Archive for the ‘Worst States for Business’ category

Business Exodus From California Is More Troubling Than Sanctuary Policies

May 5, 2018

Really pleased that Chief Executive magazine recognized my research in today’s column, “Business Exodus From California Is More Troubling Than Sanctuary Policies.” Excerpts:

“California is facing a bigger issue than its tussle with the Federal government over sanctuary cities. According to a November report from the U.S Census Bureau, the Golden State has had 142,932 more residents exit to live in other states than people arriving from other states. This domestic outmigration was the second largest outflow in the U.S. behind New York and New Jersey ….

“[M]ore serious is the number of California-based companies that have left or signaled their intention to leave the state. Last year marks the first anniversary of the announcement that Carl’s Jr., a California burger icon for more than six decades, was relocating its headquarters to Nashville. It’s a symbol for what’s become a stream of businesses that have quit California. What was once an almost quiet exodus of companies now looks more like a stampede.

“In addition, two dozen California companies have said they are tired of the business-bashing in Sacramento, along with the high taxes — and are now threatening to leave the state.

“Business relocation expert Joe Vranich who, as president of … Spectrum Location Services … told Investor’s Business Daily (IBD) that from 2008 through 2015 …. that as many as 10,000 companies have left [California] in recent years.”

Here is the link to the full article: https://chiefexecutive.net/business-exodus-california-troubling-sanctuary-policies/

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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Spectrum Location Solutions Leaves Business-Unfriendly California for Pittsburgh Metro Area

April 18, 2018

PITTSBURGH, April 18, 2018 – A company that identifies favorable out-of-state locations for firms seeking to free themselves of California’s harsh business climate has itself departed the state for greener pastures.

Spectrum Location Solutions, which for ten years has been based in Irvine, in Orange County, has moved to Cranberry Township, a growing suburban community in Western Pennsylvania.

“I moved for three reasons – taxes, regulations and quality-of-life,” said Joseph Vranich, president of the boutique consulting firm.

“About taxes. Pennsylvania’s flat income tax rate allows my family to save a considerable sum compared to California’s progressive system – and sales taxes and real estate taxes are lower, too. California taxpayers shouldn’t expect any relief, as evidenced by the multitude of new taxes under consideration in the legislature,” Vranich said.

Next, I’ll have greater freedom in my business now that I’m free of California’s notorious regulatory environment and threats of frivolous lawsuits that hurt small businesses like mine,” he said.

“Finally, we are enjoying a superior quality-of-life here. We bought a house larger than what we had in California for about half the cost. We can afford to engage in more activities because the cost-of-living in Cranberry Township is 44 percent lower than in Irvine,” he said.

Concern about California’s costs is widespread. Statewide, 58 percent of Millennials and 65 percent of parents echoed the sentiment that “I am considering moving away from California because of the high cost of living,” according to a recent poll by the PR firm Edelman.

Gov. Jerry Brown’s spokesperson once said few companies would leave California for “desolate locations” elsewhere.

“Well, this area is the opposite of ‘desolate,’” said Vranich. “Pittsburghers are justifiably proud of their neighborhoods, cultural attractions, sports teams, scenic vistas, and transformation to a place where more than 10,000 innovative tech firms call home.”

About Us

Spectrum Location Solutions provides site-selection consulting services to help companies find optimal places for relocations, expansions or consolidations. Industries served have included manufacturing, electronics assembly, aerospace, software, financial services, healthcare, consumer goods, education, insurance, transportation and professional services. The company identifies candidate areas by evaluating workforce availability, operating costs, logistics patterns, building and land availability, taxes, economic incentives and quality-of-life factors. Mr. Vranich has also served as an Executive Coach and has been known as The Business Relocation Coach.

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.

California Lithium Battery Maker Heads to Appalachia

January 5, 2018

It’s rare that I replicate posts from other sources. However the piece below by Wendell Cox, which appeared today in NewGeography.com, may appeal to readers interested in corporate location issues.

It is starting out to be a happy new year in Pikeville, Kentucky. Little in technology is more “cutting edge” today that lithium battery manufacturing. Elon Musk last year chose Nevada, not California for his mega plant a few years ago. Now, lithium battery manufacturer Ener Blu has announced plans to move, “lock stock and barrel” from Riverside-San Bernardino, east of Los Angeles, to Appalachian Kentucky, with its plant to be located in Pikeville, to be built on what was a surface coal mine. Plans are to create 875 manufacturing jobs. Ener Blue also will move its headquarters to Lexington, Kentucky’s second largest metropolitan area and the home of the University of Kentucky.

Pikeville: A Unique Move

This could be a very significant move. On the surface, it looks fundamentally different from the many corporate moves that have left high-cost California behind as companies seek the greener pastures of lower taxes, less regulation and lower costs of living (driven largely by better housing affordability) in their efforts to recruit talented staff. The most significant examples are Japanese car manufacturers that have moved their US headquarters to Dallas-Fort Worth and Nashville, which have become major metropolitan areas capable of competing for just about any company looking to move, not to mention households seeking better opportunities as well as urban amenities at an affordable price.

