team.
Morris would only say that a few founding members, some of whom are former Tesla executives, came together because they feel that today's existing cars don't meet today's needs.
Chinese billionaire Jia Yueting finally revealed in a letter to legislators in mid-December that he was backing the company.
Jia, who Forbes says has an estimated net worth of $7.9 billion, chairs Leshi Internet Information & Technology Beijing, a multimedia company involved in online streaming and smartphone technology.
The incentive package calls for the junk-rated city to help fund any shortfall in debt service for the GOLT bonds with uncommitted general fund money before the state appropriates its own funds. The debt will be a contingent liability, but it would be a credit negative if the city's modest reserves had to support debt service, according to Moody's.
The bonds are also only a contingent liability to the state's general fund, but the state has a low debt burden and the capacity to take on what Moody's called a modest amount of incremental debt.
The $216 million in tax abatements spread over 15 years somewhat mutes any direct financial benefits to the state and local governments, Liberatore wrote.
If the project is successful, Moody's said, local governments would collect $118 million of net additional taxes from Faraday through 2034.
North Las Vegas would net $48 million in additional taxes and Clark County would collect $46 million. The remaining $24 million would be split between the county and other local governments. The state would collect $38 million over the period.
The city of 222,000 has junk-level ratings from all three rating agencies.
Moody's upgraded North Las Vegas' general obligation limited tax rating to Ba2 from Ba3 in June and maintained a stable outlook citing the city's timely adoption of a balanced budget for fiscal year 2016. Standard & Poor's revised its outlook to stable from negative in June and affirmed its BB long-term rating on the city's $341.7 million of limited-tax general obligation debt.
Fitch Ratings revised the outlook to stable from negative and affirmed a B rating in April.