Case Study: How Politicians Like Sen. Connie Leyva Motivate Companies to Leave California

Posted September 13, 2016 by Joseph Vranich
Categories: Business Relocation, Businesses leave California, Minimum Wage, San Bernardino County, Site Selection

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Manufacturing is the number one industry in California to pack up and move to states considered to be friendly to business. Since such losses are happening more frequently, let’s take a look at the record of a politician from a district that will soon lose a major employer. In this case, it’s Senator Connie Leyva who represents Colton.

seal_of_san_bernardino_county_california-svgBut, first things first. Ashley Furniture has announced it will stop manufacturing in Colton and furlough 840 employees.

The company didn’t say that California’s difficult tax and regulatory environment figured into its decision, but I can’t see how any business leader could ignore such factors when deciding whether to stay in or leave the state.

A company statement said that closing the facility will strengthen its production capability and cost structure so as to compete effectively.

The work will be transferred to Wisconsin, Mississippi and North Carolina, all of which have reasonable labor rates, lower workers’ compensation costs, a thoughtful regulatory environment, lower energy costs and a merciful litigation environment.

I have no connection with Ashley Furniture. But in my experience I’m confident that the company could reduce costs by 20-35 percent for each job moved, helping it to remain competitive in the dog-eat-dog retail world.

Consider the experience of Bing Energy, a “green” fuel-cell company, that relocated its headquarters and manufacturing from Chino to Florida.

Bing CFO Dean Minardi said the “tipping point” in his decision was Florida’s friendlier laws and its move to phase out the corporate income tax. Minardi said of eliminating the tax, “It’s huge. The more income a company can keep the more people it can hire…. I just can’t imagine any corporation in their right mind would decide to set up in California today.”

My firm completed a study – California Business Departures: An Eight-Year Review 2008-2015 – that estimates more than 3,000 manufacturers diverted capital out of California because of facility relocations, opting for expansions in other states, or deciding to go elsewhere after considering California.

The difficulty of operating here keeps increasing as our politicians (virtually always Democrats) repeatedly pass costly measures. More tax hikes. More regulations. More fees. More penalties. Much of that translates into bureaucratic harassment.

Ashley Furniture gave employees 60 days notice and met regulations governing layoffs. I’m sympathetic and understand why workers organized a protest in front of an Ashley retail store.

But by protesting at the company’s door, the workers drew attention to the effects of Sacramento’s actions.

It would be nice to see protests at the doors of the politicians who support business-killing, economy-killing, job-killing policies. In other words, speak out against the causes of California’s job losses.

The top political figure I hold responsible for our deteriorating business environment is Gov. Jerry Brown. But he has, for want of a better word, collaborators.

Since Colton has lost jobs before, I decided to examine the work done by the state Senator who represents that community, Connie Leyva. Her website focuses on social issues relating to homeless students; the rights of housekeepers, nannies, and caregivers; and safeguarding children from predators.

All are noble causes, but I didn’t see efforts to boost a business’s prospects for success. In fact, Leyva voted for California’s absurd one-size-fits-all minimum wage, requiring employers in her lower-cost district to pay San Francisco-like high wages, especially when veteran employees demand to be paid more than unskilled workers.

I can’t say that the “Leyva minimum wage” caused Ashley Furniture’s decision, but it’s reasonable to suggest a link between it and the upcoming out-of-state relocation.

According to the California Manufacturers & Technology Association’s legislative scorecard for last year, Leyva has a feeble record of supporting job-creating bills. Another report, one by the California Chamber of Commerce, shows that every time she voted for a business-friendly bill, she voted three times for business-hostile legislation.

As President John F. Kennedy proved years ago, lower taxes boost economic vitality. Thus, it was logical for me to scan the scorecard from the Howard Jarvis Taxpayers Association, which gave Leyva an “F.”

Politicians failed to learn from the event seven years ago when CalPortland Cement closed its plant – also in Colton – because of high state-related costs.

Then, company President James Repman testified that staying in business “is becoming increasingly more difficult due to the myriad of regulations and agencies that oversee every aspect of our business…. The next new plant probably won’t be built in California meaning more good, high paying manufacturing jobs will be lost to Nevada or China or somewhere.”

