Archive for the ‘Gov. Jerry Brown’ category

Businesses Joined by Non-Profits in Leaving California for Friendlier States

September 21, 2017

Friends in economic development agencies and in the site selection consulting world have asked why I haven’t posted anything in quite awhile. My answer is simple: I’ve been exceptionally busy. It certainly isn’t because there aren’t things to write about.

Another question I’m usually asked is whether businesses are still leaving California.

They are, especially with the state legislature again failing to provide tax or regulatory relief to its home-state companies. Overall, taxes, fees and regulations have gotten worse. Such a difficult business environment, combined with grim treatment by local governments, have caused operating costs to grow faster in the San Francisco Bay Area and Los Angeles than in virtually every other metropolitan area in the nation.

So large corporations and small business entities – joined by non-profit organizations – continue to look for ways to partially or fully exit the state. Today alone brought two examples, which by coincidence both involve Nevada.

The first is a loss for Los Angeles with Virtual Guard, Inc. leaving the city’s Sherman Oaks section. The company plans to relocate its headquarters and interactive command and control center to Clark County (Las Vegas area), citing an “unfriendly economic environment” in California. The move is likely to occur later this year.

There, Virtual Guard  is expected to hire 80 new employees within its first two years of operations. The video monitoring company is also a developer and integrator of technology in the perimeter security sector and its solutions are being used throughout the United States and Canada.

California, which a long time ago was a haven for aerospace companies, will lose another one next year.

ERG Aerospace Corp. plans to relocate its Oakland operations to McCarran, Nevada and make the Silver State its headquarters. The company manufactures materials and components for the aerospace, national defense, semiconductor manufacturing, biotech and other high technology industries. The target date for the move is the second quarter 2018, with operations to commence in the same quarter.

Several months ago, a non-profit organization said it would relocate out of state, too. Horizon University, a private, Christian school that started classes in 1993 in San Diego is heading to Indianapolis.

Horizon’s President Bill Goodrich calls the decision “a no-brainer.” He said Indiana offers a “climate” that was slipping away in California, and by that he wasn’t referring to San Diego’s sunny days. Goodrich said that the university helps people “grow academically” while integrating the “strong biblical teachings and we find in Indiana, there’s an openness to that.”

The move will allow the, accredited university to grow on a 97-acre spread – in a state with less “red tape” – and attract more students.

Thanks to high costs, a sizeable non-profit move is upcoming: Toastmasters International will shift its headquarters from its birthplace in Orange County to Colorado.

With about 180 employees, Toastmasters CEO Daniel Rex said costs in California were a concern. “When you look at the availability of workers, when you look at the cost of commerce and real estate, this is something that makes sense.” The organization is spending $19.5 million to buy a building in Englewood, south of Denver. Toastmasters is a legendary California institution, founded in 1924 in Santa Ana. Since 1990 it’s been based in Rancho Santa Margarita.

Business people who endure the decline in California’s business climate and pervasive cost increases can take some comfort knowing that some non-profit brethren are members of the same club.

I’ll write more about how California treats its commercial enterprises. But first let’s see how many business-helpful bills and business-damaging bills Gov. Jerry Brown will sign into law.

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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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.”

* * *

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 Tax Increase Plans Force Business to Look Elsewhere

August 25, 2015

California is considering imposing the most ruthless set of taxes ever placed on businesses – a tsunami of levies that may trigger the worst raid on private-sector finances ever organized by the state’s politicians. One result will be an increasing number of businesses leaving California for greener domestic or international pastures.

Gov. Jerry Brown and legislators will consider several proposals – including a new tax on previously untaxed services that will force companies to pay more for routine transactions, such as shipping a FedEx package, conducting bank transactions, hiring a contractor or relying on an independent auditor.

Fault map – businesses worry more about California politicians than earthquakes

This “let’s tax everything in sight” measure will be on the backs of enterprises ranging from Fortune 500 corporations down to a one-person entrepreneurial company. Estimated annual cost to businesses: $10 billion.

Then there is the fanatical $6 billion annual escalation in fuel and motor vehicle taxes, sure to hit any operation that owns or leases trucks or automobiles.

Also damaging is the potential elimination of Proposition 13’s tax-limiting protections for companies that own offices, data centers and factories – a “split roll” that would include virtually all non-residential properties. That will be another $9 billion paid annually by commercial enterprises.

Public employee unions are insisting on a multi-year extension of Proposition 30, which pushed income and sales taxes to the highest in the nation. That passed in 2012 after voters were told they were “temporary” taxes. Cost: $6-7 billion annually on businesses and individuals.

And so it goes, even though the state is awash in an unanticipated $6 billion tax surplus above Gov. Brown’s budget, according to the Howard Jarvis Taxpayers Association. Astonishing.

It’s little wonder that companies leave California in full or in part, as reflected in a sampling of moves that have occurred quite recently.

Right now, Sage North America is relocating its headquarters from Irvine to Atlanta, where it will create 400 jobs. A company official said the project happened “very quickly.”

Another firm, iDiscovery Solutions, Inc., will shift its West Coast headquarters from Costa Mesa to Seattle – the latter office having opened only six weeks prior to the relocation announcement.

