Business
Exodus From California Is More Troubling Than Sanctuary Policies, By J.P. Donlon, 5/4/18
California
is facing a bigger issue than its tussle with the Federal government over
sanctuary cities. According to a November report from the U.S Census Bureau,
the Golden State has had 142,932 more residents exit to live in other states
than people arriving from other states. This domestic out-migration was the second
largest outflow in the U.S. behind New York and New Jersey. It was up 11
percent (13,699 net departures) compared to 2015.
The
state’s net out-migration has been continuing for over two decades, yet the
state’s population continues to grow owing to foreign immigration. According
to census numbers some 108,301, or 0.3 percent immigrants came to
California as new residents from other countries. That and more births than
deaths contributed to limited population growth. To everyone else the state has
become a hard sell to people who presently live elsewhere in the country.
What
is more serious is the number of California-based companies that have left or
signaled their intention to leave the state. Last year marks the first
anniversary of the announcement that Carl’s Jr., a California burger icon for
more than six decades, was relocating its headquarters to Nashville. It’s a
symbol for what’s become a stream of businesses that have quit California. What
was once an almost quiet exodus of companies now looks more like a
stampede.
Among
the roll call of businesses abandoning California for more hospitable
business environments includes Toyota which has left Torrance and will complete the move of
its U.S. headquarters to Dallas in the coming month. Also having left for
Dallas is Jacobs Engineering Group, $6.3 billion firm formerly based in
Pasadena that has more than 230 offices across the world, employs 60,000 and
generates $12 billion in annual revenue.
Nissan
North America (left for Nashville a decade before Carl’s Jr. did), Jamba Juice
(traded San Francisco for Frisco, Texas), Occidental Petroleum (prefers Houston
over Westwood for its headquarters), Numira Biosciences (departed Irvine for
Salt Lake City) and Omnitracs, a software firm (waved goodbye to San Diego and
said hello to Dallas). Chevron moved 800 jobs from its Bay Area headquarters to
Texas, and Waste Connections shifted more than 100 jobs to Texas from Folsom.
“MANUFACTURING
FIRMS ACCOUNT FOR THE LARGEST GROUP OF BUSINESSES THAT SOUGHT GREENER PASTURES,
FOLLOWED BY PHARMACEUTICAL COMPANIES.”
In
addition, two dozen California companies have said they are tired of the
business-bashing in Sacramento, along with the high taxes — and are now
threatening to leave the state.
The
passing of proposition 30 in 2012 triggered $6 billion in new annual taxes
pushed even more companies to abandoning the Golden State for greater
opportunities in Arizona and Nevada. For example, Kubota Tractor Corp. and
Kubota Credit Corp., the company’s financing arm, plan to move their
headquarters from Torrance to Grapevine, Texas.
Business
relocation expert Joe Vranich who, as president of Irvine-based Spectrum
Location Services, has been tracking the exodus of companies of all
sizes. Vranich told Investor’s Business daily (IBD) that from 2008 through
2015, at least 1,687 California companies
pulled up stakes and
moved elsewhere. And those are only the reported ones. Vranich cites a rule of
thumb among business site-selection experts that five companies leave for each
one that actually gets reported in the press. So it’s probable that as many as
10,000 companies have left in recent years.
A
good example is that of Nestle USA which is moving its headquarters from
Glendale, Calif., a suburb just miles from downtown Los Angeles, to Rosslyn,
Va., near Washington, D.C., and taking 1,200 California jobs with it. Why? IBD
reports that the $26-billion-a-year food conglomerate tries hard to be discreet
about its reasons, but the fact is, Nestle and others in California quietly
admit that they are overtaxed and over-regulated, and elected officials treat
them not as honored members of the community but as rapacious pirates.
Apart
from having higher taxes, absurd housing costs and more regulations than nearly
any other state, says IBD, California’s wacky laws have turned the Golden State
into a venue of choice for activist groups to file costly class action lawsuits
— or to launch anti-corporate PR campaigns against big, wealthy targets like Nestle.
It’s
not all bad. According to Spectrum, California offers a variety of
incentive programs to help businesses, many of which are administered through the
Governor’s Office of Business and Economic Development. Those include tax
incentives for aerospace companies, California Film Commission incentives,
employment training panel incentives and California Energy Commission
incentives.
Some
of those incentives are hefty. Tesla, the Palo Alto-based maker of electric cars, received $15
million in tax credits last year. And Environmental Systems Research Institute, a Redlands-based international
supplier of geographic information system software, received $2 million in tax
credits.
But
these incentives are still somewhat overshadowed by the businesses that have
left California. Manufacturing firms account for the largest group of businesses that sought
greener pastures, followed by pharmaceutical companies, medical device makers,
biotech firms, health and dental businesses and veterinary businesses.
The
irony in all this is the company that identifies favorable out-of-state locations for firms seeking to free
themselves of California’s harsh business climate has itself departed the state
for greener pastures. Spectrum Location Solutions, which for ten years has been
based in Irvine, in Orange County, has moved to Cranberry Township, a
Pittsburgh suburban community in Western Pennsylvania. “I moved for three
reasons – taxes, regulations and quality-of-life,” said Joseph Vranich,
president of the boutique consulting firm. “First, I’ll have greater freedom in
my business now that I’m free of California’s notorious regulatory environment
and threats of frivolous lawsuits that hurt small businesses like mine,” he
said.
“Finally,
we are enjoying a superior qualify-of-life here. We bought a house larger than
what we had in California for about half the cost. We can afford to engage in
more activities because the cost-of-living in Cranberry Township is 44 percent
lower than in Irvine,” he said.
Concern
about California’s costs is widespread. Statewide, 58 percent of Millennials
and 65 percent of parents echoed the sentiment that “I am considering moving
away from California because of the high cost of living,” according to a recent
poll by the PR firm Edelman.
Gov.
Jerry Brown’s spokesperson once said few companies would leave California for
“desolate locations” elsewhere. “Well, this area is the opposite of
‘desolate,’” said Vranich. “Pittsburghers are justifiably proud of their
neighborhoods, cultural attractions, sports teams, scenic vistas, and
transformation to a place where more than 10,000 innovative tech firms call
home.”
Norb Leahy, Dunwoody
GA Tea Party Leader
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