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Elon Musk’s Bold Move and Its Ripple Effects

By Paul J. Carroll, CFP®April 29, 2024Videos

When I was reading the paper last night, I saw an interesting article about how Elon Musk is trying to de-annex Tesla’s factory from the city of Austin. This is something that’s been permissible since about September last year when a very controversial state bill was passed. How’s that going to affect Tesla? How’s it going to affect Austin? And how’s it going to affect Texas in the future?

So last September State Bill 2038 was passed and already over 191 companies have submitted proposal to de-annex from their local cities, and this really is a bit of a stealth nuclear weapon in the balance of power between companies and municipal agencies. They need each other. The municipalities need the jobs and the taxes and the property taxes that come with the workers. But the companies need the resources, they need access, they need utilities, electricity, water, things like that. They need the acquiescence of the local community. And that balance of power has now been significantly disrupted. Elon was not the first to do this, just loudest and the biggest so far.

What’s going on here? What’s at stake? From the city’s point of view, of course, an enormous amount of tax revenue is at stake. But remember, city revenues are not the biggest piece of the tax pie. You’ve got property taxes at the county level, you’ve got federal taxes, you’ve got state taxes. So it’s really not just about taxes. I think the other part of the issue is very much the trade-off between what’s best for the environment, what’s best for our future, and what’s not such a lot of red tape and overhead that companies are choking.

They have stickers all over the state, “Please don’t Californicate my state”, and they’re quite right. We can see what’s happening in California. We see what overzealous regulation without thought for unintended consequences can lead to. One of the big issues that’s really under the surface though is water. The Tesla plant is right next to the Colorado River. And the Colorado River and that entire basin is starving. The environmental changes of the last 10 years has left Lake Travis very short. In fact, the lake is close to about a third to a half of its traditional level. But at the same time, the demands on that lake are going through the roof. But water under the surface is a big part of the deal, and the other side of the deal is flexibility in the implementation and the attitude of regulation.

Possibly what separates Austin apart from any other city in the state is how challenging the city of Austin can be to work with for for a small business owner or an entrepreneur. Nobody’s crying a river for Elon. For every Elon there are thousands, tens of thousands of small and mid-sized business owners who are just trying to make things work, make ends meet, make a buck. And by doing so, create jobs, create a better world for us all to live in. So flexibility on both sides, clearly it’s going to be needed. It’s an interesting issue. I don’t have an answer. I think it should be on people’s radar as this conversation is now breaching the public awareness.

We wish you the best of investing success.

 

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Founder & CEO at Avion Wealth

Paul is the founder and CEO of Avion Wealth, LLC. He leads a team of wealth managers in building and executing financial plans for high net worth individuals and families. Contact Avion Wealth to speak with a financial advisor.