"Not only will it bring money to the city, it will establish us as a leader in electric car and green technology production," Mayor Mario Guerra said of the unanimous.
The city is pinning hopes that the car factory could bring $21 million in city revenues over 15 years, create about 1,200 jobs and help revitalize its reputation as Southern California's high-tech hub.
Downey, a city of 115,000, was once a vibrant center of high tech manufacturing jobs where aerospace engineers designed and built parts for America's space program. At its height, there were some 30,000 employees at the complex, but when the plant closed in 1999, the complex fell into disrepair.
Sandra Barrett, a 19-year resident of Downey, said she can recall when the NASA facility closed and thousands of people lost their jobs. The 69-year-old said a Tesla factory would "be a big boost to our city. There are so many people in need of a job here."
The city bought 160 acres of land from NASA and has been trying to redevelop it. A hospital, park, shopping center and memorial dedicated to the shuttle Columbia now occupy half of the complex. The other half became a film production facility used in the making of "Ironman," "G.I. Joe: The Rise of Cobra" and at least one of the "Spiderman" films.
Industrial Realty Group owns nearly 60 acres of Downey Studios, and the city owns the remaining 20 acres.
Under a memorandum of understanding with IRG, the city agreed to waive $6.9 million in rent on those 20 acres and promised to expedite the permit process if IRG enters into a lease with Tesla.
Tom Messler, senior vice president of IRG, said his company is holding final discussions with the carmaker.
For nine months the city has aggressively courted Tesla, a Bay Area company known for its sporty all-electric Roadster and now moving toward more mainstream sedans.
In September, the council took out a half-page advertisement in the Los Angeles Times featuring a photo of the members wearing "Downey (hearts) Tesla" T-shirts and holding a banner that read: "Downey Welcomes Tesla Motors. Apollo to Tesla... the legacy continues."
The rotund mayor vowed to purchase a Tesla, even lose weight to fit into the sleek vehicle, if the carmaker comes to town.
"We're continuing to make progress," he said.
San Carlos-based Tesla has been looking for a place to build its next-generation Model S sedan, its seven-seat, $57,400 alternative to the $109,000 Roadster.
The Roadster's chassis is assembled in England and its guts — the powertrain, battery and so on — are installed at Tesla's factory in Menlo Park.
Tesla Motors Inc. initially planned to build the Model S in New Mexico but was persuaded to stay in California when Gov. Arnold Schwarzenegger offered to exempt Tesla from state sales tax on equipment it buys to build the sedan. That will save the company 7 percent to 9 percent on each part purchased.
When the Model S was unveiled to reporters in the spring, Tesla said it would bring the plant to Southern California. The company has also flirted with Long Beach, and Tesla spokesman Ricardo Reyes would not confirm if it has chosen a site.
In June, the company was awarded $465 million in low-interest loans from the U.S. Department of Energy to help build the Model S, which is designed to travel as far as 300 miles on a three- to five-hour charge.
The car is slated to go into production by late 2011, and with a federal tax credit for battery-powered cars, the cost to buyers could be less than $50,000.
If Tesla comes to Downey, it would mark the return of auto manufacturing to Southern California for the first time since General Motors Co. closed its Van Nuys Plant in 1992.
Barrett said she isn't bothered by the incentives the city is offering to lure Tesla.
"In order to get, you have to give," Barrett said. "I'm willing to see us make a little sacrifice to get people working again."