Archive for the ‘Best States for Business’ category

Uber Regulations Mean San Francisco Loses While Phoenix and Pittsburgh Win

December 23, 2016

Any business person who has dealt with California’s frustrating laws, regulations and bureaucrats was nonetheless surprised to see a story with the headline, “Uber Ships Self-Driving Cars to Arizona After California Ban.”

uber-cars-on-flatbed-truckReally? A state ban on Uber? The poster child of the billion-dollar-plus startup, tech-guru, market-disruptor club? Why would Sacramento give Uber, of all people, a bad time?

Reuters said Uber Technologies Inc. pulled its fleet of self-driving cars from the streets of San Francisco and sent them to Arizona’s friendlier territory:

The California Department of Motor Vehicles banned Uber’s self-driving cars from San Francisco just days after they first deployed. In response, Uber picked up and moved out. “Our cars departed for Arizona this morning by truck, Uber said… . We’ll be expanding our self-driving pilot there in the next few weeks, and we’re excited to have the support of Governor Ducey.”

Gov. Doug Ducey wooed Uber on social media the evening when the ride-hailing company pulled its self-driving test from San Francisco. “California may not want you; but AZ does!” he wrote on Twitter. The next morning, Uber’s fleet was headed his state’s way.

California moved to revoke registrations for Uber’s automobiles, but Uber said its vehicles require oversight by a human driver and shouldn’t qualify under California’s autonomous-driving rules. Nonetheless, the state Attorney General and soon-to-be Senator, Kamala Harris (loyal to unions and hostile to business interests), threatened legal action if the company continued operating automobiles without a permit.

Uber in Arizona

Gov. Ducey’s full statement reads:

Arizona welcomes Uber self-driving cars with open arms and wide open roads. While California puts the brakes on innovation and change with more bureaucracy and more regulation, Arizona is paving the way for new technology and new businesses. In 2015, I signed an executive order supporting the testing and operation of self-driving cars in Arizona with an emphasis on innovation, economic growth, and most importantly, public safety. This is about economic development, but it’s also about changing the way we live and work. Arizona is proud to be open for business. California may not want you, but we do.

Anthony Levandowski, the head of Uber’s Advanced Technologies Group, argued that because the company’s self-driving system is an early prototype and requires test drivers to keep their hands on the steering wheel at all times. It’s no different from driver-assist systems already on the market — and those are exempt from the requirement for a California permit.

Levandowski said that it isn’t clear why the DMV is requiring a permit now when they’ve known that Ubers have been on the streets of San Francisco over a month and have been operating safely for months in Pittsburgh, “where policymakers and regulators are supportive of our efforts.”

Last year, Uber opened its Center for Excellence in Phoenix, where it serves U.S. customers and Uber users worldwide. Now, it seems that more development work will occur in Phoenix. That’s what happens when a state is friendly to business interests.

Uber in Pittsburgh

Uber has been successfully testing autonomous-driving vehicles in Pittsburgh for some time. An extensive Wall Street Journal story in September — Uber’s Self-Driving Cars Debut in Pittsburgh — described how Uber is turning the city into an “experimental lab” where it will have as many as 100 specially equipped Volvo XC90s operating. Also, reported the WSJ, the city has its quirks — like the “Pittsburgh left turn” — which makes it a great location for testing autonomous vehicles.

It is customary for the first driver at a stoplight who is signaling a left turn to have priority over oncoming traffic when the light turns green. People in the oncoming lanes generally allow that leftward dash and are puzzled or even angry if it doesn’t occur. Uber has programmed its cars to allow other cars to make the ‘Pittsburgh left’ but not to make it themselves. The city is also notoriously difficult to drive through with steep hills and three rivers that make streets twist and turn unpredictably… . “If you can drive successfully in Pittsburgh, you’re pretty much done,” said Ragunathan Rajkumar, a professor at [Carnegie Mellon University] who specializes in autonomous vehicles.

Last year Uber opened an Advanced Technologies Center in Pittsburgh and this year is developing its second research facility there as part of a massive brownfield redevelopment site. Uber says it likes Pittsburgh’s “world-class research universities and engineers and a thriving technology community.”

Uber entered into a strategic partnership with Carnegie Mellon University to help create its new technology center and also to rely on the university’s National Robotics Engineering Center to do R&D in mapping, vehicle safety and autonomy technology. Safety is one of Uber’s major concerns.

Uber also selected Pittsburgh because of the clustering of robotics companies such as Carnegie Robotics and RedZone Robotics.

Although California prides itself on the pool of technical talent found in San Francisco and Silicon Valley, Uber has found justification to praise Phoenix and Pittsburgh for the the talent available from local universities and the community support of technology and innovation.