The biographies for Gov. Brown, Sen. Leyva and most Democrats show that they’ve never run a company. Until voters who want good jobs become wiser about who they elect to office, we will see more businesses leave the state.

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One focus of this blog has been to address California’s difficult business environment, as addressed in the study, California Business Departures: An Eight-Year Review 2008-2015, (PDF) updated Jan. 14, 2016.

 Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

 

Two Reporters Walked Into a Bar ….

Posted August 1, 2016 by Joseph Vranich
Categories: Best States for Business, Business Relocation, Businesses leave California, Financial Service Firms, New York City Business Climate, Site Selection

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Well, not really. Two reporters moved from California to Texas and last week both of them wrote stories about companies moving to the Lone Star State.

Dallas Morning NewsIn the Dallas Morning News, Jill Cowan wrote a piece about how financial firms are shifting their business operations out of hyper-expensive New York City to “lower cost, more business-friendly environments.” Although Phoenix won the top spot, Dallas, San Antonio and Austin came in second, third and seventh, respectively, for financial services job growth in the 2008-2013 period. If you are in the financial services industry, this is an excellent story to read. See “Y’all Street: Could Dallas oust New York City as a global financial capital?”

Meanwhile, another former Californian, Katie Burke, reported on a high-growth software company, Rev-Ignition, relocating its headquarters from Ontario, Calif. to Texas. See the San Antonio Business Journal story “Payment software company relocates CA headquarters to San Antonio.”

My studies show that for many years Texas has ranked as the number one state to which California companies migrate.

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One focus of this blog has been to address California’s difficult business environment, as addressed in the new study, California Business Departures: An Eight-Year Review 2008-2015, (PDF) updated Jan. 14, 2016.

 Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

A July 4th Message About How ‘Freedom’ Is Under Siege for California Businesses

Posted July 3, 2016 by Joseph Vranich
Categories: Businesses leave California, California Business Environment, Site Selection, Ventura County, Worst States for Business

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Once in awhile I come across a business owner’s explanation of just how tough it is to run a commercial enterprise in California. I found one that amounts to “can’t-put-it-down reading.”

Ventura County RecreationThe writer, Warren Meyer, described conditions relating to the regulatory requirements, such as getting county permits, high unemployment insurance costs, concern over rising minimum wages, and the fact that all employee lawsuits against this multi-state company were in California.

I’ll let his words speak for themselves:

Normally, the closure of a business operation or division is not grounds for a celebration, but in this case I am going to make an exception. At midnight on December 31, I not only drank a toast to the new year, but also to finally getting all my business operations out of Ventura County, California.

Never have I operated in a more difficult environment. Ventura County combines a difficult government environment with a difficult employee base with a difficult customer base.

It took years in Ventura County to make even the simplest modifications to the campground we ran. For example, it took 7 separate permits from the County (each requiring a substantial payment) just to remove a wooden deck that the County inspector had condemned. In order to allow us to temporarily park a small concession trailer in the parking lot, we had to (among other steps) take a soil sample of the dirt under the asphalt of the parking lot. It took 3 years to permit a simple 500 gallon fuel tank with [the California Air Resources Board] and the County equivalent. The entire campground desperately needed a major renovation but the smallest change would have triggered millions of dollars of new facility requirements from the County that we simply could not afford.

In most states we pay a percent or two of wages for unemployment insurance. In California we pay almost 7%. Our summer seasonal employees often take the winter off, working only in the summer, but claim unemployment insurance anyway. They are supposed to be looking for work, but they seldom are and California refuses to police the matter. Several couples spend the whole winter in Mexico, collecting unemployment all the while. So I have to pay a fortune to support these folks’ winter vacations.

California is raising minimum wages over the next 2 years by $2. [Note: The actual amount was higher.] Many of our prices are frozen by our landlord based on past agreements they have entered into, so we had no way to offset these extra costs. At some point, Obamacare will stop waiving its employer mandate and we will owe $2,000-$3,000 extra additional for each employee. There was simply no way to support these costs without expanding to increase our size, which is impossible due to County regulations.

