Archive for the ‘Worst States for Business’ 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 moe 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. 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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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.

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.

 

Orange County Register editorial: California stoking job growth – in the moving industry

May 29, 2016

Californiaocr R has earned quite a reputation for being openly hostile to business, as confirmed by numerous studies and surveys. Its plethora of taxes and regulations are driving away legions of entrepreneurs and workers, but they are doing wonders for one segment of the economy: the moving industry. It is almost as though that industry is secretly lobbying the state Legislature for its anti-business policies.

Joe Vranich, as president of Spectrum Location Solutions, an Irvine business relocation consulting firm, knows all about what drives businesses’ decisions to give up and leave for greener pastures.

See more of the editorial, which contains quotes from company CEO’s, 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’s Split Personality’ – Coastal Economy Brisk While Large Swath of the State Suffers

February 3, 2016

California FlagPleased to note that the City Journal published a column which relies in part on our firm’s research about companies shifting their investments out of California to more business-friendly states and nations. The column’s subtitle is quite apt: “The Golden State’s tech sector is booming, even as its industrial base flees.” It’s written by Steven Malanga, the senior editor of the magazine and a senior fellow at the Manhattan Institute.

See California’s Split PersonalityCity Journal, a quarterly magazine of urban affairs, published by the Manhattan Institute, is “the most beautifully produced political magazine in the country,” according to PowerLine.

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.