Special ‘California Alert’ to the U.S. Site Selection Community

California, long known to be unfriendly to business, is now inhospitable to site selection consultants. Gov. Jerry Brown’s Office of Business and Economic Development has banned commissions that have long been a tradition in the business in the United States and internationally. Or perhaps it’s better to say the state is limiting commissions.

According to the Sacramento Business Journal, the agency, known as GO-Biz, has placed on ban on commissions to consultants for aiding companies in securing a tax credit should they decide to move to or expand in the state.(1)

Since the story appeared, one consultant clarified that commissions are still permissible under some circumstances, but the state limits the ability for consultants to earn more than what the state deems reasonable.

Regardless of whether it should be called a ban or a limitation, a tax consultancy firm has filed suit against what it calls “regulatory overreach that impacts the ability of taxpayers to obtain representation to pursue their right to a tax credit for driving economic growth and job creation.”

In all candor, the GO-Biz restriction doesn’t affect my business.

My projects are done on a flat-fee basis, so no commissions are involved. Moreover, a good part of my client work involves companies seeking out-of-California locations with friendlier business environments.

When I’ve had companies interested in establishing a presence in California, I “ran the numbers” on a completely objective basis. The data on taxes, workers’ compensation, unemployment insurance, cap-and-trade fees to reduce global warming – and more and more – caused them to do what I call a “U-Turn” and head off to other states.

Said one client, “We knew California was going to be more expensive, but we thought we could afford to move there anyway so we began the planning.” After reviewing the cost comparisons with its current community, the company will stay put in its Mountain Time Zone location.

California’s voters seem determined to reelect politicians who could be called “California’s Wrecking Crew” – people who are hostile to business, love hiking taxes again and again, and waste tax dollars on boondoggles – with Gov. Jerry Brown but one example.

The state’s business environment is sure to worsen in 2015, 2016, and who knows for how long after that. Doubters should consider Gov. Brown’s plan to toughen carbon regulations to an unprecedented degree, thus increasing costs (again) on all businesses in every part of the state.

When that happens, Sacramento will once more demonstrate that it’s the “marketing department” for the site selection consulting profession.

(1) See: Allen Young, “Dallas company sues GO-Biz over tax credit,” Sacramento Business Journal, Oct. 3, 2014 http://www.bizjournals.com/sacramento/news/2014/10/03/dallas-company-sues-go-biz-administration-over-tax.html

One focus of this blog has been to address California’s perennially difficult business environment. 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.

Explore posts in the same categories: Businesses leave California, California Business Environment, California Regulations, California Taxes, Cap-and-Trade, Economic Development, Gov. Jerry Brown, Worst States for Business

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