The state-owned Tesla factory in Buffalo is once again in flux.
The electric automaker, which is behind on its job requirements, has been renegotiating its lease with state officials for the last two years. A resolution seemed close — state officials promised final approval over the summer — before a change to the company’s AI strategy complicated a pending deal.
“It's been fits and starts,” said Kevin Younis, the chief operating officer of Empire State Development, which is New York’s principal economic development agency. “They can be an organization that can be difficult to communicate with.”
Tesla didn’t respond to a request for comment. Its factory in South Buffalo — which the state built for almost $1 billion and rents out for $1 a year — has been a political lightning rod for more than decade.
Earlier this year, critics said the state should walk away from the company as CEO Elon Musk joined the Trump administration as head of the Department of Government Efficiency. Gov. Kathy Hochul promised to review the pending lease negotiations. Liberals called on her to enforce penalties of up to $41.2 million against the company, but her administration demurred.
The latest source of uncertainty is the collapse of an AI supercomputing project that was to be located at the Buffalo site. As part of the pending lease update, Tesla pledged to spend $500 million on a supercomputer called Dojo that would run on specially designed chips and include a cluster of servers in Buffalo.
The computer would analyze data from more than a million Tesla vehicles to help the company develop its self-driving software. But Musk announced in August that he was shutting down Dojo and focusing on a different supercomputer, Cortex, that is located at Tesla’s plant in Austin, Texas.
Younis said the state still wants Tesla to commit to placing some kind of computer in Buffalo, regardless of what type of chips the company uses.
“They backed away from the Dojo and that was a problem for us because that was a big part of why we were coming to this extension of the agreement,” Younis said. “While they weren't doing Dojo, they're doing a supercomputer. What essentially that means is they're not using their own chips for the supercomputer, they're using somebody else's chips.”
“So same investment, but again, because we don't have great communication sometimes with them, we didn't know. That sort of set things back and slowed things down again,” he continued.
The factory was the centerpiece of former Gov. Andrew Cuomo’s “Buffalo Billion” initiative, and the biggest investment in his broader effort to boost Upstate New York’s economy. It was also the subject of a bid-rigging scandal that led to federal charges against construction executives and top Cuomo administration officials.
State taxpayers spent roughly $1 billion to build and equip the sprawling factory, which was intended to make solar panels. The state’s original deal was with Silevo, which was acquired by Tesla’s sister company SolarCity in 2014.
Tesla subsumed SolarCity in 2016. The plant, which opened that year, now makes components for Tesla’s superchargers.
In exchange for $1 of annual rent, Tesla promised to create 3,460 jobs across the state, including 1,460 “high tech” manufacturing jobs at the Buffalo plant. Tesla said it had 2,883 qualified employees in New York at the end of last year and “more than 3,000” as of Jan. 31, according to a report filed with state officials on that date.
Sam Magavern, senior policy fellow at the Partnership for Public Good, a Buffalo think tank, says the state should open up a public request for proposals of what to do with the factory. That would allow officials to see if there are better alternatives to the company.
“There's been a real litany of problems with the Tesla site. First of all, they never met the job targets and the job expectations that were initially agreed to and promoted,” said “There's no new deal. So one of our biggest questions for the state is, why hasn't Tesla been penalized for missing those existing job targets?”
A spokesperson for the state’s economic development agency said it reserves the right to impose penalties.
Tesla and the agency exchanged updated lease terms in mid-July, according to emails reviewed by Gothamist in response to a public records request. The agency withheld the July drafts because they contain information that “if disclosed would impair present or imminent contract awards," lawyer Jaclyn Clemmer wrote.
The most recent publicly available draft, dated January of this year, reduced Tesla’s job creation requirement to 3,000 around the state. The draft agreement also includes provisions about the Dojo investments and lengthens the lease by five years, to 2034. Rent would immediately increase to $2 million a year, and eventually $5 million annually.
Buffalo Mayor-elect Sean Ryan has long criticized the state’s deal with Tesla. But the factory is there, and Ryan said he’s loath to do anything that could jeopardize jobs. He said he hopes any new lease will include provisions for a local payment in lieu of taxes to the city.
“Everyone still holds out hope that by having an offshoot of such a big company here that maybe something good will happen. So I think no one is prepared to, you know, dance on the grave of the agreement,” he said. “But right now we're in a prolonged status quo.”
