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Sweetening the Pot For the most part, California companies turned a cold shoulder. "They said, 'We've dealt with earthquakes and floods. We can handle this too,'" recalls Somer Hollingsworth, economic development director for southern Nevada. "But now they're calling us saying so many things are piling on that it's going to drive them out of business." Because of high taxes, more regulations and greater costs of doing business, California has long been a fertile field for other states seeking to lure companies that want to relocate or expand. The state's current budget crisis, skyrocketing workers compensation costs and among the nation's highest electricity rates give renewed impetus to other states' hunting expeditions. And they're offering incentives that California is hard-pressed to match. In recent weeks, ceramics manufacturer Ceradyne announced it may leave Costa Mesa for Lexington, Ky., where the state is offering $2 million in tax savings and the city promised expedited permits to build a new plant. But the clincher was electricity rates two-thirds less than the company is paying here. Irvine-headquartered Fidelity National Financial, the nation's largest title insurer, is headed to Jacksonville, Fla., hooked by $12.5 million in state-city incentives, lower land costs and what Chief Executive Bill Foley described as the "oppressive cost of doing business" in California. In the former case, Costa Mesa said it wasn't aware Ceradyne had been thinking of leaving but it wouldn't matter because the city has a policy against offering direct assistance to companies. In the latter case, Santa Barbara County, where most of FNF's staff is located, didn't know the title insurer was ready to bolt "until fairly late in the game," said Jim Claybaugh economic development program coordinator. "But (Florida's) incentives far exceed what we could offer." In a survey of states that have successfully attracted California companies recently, the Register found a variety of tax breaks, fewer environmental regulations, simpler paperwork to receive assistance like employee training funds and lower land costs. David Biggs, economic development director in Huntington Beach, tries to counter these incentives by pointing to local access to nearby ports, an educated and skilled workforce and beautiful climate year-round. But he acknowledged, "In California in general we do a lot to make it easier for companies to decide to go elsewhere." In fact, other states' representatives said their best selling point is that they're not California. "Your workers compensation rates are out of control and California's doing everything it can not to support small manufacturers," said Bob Potter who has personally recruited 70 California companies, including Buck Knives of San Diego, to move to Idaho. Potter targets profitable companies with fewer than 50 employees currently in high-cost communities but that don't depend on that location for survival. He only recruits in California, he said, because he used to work here so he has many contacts and "it's easy." He's currently in Southern California meeting with 19 companies that have expressed interest in moving north. "Buck Knives with 200 employees is big for Idaho; in California they're not even missed," Potter said. Hollingsworth of Nevada said California companies are increasingly discontent with the state's business climate. "Forty-five percent of our inquiries are from California now. It's never been that high." This year's Orange County Executives Survey by the University of California, Irvine, noted some interest in business relocation. A quarter of the 302 executives polled expected their companies to expand or relocate outside the county within the next five years. Of those, 36 percent will move to another state and 18 percent to another country. |
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