Los Angeles sees many company departures, the latest being Go West Creative. The marketing agency said it didn’t intend to relocate its headquarters to Nashville when it opened there a few months ago, but that’s precisely what happened.

None of this is surprising because the state’s political establishment routinely ignores concerns expressed by business leaders.

For example, Ehsan Gharatappeh, CEO of CellPoint Corp. of Costa Mesa, when launching a new facility in Fort Worth, said, “Even if California were to eliminate the state income taxes tomorrow, that still would not be enough to put my manufacturing operations back in California.”

Think about Dan Castilleja, president of DHF Technical Products, who said when relocating that it’s easier to expand in New Mexico than in the Los Angeles area where “We are hampered by everything from payroll to taxes to regulation.”

Examples abound of companies leaving for other states – even to the so-called “Rust Belt” – because their friendlier business environments far outshine our disadvantages.

California’s public officials come across as being uncaring about the damage they inflict on businesses, investors, employees and their families, and to the towns that lose jobs to distant locations.

As the California political parade demanding higher taxes becomes longer, look for the list of companies leaving California to become longer, too.

Published yesterday at the Orange County Register and today at Fox and Hounds.

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: The Land of Double Taxation for Small Businesses

November 26, 2014

Just think: You run a small company. Your partner embezzles from you and you are reeling – you feel like you’ve been punched in the gut. Next, California’s state government shows up and slaps you around. When you object, Sacramento offers no apology, no comfort. You’re on your own.

Farfetched? Read on to see what happened to a California Limited Liability Company (LLC) that tried to play by what it thought were common-sense rules.

First, an LLC is a form of business that permits the owner to avoid double taxation. In California, such companies must pay an annual minimum franchise tax of $800, which is the highest of any state (in 40 other states the fee is $100 or less) and may be subject to additional fees based on revenue.

An article by Mike Dazé in Bloomberg BNA – Corporate Close-Up: The Burden of California’s Taxes and Fees on Limited Liability Companies – points out that the State Board of Equalization “illustrates the challenges businesses face when trying to reduce their liability for taxes and fees in California. A company filing two short-period returns in tax year 2010 unsuccessfully protested the imposition of the minimum tax and LLC fee in each short period.”

In short, they objected to double taxation.

The company, Bay Area Gun Vault, LLC, converted from a two-member entity into a single-member LLC after one of the two members was caught embezzling money and was removed. So the company filed two returns for 2010, one as a two-member LLC and the second as a single-member LLC.

In the first return, the company timely paid the annual tax of $800 and an extra LLC fee on profit. In the return for the second period, the company did not pay the LLC annual fee, but did pay the tax.

Despite two tax returns, the company clarified that the income was for the same business with the same tax ID number and assets and was operating in the same location. So the company should owe only $800 in tax and an LLC fee of $6,000.

But the removal of the embezzler caused a “technical termination” of the original LLC because 50 percent or more of the interests changed hands. Hence, the resulting single-member LLC was a “new entity for tax purposes” and owed the minimum tax and LLC fee during the same year.

Mr. Dazé wrote, “The logic of the company’s argument is appealing: LLC taxes and fees should not be imposed twice in the same year on the same business.”

The Board claims there is no statutory support for that position.

Well, if the Board is correct, why did legislators let an unfair law stand? Do Sacramento lawmakers use no foresight in determining whether technical provisions in business-oriented laws might cause future injury?

Actually, I know the answers to my own questions. Here is why the legislature doesn’t care how its actions harm the business community:

  • First, the Franchise Tax Board (California’s version of the Internal Revenue Service) has projected revenue from LLC taxes and fees to be $753 million in fiscal year 2014-2015. Sacramento wants to collect every single penny of that revenue.
  • Next, California’s legislature is packed with people who will use taxpayer funds to support the latest half-baked ideas. But they routinely turn a deaf ear to requests from the business community for fair taxation and regulatory policies.
  • Finally, most Sacramento politicians are clueless about what it takes to run a business.

To amplify on that last point – only “18 percent of the Democrats who control both houses of California’s full-time legislature worked in business, farming or medicine before being elected,” wrote former California Assemblyman Chuck DeVore. “The remainder drew paychecks from government, worked as community organizers, or were attorneys.”

In business-friendly Texas, “Democrats are more than twice as likely as their California counterparts to claim private-sector experience outside the field of law,” continued DeVore, and “75 percent of the Republicans earn a living in business, farming, or medicine….” All that can be found in his book, The Texas Model: Prosperity in the Lone Star State and Lessons for America.

The analysis was for a couple of years ago, but the makeup of both legislatures remains virtually the same.

California is replete with demands for “environmental justice,” “social justice,” “income justice,” “sexual justice,” “workplace justice” – oh, the list goes on and on. What California needs more of is “entrepreneurial Justice,” “business justice” and “tax justice.”

Gov. Jerry Brown and legislative leaders should reverse tax-confiscatory policies and refund overpayments to that LLC and others in similar positons. If not, California will perpetuate its mean-spiritedness towards corporations – even the one-person kind.