Uber’s experience in San Francisco shows that venture capitalists, Ph.Ds in robotics and software engineers are no match for an all-knowing California bureaucracy.

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One focus of this blog has been to address California’s 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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Two Reporters Walked Into a Bar ….

August 1, 2016

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.

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.

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

June 9, 2016

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.”

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.

 

Top Destination for California Company Relocations: Texas

December 9, 2015

Today, the Dallas Morning News published a big spread online about businesses migrating from California to Texas. The story is based on our new study of 9,000 companies leaving California in the last seven years “with about 15 percent finding a home in the more business-friendly Lone Star state.” (The print version will appear sometime next week.)

California FlagExcerpts:

“This report echoes what businesses that relocate to Texas continue to say – they are sick and tired of being over-taxed and over-regulated and are making the economically sensible choice to move to Texas,” said John Wittman, deputy press secretary for Texas Gov. Greg Abbott’s Office.

Texas Flag“Texas is an easier place in which to conduct a business,” said Joseph Vranich, president of Spectrum Location Solutions in Irvine, Calif. “Why is that so? A lot of people think it’s taxes, but in my view the No. 1 benefit is an easier regulatory environment. California’s regulatory regime is so harsh that it causes companies to look at all kinds of states to go to.”

California … is one of the costliest states in which to do business, with expenses 20 percent to 35 percent higher than other states, Vranich says.

Of all U.S. cities, Austin was No. 1, gaining 86 California corporate sites or expansions. Dallas ranked sixth (20 companies), San Antonio was No. 8 (16), Houston was No. 11 (11), Plano and Irving tied with Hillsboro, Ore., for No. 13 (9) and Fort Worth tied with Tempe, Ariz., for No. 14 (8).

The online version has a drop-down menu that permits searches by year, company, city, industry and product/service.

See the full Dallas Morning News story here.

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.

 

California: Awful Ranking in Business Tax Survey; How One Company Owner Said ‘Goodbye’

November 18, 2015

The Tax Foundation issued its 2016 State Business Tax Climate Index, a highly respected report on the topic. For the fourth year in a row California ranks at No. 48 – meaning that taxes on businesses are worse only in New York and New Jersey.

Calif FTB LogoBefore saying more about the Index, let’s bring to light how some business owners feel about taxes in California.  I recently came across comments by Erica Douglass, a young tech entrepreneur, who moved the headquarters of her company, Whoosh Traffic, from San Diego to Austin, Texas. Although what she said is several years old, her comments remain relevant today:

Dear California, I’m leaving you. One thing I’ve struggled with for years is a government that is notoriously business-unfriendly – with everything from high taxes on business earnings to badgering businesses into more work to satisfy the bureaucracy. California decided that businesses grossing over $100,000 a year should have an account to report quarterly on the sales tax customers pay for goods sold. But my company sold services – not products – which aren’t taxed. When I closed the account with the state (by going into a local office and spending nearly an hour explaining my situation), they forced it open again and sent me a nastygram explaining that I would owe fines for not filing the quarterly reports. It takes time to fill them out, even if you owe nothing. Also, the state charges a 10% income tax on all income over $47,055 in addition to an 8.25-9.25% sales tax (depending on where you buy products). I paid enough in California income tax in one year alone to hire another worker for my business. I’d bet that I’m far more efficient at creating jobs as a small business owner than the state is given the same amount of money. And a really dumb law for small business owners is an annual $800 fee just to have a corporation in California. Most states only charge you a few dollars annually. California’s is exorbitant. (Her comments were edited for brevity.)

How many other business owners share Ms. Douglass’s frustration? With the state ranking at No. 48, the answer is “plenty.”

Back to the Tax Foundation. The organization compiles the Index each year to rank the 50 U.S. states across more than 100 variables in the areas of corporate income tax, individual income tax, sales tax, property tax, and unemployment insurance tax. The Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how states structure tax systems and provide a roadmap for improvement.

Improvement? There will be numerous proposals to increase taxes (business and personal) considered by the California legislature in 2016 as well as ballot propositions to do the same. I don’t know of a single serious proposal to reduce state taxes in California.

Key findings from Tax Foundation

The top ten states are Wyoming, South Dakota, Alaska, Florida, Nevada, Montana, New Hampshire, Indiana, Utah, and Texas. The bottom ten states are Maryland, Ohio, Wisconsin, Connecticut, Rhode Island, Vermont, Minnesota, California, New York, and New Jersey.

