New York State officials are frustrated with Tesla after two years of lease renegotiations for the taxpayer-funded Buffalo factory hit another wall when Elon Musk abruptly killed the AI supercomputer project that was central to the pending deal.

The state built the sprawling facility for nearly $1 billion and rents it to Tesla for just $1 per year. Now officials say Tesla’s communication problems are derailing efforts to finalize new terms.

State Officials Call Tesla ‘Difficult to Communicate With’

“It’s been fits and starts,” said Kevin Younis, chief operating officer of Empire State Development, New York’s principal economic development agency. “They can be an organization that can be difficult to communicate with.”

The latest disruption stems from Tesla’s August 2025 decision to shut down its Dojo supercomputer project. As part of the pending lease update, Tesla had pledged to spend $500 million on Dojo, which would have included a server cluster in Buffalo to analyze data from Tesla vehicles for self-driving software development.

Then Musk posted on X that he was shutting down Dojo entirely, calling the project “an evolutionary dead end.” He shifted Tesla’s AI focus to a different supercomputer called Cortex, located at Tesla’s Austin, Texas headquarters.

New York officials learned about this through the announcement, not direct communication.

Dojo Shutdown Blindsided State Negotiators

“They backed away from the Dojo and that was a problem for us because that was a big part of why we were coming to this extension of the agreement,” Younis said.

The state still wants Tesla to commit to placing some kind of computing infrastructure in Buffalo, regardless of chip type. Younis noted that Tesla’s pivot means using third-party chips instead of its own custom silicon, but the investment should remain equivalent.

“While they weren’t doing Dojo, they’re doing a supercomputer. What essentially that means is they’re not using their own chips for the supercomputer, they’re using somebody else’s chips,” Younis explained.

“So same investment, but again, because we don’t have great communication sometimes with them, we didn’t know. That sort of set things back and slowed things down again.”

A Decade of Broken Promises

The Buffalo factory has been a political lightning rod since former Governor Andrew Cuomo launched it as the centerpiece of his “Buffalo Billion” economic stimulus initiative.

State taxpayers spent roughly $1 billion to build and equip the sprawling facility, which was originally intended to manufacture solar panels. The state’s original deal was with Silevo, which was acquired by Tesla’s sister company SolarCity in 2014. Tesla absorbed SolarCity in 2016.

In exchange for $1 annual rent, Tesla promised to create 3,460 jobs across New York, including 1,460 “high-tech” manufacturing jobs at the Buffalo plant.

Tesla has consistently fallen short. The company reported 2,883 qualified employees in New York at the end of 2024 and “more than 3,000” as of January 31, 2025, according to state filings.

The plant now makes Supercharger components rather than solar panels.

$41 Million in Penalties Remain Unenforced

Critics have called on Governor Kathy Hochul to enforce penalties of up to $41.2 million against Tesla for missing job targets. Her administration has declined.

“There’s been a real litany of problems with the Tesla site. First of all, they never met the job targets and the job expectations that were initially agreed to and promoted,” said Sam Magavern, senior policy fellow at the Partnership for Public Good, a Buffalo think tank.

“There’s no new deal. So one of our biggest questions for the state is, why hasn’t Tesla been penalized for missing those existing job targets?”

A state comptroller’s audit found the factory generated just 54 cents of economic benefit for every subsidy dollar spent. External auditors have written down nearly all of New York’s investment. The Empire Center for Public Policy called the project “the single biggest economic development boondoggle in American history.”

Draft Deal Would Reduce Job Requirements

The most recent publicly available draft agreement, dated January 2025, would reduce Tesla’s job creation requirement from 3,460 to 3,000 statewide. It would extend the lease by five years to 2034 and increase rent from $1 to $2 million annually, eventually rising to $5 million.

State officials exchanged updated lease terms with Tesla in mid-July, but the agency withheld those drafts from public records because they contain information that “if disclosed would impair present or imminent contract awards.”

Buffalo Mayor-elect Sean Ryan, a longtime critic of the Tesla deal, said he hopes any new lease includes provisions for local payments in lieu of taxes.

“Everyone still holds out hope that by having an offshoot of such a big company here that maybe something good will happen,” Ryan said.

“So I think no one is prepared to, you know, dance on the grave of the agreement. But right now we’re in a prolonged status quo.”

Tesla did not respond to requests for comment.

EVXL’s Take

The Buffalo factory saga perfectly encapsulates everything wrong with subsidy-dependent economic development, and the timing couldn’t be more ironic.

This is a company whose CEO spent the first months of 2025 leading the Department of Government Efficiency, preaching about eliminating wasteful federal spending. Yet Tesla remains the beneficiary of one of America’s most criticized corporate welfare arrangements, a billion-dollar facility that returns pennies on the dollar to taxpayers while the company consistently fails to meet its commitments.

We documented this contradiction extensively when covering Musk’s DOGE role, noting that Tesla secured a $465 million Department of Energy loan in 2010 that kept the company afloat during its early struggles. Now Musk champions dismantling the very support structures that made Tesla possible.

The Dojo fiasco adds another layer of absurdity. Tesla committed $500 million in AI investment to sweeten the lease renegotiation, then killed the project without bothering to inform state officials. When Younis says Tesla can be “difficult to communicate with,” he’s being diplomatic. This is a pattern of corporate arrogance that treats government partners as afterthoughts.

The broader context matters here. As we reported when analyzing Tesla’s regulatory credit revenue decline, the company faces mounting financial pressures as policy shifts erode revenue streams. The post-subsidy EV market collapse we’ve been tracking demonstrates what happens when companies build business models dependent on government support rather than genuine market demand.

Buffalo is the cautionary tale writ large. Nearly $1 billion in taxpayer investment. Broken job promises. Equipment sold at a discount or scrapped. A state comptroller finding 54 cents returned per dollar spent. And still, New York officials negotiate from weakness because walking away means admitting the entire project was, as critics have called it, a boondoggle.

The question now is whether Tesla will actually deliver on whatever revised commitment emerges from these negotiations, or whether state officials will find themselves blindsided again when Musk’s next strategic pivot renders current promises obsolete.

History suggests New York taxpayers shouldn’t hold their breath.