A local attorney held regular evening meetings with my employees to brainstorm new ways they could sue our company under arcane California law. For example, we went through three iterations of rules and procedures trying to comply with California break law and changing “safe” harbors supposedly provided by California court decisions. We only successfully stopped the suits by implementing a fingerprint timekeeping system and making it an automatic termination offense to work through lunch. This operation has about 25 employees vs. 400 for the rest of the company. 100% of our lawsuits from employees over our entire 10-year history came from this one site. At first we thought it was a manager issue, so we kept sending in our best managers from around the country to run the place, but the suits just continued.

Ask anyone in the recreation business where their most difficult customers are, and they likely will name the Los Angeles area. It is impossible to generalize of course, because there are great customers from any location, but LA seems to have more than its fair share of difficult, unruly, entitled customers. LA residents are, for example, by far the worst litterers in the country, at least from our experience. Draw a map of California with concentric circles around LA and the further out one gets, the lower the litter clean-up costs we have. But what really killed it for me in Ventura County was the crazy irresponsible drinking and behavior. Ventura County is the only location out of nearly 200 in the country where we had to hire full-time law enforcement help to provide security. At most locations, we would get 1 arrest every month or two (at most). In Ventura we could get 5-10 arrests a day. In the end, I found myself running a location where I would never take my own family.

And so I got out. Hallelujah.

PS – People frequently talk about taxes in California being what makes the state “anti-business.” That may be, but I guess I never made enough money to have the taxes really bite. But taxes are only a small part of the equation.

Update: Wow, reading this again, I left out so much! An employee once sued us at this location for harassment and intimidation by her manager – when the manager was her sister! It cost me over $20,000 in legal expenses to get the case dismissed. I had an older couple file a state complaint for age discrimination when they were terminated – despite the fact that our entire business model is to hire retired people and the vast majority of our employees are 70 and older. And how could I have forgotten the process of getting a liquor license? I suppose I left it out because while tedious (my wife and I had to fly to California to get fingerprinted, for example), it is not really worse than in other places – liquor license processes are universally bad …. We gave the license up pretty quickly, when we saw how crazy and irresponsible much of the customer base was. Trying to make the place safer and more family friendly, we banned alcohol from the lake area, and faced a series of lawsuit threats over that.

Source: A Milestone to Celebrate: I Have Closed All My Businesses in Ventura County, California

Note: It’s irrelevant that this piece was written more than two years ago because since then the business environment in California has gotten worse.

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One focus of this blog has been to address California’s difficult business environment, as addressed in the new study, California Business Departures: An Eight-Year Review 2008-2015, (PDF) updated Jan. 14, 2016.

Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow. Also, Joe has been a Keynote Speaker for more than 20 years – see A Speaker Throughout the U.S. and in Europe and Asia.

Inspirational Californian Must Relocate – Here Is Why He’s Moving to Georgia

Posted June 28, 2016 by Joseph Vranich
Categories: California Land Regulations, California Regulations, Leaving California, Site Selection

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This is the most touching “relocation story” ever to appear on this blog.

First – it’s been said time and again that California’s housing is so unaffordable that poor people are the ones who are hurt the most, a situation aggravated by the state’s land-use regulations and tax policies.

Marty TurciosThis is an account of a challenged couple, Marty Turcios and his girlfriend Melody Lacy, who are planning to leave the state because of high housing costs. They expect to move to Georgia by late September or early October and do so in a way that allows them to keep helping disadvantaged people.

Marty is leading a full life giving golf lessons to many types of limited-ability people every year, which he does cheerfully despite having cerebral palsy.

A Golf Channel special shows Marty giving golf instructions to high school students, to people with developmental disabilities and to disabled veterans, many of whom have post traumatic stress disorders. “I treat them like golfers and not like people with disabilities,” he said. His teaching includes instructing people in wheelchairs how to putt. See the remarkable video “Golf in America: Marty’s Story.”

With a Masters degree in Recreational Therapy, Marty was a coach at the University of California at Berkeley and at a local high school. Also, he created the Marty Turcios Therapeutic Golf Foundation based in Richmond, about 20 miles from San Francisco.