Source: 2016 State Business Tax Climate Index

Note: The Tax Foundation, a non-partisan research think tank, based in Washington, D.C., is the nation’s leading independent tax policy research organization. Since 1937, its principled research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels.

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.

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.

Note to California Manufacturers: Brace Yourself for Higher Costs

May 30, 2015

I’m indebted to Tom Martin, Executive Director & Legislative Chairman of the Small Manufacturers Association of California, for permission to reprint this column, which I shortened a bit. Credit is also due Michael B. Marois, a Bloomberg reporter, for his focus on this event that inspired Mr. Martin’s column.

California manufacturers from food processors to apparel makers are warning costs will skyrocket if state regulators proceed with a plan to reduce their allocations of free greenhouse gas emission credits.

Starting in 2018, some companies California considers to be at risk of losing business to competitors outside the state’s landmark emissions cap and trade market will receive up to 50 percent fewer free pollution credits. That means they will either have to buy more allowances at auction or invest in ways to cut carbon pollution even more.

California has the toughest greenhouse gas curbs in the U.S., seeking to cut discharges to 1990 levels by 2020. The pushback from industry comes as Gov. Jerry Brown and other state Democratic leaders are looking to advance those climate change policies further even as business leaders warn that lack of a national and global carbon emission market puts companies in the state at a competitive disadvantage.

“Manufacturers are the canaries,” said Dorothy Rothrock, president of the California Manufacturers & Technology Association. “All of the costs in this system are radiating up and concentrate in manufacturing. It’s cumulative and it’s not happening anywhere else like this. California is doing it to its manufacturers in a way that no other state is contemplating.”

Brown has proposed cutting the state’s petroleum consumption in half by 2030 in an effort to curb carbon pollution. He also wants to expand renewable energy mandates to require utilities to obtain 50 percent of electricity from renewable sources, up from 33 percent.

Marois reports that California has capped greenhouse-gas emissions from industry since 2013 and began imposing limits on transportation fuel suppliers this year. The statewide cap, set at about 394.5 metric tons for 2015, shrinks roughly 3 percent annually to achieve a 15 percent reduction by 2020.

Companies must surrender allowances that permit the release of a metric ton of carbon dioxide. While allowances, issued by the state, are sold in quarterly auctions, most have been handed out for free, with industries such as food manufacturing receiving allocations as transitional assistance.

State Allowances Shrinking

The total state allowances available shrinks with the cap over time, and so do the handouts. Under the current level of free allowances, the state is on track to meet the 2020 limit, Rothrock said.

“You don’t need to do it to reach the 2020 goal,” she added. “It’s simply increasing the amount of revenue that will be raised by the state. It’s just a tax.” [Note: There are other ways California’s politicians want to increase taxes on businesses in 2015, but that’s another story. – J.V.]

California’s program is intended to operate in a global market where companies in other states and in other countries would face similar pressures to reduce emissions or spend money to buy pollution credits. California a year ago linked its cap and trade market to one in Quebec.

Companies in California already are some of the most energy-efficient and environmentally friendly in the nation because of climate-change programs.

The state gets 23 percent of its electricity from renewable sources and is on track to meet its 33 percent goal by 2020. That compares with 13 percent nationally, according to the U.S. Department of Energy.

“It’s going to be an additional cost of doing business in California that only the one or two affected steel mills in California will have to pay,” said Brett Guge, executive vice president of finance and administration for California Steel Industries Inc. a maker of flat-rolled steel in San Bernardino County. “We will do everything we can to comply, but it’s a big concern.”

During the state’s auctions, companies submit confidential bids for the number of allowances they want at specific prices. The highest bidder is awarded permits first, and then the second-highest, and so on until all of the permits for sale have been called. Then all bidders pay the price of the lowest winning offer.

The state is supposed to spend the money it earns from the auctions on projects to reduce greenhouse gas emissions. Brown’s budget estimates the state will earn about $1 billion from carbon auctions in the fiscal year that begins July 1.

Emission Reduction Increases Costs

Also, manufacturers’ cost to transport goods and materials is higher because transportation fuel suppliers are now required to participate in carbon-emission reduction programs.

Manufacturers in the state paid an average of 11.93 cents per kilowatt-hour in November, according to the U.S. Energy Information Administration. That was 79 percent higher than the national average of 6.67 cents.

“We are doing everything we can to be as efficient as we can, but at the end the day, if you burn natural gas, which we have to do, there will be carbon emissions,” Guge said. “When you look around the world, the hunger for carbon-based energy isn’t diminishing, it’s growing. So whatever California does, it certainly has a cost to companies here, but it’s not making a dent in worldwide carbon emissions.”

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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