This is the launch of a new series of occasional business alerts relating to the

abusive treatment businesses receive from California’s state and local

governments. 

If you are a California business person who has been hoping that treatment

from the state would somehow become better, it’s time to give up that dream.

The reason? Well, psychologists say that attitudes shape action, and we have

to be worried about the state’s political elites continuing to broadcast

business-hostile messages.

The latest example is Gov. Jerry Brown’s office ridiculing the idea that population

losses to other states are linked to employers relocating facilities to other states.

A bit of background: The Tax Foundation found in a recent two-year period that

406,883 Californians migrated to other states, while 365,673 people came here,

for a net out-migration of 41,210. This is more fully explored in an Orange County

Register piece entitled "Editorial: Still heading for exits from California."

The governor’s spokesperson, Gil Duran – in denying that people move out because

companies move out – was contemptuous enough to say that “businesses are not

fleeing the state for the cold, empty and desolate hinterlands." [Note: He was

referring to Iowa.]

The statement is absurd. People follow opportunity, and they do so even to

“hinterlands” like Gardnerville, Nevada. A small business, Aerospace and

Commercial Precision Machining, recently left Palmdale and took eight of their

nine employees with them to Northern Nevada.

See "Aerospace manufacturer relocates to Gardnerville."

One must wonder what California officials think of South Dakota. Capital One

recently announced it will open a new credit-card processing center in Sioux Falls

at the same time it announced it will close its 850-employee Salinas facility by

mid-2013.

See "Capital One moves out of Salinas, lays off 850 workers."

Also, what does Sacramento make of the following sampling of “hinterland”

moves within the last year or two?

Some relocations are unique, like when BMC Select, a building materials supply

company, moved its headquarters from Boise, Idaho to San Francisco. Then they

moved again – back to Boise.

Companies relocate to many “non-hinterland” communities. In Texas, the top draws

for California companies are Dallas, Houston, Austin and San Antonio. Some

businesses “hop over” to Phoenix, Tucson, Reno and Las Vegas because short

airplane flights allow employees easy visits to friends and family who stayed behind.

Mountain backdrops and four seasons attract California companies to Salt Lake

City and Denver. We can’t ignore southern charm that has in part lured companies

to Atlanta and Nashville. Even so-called “rust-belt” cities like Indianapolis and

Pittsburgh, which have re-invented themselves, have seen moving vans arrive

from California.

The way these cities sparkle in the glow of sunsets can be as captivating as any city

in California; cultural events whether stage, dance or symphony are sell outs; sports

fans are intensely loyal, and in older areas the adaptive reuse of historic buildings is

enough to make an architect swoon.

Two years ago when Hilton Worldwide moved corporate headquarters from Beverly

Hills to McLean, Va., the company said approximately 80% of the employees

invited to move east accepted the invitation. “My impression is they’ve settled into

the area very well, regardless if they are in new roles or the same roles,” said

President and CEO Chris Nassetta. “It’s seamless at this point.” He also said that

“It’s worked out even better than we thought it would. There were a lot of reasons

that we did it, and we knew that, at the same time there would be benefits, it would

be disruptive. But in the end, it’s been less disruptive than we thought.” See more of

his comments in theHotelNewsNow.com story 

"Hilton thrives amid massive changes."

Using conservative information, I found that 254 California companies conducted

“disinvestment events” that resulted in some or all of their jobs being placed outside

of California in 2011. I relied solely on public domain information for my

compilation, which makes it impossible for politicians to deny events reported in

reputable publications. My finding was 26 percent more than in 2010 and 5 times

higher than 2009. Using different criteria, other researchers have found higher

business losses.

But don’t expect the governor’s office to agree. The Register's editorial concluded,

"Mr. Duran's comment, reflecting the sentiments of Gov. Brown, shows how

insulated they are from what's really going on in California." Well said. Obscuring

this issue makes it easier to remain tough on business.

Business Alert – What This Issue Means for the Future:

Today, California businesses can reduce costs by 20 percent in many states and

up to 45 percent in “hinterland” areas. Who is to say that within a year out-of-state

advantages won’t grow to a range of 25 percent to 50 percent?

Growing cost disparities can result from California increasing business and

personal taxes, in higher capital expenditures required to comply with new

regulations, in still more fees and fines from all sorts of agencies, and in soaring

utility costs sparked by “green” energy-renewable laws. Meanwhile,

Sacramento will preserve big-spending programs despite growing state

budget deficits and a bottom-level credit rating.

A company interested in exiting California in part or in full between 2013 and 2015

should initiate project planning now because a careful relocation or expansion

elsewhere can take from one to three years to implement.

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Joseph Vranich is available for public speaking on the subject of business

relocation in the United States regardless of whether California issues

are involved.

© Copyright by Joseph Vranich, 2010. Use is permitted provided attribution is

given to "Joseph Vranich, The Business Relocation Coach, located in

Irvine, Calif."