Now he and Melody want to move to Augusta, Georgia. Why? Well, besides it being the Home of the Masters and a place brimming with golf courses, here is what Marty said to his Facebook followers about housing:

“We will miss you and our students so much. We, as a disabled couple, have spent five years trying to figure out how to stay in the Bay Area. We have tried everything to find affordable rental, to no avail, we tried to figure out how to buy a home around here, which is cheaper than renting, to no avail. We tried to build a container home on friends’ land, but due to the restrictive building codes and lack of water that did not work out either. We finally gave up . . . and looked at moving to Augusta. This has been a long, hard decision and now we are under a deadline to move out so we are hoping for a little help from our donors to relocate the program. Augusta has a huge veterans center and a large disabled population. Please accept our sincere apologies for having to leave and try to wish us well.”

While visiting their potential new turf, he met with Augusta University Athletic Director Clint Bryant and looked at housing. Here is what they posted about their visit:

We just found a home in Augusta for less than $25k that is perfect for us but it might go soon at that price in that lovely neighborhood. We need to raise the money to put down on this house right away!”

“We are finally back from Augusta, but we are not feeling nearly as ‘at home’ as we felt in Georgia! We have so much to tell you all about Marty’s multi-level work with Augusta University and Marty’s up-and-coming programs with Wedges and Woods! The home we chose is only blocks from the athletic and sports offices on the beautiful Forest Hills Golf Course.

Think of it – an inexpensive home near Forest Hills, which Augusta Magazine repeatedly names the city’s “Best Public Golf Course.”

Here is a summary of the appeal to help finance the move:

For more than a decade Marty Turcios, who was born with cerebral palsy, has taught golf lessons to disabled people throughout the Bay Area including veterans with traumatic brain injuries, teens and adults with autism, Down’s syndrome and other severe disabilities including amputees and stroke survivors. “Our home in Richmond is being sold and we are moving to Augusta, Georgia where there is a huge veterans center and affordable housing among eight golf courses. We have to go due to the cost of housing in the Bay Area and we will continue to teach golf, as therapy, to over a hundred separate individual disabled people every year. We are sad to go. Please send us off with enough money to get set up in Augusta in celebration of Marty Turcios’s service to the Bay Area and particularly Contra Costa and Alameda Counties. We will use the money to rent a truck ($2,771), down payment on a house ($2,250), send out a mailing with the new address ($350), for a grand total of $6,371 dollars. This move means housing security to us, which we, at age 56 and 60, have never yet known. We will be so thankful to everyone that helps and remember that every donation is totally tax deductible because we are a public charity under the 501(c)3 laws of the Federal Government. We have served the Bay Area at no cost to the disabled participants at all for over a decade. Now we need to move and we are sorry to leave you all.”

CerebralPalsy.org has a remarkable story about Marty – “Golfer swings past physical challenges.”

It appears that Augusta already has begun giving Marty and Melody a warm welcome based on WRDW-TV coverage: “Therapeutic Golf Foundation relocating from California to Augusta to rehabilitate those with disabilities.”

Note: Contributions can be made through PayPal on this page at the Marty Turcios Therapeutic Golf Foundation’s website.

Another Los Angeles-Area Tech Company Creates Jobs . . . 800 Miles Away & Out of State

Posted June 20, 2016 by Joseph Vranich
Categories: California Business Environment, Economic Development, El Segundo, High Technology, IT Companies, Los Angeles, Site Selection

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PCM, an El Segundo-based IT services provider, will open a sales center in Rio Rancho, New Mexico this summer, with the first of more than 200 employees coming on board in August.

El Segundo to Rio RanchoGov. Susana Martinez and other state officials, on a recent trade mission to California, asked the company’s CEO to consider New Mexico.

PCM provides technology support to clients that include the NFL’s Cincinnati Bengals and Green Bay Packers, Sea World, Wendy’s, GE, and others. Salaries of the sales positions will range between $45,000 and $65,000.

Frank Khulusi, CEO and founder of PCM, said, “Meeting with Gov. Martinez and her team in California was a game changer. Learning about New Mexico’s improved business environment and talented workforce was a deciding factor in expanding our operations to this state.”

The publicly traded company will generate $2.2 billion in sales this year.

See the complete story at the Albuquerque Journal, “Calif. tech company brings more than 200 jobs to Rio Rancho.”

