Archive for the ‘California Business Environment’ category

The Big Mystery: Will a Coastal or Interior City Win Amazon’s HQ2 Project

October 19, 2017

Today is deadline day at Amazon for cities and states to file their proposals to become home to the company’s second headquarters, commonly referred to as HQ2.

I can’t count the number of times I’ve been asked what decision Amazon will make. Well, Amazon isn’t my client so how would I know? Even if they were, under non-disclosure rules I wouldn’t breath a word about the company’s project.

A little speculation can’t hurt, so here goes …

I think Amazon will seriously consider metropolitan areas located in the nation’s interior. While the smaller ones won’t make it simply because the workforce isn’t there, others have characteristics that are superior – often far superior – to coastal areas.

Many people think the winning bid will be the one that offers the highest value in economic incentives, but that isn’t always the case. It’s true that incentives can be a significant factor, but not necessarily a decisive one.

At times, a community offering the most attractive incentives can lose if it fails to meet certain parameters. For example, putting a warehouse located a half-mile from an Interstate highway will beat out a community that is situated 25 miles from an Interstate.

Countless examples like that exist.

So incentives are only part of the puzzle. Selecting the optimum location is a balancing act that weighs many important factors, such as the extent of workers in the area with appropriate talents, availability of shovel-ready land on which to build, tax rates and how they are applied, and laws that regulate labor factors such as overtime — the list is a lot longer than this.

Also important are quality-of-life factors for employees, such as the cost of living (especially housing costs), quality of the local school system, traffic congestion during peak commuting times, recreational and cultural opportunities, taxes and crime rates.

I predict that one state Amazon won’t put its HQ2 is California because of the state’s harsh business and legal environment.

Just one example: Employers can be fined or sued for a mistake on a paycheck stub (not the check, just the stub). Challenges facing workers include super-expensive housing, the highest taxes in the nation and long commuting times caused in part by highway improvements that have long been neglected.

Two days ago the Tax Foundation released its 2018 State Business Tax Climate, which showed California ranking as the 48th worst state beating out only New York and New Jersey.

Next year the tax picture may worsen as California legislators again try to revise Proposition 13 to put business and residential properties into two groups – and then place still-higher taxes on all types of office, industrial and commercial property.

Legislators are motivated by plans to once again increase state spending despite needing reserve funds to pay down state and local debt that now exceeds $1.3 trillion.

So it’s little wonder that the California Business and Industrial Alliance in Sunland has placed a full-page ad in the Seattle area to warn Amazon away from locating its HQ2 in the state. According to the San Fernando Valley Business Journal, “The headline warns the Seattle online retailer that while the weather is nice in California, the business climate is not.”

All of that represents the formula for California being scratched off the list, especially because of this Amazon specification: “A stable and business-friendly environment and tax structure will be high-priority considerations for the Project.”

Since Illinois, New York and New Jersey mimic California’s awful public policies, I won’t be surprised if Chicago, New York City and Newark also disappear as candidates.

Finally, I wish I could be in Amazon’s office as each proposal was unveiled. I know this is serious business, but I also think it would be fascinating, exciting and fun, too.

Note: Three excellent stories appeared today regarding the project:

CNBC’s – Bids for Amazon’s second headquarters are due Thursday — here are the cities in the running – This story states: “Although we don’t know exactly which cities have officially submitted their proposals so far, there are more than 100 cities and counties that have expressed interest in placing a bid, according to previous reports. There could be more, as some cities are keeping their bids secret, at least through Thursday, for competitive reasons.”

Wall Street Journal – As Cities Woo Amazon to Build Second Headquarters, Incentives Are Key

PoliticoThis Is What Really Happens When Amazon Comes to Your Town.

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.

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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.

