Electric truck manufacturer Rivian's plans for a 16 million square foot production plant in rural Georgia are temporarily on hold after local residents sued to block validation of a municipal bond offering underpinning a state subsidy plan.
The Georgia Economic Development Commission, in conjunction with the Joint Development Authority for Jasper, Morgan, Newton, and Walton counties and Rivian, inked an economic development agreement in May that allowed for the acquisition of 2000 acres of farmland less than 50 miles east of downtown Atlanta.
The deal includes financial incentives to back the development of a sprawling plant outfitted to accommodate battery and vehicle production, along with industrial waste, a driving test track, staff facilities, roads and utility systems, and shipping infrastructure.
The planned facility, boosters say, would be the largest state economic development investment in Georgia's history, generating 7,500 direct jobs, buoyed by a bevy of tax incentives that includes $15 billion of PILOT, or payment-in-lieu-of-taxes, revenue bonds.
The main purpose of the bonds isn't to generate capital — according to the final
Rivian, according to the agreement, is purchaser of the bonds and tenant of the project.
The agreement followed years of work by state officials to court the California-based carmaker among a crowded field of competitors that included Arizona and South Carolina.
Under the agreement, Rivian will have access to up $15 billion of tax revenue bonds issued by the GDEcD via the JDA in a "bond-financed sale-leaseback structure" that allows the carmaker to rent, instead of own, the facility and land after purchasing the bonds in increments as needed from the JDA.
The rental agreement between Rivian and the JDA covers an initial lease of 25 years, after which the company can choose to extend or purchase the facility by turning the purchased bonds over.
While Rivian is required to make PILOT payments to surrounding counties amounting to a minimum of $300 million over the first five years of operation under the current agreement, its status as a tenant would make it exempt from paying local property taxes.
The difference between the PILOT payments and the potential haul municipalities could see under standard property tax rates could be as high as $700 million, according to JoEllen Artz, president of a community group opposed to the construction of the plant and one of the residents responsible for bringing the validation suit.
"We've decided to call it a loophole bond because Georgia's Constitution does not allow tax abatement," said Artz. "And this is essentially what that is."
Artz and seven other county residents filed
"Our economy is agricultural, and the land that this plant is proposed to be constructed upon is farmland," she said.
However, the crux of the opposition's legal argument is contesting the structure of the bond authorization backing the plant's construction.
According to the suit, the JDA "is not merely permitting Rivian to occupy" the facility and land for decades, and rather giving the carmaker "primary control of the property," a fact the objectors and their lawyer, John Christy, a partner at the Atlanta-based law firm of Schreeder, Wheeler & Flint, believe invalidates Rivian's status as a simple renter.
"The whole scheme is really designed to avoid the payment of real property taxes and ad valorem taxes on the facility and instead, substitute it with a negotiated payment plan, called a PILOT plan," Christy said. "The flaw in all this is the financial stability of Rivian."
Rivian has so far been better at building buzz for its pricey electric pickup trucks than it has been at building the pickup trucks.
According to its recent
The Georgia factory is supposed to be able to produce 400,000 vehicles annually.
The automaker, which was founded in 2009, briefly became the third most valuable electric car maker in the world went its stock went public in November. It was trading at $32.96 Wednesday on the NASDAQ, about 75% lower than its IPO price.
Rivian intended to begin construction on the Georgia plant this summer, with vehicle production expected to begin in 2024. In a press release, the company said the site was chosen with "logistics, environmental impact, renewable energy production, availability and quality of talent and fit with Rivian company culture."
The company faces significant competition in the EV market, including from deep-pocketed competitors like Tesla, Ford and GM.
If the company were to file bankruptcy, liquidate, or go out of business, the state and municipal governments would "be left holding the bag," said Christy.
The suit calls for Rivian's agreement to be reclassified from rental to a standing estate, making the company subject to property taxes.
The presiding judge requested additional evidence and proposals, giving both parties until Aug. 31 to submit them, according to the text of her ruling.
"We believe petitioners' claims are meritless and intend to vigorously defend against this lawsuit," Rivian said in its quarterly report.
Artz said her group plans on further contesting the legality of other aspects of the agreement, including the state's February takeover of negotiations with Rivian following failure by municipal officials and the JDA to come into agreement on an exact structure for the bonds.
The move cut local official entirely out of the negotiation process, she said, stymieing community input.
Despite Georgia being "a home rule state" that gives localities authority over most local matters, the move negated local officials' ability to give an opinion on the zoning among other things, she said.
According to Christy, the state was racing to "get in the front of this electric wave" changing the automobile industry. That has included major electric vehicle
"They want this project, and the state's going to do what it can to just steamroll over everybody to get this project built," Christy said.
In a letter explaining the decision, GDEcD commissioner Pat Wilson claimed the approached would "enable the State to provide additional resources to improve the process" being carried out, ensuring Georgia's investment in a next-generation industry and new local job provider.
Job creation was much touted by the supporters of the deal.
"My administration's more recent emphasis on innovation and development in the electric mobility ecosystem has equipped our state with a new tool in the tool box to deliver big wins for hardworking Georgians," Gov. Brian Kemp said in the statement announcing the deal.
Electric vehicles will represent 32% of the total market share for new car sales, according to the report.
With an average unemployment rate of 3% in the surrounding counties, Artz believes the harm the factory can cause outweighs the economic benefit it may have on the immediate community.
She said she hopes the state sees "how adamant we are about protecting our environment" and take a more cautious approach with how the land is developed.
