$15B in bonds for Rivian EV plant in limbo as judge considers concerns

Morgan County Superior Court Judge Brenda Trammell gave the JDA two weeks to submit paperwork addressing concerns brought up by seven Morgan County residents, who oppose the project and the incentives used to bring the company to Georgia. John Christy, an Atlanta attorney representing the seven Georgians, told The Atlanta Journal-Constitution the financial incentives, which primarily act as tax breaks, are likely critical for Rivian to proceed with its plans — plans he hopes will never come to fruition.

“They’ve indicated that this issue that we’ve raised ... if this issue is not resolved favorably to them, they say the project will not go through,” Christy said Thursday after the hearing ended.

In a statement, JDA spokesman Ben Sheidler said the judge’s delay will not hamper their short-term plans. A spokesman said groundbreaking on the EV plant is still scheduled for September.

“We will provide additional information to assist Judge Trammell with her decision,” the statement said. “With widespread support from the community, region and state, we are excited to make this project a reality bringing thousands of good-paying jobs to the community.”

How do these bonds work?

Bond validation is the next step in the complicated incentive package the state and JDA used to woo Rivian to Georgia.

The California-based automaker and Gov. Brian Kemp announced plans for the factory in December, and the plant is expected to begin production of a new crossover, known as the R2, starting in 2025.

To come to Georgia, Rivian was offered a $1.5 billion package of state and local incentives, including free land, a state-owned training center, a new interchange along I-20 and about $700 million of local and state tax breaks. It was the largest such deal in Georgia history until last month when Hyundai was offered $1.8 billion in similar incentives to build its EV plant near Savannah.

While $15 billion in bonds is an eye-popping number, neither the JDA nor Rivian plan to publicly sell the government-backed bonds. These bonds, typically called “bond for title” deals, amount to a real estate transaction where a development authority holds the title for the property while the company makes rent payments to the authority.

The bonds act as collateral in the arrangement, with Rivian on the hook to pay their value back to the JDA through rent payments. Since development authorities do not pay property taxes, they can lease the property back to the project’s developer while providing a tax break.

The value of the bonds was chosen based on the potential value of Rivian’s finished factory. While the company’s plans amount to a $5 billion facility, the higher bond amount gives the company room to expand their facility’s scope.

Opposition in court

Bond validation hearings are usually quick affairs, but Thursday’s was an exception. It lasted more than three hours, with testimony from the plant’s proponents, detractors and JDA leaders.

Most bond validation hearings are uncontested, Christy said. “Here, there was counter evidence,” he said, “and significant legal issues that deal with this rental agreement with Rivian.”

Christy argued the bond validation amounts to a “tax avoidance scheme,” according to court filings. Christy said the massive amounts of money at play are a huge gamble given Rivian’s status as an upstart that has seen its value plummet this year. On Thursday, multiple media outlets reported that Rivian CEO RJ Scaringe told employees that the company has started laying off roughly 6% of its workforce as part of a restructuring plan.

“If Rivian goes out of business, what are you going to do with this plant?” Christy said.

The JDA said if Rivian doesn’t reach 80% of its investment and job creation goals by the end of 2028 or maintain those commitments through 2047, which is also known as a “claw back” period, it will have to pay penalties to the JDA.

“The bonds are payable solely from rental payments made by Rivian to the JDA and Rivian is the bondholder which means Rivian carries the risk,” Sheidler said. “If the project doesn’t come to fruition, in addition to the clawbacks Rivian will have to pay, the JDA and State would have the ability to market the project to another user.”

The argument against the bond validation is one of several legal challenges Christy and his seven clients have pursued to challenge Rivian’s incentive package. The primary question they raise is whether the Morgan County Board of Tax Assessors properly approved a rental agreement with the company, a central piece of the $1.5 billion incentive package.

Instead of paying typical property taxes, Rivian and officials with the JDA reached a payment in lieu of taxes agreement or PILOT in which the automaker would pay a reduced tax bill of more than $300 million to local governments and school systems over 25 years. Christy argued in a letter to the Board of Assessors that they should reject the PILOT deal, because the Rivian lease is a type that should be subject to full taxation.

State officials and the JDA said these type of bond deals and financial incentives are common across Georgia and result in the state attracting large developments that otherwise would not take place.

Andrew Capezzuto, chief administrative officer and general counsel for the state Department of Economic Development, previously said the incentive structure for Rivian “is consistent with countless other economic development deals done across Georgia over the years.”

A note of disclosure

Cox Enterprises, owner of The Atlanta Journal-Constitution, also owns about a 4% stake in Rivian and supplies services to the company. Sandy Schwartz, a Cox executive who oversees the AJC, is on Rivian’s board of directors and holds stock personally. He does not take part in the AJC’s coverage of Rivian.