California to Business: Get Out!

Richard Rider, Chairman, San Diego Tax Fighters Richard Rider, Chairman, San Diego Tax Fighters Leave a Comment

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Illustration by Sean Delonas

Grimly funny.  Actually, NOT so funny.

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Last November I posted on my blog http://open.salon.com/blog/richard_rider  an excellent article on California’s anti-business climate — produced for CITY JOURNAL, and later published in the WALL ST JOURNAL.  I failed to post this article on Rostra for some reason.  Belatedly, here it is.  And then some.

http://open.salon.com/blog/richard_rider/2011/11/16/california_to_business_get_out

City Journal Autumn 2011.

by STEVEN MALANGA

Cali to Business: Get Out!

Firms are fleeing the state’s senseless regulations and confiscatory taxes.

Last year, a medical-technology firm called Numira Biosciences, founded in 2005 in Irvine, California, packed its bags and moved to Salt Lake City. The relocation, CEO Michael Beeuwsaert told the Orange County Register, was partly about the Utah destination’s pleasant quality of life and talented workforce. But there was a big “push factor,” too: California’s steepening taxes and ever-thickening snarl of government regulations. “The tipping point was when someone from the Orange County tax [assessor] wanted to see our facility to tax every piece of equipment I had,” Beeuwsaert said. “In Salt Lake City at my first networking event I met the mayor and the president of the Utah Senate, and they asked what they could do to help me. No [elected official] ever asked me that in California.”

. . .

Go to the link for the full article. You will find it to be both informative and depressing.

But wait.  There’s more!

RIDER COMMENT:  The article is superb, but I also found some of the meaty WALL ST JOURNAL reader comments of interest.  They describe the actual regulatory impediments California businesses face — concrete examples.  Hence I’m posting some highlights below:

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Unfortunately I am stuck in California until I retire in 3 or 4 years. It isn’t in my best financial interest to leave before then. With the exception of military service, I have live here for the last 50 years and have watched the decline of the state. Not only have they made it hard for business, they have made it more costly for the average middle class person to live here.

Two examples are the Electronic Waste Recycling (eWaste) Fee, (with information on the fee found at http://www.boe.ca.gov/sptaxprog/ewfaqsgen.htm) and the Reducing Climate Change Emissions from Do-It-Yourself Automobile A/C Re-Charging regulations. The California Air Resources Board (ARB) has adopted a regulation to reduce refrigerant emissions from the do-it-yourself servicing of motor vehicle air conditioners (MVAC) such as those in cars and pickup trucks. This regulation became law in the state of California on October 1, 2009. Detailed information on this regulation can be found at
http://macsworldwide.wordpress.com/2011/01/05/in-california-it%E2%80%99s-the-new-law-for-refrigerant-use/ 

Both add significantly to the cost for Californians and have tended to drive purchases to internet retailers where you don’t have to pay the ewaste fee or sales tax. That may well be one of the reasons the ewate fees were significantly reduced at the beginning of this year.

There are a lot of other negatives to living in California that will continue to drive people like myself out as soon as is feasible. To bad for California, it was once a great place to live and work.

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More evidence:

In 2005 California’s Governor Arnold Schwarzneggar appointed David Booth to his “California Commission For Jobs and Economic Growth”. At the time, David Booth was co-founder and Co-Chairman (along with Rex Sinquefield) of the institutional asset management firm Dimensional Fund Advisors (DFA). In late 2008 Mr. Booth and Mr. Sinquefield announced that the headquarters office of Dimensional Fund Advisors would be moving from Santa Monica, CA to Austin, TX. (At about the same time David Booth made a donation of 300 million dollars to the University of Chicago School of Business.)

In the initial publicity about the move Mr. Sinquefield discussed several economic reasons for the move. From the St Louis Post Dispatch: “Sinquefield retired as co-chairman last year and moved back to Missouri but remains on the board. In an April interview with the St. Louis Post-Dispatch, Sinquefield said he was helping the company with the move and that rising costs in California played a role in the decision to relocate. “The region is becoming a third-world country with increasing tax rates,” Sinquefield said. “We’re moving the company to Austin, Texas, where there is no personal income tax.”