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One focus of this blog has been to address California’s difficult business environment, as addressed in the new study, California Business Departures: An Eight-Year Review 2008-2015, (PDF) updated Jan. 14, 2016.

Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow.

Another Firm Says ‘Bye’ to California: Moves Silicon Valley Headquarters to Indiana

Posted June 16, 2016 by Joseph Vranich
Categories: Business Relocation, California Business Environment, California Out-Migration, California Regulations, California Taxes, Indiana Business, Leaving California, San Mateo, Site Selection, Software Companies

Determine, Inc., a software company, will relocate its headquarters to Carmel, Indiana, about 30 miles north of Indianapolis. The company’s announcement said the new headquarters will provide a home base as of this month (June) for its worldwide business, which includes offices in California, Georgia, France and the United Kingdom.

Indiana-StateSeal.svg“It was a big decision to leave Silicon Valley,” said Patrick Stakenas, Determine’s president and CEO. “Locating in Carmel offers us an extremely solid business environment and a quality of life that will allow us to attract and retain talented employees. Due to these key points, the bulk of our future U.S.-based growth will be in Indiana.”

Note the reference to attract and retain employees. While I’m not privy to the company’s retention rate, it’s well known that employees in Silicon Valley and San Francisco are job hoppers extraordinaire.

Gov. Mike Pence said, “In Indiana, we maintain a balanced budget and have cut costs and taxes, creating a fiscally predictable environment that allows entrepreneurs and job creators to invest in what matters most – their business and their employees.”

The company’s enterprise customers include AOL, Cushman & Wakefield, Endo Pharmaceuticals, Nordstrom, and Sony Music Entertainment.

The Indianapolis Star reported that Determine Inc. has been based in the heart of Silicon Valley in San Mateo.

Inside Indiana Business said Determine is hiring for customer support, professional services, software development and financial positions. The company was founded in 1996 under the name Selectica.

A study, California Business Departures: An Eight-Year Review 2008-2015, published this January, included a sampling of other California-to-Indianapolis moves.

For example, Memory Ventures, in looking for a location for the growing company’s new headquarters, avoided Los Angeles. “The business environment in California is very challenging,” CEO Anderson Schoenrock said, citing the tax structure, government regulation and the high cost of living. “Over time, that grinds on you and your employees.” The company was founded in 2007 with its first brand, ScanDigital, and has been featured on the Inc. 500 and Deloitte’s Technology Fast 500 lists.

Last year, Emarsys, a Vienna, Austria-based digital technology company, located its North American headquarters in Indianapolis. Emarsys has a handful of employees in California, and decided to settle in Indianapolis after considering San Francisco.

Finally, Appirio Inc., another software company, moved its headquarters from San Francisco to Indianapolis.

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One focus of this blog has been to address California’s hostility toward business, as addressed in the new study, California Business Departures: An Eight-Year Review 2008-2015, (PDF) updated Jan. 14, 2016.

Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow.

California Loss: Swiss Company Puts U.S. HQ in Phoenix, not San Francisco

Posted June 9, 2016 by Joseph Vranich
Categories: Best States for Business, Business Location, California Business Environment, California Regulations, California Taxes, Cybersecurity company, Site Selection, Software Companies, Worst States for Business

The Kudelski Group, a Switzerland-based global technology company, has an office in San Francisco, but selected the Phoenix area for the location of its  350-job U.S. headquarters.

Arizona-StateSeal.svgAccording to the Phoenix Business Journal, “We wanted to be in a business-friendly environment,” said Richard Fennessy, CEO of Kudelski Security, the Group’s cybersecurity division. “The governor made it clear we’d find that (in Arizona).”

“We’re bringing our global finance, human resources, administration, legal and information technology divisions to Phoenix,” Fennessy said, which includes moving employees from Switzerland.

See the complete story at “EXCLUSIVE — Kudelski Security CEO: Phoenix made ‘best business case’ for HQ.”

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One focus of this blog has been to address California’s hostility toward business, as addressed in the new study, California Business Departures: An Eight-Year Review 2008-2015, (PDF) updated Jan. 14, 2016.

Joseph Vranich is known as The Business Relocation Coach while the formal name of his business is Spectrum Location Solutions. Joe helps companies find great locations in which to grow.

 


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