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Rivian's $1.5B Tax Incentive Package Rejected By Georgia Judge

The first of Rivian's R1T electric SUVs rolls off the company's assembly line in Normal, Illinois last year.

A judge has denied approval for a $1.5B incentive package Georgia agreed to give to electric vehicle maker Rivian for a new factory, potentially bringing a $5B project — the largest economic development project in state history — to its knees.

A Morgan County judge ruled Thursday that the incentive deal provided to the EV firm rests on the company’s financial viability — which is yet unproven, meaning that the 2,000-acre development is subject to property taxes rather than the workaround granted by the state, The Atlanta Journal-Constitution reported.

Rivian planned to spend $5B building an assembly plant 50 miles east of Atlanta, on land offered by the state of Georgia essentially for free. Rivian was offered a “bonds for title” deal through 2047, where a development authority retains the property title and the company makes rent payments to the authority, according to the AJC.

Development authorities don't pay property taxes, and can lease the property back to the tenant while providing a tax break — but the arrangement has to get the go-ahead from a judge. 

Rivian sought the court’s approval to issue bonds totaling $15B — the equivalent of almost all the cash it has on hand after a difficult quarter — representing the project’s future value, rather than a dollar amount that changes hands. Neither Rivian nor the Joint Development Authority planned to publicly sell the bonds, the AJC reported.

Ocmulgee Superior Court Chief Judge Brenda Holbert Trammell said in her ruling that the local development authority “failed to establish”  whether the bonds central to Rivian’s deal “are sound, feasible and reasonable.” Trammell also ruled that the JDA had not “put forward sufficient evidence demonstrating that the Project would promote the ‘general welfare within the territory of the Authority.’”

California-based Rivian, which counts Amazon as a major backer, was founded in 2009 and went public last November with a market capitalization of more than $85B. But the company has lost billions over the past two years as it tries to scale operations and compete with rival Tesla, posting a net loss of $1.7B last quarter.

The deal hinges on whether the lease agreement is something known as a usufruct, where a tenant has limited rights but isn’t subject to property taxes. Instead, Rivian reached a payment in lieu of taxes agreement where it would reportedly pay a reduced tax bill totaling more than $300M to local government and school systems over a 25-year period.

The Morgan County Board of Tax Assessors signed off on the deal earlier this year, agreeing that Rivian’s lease agreement with the Joint Development Authority of Jasper, Morgan, Newton and Walton counties was a bona fide usufruct.

The arrangement is part of a $1.5B incentive package offered to Rivian by state and local governments in an attempt to woo the EV maker to set up shop on Georgia soil. The package was made public and approved months after the deal was announced.

Opponents of the project raised objections over the deal almost immediately, and now a judge has ruled in their favor finding the lease isn’t a usufruct, but rather an “estate for years,” according to Thursday’s ruling, where a tenant has more control over the property and should pay taxes.

Trammell’s ruling will likely be appealed, the AJC reported. The Georgia Department of Economic Development and the JDA told the newspaper that they are “currently assessing all legal options.”

But if the ruling stands, it could provide a pathway for opponents in other parts of the state to challenge property tax breaks given to developers and corporations, the AJC reported, potentially disrupting other economic incentive packages. Georgia lost out on two plant projects, both of which looked at the site near Savannah that Hyundai ended up acquiring.

The package granted to Rivian is the state’s largest incentive package on record, with more than $700M in local property tax abatements, almost $200M in job tax credits, $111M for land and grading of the site, and $105M in construction material tax exemptions. The state also agreed to $90M for training and recruitment for the automaker, and tens of millions more in direct grants and wetland mitigation.

In exchange, Rivian expects to finish building the plant within two years and begin producing 400,000 vehicles, hiring 7,500 employees in Georgia at an average annual wage of $56K.