With Tesla Contract Under Scrutiny, NY Legislators Call to Fine Carmaker for Missing Job Benchmarks

As New York weighs a deal to let Tesla renew its lease at a state-owned factory in Buffalo, the electric carmaker is falling short of its job-creation commitments — prompting some state lawmakers to call for penalties.

The state’s contract with Tesla requires the company to employ 3,460 people, according to documents reviewed by the New York Public News Network, and sets a $41.2 million penalty if the company fails to meet its job or investment requirements. 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.

“They should be fined if they didn’t meet the terms of their agreement, both because that’s fair and because it’s essential for the state of New York to have any credibility in negotiating and enforcing agreements around economic development subsidies,” said Assemblymember Micah Lasher, a Democrat from Manhattan’s Upper West Side.

The employment shortfall may complicate the company’s attempts to renew the lease. Gov. Kathy Hochul declined to back the pending deal as some of her fellow Democrats have raised concerns over the company and its leader, Elon Musk.

“I’m aware that there’s more interest in changing that dynamic going forward in light of – Tesla,” Hochul, a Democrat from Buffalo, said last week. “I’m going to look at that. I truly want to look at that.”

Tesla currently pays $1 a year in rent to a state-backed nonprofit entity. Under the pending deal, that figure would increase to $2 million a year, and eventually to $5 million annually. The company also committed to build a supercomputing cluster at the factory.

Tesla didn’t return an email seeking comment.

Critics from across the political spectrum have long questioned New York’s deal to lease the factory to Tesla, which former governor and current New York City mayoral candidate Andrew Cuomo brokered in 2014.

The arrangement has come under renewed scrutiny since President Donald Trump’s second inauguration, as Musk has taken the lead in laying off federal employees and shuttering government agencies, drawing protests at Tesla dealerships around the country.

New York state spent $959 million to build and equip a factory for SolarCity, a green energy company that Tesla purchased in 2016. In exchange, the company agreed to employ thousands of people and spend billions of dollars, according to a 10-year schedule.

Over the last decade, state officials agreed to a dozen amendments to the contract, some of which loosened the type of required jobs and pushed back deadlines. Negotiations over another amendment began last year amid concern that Tesla couldn’t meet its job requirements, state officials said.

In the Jan. 31 report, Tesla executive Jeffrey Munson said that the company exceeded job requirements that were laid out in a letter of intent signed in January 2024. The letter, which was signed by top state and company officials, lowered the required number of jobs to 2,750. A subsequent letter of intent increased the target to 2,900, but delayed the reporting date.

But the company is still subject to the terms of its existing contract, according to Matthew Gorton, a spokesperson for Empire State Development, the state’s economic development arm.

Gorton said the lower figures in the letters will be the basis for another amendment to the contract and represent the new targets, which Tesla is meeting.

“It is the new consensus on the contract as everything else is being renegotiated,” he said.

But the letters of intent, which were reviewed by Gothamist, explicitly say they are nonbinding agreements.

Cam Macdonald, general counsel for the fiscally conservative Empire Center for Public Policy, said the state has the power to push for the penalty under the contract.

“The issue is that it’s both a complicated political and economic question,” Macdonald said. “Is it worth it to Tesla in the long run to pay whatever penalties and walk? And then the thorny question for the state is, what are you left with in that facility?”

Some officials said New York should get tougher with Tesla, or perhaps look for another tenant.

State Sen. Brad Hoylman-Sigal, a Democrat from Manhattan, said the company shouldn’t be awarded for failing to meet the terms of its agreement.

“It is outrageous that Elon Musk weasels out of his commitments to New York taxpayers while he destroys the federal government — and we as a state shouldn’t be facilitating his Buffalo boondoggle,” Hoylman-Sigal said.

Kevin Younis, the chief operating officer for Empire State Development, previously said renegotiating a deal with Tesla was the best use of the facility because the state had already spent the money on the factory.

A spokesperson for Cuomo also defended the deal, noting that most of the company’s jobs are in economically depressed Western New York. Hochul, who grew up near the factory and joined the Cuomo administration as the facility was under construction in 2015, has previously talked about the number of jobs associated with the plant.

Younis said Tesla and the state reached a tentative agreement to extend Tesla’s lease on the Buffalo plant until 2034 and immediately increase its rent to $2 million a year. The company agreed to an additional investment in a supercomputer at the site. The statewide employment requirement would fall to 3,000 jobs from 3,460.

Lasher and Hoylman-Sigal introduced legislation, first reported by the New York Times, that would direct Empire State Development to review the deal. Gorton, the authority spokesperson, said ESD didn’t comment on pending legislation.

Story by Jimmy Vielkind
Jimmy Vielkind covers how state government and politics affect people throughout New York. He has covered Albany since 2008, most recently as a reporter for The Wall Street Journal.

Image: The Tesla gigafactory in South Buffalo, NY. (Credit: Chris Caya/WBFO News file photo)