 

US Labor Secretary-Nominee Exits California’s Harsh Business Climate

December 10, 2016
By Joel Fox
Editor of Fox & Hounds and President of the California Small Business Action Committee

President-elect Donald Trump’s nominee as Labor Secretary, Andrew Puzder, heads a California company that decided to move headquarters to Tennessee. His reasoning: California’s suffocating regulatory business climate.

dept-of-labor-logoLabor and union supporters immediately attacked Puzder, head of CKE Restaurants that operates Carl’s Jr. and Hardee’s restaurants, when news of the pending appointment became public. Pudzer opposed California’s $15 minimum wage and has predicted that iPads and robots would soon take over some restaurant jobs.

However, Puzder has defended his statements in the past declaring that it is government policies that drive up the cost of labor to a point that employers must turn to automation to maintain the thin profit margins restaurants offer.

Puzder argues that government mandates are hurting the populations that those who pass the regulations are trying to protect. In his personal blog, Pudzer told of his interview on CNBC’s “Squawk Box” show after California passed the $15 minimum wage. “Jobs will disappear when minimum wage increases make the cost of hiring employees exceed productivity. I also told (“Squawk Box” Co-Anchor Becky) Quick that raising wages so drastically will price entry-level workers out of jobs and force businesses to automate.”

Puzder is not opposed to minimum wage increases but he said he wants them to be “rational” so as to have minimal impact to help preserve jobs. He favors earned-income tax credits to help low paid workers.

He also argues that government policies especially in California stifle the entrepreneurial spirit of immigrants and minorities who would move up to management and ownership of fast food restaurants.

When Pudzer announced the company’s headquarters’ move from Santa Barbara County to Nashville, Tennessee this past March he said the location of headquarters was unimportant. Where restaurants were building franchises and facilities is important and California presented too many business obstacles.

In a 2013 Wall Street Journal article, Pudzer said, “California is not interested in having businesses grow.” He cited as example that it takes 60 days in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia for one of CKE’s restaurants to get a building permit after signing a lease. But in Los Angeles it takes 285 days. Pudzer said, “I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California,” a street named for Carl’s Jr. chain’s founder.

Beyond the difficult permitting process, Pudzer complained about labor regulations often required the company to battle class-action lawsuits in the state. He said over the previous eight years his company paid $20 million in damages and attorney fees fighting the lawsuits.

In discussing the debate over minimum wage, Pudzer said he is not a fan of automation at restaurants.

“There’s a personal element that you don’t get from machines, and I think you’re going to lose that.” Fast food is a “great level of job for people to enter the labor force. A high percentage of our employees, particularly in California, are immigrants.”

In a September Wall Street Journal piece Pudzer wrote, “At restaurant-industry meetings, my colleagues typically voice concerns about government mandates. I’d much prefer to hear them complain that labor costs are rising because companies are hiring and the growing market has made competition for workers stiff. A freer market would do much more to improve worker’s lives than the Labor Department’s new regulation.”

Puzder is the co-author of a 2010 book, “Job Creation: How It Really Works and Why Government Doesn’t Understand It.”

If he gets the Labor job he can do something about it.

This column appeared on Dec. 9, 2016 in Fox & Hounds Daily, which gave permission to republish, and can be found here.

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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.

 

Los Angeles KTTV Editorial – ‘California Losing Companies & Jobs’

October 7, 2016

Now here is an editorial that gets to the point about California’s business departures, saying, “Governor Brown: Your attitude needs to change…. Creating a climate that is business friendly should come from the top and be a priority.”

ch-11-point-of-view-calif-losing-jobsThe piece runs a lengthy news crawl at the bottom of the screen that shows the names of some of the companies that have relocated in full or in part out of California.

The commentary cites my study issued in January, entitled, “California Business Departures: An Eight-Year Review 2008-2015.”

The views expressed by the station’s Vice President and General Manager, Bob Cook, are in concert with the assessments held by business leaders throughout the state.

See KTTV’s “Point of View: California Losing Jobs.”

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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.

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

July 3, 2016

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.

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.

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

June 20, 2016

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.

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.

 

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

June 16, 2016

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 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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