Archive for March 2016

California Legislature Considers More Business-Bashing, Job-Killing Bills

March 31, 2016

As each year passes the California legislature introduces and often enacts increasingly severe measures that damage the state’s business climate.

We need only look at the newest summary of legislation that the California Chamber of Commerce issued yesterday. Seeing some of the shocking language in the bills – note especially the italicized parts – makes me wonder what planet Sacramento legislators came from, or perhaps I should say what solar system California voters came from.

Calif State Assembly logoAfter reading the list, will anyone wonder why some businesses can’t wait to leave California for a friendlier state?

A shortened and edited version of the announcement follows:

The California Chamber of Commerce released a preliminary list of job killer bills to call attention to the negative impact that proposed measures would have on the state’s job climate and economic recovery if they were to become law. The list is preliminary because CalChamber expects to add more bills to the list as legislation is amended.

“These job killer bills represent the worst of the worst legislative proposals currently under consideration by lawmakers,” said Allan Zaremberg, President and CEO of the Chamber.

“Whether they create barriers to providing affordable housing for workers, or increase costs for companies trying to grow or stay in business, these job killer bills should not become law,” he said.

The preliminary list of 2016 bills along with 2015 carry-over bills follows:Calif Senate Logo

Increased Labor Costs

SB 1166 (Hanna-Beth Jackson; D-Santa Barbara) Imposes New Maternity and Paternity Leave Mandate — Unduly burdens and increases costs of small employers, with as few as 5 employees, as well as large employers by requiring 12 weeks of protected employee leave for maternity or paternity leave, in addition to up to four months of existing pregnancy disability leave, for employees who have worked for the employer one day, as well as exposing employers with 50 or more employees to lawsuits for failing to provide 24 weeks of protected leave in a 12-month period.

SB 878 (Connie Leyva; D-Chino) Mandated Scheduling Requirement — Eliminates worker flexibility and exposes employers to costly penalties, litigation, and government enforcement, by mandating employers in the retail, grocery, or restaurant workplace, including employers who have hybrid operations that include a retail or restaurant section, to provide a 21-day work schedule and then face penalties and litigation if the employer changes the schedule with less than 7 days notice, even when the change is at the request of the employee.

SB 3 (Mark Leno; D-San Francisco) Automatic Minimum Wage Increase — Unfairly imposes a potential 50% increase in the minimum wage by 2022 (actually an 87% increase over an 8-year period when combined with the last increase just implemented in January 2016), and automatically adjusts minimum wage beyond 2018 according to national inflation, with no “offramps” to suspend the indexing if employers are struggling with other economic factors or costs.

Tax Increases

SCA 5 (Loni Hancock; D-Berkeley) Split Property Roll — Undermines the protections of Proposition 13 by unfairly targeting commercial property owners and increasing their property taxes by assessing their property based upon current fair market value instead of acquired value. Such costs will ultimately be passed on to consumers and tenants through higher prices and will result in job loss as businesses struggle to absorb such a dramatic tax increase.

ACA 8 (Richard Bloom; D-Santa Monica) Lowers Vote Requirement for Tax Increases — Adds complexity and uncertainty to the current tax structure and adds pressure to increase taxes on commercial, industrial and residential property owners by giving local governments new authority to enact special taxes for storm and wastewater infrastructure, including parcel taxes, by lowering the vote threshold from two-thirds to fifty-five percent.

Burdensome Environmental Regulations

SB 32 (Fran Pavley; D-Agoura Hills) Slows Economic Growth — Strengthens the already excessive authority of the California Air Resources Board and Increases costs for California businesses, makes them less competitive, and discourages economic growth by adopting further greenhouse gas emission reductions for 2030 without regard to the impact on individuals, jobs and the economy.

