As a corporate site selection consultant, my world is buzzing about the big Toyota headquarters move from Torrance, California to Plano, Texas. My peers and I know full well how company employees will have to seriously consider their stay-or-move options and how Torrance’s treasury will be adversely affected.
But some of us are irritated with the nonsense coming from people who defend California’s business environment at all costs. Causes for relocating the company’s North American HQ and 3,000 high-paying jobs aren’t quite what politicians or the Los Angeles Times want people to believe.
Toyota announced that a more “geographically central” location will “improve collaboration,” “speed decision-making” and enhance “cost efficiencies.” Actually, there is a boatload of truth to all that.
To be kind to Toyota, the company had to limit what it said because even after the move it will keep about 2,300 jobs in California. Also, right after the announcement, Toyota said it will help fund a California startup, FirstElement Fuel of Newport Beach, to speed up the opening of retail hydrogen-fuel stations.
So Toyota gains nothing by criticizing California’s business climate in a way that would embarrass politicians. But Toyota doesn’t need to say a single harsh word. The record is clear that California officials are more interested in keeping wasteful government programs going than in keeping traditional wealth-building corporations in the state.
The latest evidence: Sacramento is now discussing two more tax increases – extending the “temporary” Proposition 30 income-tax hike that took effect two years ago and establishing a new oil-extraction tax.
I’ll say what Toyota didn’t – any business leaving California can benefit from cost reductions between 20 and 35%, depending upon their destination, helped significantly by lower taxes and lower compliance costs as compared to California’s jumble of mind-boggling regulations.
I’ve been to Sacramento and have encouraged policy changes to benefit commercial enterprises. For all the difference it’s made, I may as well have spoken to a box full of doorknobs.
As for the Los Angeles Times, a few years ago when a corporation announced it was leaving the L.A. area (I can’t remember if it was the Northrop Grumman or the Hilton Hotels departure), a reporter called about the “business climate.” His first question, asked in an accusatory tone, was, “Did you endorse Meg Whitman for governor?” (For the record, I don’t endorse any candidates.) I gave him an encyclopedic amount of well-documented information, which failed to influence his story one iota.
When the Toyota news broke, Gov. Jerry Brown revealed his condescension towards businesses by saying, “We’ve got a few problems, we have lots of little burdens and regulations and taxes, but smart people figure out how to make it.” The Wall Street Journal’s comeback is priceless: “California’s problem is that smart people have figured out they can make it better elsewhere.”
The Los Angeles Times seems to have pulled out all the stops in trying to make Texas look bad.
Last week, David Horsey of the Times wrote: “In lots of places in California, it’s tough to live on a middle-class family budget.” True, but he then followed with a comment that is shocking, outrageous and inexcusable: “In lots of places in Texas, it’s hard to live outside a church-going, football-loving, white, heterosexual lifestyle.”
Really? Well, life is hard in Los Angeles, which has the highest poverty rate in the nation.
It’s not hard to live in Plano, where voters last year elected Harold LaRosiliere as mayor. It was a great day there when LaRosiliere – a black man born in Haiti who grew up in Harlem – was supported by a white guy who happened to be the outgoing Republican mayor. And it was a fabulous time in Plano when, upon taking his oath of office, LaRosiliere received a standing ovation from a packed city council chamber.
It’s not hard to live in Houston, either. In a Rice University study, the region came out on top as the most ethnically diverse large metropolitan area in the country. Houston has seen big population increases in Latinos and Asians, and segregation among African-Americans and Latinos has declined. Also, Houston Mayor Annise Parker recently married her long-time gay partner.
Too often the Times ignores the fourth estate’s tradition of focusing on what is wrong with its home state and community. Until the newspaper shapes up, it’s difficult to imagine government cleaning itself up.
At least a dozen companies are leaving Los Angeles County for out-of-state locations just since the start of this year – or decided not to come here.
Universa Investments will move from Santa Monica to Miami. Why? The company’s founder, Mark Spitznagel, told the South Florida Business Journal: “Florida’s business-friendly policies, which are so different from California’s, offer the perfect environment for us as we expand.”
Gary Lee, Chief Executive of Chinese technology firm Wirelessor, said to the Las Vegas Review-Journal: “I was considering opening my North American operation in Long Beach, but after comparing the region’s political, tax, and economic climates, I decided that Las Vegas was the better option.” He expects to build a manufacturing plant there within 24 months.
Some of the other Los Angeles County departures this year include:
Considering those events, will the Los Angeles Times direct its Texas-style vitriol to Nevada, Florida, Utah, Michigan, New Mexico and Canada?
And that Occidental Petroleum headquarters relocation to Houston is a huge loss. According to Bloomberg, “Occidental is still ranked as the third-most-valuable company in Southern California.”
When it comes to population comparisons, people are moving to Texas cities in droves. The Dallas-Fort Worth-Arlington metro area had a 29.8% population growth in the 2000-2012 period. The Houston-Sugar Land-Baytown area saw a 31% gain. Austin and San Antonio, among others, also show substantial increases.
Meanwhile, in that period, the Los Angeles-Long Beach-Santa Ana region registered a gain of (get out your hankies) 5.6%.
Let’s look at job growth.
The Bureau of Labor Statistics lists employment in the Dallas-Arlington-Fort Worth metropolitan area as increasing from 2.1 million jobs in 1990 to 3.2 million in 2013 – a 52.4% increase.
Last month’s UCLA Anderson Forecast examined the Los Angeles economy. One stunning conclusion is that Los Angeles has ranked near the bottom of major U.S. metropolitan areas in job growth from 1990 to 2012. In looking at the 30 largest metro areas, only three had declines over the 23-year period. They are Cleveland (-2.6%), Detroit (-6%) and Los Angeles County (-7.1%). So sunny L.A. has had deeper employment losses than those two Rust Belt cities.
The “creative class” amongst L.A.’s defenders may find a way to spin that -7.1% into a positive.
Some Californians belittle Texas by claiming its employment growth is in low-paying jobs. In fact, Texas is an epicenter for new high-paying jobs.
According to Wendell Cox of Demographia, “The number of jobs in Texas has grown by a truly impressive 31.5% since 1995, compared with just 12% nationwide [and] many of the new Texas jobs paid well.” From 2002 through 2011, “for industries paying over 150% of the average American wage, Texas could claim 216,000 extra jobs; the rest of the country added 495,000. In other words, the Lone Star State, with 8% of the U.S. population, created nearly a third of the country’s highest-paying positions.”
The Los Angeles Times is likely to continue to smear Texas while making California look as look good as possible. That is a prelude, after all, to the paper’s expected endorsement of Jerry Brown in the upcoming gubernatorial race.
Joseph Vranich of Spectrum Location Solutions, based in Irvine, California, helps companies find optimal locations in which to grow. Joe also is a keynote speaker on the challenges and benefits of business owners relocating out of high-tax, high-cost, over-regulated states. More information is available at Biography and Speaking Availability.