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Downey City Council opens the door to a Tesla auto plant

A memorandum of understanding with Industrial Realty Group could lead to an electric-car factory on a site managed by IRG.

November 26, 2009|By W.J. Hennigan

The Downey City Council on Wednesday approved a preliminary deal that could help bring auto manufacturing back to Southern California for the first time in nearly two decades.

The council agreed to a memorandum of understanding with Industrial Realty Group, the manager of an 80-acre parcel where Tesla Motors Inc. is considering building an electric-car plant. The facility is currently used for film and television production.

According to the memorandum, the city will provide $8.7 million in economic development incentives to help Industrial Realty Group, or IRG, negotiate a lease agreement with the San Carlos, Calif., carmaker.

The city estimates that 1,200 to 1,500 jobs could be created as a result of the deal.

The city said a car plant could generate about $20 million in revenue from taxes and utility fees.

Tesla for several years has been looking for a location to build its next vehicle, an all-electric sedan called the Model S.

The car, which can travel up to 300 miles on a full charge, is slated to go into production in late 2011. The retail price will be $57,400.

A Downey spokesman said passage of the memorandum by the City Council was necessary to make the deal possible between Tesla and IRG.

The city owns 20 acres of the 80-acre site.

Under the agreement, IRG doesn't have to pay the city for leasing the land for 15 years, which amounts to about $7 million.

The remainder of the $8.7 million in economic incentives includes fixing up the site.

The U.S. Department of Energy, which has given Tesla $465 million in low-interest loans to build the Model S vehicle, still needs to review the leasing agreement before any deal can be finalized.

The deal is no sure thing. Tesla has abandoned previous plans to open factories in San Jose and Albuquerque, which raised eyebrows among industry experts about the Downey deal.

Tesla spokesman Ricardo Reyes said that the company was in negotiations and declined to comment on the City Council's action.


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