SB 654 (Kevin de León; D-Los Angeles) Creates Unworkable Hazardous Waste Permitting Process — Discourages investment in upgrading and improving hazardous waste facilities by shutting down hazardous waste facilities if the Department of Toxic Substances Control (DTSC) fails to take final action on the permit renewal application within a specified timeframe, even if the permit applicant acted diligently and in good faith throughout the permit application process.

California Oil Production Barriers

AB 2729 (Das Williams; D-Santa Barbara / Thurmond; D-Richmond) Gas Price Increase — Jeopardizes the production of California based fuel supply and increases costs to the industry by revising the definition of an idle well and requiring permanent closure of 25% of California’s long-term idle wells each year.

AB 1759 (Rob Bonta; D-Alameda) Gas Price Increase — Jeopardizes the production of California based fuel by banning the use of hydrogen fluoride and hydrofluoric acid at facilities that use more than 250 gallons and are located within two miles of a residence, notwithstanding the fact that there are significant safety regulations in place at the local, state and federal levels.

AB 1882 (Das Williams; D-Santa Barbara) Gas Price Increase — Jeopardizes the production of California based fuel by substantially complicating the existing permitting process for the Underground Injection Control program by imposing duplicative requirements and requiring the Division of Oil, Gas and Geothermal Resources to cede aspects of its permitting authority to the regional water quality control board.

Affordable Housing Barriers

AB 2162 (Kasen Chu; D-San Jose) Erodes Housing Affordability — Increases the cost of and delays housing and other development projects by eliminating existing mitigation options for impacts to oak woodlands under the California Environmental Quality Act and instead imposes an entirely new and separate permitting process for the removal of even one valley oak tree.

AB 2502 (Kevin Mullin; D-South San Francisco / David Chiu; D-San Francisco) Erodes Housing Affordability — Increases the cost and reduces the supply of housing by authorizing local governments as condition of development to impose a costly and inflexible price-controlled inclusionary housing requirement and, in doing so, legislatively repeals an established court decision upholding developers’ ability to set initial rental rates for new dwelling units.

SB 1150 (Mark Leno; D-San Francisco) Erodes Housing Availability — Increases risk and the cost of residential loans by allowing a party not on the mortgage loan to interfere with appropriate foreclosures and creates a private right of action for violations of overly complex and burdensome requirements.

SB 1318 (Lois Wolk; D-Davis) Erodes Housing Affordability— Inappropriately leverages necessary affordable housing in order to solve infrastructure issues with the consequence that the housing won’t be built by imposing requirements on water or waste water districts to serve certain communities first.

Meritless Litigation

SB 899 (Ben Hueso; D-Logan Heights) Increased Meritless Litigation Costs — Drives up consumer costs and increases frivolous litigation similar to the disability access lawsuits in California, by prohibiting a retailer or grocery store from discriminating against a person on the basis of gender with the price of goods and subjecting them to a minimum $4,000 of damages for each violation.

Arbitration Discrimination

AB 2667 (Tony Thurmond; D-Richmond) and AB 2879 (Mark Stone; D-Scotts Valley) Arbitration Agreements Discrimination — Unfairly discriminates against arbitration agreements and therefore is likely preempted by the Federal Arbitration Act, which will lead to confusion and litigation. Such will be the result by prohibiting arbitration of Unruh Civil Rights violations made as a condition of a contract for goods or services (in AB 2667) and by prohibiting an employer from requiring an individual who is a member of the military to sign a mandatory arbitration agreement as a condition of employment (in AB 2879).

To see future changes to the CalChamber list, go to www.cajobkillers.com

If you are a California resident and want to see your legislator’s record on business-related votes in 2015, see here.

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, 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. He offers an introductory consultation at no cost to help company leaders understand the Site Selection process and explore whether a project makes sense.

Joe is a keynote speaker on the benefits of relocating out of high-tax, high-cost, over-regulated states to friendlier business environments. For more information, see Biography and Speaking Availability. On Twitter, Joe is known as @LocationConsult.

