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

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.

NevadaSo large corporations and small business entities 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 plans 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 I need to 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.

This article was originally published by Fox and Hounds Daily

Even Tax Breaks are Torture for California Businesses

tax signCalifornia has a terrible reputation of being unfriendly to business, but that’s just because some people don’t have a sense of humor.

If you love comedy, check out the website of the Governor’s Office of Business and Economic Development (GO-Biz) at

There you’ll find all the incentives, programs and helpful information that the state of California has created to help businesses grow and stay in California. There’s not much, but brevity is the soul of wit.

The state offers advice on “Setting up a Facility,” under the category of “Start a Business.” Here, in its entirety, is the section titled, “Acquiring Office Manufacturing Equipment”:

“Office furnishings can be rented or bought through businesses that deal primarily with office occupants. These companies are easy to locate through local telephone Yellow Pages under ‘office furniture and equipment, dealers or rental.’ Companies that sell telephone and computer systems, copy, fax and mail machines and other technical equipment can also be located through the Yellow Pages. Companies selling other office supplies such as pens, paper, tape and staples can be found through the Yellow Pages listed under ‘office supplies’ or ‘stationers,’ or through catalog sales.”

Daunted by the task of shopping for office furnishings? The state suggests a business incubator program.

It doesn’t have one, unfortunately. But “universities, cities or counties, ethnic or industry associations, or private companies” run business incubators, and “generally they offer an individual office, cubicle or at least a desk for the businessperson.”

Let’s just pray they have a copy of the Yellow Pages.

The bureaucrats at the Department of Business Friendliness don’t just sit around all day fielding inquiries on where to buy fax machines. They also administer the California Competes Tax Credit, a program that allows businesses to plead for the chance to keep a little more of the money they earned.

During the current fiscal year, these tax credits will total about $200 million statewide, which is probably less than we’re spending on the latest new watercolors of the bullet train. Those paintings should be hanging in the Louvre for what they’ve cost us.

So, how does a business qualify for the California Competes tax credit and how much money can it save on taxes?

There doesn’t seem to be a clear answer. “Tax credit agreements will be negotiated,” the website states.

The negotiating is done by the governor’s appointees at GO-Biz, then approved by the California Competes Tax Credit Committee.

The CCTC committee is made up of the state treasurer, the director of the Department of Finance, the director of GO-Biz, one person appointed by the Assembly Speaker, and one person appointed by the Senate Rules Committee.

They meet several times a year to consider applications, and the minutes of their meetings are fun reading if you’re a fan of the Inquisition.

One after another, company representatives are brought before the committee to be grilled about their application for a tax credit.

The questions are harsh. Why are your wages so low? Do you provide health benefits? What does your company do? Why do you need this money? What are you doing to get more women on the production floor? Do you have a training program? Will you hire through an employment agency? What is your outreach plan to achieve a diverse workforce?

This kind of thing caused the committee to get a visit from the legal counsel for California Competes, who explained at their meeting last November that under the law, “the sole function of the committee is to approve or reject the agreements” recommended by GO-Biz.

The lawyer said the committee has no authority to collect demographic data, like race and gender, about an applicant’s workforce. The committee also has no authority to require the applicant to collect and turn over that demographic data, and no authority to “promulgate regulations” about diverse work forces.

But that didn’t sit well with the political appointee from the Assembly, who hired an attorney independently and insisted that the intent of the legislature was to use the California Competes tax credits to pursue other “underlying goals.” The interrogations will continue, the committee member made clear, because even if there’s no legal authority for action, “Simply asking the questions sends a message.”

That’s a statement that could give all the old Russians living in the Fairfax District a nasty flashback.

And this is the business incentive program. Imagine if it was the penalty phase.

This piece was originally published by the L.A. Daily News.