Archive for June 2015

Cost of Doing Business Report Again Shows California as Most Expensive

June 30, 2015

“California continues to have the highest business tax climate on the West Coast. This reality compels businesses to reconsider their relationship with the State and look elsewhere for a lower-cost solution.” – Larry Kosmont

For ten years now I’ve been posting opinion and news pieces on the Internet, but today marks the first time that I’m republishing someone’s news release. I’m doing so because of the excellent findings in a well-respected Cost of Doing Business Survey. For an abridged version of the announcement, read on . . .

Claremont, Calif., June 29, 2015 – Claremont McKenna College’s Rose Institute of State & Local Government today released the 20th annual Kosmont-Rose Institute Cost of Doing Business Survey. The Rose Institute gathers business fees and a variety of tax rates from 305 selected cities, focusing on the states where business relocation is the most active.

The 2014 edition encompasses the most recent calendar year and takes a close look at business costs in California along with eight other western states that many companies view as possible alternatives to California (Arizona, Colorado, Nevada, New Mexico, Oregon, Texas, Utah and Washington).

Rankings for each city are divided into one of five “Cost Ratings” groups: Very Low Cost ($), Low Cost ($$), Average Cost ($$$), High Cost ($$$$), and Very High Cost ($$$$$).

Highlights: Most Expensive Cities

Of the 20 most expensive cities surveyed, 12 are located in California; 9 are in Southern California and 3 are in the San Francisco Bay Area. Los Angeles and the San Francisco Bay Area are the two most expensive metropolitan areas in the western United States.

Seven out of the twenty most expensive western cities surveyed are in Los Angeles County: Those cities are Bell, Beverly Hills, Culver City, El Segundo, Inglewood, Los Angeles, and Santa Monica.

Highlights: Least Expensive Cities

Texas stands out as a low-cost state, with six cities on the list of twenty least expensive western cities surveyed. Both of the least expensive cities in California, Moorpark and Mission Viejo, are located in Southern California.

California Cities Continue to Rank as High Cost – No Relief in Sight

“California continues to have the highest business tax climate on the West Coast. This reality compels businesses to reconsider their relationship with the State and look elsewhere for a lower-cost solution,” according to Larry Kosmont, President of Kosmont Companies and founding publisher of the Kosmont-Rose Institute Cost of Doing Business Survey.

Kosmont maintains that firms still want to locate in California, citing the Golden State’s world-class weather (although recently dry), amenities, large and diverse workforce, and strategic Pacific Rim location. “Mid-to-large corporations have a love-hate relationship with California. They may want to be in California, but in their attempt to control costs and remain competitive, many CEO’s are motivated to ask, ‘How small an operation in California can I manage and still service that market?’ As a result, the sales, design office, or distribution unit may stay or even expand in places in or nearby Los Angeles, San Diego or the Bay Area, but other operating units are more likely to end up in states like Nevada, Arizona or Texas,” says Kosmont.

[From experience, I can say that Mr. Kosmont’s views are quite accurate. – J.V.]

Fueling an environment unfriendly to business, numerous city elections during the past few years have resulted in increased taxes at the local level. In 2014, an astounding 65 local sales tax measures were decided, and of this total, 50 were approved by voters.

Almost every year, the California Legislature considers whether the Property Tax on businesses should be increased. Called the split roll, if adopted, it would require businesses to pay property taxes at a rate higher than the homeowners’ rate versus the present system where property taxes are taxed based on the same formula, whether a residence, apartment building, or property used for commercial or industrial purposes.

The twenty most expensive cities in the West in 2014 are (in alphabetical order):

Bell, Calif.
Bellingham, Wash.
Berkeley, Calif.
Beverly Hills, Calif.
Chandler, Ariz.
Culver City, Calif.
Denver, Colo.
El Segundo, Calif.
Glendale, Calif.
Inglewood, Calif.
Los Angeles, Calif.
Oakland, Calif.
Phoenix, Ariz.
Portland, Ore.
San Bernardino, Calif.
San Francisco, Calif.
Santa Monica, Calif.
Seattle, Wash.
Tacoma, Wash.
Tucson, Ariz.

The twenty least expensive cities in the West in 2014 are (in alphabetical order):

Abilene, Texas
Corpus Christi, Texas
Dallas, Texas
Eugene, Ore.
Everett, Wash.
Federal Way, Wash.
Fort Worth, Texas
Gresham, Ore.
Henderson, Nev.
Houston, Texas
Kent, Wash.
Las Vegas, Nev.
Mission Viejo, Calif.
Moorpark, Calif.
Ogden, Utah
Plano, Texas
Reno, Nev.
Sparks, Nev.
Spokane, Wash.
Yakima, Wash.

The complete news release can be found at PRWEB.

Some background information about the survey is here.

The Rose Institute’s interesting history is here.

To purchase the 2014 survey, click on the Institute’s logo, below:

The Rose Institute of State and Local Government

Congratulations to all who worked on this excellent survey.

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.

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Growing California Company Moving One Operations Center to Three Other States

June 9, 2015

There are times when being a site selection consultant means it’s time to kick back, have a bourbon, light a cigar and be delighted about how an assignment worked out. Well, I don’t drink bourbon, nor do I smoke anything, but that describes the mood I’m in now that a California client has wrapped up a project and will relocate employees to three out-of-state metropolitan areas.

The company’s executive leadership knew that it was time to cut costs. They understood that moving jobs elsewhere would lower expenses, but they worried about the reaction of employees. Because of decent pay, excellent benefits, and continual displays of respect at the firm, employee loyalty is strong – so strong that employees stay for many years. Will a potential move ding employee morale?

The CEO, who has direct communication with many employees, was open about the prospects of moving the Operations Center. He asked potentially affected employees for their thoughts; also, Human Resources conducted a “Tell us where you are willing to move to” survey.

The results showed quite a number of employees were willing to relocate, and they ranked their preferences against a list of about a dozen metro areas in numerous states. Some respondents marked up their surveys and volunteered metro areas they thought should be candidates.

My part of the project was pretty much the “standard stuff” in evaluating a dozen metro areas, inquiring about business factors like the cost of operations, available local workforce, tax climate, litigation environment, cluster analysis, political risks, and so forth. Since the company has facilities in different parts of the country, we also examined each airport’s non-stop flight pattern.

Part of the objective was to find suburban locations with office leasing rates lower than what they’re facing in California. That part was easy since every location studied was able to deliver on smile-inducing rates.

Significant effort went into examining qualify-of-life factors important to employees. We examined cost of living – especially housing prices – spousal employment opportunities, health care options, childcare options, quality of education, personal tax burdens, and access to local colleges and universities. Included were assessments of the local cultural and sports assets.

My requests to Economic Development agencies treated lightly the prospect of economic incentives because it was probable that the number of relocating employees would be below required thresholds. Executives didn’t bat an eye at the lack of inducements, saying, “We always assumed we wouldn’t qualify for incentives and planned to move the jobs anyway.”

As I write this, office leases are being negotiated in three out-of-California metropolitan areas. Employees of the company are volunteering to move to this or that location. And apparently the entire process was completed without a lot of anguish within the company.

Oh! Almost forgot to say that of the metro areas that were passed over, two impressed company officials so much that they are now on a list for consideration for future projects.

If you are interested in the project and why it was so successful, just let me know. People in my field know that I’m unable to identify the company, but even so I can share valuable insights with you.

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.