Los Angeles Radio interview scheduled for this morning

March 25, 2016

To be on KABC 790 AM Los Angeles Radio at 10:36 this morning with host Peter Tilden to discuss the demanding #California business environment. Listen here: http://www.kabc.com/peter-tilden/

We Must Create Accountability or California Will Keep Bashing Businesses

March 24, 2016

Recently, when my firm completed a study that found about ten thousand companies left California in the last eight years, it hardly surprised leaders in the business community.

Some say there is one thing in California worse than taxes – and that is the complex set of directives enforced by unforgiving state inspectors. In fact, many business owners consider the state’s regulatory environment to be worse than its notorious tax burden.

Kathye & Jim Rietkerk, Kallisto Greenhouses

Kathye & Jim Rietkerk,
Kallisto Greenhouses

California’s political elite and their regulatory enforcers don’t understand that business owners enjoy running their enterprises and virtually all of them try to do the right thing. One example can be found in Kallisto Greenhouses, which closed in Fontana in response to Sacramento stinging them from many directions like a group of killer bees.

Suffocating a Nursery

Even a non-polluting, greenhouse-gas reducing, job-creating, tax-paying, greenhouse run by good employers can’t escape the punishing regulatory noose.

Kallisto Greenhouses operated with a peak of 36 employees shipping tropical indoor plants to ten western states and Calgary Canada since 1977. But the owners padlocked the doors because of actions by the California Air Resources Board (CARB) and California’s Occupational Safety and Health office (Cal-OSHA).

CARB Calif Air Resources BoardCARB required heaters that underperformed despite costing tens of thousands of dollars and also insisted that their truck – which almost certainly would be legal in most states – be replaced by a new vehicle with an unaffordable price tag.

“Contributing factors included the ripple effect of an increase in the minimum wage and addition of paid sick leave,” said Kathye Rietkerk, co-owner. “But the nail in the coffin was Cal-OSHA. We got a letter saying we had the choice to invite in a visit by a Cal-OSHA consultant to review employee manuals or take the chance of being visited by an inspector.”

Outrageous Fine for Simple Mistake

Naturally, the company opted for help from the state’s consultant. Upon his arrival he noted that a numerical calculation on a certain OSHA form was in the wrong column, which resulted in a $5,000 fine. Not that the number was incorrect. Only that it was in the wrong place on the form.

By the time he was done, the fines he felt he could assess had he visited not as a consultant but as an “inspector” would have been in the hundreds of thousands of dollars for similar mistakes.

Cal OSHA“Also, the corrections to procedures and existing manuals were deemed not exact enough to suit the Cal-OSHA consultant, so it took six months of staff time to satisfy him.” she said. “They wanted us to be rigorous on things that aren’t that important.” (Note: Cal-OSHA rules are more stringent than required by federal OSHA regulations.)

For example, the agency wanted a requirement that mandatory disciplinary proceedings be initiated for certain employee mistakes even if the employer doesn’t want to treat long-term employees that way.

“To be forced to be inflexible makes you an adversary to your employees, and we should be allowed to determine when discipline makes sense and when it does not,” Rietkerk said. I contacted workplace expert Tom Martin of People Management Professionals in Riverside, Calif., who confirmed her viewpoint that Cal-OSHA indeed makes inflexible “one size fits all” demands.

Company Hit Hard

Meanwhile, the company’s operating costs kept increasing as water bills rose despite having installed $300,000 in sophisticated water-saving technology, health insurance prices went up, electricity became more expensive, and taxes continued to climb.

“The day after the OSHA consultant left we called the developers who had been seeking to buy our property for yet another distribution warehouse to serve ‘products imported from abroad,'” Rietkerk said. The company owned ten acres, six of which were covered by 257,000 square feet of greenhouses.

Kallisto Greenhouses had loyal employees (76 percent with more than 20 years of service) and offered health insurance since the early 1980’s, three weeks vacation to long-term employees, seven paid holidays and flexible working conditions.

