Posted on 11/07/2004 9:27:37 PM PST by BurbankKarl
Neighboring business-friendly environments to lure California businesses
Joan Capponcelli did not want to leave California, but her employer did. Placing even more strain on the general manager was a responsibility to find a state that could accommodate a classic car parts manufacturer.
Arizona was close enough. Oregon certainly had its merits, too. But Nevada ended up wooing Scott Drake Enterprises, with its tax savings and more affordable workers' compensation rates an easy sell.
"It's a wise business move. I just challenge Arnie to make it so good in California that we would want to come back," said Capponcelli, who will soon commute several times a week to Henderson, Nev., from Oxnard.
It's been nearly a year since Gov. Arnold Schwarzenegger was elected to office. Among his winning platforms: to make California more business-friendly. But for companies like Scott Drake, the Golden State is far from regaining its glory. And now Nevada and other bordering states are beginning to capitalize on what they say are false promises that threaten to "terminate your business."
"I'm not putting the blame on Arnold. We started the process of looking for a new home when the old governor was still in office," Capponcelli said. "But workers' comp is far too high for us to wait."
Rates have nearly tripled in recent years, costing California businesses far more than their budgets had previously anticipated. The full cost of savings from the governor's reform packages -- likely to have a profound effect on businesses contemplating a move -- will not be fully realized until 2005.
But it's not just workers' comp influencing California businesses. Scott Drake, which specializes in reproduction parts for classic Mustangs, will save approximately $1.6 million constructing a new facility in Henderson instead of Oxnard.
That alone is worth a move, even if the company has to say goodbye to more than half of its staff, Capponcelli said. About 20 key executives have already agreed to relocate.
The lack of heavy taxes in other states is yet another enticing draw for many California companies. Five states that began 2004 with the most business-friendly tax systems are: South Dakota, Florida, Alaska, Texas and New Hampshire. Nearly all of these states raised sufficient revenue without imposing at least one of the three state taxes -- sales, personal income and corporate income taxes, according to the Tax Foundation, a nonprofit research group based in Washington, D.C.
California, which generates revenue from all three taxes, ranks 38th out of 50 states for business-friendly tax systems.
"That's not exactly a welcome mat," said Bill Ahern, spokesman for the foundation.
Nevertheless, Schwarzenegger continues to court businesses in other states. The governor drove a moving truck up and down the strip in Las Vegas this summer as a part of a nationwide advertising campaign with the slogan "California Wants Your Business."
Threatening his economic muscle, about 40 California companies relocated to or expanded operations in Nevada last year, resulting in approximately 1,500 jobs. The Silver State also has no corporate income tax, no personal income tax and no inheritance tax.
To further the point, Nevada is running billboard advertisements in California with the caption "Will Your Business Be Terminated?"
Perhaps Schwarzenegger's Hollywood status and his acumen for business can counter such an assault. At least, that's what California's Chamber of Commerce believes. "In general, the California business community feels better about the direction the state is going right now," said Allan Zaremberg, president of the chamber. "Arnold has stood up to the state Legislature. He didn't raise taxes on targeted businesses. And he has made economic recovery the hallmark of his administration."
But independent organizations and local governments don't have the control that the state does, said Paul Hiller, the Inland Empire Economic Partnership's president and chief executive officer.
Based in Riverside, the IEEP is a private, nonprofit, economic development corporation that promotes the combined San Bernardino and Riverside counties region.
The high business cost climate is the result of state actions, Hiller said.
To counter this, local economic development officials are focusing on the strengths of their region.
For the two-county region, benefits include locations near freeways, intermodal facilities, lower land costs and affordable housing.
Equally important, local economic development officials should be communicating with the business community, Hiller said.
To get the message out, Hiller's agency expects to spend between $650,000 and $750,000 this year to bring in members of the business press to lift the region's profile.
Tom Laurin, director of Economic and Community Development for the county of San Bernardino, is allocating more time to focus on retention and expansion issues.
The county offers low-interest loan programs to help businesses expand, in addition to providing counseling for smaller firms.
"We take a holistic approach," Laurin said.
At the state level, many argue that Schwarzenegger has also taken a more holistic approach. But the governor should use caution "if he decides to court companies with tax-related giveaways. What kind of message does that send to the businesses already in California? It sends a message that they are picking up the tab for some famous guy," Ahern said.
Oregon takes a more passive approach. The state rarely launches campaigns in California that aggressively tout Oregon's friendly business environment. Ron Fox, division manager of the state's Economic and Community Development Department, referred to the method as "applied idealism."
