Musklandia: Tesla divorces gigafactory land from city of Austin

Using de-annexation law to bypass regulations in development process, avoid city taxes for 2,100 acres

Tesla De-Annexes 2,100-Acre Gigafactory from City of Austin
Tesla’s Elon Musk with Austin gigafactory (Getty, Google Maps)

Tesla is the latest company to exercise a controversial “de-annexation” law to bypass various regulations tied to its Austin gigafactory and surrounding land in eastern Travis County.

Tesla is de-annexing nearly 2,100 acres along State Highway 130 and the Colorado River, after its initial request was denied due to partial boundary discrepancies, the Austin Business Journal reported. The eclectic vehicle maker’s revised petition for removal from the City of Austin’s extraterritorial jurisdiction complied with a state law that took effect Sept. 1, and the city has no recourse in the action. 

Senate Bill 2038 allows landowners to remove their property from a city’s outer reaches, allowing them to sidestep development approval processes. The legislation is especially relevant in rural areas on the fringes of major cities, where there are unincorporated communities over which municipalities have some control, and where they often provide services such as utilities and garbage. 

Extraterritorial jurisdictions matter in part because they allow cities to enforce environmental and flooding standards, said Shelley Parks, a city spokesperson.

In 2020, Tesla CEO Elon Musk touted plans for an environmentally friendly “ecological paradise” along the Colorado River, promising public access to amenities like hiking trails and boardwalks. However, these visions remain unrealized, and Musk’s penchant for challenging regulations across his ventures is well-documented. He has blamed labor laws, Covid-19 restrictions and other measures for delaying his Boring Company projects and SpaceX facility in South Texas. 

“Part of him moving the [Tesla headquarters] here was because of conflicts with California environmental and labor standards,” Bill Bunch, an Austin attorney and environmentalist, told the outlet.

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Bunch criticized the city’s extension of utilities to Tesla without annexation or firm assurances of future annexation. 

“We don’t have any business extending utilities to people who don’t want to meet our standards or pay our taxes,” Bunch said.

Since the law took effect, de-annexation requests have mushroomed all over the state, with Austin receiving 191 petitions as of December. Several municipalities, including the central Texas towns of Hutto and Lockhart, have sued over SB 2038, calling it unconstitutional and unsafe. Austin hasn’t joined the lawsuit.

In Bastrop, which is near Tesla’s gigafactory and several other of Musk’s projects, developer Alton Butler recently used the law to propel a 546-acre film studio. 

—Quinn Donoghue 

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