Kallisto Greenhouse

Kallisto Greenhouse

“We were forced to make decisions we never dreamed of because of the incredibly hostile small business environment in California,” she said. “It is sad that government programs that are ideally intended to protect employees can result in complete job loss instead.”

“We got into business because it was enjoyable and we loved producing a product that enhanced people’s lives. People who create jobs are not ‘the enemy’ and we were grateful to have choices when the onslaught of regulations made the choice of closing more attractive,” Rietkerk said.

It appears that the majority of California legislators, Gov. Jerry Brown’s “jobs czar” Michael Rossi, and state bureaucrats are just fine with ignoring the hardships the state imposed on Kallisto Greenhouses and continues to inflict on other businesses.

Hold the State Accountable

It’s time we make life uncomfortable for state inspectors who have been allowed to remain anonymous while inflicting unreasonable demands on entrepreneurs.

I have such a way – it’s called accountability.

Let’s begin requiring that California regulatory agencies publish online the names of inspectors every time a business shuts down or leaves the state because they decided there was a regulatory “failure.” The inspector would be free to list the details of infractions, but, in the same posting, an option should be available for the company’s leadership to tell their side of the story.

Doing so would help journalists and the public better understand how harsh treatment by public agencies motivates companies to transfer jobs and capital to other states or close their doors.

California needs such disclosures because the majority of voters are ill-informed about what it takes to run a successful enterprise. Such voters elect majorities of business-bashing politicians to the state legislature and to city councils in liberal strongholds like Los Angeles and San Francisco.

Consider the popularity of Presidential Candidate Bernie Sanders, a fierce socialist who attracted a huge crowd in San Diego on Tuesday. It seems that the ranks of voters antagonistic toward business are expanding.

If we fail to expose how California politicians and their regulatory armies treat companies, the proverbial man in the street will continue to be unaware of the pain that leaders of commercial enterprises have to endure.

An Astonishing Contrast

Many California Democrats represent a Jekyll-and-Hyde disorder by being contemptuous toward business interests while coddling state agencies that are guilty of far worse behavior.

Calif HSRAFor example, legislators recently blocked the State Auditor from examining financial mismanagement at the California High Speed Rail Authority (CHSRA); they did that after eliminating the rail agency’s obligation to report twice yearly on a project likely to cost in excess of $100 billion. Now, the CHSRA must report only once every two years despite evidence of serious cost overruns, dubious changes in plans and multiple statements that lack credibility.

Members of the Authority’s board ignore the stipulations contained in Proposition 1A, which voters passed into law in the 2008 election. California propositions that pass at the ballot box become law, and that high-speed rail law is being violated in so many ways that the list is too long to publish here.

Members of the Authority’s board continue to ignore the stipulations contained in Proposition 1A, which voters passed into law in the 2008 election. California propositions that pass at the ballot box become law, and that high-speed rail law is being violated in so many ways that the list is too long to publish here.

Can you imagine the outcry if Kallisto Greenhouses had copycatted the High Speed Rail Authority by demanding elimination of audits by the California Franchise Tax Board or the Internal Revenue Service? Or obfuscated details in documents required by state law?

The double standard in the way California treats businesses and public agencies is enough to turn the stomach of any business owner. Without more voters becoming concerned, we will continue to see company relocations to friendlier states, or – as in the case of Kallisto Greenhouses – simply go out of business.

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, 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. He offers an introductory consultation at no cost to help company leaders understand the Site Selection process and explore whether a project makes sense. See a summary of the three phases of the project at Finding Help for Your Location or Relocation Project.

Joe is a keynote speaker on the benefits of relocating out of high-tax, high-cost, over-regulated states (California, New York, Illinois and Connecticut are among the worst) to friendlier business environments. For more information, see Biography and Speaking Availability. On Twitter, Joe is known as @LocationConsult.