But Pikeville is no Dallas-Fort Worth or Nashville. It is not even a micropolitan area, much less a metropolitan area. The city (municipality) had a population of under 7,100 in 2016, up just 200 from the 2010 census. Pikeville is the county seat of Pike County, which has a population of 61,000, down from 65,000 in 2010.

Appalachian Poverty

Pike County is at the core of one of America’s poorest regions, the Appalachians. Pike County’s economy has long been dependent on coal and even before recent setbacks, Appalachian coal regions have had more than their share of poverty. The recent declines in coal employment have been legendary. Eastern Kentucky has been particularly hard hit. In the last six years, nearly 75 percent of its coal jobs have been lost.

The latest data from the Appalachian Commission shows Pike County to have a poverty rate of 22.9 percent, 48 percent above the national poverty rate. Its poverty rate is more than double the overall poverty rate for the entire Appalachian region, which stretches from Upstate New York to Mississippi. The median household income is approximately 40 percent below the national figure.

Appalachian Hope

But not all see Pikeville as a place without a future. This would include prolific demographer Lyman Stone, who wrote more than one year ago about the progress that has been made in Pikeville, even as the rural and coal economy surrounding it declines. Pikeville has been rejuvenated by the expansion of its small university, the University of Pikeville, which has more than doubled its enrollment over the past two decades. Stone anticipates continued growth.

Moreover, there is more good news for Eastern Kentucky than just Pikeville. Braidy Industries has embarked on a project to build the first new aluminum plant in the United States in 30 years in Greenup County, on the south bank of the Ohio River west of Huntington, West Virginia. After the plant opens there are plans for more than 500 full time employees.

The tendency over the past few decades has been for the US to shed its manufacturing functions to lower cost venues overseas. At the same time, many areas have been left behind. As the cost of living differences expand between the more expensive metropolitan areas and the rest of the United States, it may be that US corporate interests, and others, will identify opportunities for profitable operation, while at the same time rejuvenating places that have been left behind, like Pikeville and Greenup County.

Meanwhile, back in Pikeville, Kentucky Governor Matt Bevin, Congressman Hal Rogers and Pikeville state Senator Ray Jones II, were present for Ener Blu’s Pikeville announcement. The Governor, according to U.S. News and World Report predicted that the company’s arrival would transform an area where the coal jobs have disappeared. Congressman Rogers added “this is where we’ve got a lot of workers needing work that are … capable, ready to go,” An elated Mayor Jimmy Carter referred to the development as revolutionary “for the city of Pikeville and all of Eastern Kentucky.”

Jones, the Democratic Kentucky Senate minority leader, acknowledged partisan differences with Republican Governor Matt Bevin, but added that he has nothing but praise for the Governor’s efforts to revitalize eastern Kentucky. He added that, first the Greenup County Braidy announcement and now Ener Blu are two of the most positive economic news in this state in many years.

The Beginning of a Trend?

The real question is whether Pikeville and Greenup County are just blips in the continuing decline of small town America. There are many more small towns that have been left behind in the changing economy. Indeed, there is a broad view that small towns have little or no future, the theme of a New Year’s Day Wall Street Journal feature, “The Divide Between America’s Prosperous Cities and Struggling Small Towns.” Nobel Laureate Paul Krugman even wonders if there is a future for some major metropolitan areas, such as Rochester, New York.

Yet the developments in Eastern Kentucky suggest the potential for an alternate narrative. Greenup County could indicate a revived potential for traditional manufacturing even in the post-industrial age. Pikeville could indicate the potential for “cutting edge” technology to find a home in small towns. Many small towns may not die at all, as they are rejuvenated by public policies in places like [business-hostile] California, where the cost of living and cost of doing business has increased by such a degree so that even the most advanced industries seek other venues.

Wendell Cox is principal of Demographia, an international public policy and demographics firm. He is a Senior Fellow of the Center for Opportunity Urbanism (US), Senior Fellow for Housing Affordability and Municipal Policy for the Frontier Centre for Public Policy (Canada), and a member of the Board of Advisors of the Center for Demographics and Policy at Chapman University (California). He is co-author of the “Demographia International Housing Affordability Survey” and author of “Demographia World Urban Areas” and “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.” He was appointed to three terms on the Los Angeles County Transportation Commission, where he served with the leading city and county leadership as the only non-elected member. He served as a visiting professor at the Conservatoire National des Arts et Metiers, a national university in Paris.

[Note: my research found that other California companies have relocated jobs or facilities to Kentucky, the most recent of which was Cafe Press Inc., which in 2016 closed its Hayward office and moved employees to its Middletown, Ky. headquarters. CafePress was founded in a California garage in 1999. The company moved its headquarters to Kentucky in 2012 – the same year it went public – Joe.]

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.

I’m grateful to Joel Kotkin, Executive Editor of NewGeography.com, for permission to reprint the above column. The photo of the University of Pikeville and the map were extracted from a City of Pikeville Economic Development Video.

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.

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.

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.

*  *  *

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.