Also noteworthy, In June of 2003 another high profile and economically savvy business left California – citing high taxes and high cost of living / employment costs as reasons for the move. In 2003, long time resident of Rancho Santa Fe, California – Professor Arthur Laffer moved his economic consulting firm, Laffer Associates’ from La Jolla, California to Nashville Tennessee. Subsequently Prof. Laffer is a co-author of an annual review of state’s economic competitiveness titled, “Rich States, Poor States”, and on May 18, 2009 the Wall Street Journal published an opinion/editorial co-written by Arthur Laffer and Stephen Moore titled, “Soak The Rich, Lose The Rich: Americans Know How To Use Moving Vans to Escape High Taxes”.

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I drove 600 miles to expeditiously file paperwork over the counter with the CA Secretary of State’s office in April to register our business so I could hire an employee who lived in Silicon Valley. I asked if they wanted to review it as I turned it in and they declined saying that they would provide feedback within eight weeks. Meanwhile our new ’employee’ was waiting. Then I received the paperwork by mail and it was rejected because I had put information on the wrong line. So I quickly corrected it an returned it by mail. Little did I know that it went onto the top of the file-by-mail pile which was an additional three month wait. Meanwhile our new employee was waiting. I received the revised paperwork and it was rejected again even though the paper was filled out correctly.

After a phone call and fax, I finally received the paperwork with an Approved stamp, called ADP and got our employee on the books. He only lasted about six weeks because he had already started looking for a different job.

When I did the same thing in another west-coast state I filed online and was approved within a couple of days.  This was a very painful lesson which harmed our business severely.

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My company is packing up and leaving California for Oklahoma in 2012. To say the business environment here is toxic is a profound understatement.

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I worked for the first semiconductor company company whose headquarters is still here in Silicon Valley. Today there are about 9000 employees worldwide, but only about 180 are working here in Silicon Valley. There are no wafer fabrication (fabs), no assembly facilities, and no production test floors. Officers of such companies have a fiduciary duty to the stockholders/owners so there’s very few reasons to expand in California.
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I’ve spent the last 14 months in various LA County government agencies’ plan check procedural protocols seeking to gain approval for the first food processing facility to be permitted by said county, we were informed, in seven years. We are almost through the process. We did exactly the same procedure for the same client a decade before and it took 2 months. Here are some of the interesting new angles:

1. The South Coast Air Quality Management District used to require a wood-burning or charcoal-burning grille to have a $150.00 permit. Now it has required all grilles, griddles, radiant broilers to be “registered”, whether smoke-producing or not, but all they want is money – they have no training or clue as to what the spectrum included within that realm consists of.
2. California and Vermont now mandate “lead-free” faucets as of 2011 on all incoming potable water faucets
3. Grease ” interceptors” as large as 5000 gallons / restaurant are required in some jurisdictions, we end up having to back them down, which takes more time.
4. Though the state requires handicapped access, the federal law is more restrictive than state law but
businesses do not learn this until they get the lawsuit served based on the federal reg’s. So they settle.
5. The symbol of the LA County Department of Public Works’ attitude is its head, one Gail Farber, who
refuses to return calls or respond to e-mails, but enjoys having her picture taken online wearing a lei.
6. The LA Regional Planning Department has spent some 4 months asking us to do the following:
a. Prove that the construction permit issued to my clients’ building in 2001 was a legitimate permit because they cannot locate the permit in their system. (done)
b. Prove that the existing parking lot layout, which has not changed since 2001, was approved by them in 2001. (done, after many meetings )

So far the most popular publicly-aired outrage which comments on this stuff daily seems to come from the John and Ken Show on KFI in Los Angeles, where they regularly feature local government officials in their “Heads on a Stick” segment.

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