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.

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

October 21, 2014

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.

California’s ‘Score’ for Business Deteriorates

September 12, 2014

Down again.

That’s what we can say about California’s “business attractiveness” as it lost its tenth place ranking in a survey of site consultants, published yesterday by Area Development Online. Here is what Editor Dale Buss had to say about the state losing the ranking it had in last year’s survey:

“The state’s reputation with site consultants keeps taking hits — witness Toyota’s announcement earlier this year that it plans to move its corporate headquarters and 4,000 jobs to suburban Dallas from southern California. And so this year, California placed in the top states in only three of the 18 sub-categories, notably ranking third for access to capital and project funding, no doubt a legacy of the continued success of Silicon Valley.”

The new survey was interesting in other respects, too, in that Georgia took over the top spot, with Texas moving to second place. States in the South and mid-South dominate the list because of their continuing momentum in business development. Also, some states in the Midwest “are scratching their way back into position as major players in the U.S. economic-development derby.”

Area Development did an excellent job explaining the survey’s findings. For the story, along with state profiles, see “Top States for Doing Business 2014: Georgia Unseats Texas, Industrial Midwest Rises.”

The finding should unnerve California business leaders because site selectors surveyed over the years by the publication have been kind to California – especially when compared with other surveys that usually portray conclusions that are less kind.

I would be remiss if I failed to remind business owners and corporate leaders that this year Chief Executive magazine found California to be the “worst state for business” — for the tenth year in a row. CEO’s comments include: “California could hardly do more to discourage business if that was the goal.” “The state regulates and taxes companies unreasonably.” “California is getting worse, if that is even possible.”

Moreover, CNBC’s 2013 “Top States for Business” scored states on 51 measures of competitiveness, weighted states based on other criteria, and found California ranked low at 47.

As if that weren’t enough, 24/7 Wall St. ranked California 50th in its evaluation – for the third year in a row.

Incidentally, after reading the Area Development story, the next item to pop up on my news screen was headlined, “California Rocket Company Moving to Texas.” Turns out Firefly Space Systems of Hawthorne will relocate its headquarters to Cedar Park, near Austin, where it will hire up to 200 workers, mostly highly paid engineers. It will develop rocket engines in collaboration with the University of Texas.

Twenty-five years ago California was among the best states for business. Sadly, it’s lost that distinction, and I expect little improvement in the business climate. When I consider the strength of business-hostile interest groups, the attitudes of elitist voters along the coast, and Gov. Jerry Brown surrounding himself with business-clueless advisors, I see more regulations and higher taxes in the future for California businesses.

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 Gas Prices to Jump 13-to-20 Cents per Gallon Jan. 1— This is Not a Joke

August 27, 2014

It isn’t often that I’m speechless — but I’m speechless.

California Gov. Jerry Brown and the legislature refuse to stop an unprecedented increase in gasoline prices. So, effective January 1st, the cost of a gallon of gasoline in California will spike between 13 and 20 cents per gallon. No other state will do this.

The price hike is an outgrowth of a state law, the California Global Warming Solutions Act, AB 32, which created a cap-and-trade system relating to carbon emissions. Even though the state issues only about 1 percent of the world’s greenhouse gases, it nevertheless has instituted draconian regulations that will cost industry billions of dollars in fees to purchase carbon credit allowances. The gasoline price increase will result from energy companies being required to pay higher fees, which will be passed onto businesses and consumers.

And it could get even more expensive. California’s Legislative Accounting Office found that increases resulting from cap-and-trade penalties could exceed 50 cents per gallon by 2020.

All of this is on top of California’s current gasoline tax. The Tax Foundation puts the state in 1st place nationwide with the highest rate of 52.89 cents per gallon. Adding in the 18.4 cent federal excise tax means California consumers now pay 71.29 cents per gallon to various public treasuries.

The new requirement will harm business operations in California for several reasons:

  • Any company with a union agreement that ties compensation to the cost-of-living will see an increase in labor costs as soon as contract provisions permit. (Keep in mind that Californians are now seeing costs increase for taxes, apartment rentals, utilities and food.)
  • Next, countless small businesses that rely on gasoline-powered pickup trucks and delivery vans (e.g., farmers, contractors, retailers) will see costs rise.
  • Finally, much of the new “river of  revenue” to the state will be wasted, in typical Sacramento fashion, further entrenching the state’s 373 public agencies, commissions and boards.

Anyone with a heart will recognize the harm done to individuals, particularly the poor, or people in agricultural areas who must drive long distances for their jobs.

Measures like cap-and-trade are supported by more than environmentalists — they are promoted by the ultra-rich and celebrities living in their San Francisco, Silicon Valley and Los Angeles enclaves.  That group, I presume, will celebrate the New Year with extra high-fives all around. That is, before they head off to their limousines.

See more about this sad state of affairs in two stories in the Sacramento Business Journal“Steinberg: Cap-and-trade expansion will not be delayed” (Aug. 26 story) and “Analyst: Cap-and-trade will push gas prices up as much as 20 cents” (Aug. 7 story).

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.