Procurement Delays Cost Rivian Local Tax Breaks For 2018
Local schools and other taxing bodies will be getting some unexpected tax revenue from Rivian after the electric vehicle startup failed to meet its minimum capital investment amount for 2018.
Rivian’s agreement with local taxing bodies required the company to invest $10 million at the plant and hire 35 full-time employees by Dec. 31, 2018, to get its property tax breaks. While Rivian does have around 60 employees in Normal, it failed to reach the $10 million investment threshold, officials said Tuesday at the McLean County Chamber of Commerce’s State of McLean County event.
“It was really based on logistics,” said Mike O’Grady, vice president and interim CEO of the Bloomington-Normal Economic Development Council. “Engineering for some of the parts (coming into) the plant just took longer than anticipated.”
Rivian spokesperson Michael McHale confirmed Tuesday the plant equipment procurement process has taken longer than they expected.
“We don’t physically have the goods to pay the supplier for the parts coming into the factory,” he said.
For the 2018 tax year (payable in 2019), Rivian owes around $657,000 in property taxes for five parcels, according to county records. Unit 5—the largest taxing body affected—will receive around $389,318 in unexpected tax revenue from Rivian this year, said Unit 5 attorney Curt Richardson.
Rivian did meet its obligations to qualify for its 2017 tax breaks. Around $561,000 was abated as a result, said McLean County Treasurer and Tax Collector Rebecca McNeil.
O’Grady predicted that Rivian would meet its $22 million minimum capital investment amount by Dec. 31, 2019, to qualify for its next year of tax breaks.
“They’re gonna far exceed that next year,” O’Grady said, pointing to the effectiveness of the tax-break agreement’s so-called “clawback” provisions.
Rivian secured the local tax breaks in 2016. Since then Rivian has received two major investments—$700 million, led by Amazon; and another $500 million from Ford. McHale declined to comment on whether Rivian would still pursue its local tax breaks in future years, given those recent investments.
“We are clearly in a very healthy state because of the money that’s coming into the business,” McHale said.
Rivian plans to build its own electric vehicles in Normal, starting next year with an SUV and pickup. It will also make its batteries and skateboard platform on site. The company has promised to hire at least 1,000 workers by 2024 to qualify for its full slate of tax breaks.
O’Grady said the Amazon and Ford investments are good news. Ford plans to use Rivian’s skateboard platform—also built in Normal—to build a new electric vehicle of its own.
“That’s additional work that none of us had anticipated,” O’Grady said. We may see more employees out there than we originally thought.”
State Tax Breaks
Rivian also failed to meet the investment benchmark required for its state tax credits, a state official said Tuesday.
Rivian was set to receive $49.5 million in EDGE state tax credits if it met certain annual hiring and capital-investment thresholds over several years. Rivian was required to spend an unspecified amount—it’s redacted from the agreement—on “equipment, site acquisition, and site improvements” by Dec. 31, 2018.
“Rivian has surpassed the job creation requirement but has not met the investment benchmark in the EDGE agreement. They have submitted a request for us to consider a new investment benchmark for the coming year," said Illinois Department of Commerce and Economic Opportunity spokesperson Charity Greene.
Rivian has around 750 employees companywide, mostly in Michigan, California, and the United Kingdom.
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