Why do Businesses Leave California?
At a time when California's unemployment rate is over 11%, I was pleased to accompany Assemblyman Dan Logue (R) to be proactive and find out exactly why. I'll bet most of you thought as I did that the reason for job flight is our onerous tax structure. However, surprisingly enough, on our tour to Reno, Nevada last month the ''T'' word was on the list but according to the attendees, the primary driver of businesses out of our Golden State was an ''R'' word – Regulation. It seems from the testimony we heard, most business owners are willing to tough out our tax structure, but the regulation and heavy-handed and expensive enforcement was the impetus to begin shopping around. Once the companies began researching other western states, the California ''climate'' appeared less enticing.
While we spoke with numerous ''former'' California executives and long-time residents, I have listed 2 award winning categories for your review that typify the shared California experience:
Believe it or not Category: According to Bob Ostendorf, President and CEO of Neenah Enterprises, Inc., their wholly owned California subsidiary, Gregg Industries, closed up shop the week of our Nevada tour. The reason – Sniffer Fines. Reportedly, the South Cost Air Quality Management District (SCAQMD) actually employs ''Sniffers.'' No, not the canine-type that sniff for bombs or drugs, but people who sniff the air to see if there are any smells that might be offensive and then found neighbors to file a complaint. The foundry in El Monte, Ca. employed over 200 people and had been conducting operations in the same location for over 60 years, and complying with increasing regulations, but the ''sniffer'' test was the impetus to look around. Hence, Gregg Industries has chosen to relocate to the Reno area to escape the ''sniffers'' and the onerous fines and regulations. Result, lives changed, people relocated to Nevada or out of luck, and 200 living-wage jobs lost.
The Saddest Tale Category: Steve Patmont is a 3rd generation Californian, a Berkeley grad, and owner of Patmont Motor Werks, formerly of Livermore, Ca. (150 employees). He claims he was driven out of our golden state 3 years ago by California Air Resources Board (CARB) and the Occupational Safety and Health Administration (Cal OSHA). He stated that with Cal OSHA, ''…it was not weather you would be fined but merely how much,'' and as for CARB, they did not appreciate his gas powered, weed-whacker motor. You see, surfer and outdoors fanatic, Steve, created the ''Go Ped'' that we see all over town. According to Steve, his $1 Million dollar shipment of weed-whacker motors were held hostage at the docks because they were not electric. To settle with CARB he paid $100,000 fine to be allowed to receive his product. He now offers both gas powered and electric motors from Nevada. He had tears in his eyes as he described having to leave his home state that was again auditing him the week he was moving out.
The attendees also reported that it was less expensive to ship from Nevada to Southern California than to ship from Los Angeles to Orange County, due to in-state tariffs. In addition, our state is implementing new strict off-road diesel regulations, costing companies as well as our state agencies millions of dollars to replace or retro-fit vehicles. At a time when cash flow is low and profits for most businesses are tenuous to non-existent, I fear we will see more industries fleeing our state. We will also be tapping the much-needed Cal Trans roadway funds for retrofits and new vehicles to meet the mandate.
While those interviewed understood the need to regulate to protect our environment, air quality and safety in the workplace, they only asked that the agencies work cooperatively for solutions and consider the business side of the equation. California is losing businesses daily to other states; it's time to stem the tide and encourage living-wage jobs for our financial well-being. With anticipated revenues down (tax receipts) we have another huge deficit facing our state. Now is not the time to drive employers out, and unemployment up – the regulators may soon have little to regulate.