"We don't have to sell Oregon as much as states like Nevada. All you have to do is move one foot north of the California border and Oregon will provide you with greater opportunity," Fox said.
Workers' comp rates will remain unchanged in Oregon for the next two years. And the average cost of a four-bedroom home in Portland is at least 30 percent less than in major cities in Southern California. The state also talks up its transportation capabilities, with its coastline and close proximity to California desirable for a wide range of manufacturers.
Like Oregon, Arizona also mentions its access to California as a major selling point. But close proximity has its drawbacks. "It's one thing to be a predator of the California business community. Although it doesn't do us any good to have a weakened economy next door," said Joe Yuhas, deputy director of the Arizona Department of Commerce.
Despite Arizona and Oregon's enthusiasm to woo more business, it's still too early for many California companies that remain optimistic about Schwarzenegger.
Randy Gordon, president and chief executive officer of the Long Beach Chamber of Commerce, said that before Arnold was elected, businesses were humdrum about the California economy. "The business report card was an F. With Arnold, I'd say it's about a C right now. Many are waiting to see what happens by the new year," he said. "It could take some time, though. He inherited a mess."
In an effort to keep businesses from fleeing the state, the Long Beach Area Chamber of Commerce is delving deeper into the political arena. It has a stated agenda to stem the tide of "anti-business legislation" coming out of Sacramento and is making its evaluations of local politicians increasingly public.
The chamber this year recruited a business-friendly candidate to run against a Democrat in a Long Beach-area Assembly district and recently issued a candidate scorecard to grade elected officials' legislative performance on business-related issues.
Each of three Democratic legislators in the Long Beach area received failing grades on the scorecard, which came out a week before Tuesday's election.
"We will continue to play an active role, both locally and statewide, in recruiting and endorsing candidates," said Shaun Lumachi, the chamber's vice president of government affairs. "We will continue that process in 2006, both in the state Assembly and possibly at the City Council level."
And that's not the end of it.
Members have created what they call the "Chamber Academy," which recruits community members to go through a three- to five-month course on how to run for office and evaluate and respond to the needs of the business community.
Perhaps the chamber's most virulent ongoing effort is through its "e-alerts," which go out to the chamber membership and others in the community.
The San Gabriel Valley is also attempting to attract and retain businesses. Between April 2003 and April 2004 the region preserved or created more than 5,061 jobs.
As for Schwarzenegger's thoughts, "he's about improving the California business environment and spreading the word that California is business-friendly," said spokesman Vince Sollitto. "What Arnold is not interested in is getting into a bidding war for jobs with other states."
Arnold's got his work cut out for him.
I guess Arnold's lame workman's comp reform, inaction on the high cost of unreliable electrical power, foisting of higher local taxes and fees, and reinvigorated regulatory bureaucracy had nothing to do with it.
Great job Arnold.
So...if businesses are leaving, and Red State Nation people aren't wanted, just who is going to pay the bill for Kalifornistan's Blue State Nation entitlement seekers?
Arnold is making it worse.
What planet is this guy from? Or have I somehow managed to fall through a black hole into "Bizarro World"?
I moved my LLC to Nevada...but my heart is still in Taxifornia......ROTF
Thanks for posting this and giving me a case of the goosebumps.
W.A.S.S.
Yep going elsewhere to build is more favorable because land is cheaper and the codes for building less rabid.
I can see that.
But he has an R behind his name. That is all important!
Kalifornistan will file Chapter 7
California still supplies more revenue to the Federal government than it receives. In fact, not a few red states are among those most dependent upon Federal largesse, notably Montana.
And that says all that has to be said. Business is NOT "touchy feely". Business is "dog eat dog".
Another Socialist(Liberal) state that is trying hard to bankrupt itself and it's residents. May John Kerry has a "PLAN" for it.
bttt
Democrats? Sounds more like Arnold to me.
You should slide on that BS you posted for a mile or so.
It's the Democratic controlled legislature and the press time given to the few radicals for news bites that are problems with the state.
We need to make about a 6% switch in voting patters and things will start to change.
Kalifornistan is already billions of dollars in the hole, but nevertheless saw fit to commit another 3 billion dollars they don't have to stem cell research. And they just banned .50's too ... I am starting to see why.
Wooohooo....we're famous for something.
We've been down this road before. It's not bs. You need to read more news and stop drinking cool aide.
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