California’s Business ‘Leakage’ Becoming a Deluge

Katy Grimes
FlashReport Senior Correspondent

The list of businesses leaving California for greener pastures is long and growing. And now we can add Toyota to it.

The word ‘leakage’ is the new politically correct term used by legislators, the Governor, bureaucrats and the California Air Resources Board, to describe what happens when California businesses leave the state because of tax increases and stupendous regulations… as if any of them really know what it means for a business to make the difficult decision to close a location, terminate hundreds of employees, and physically move equipment, machinery, offices and records. And, the CEO must figure in the cost of business interruption, as a business’s productivity will be undoubtedly be reduced after a move.

Who is “leaking?”

Apparently California is ‘leaking’ businesses… as if businesses and middle class families are dribbling away, or just accidentally seeping into other states. But according to Jon Coupal of the Howard Jarvis Taxpayers Association, more than 50 companies have relocated or expanded in Texas in the last year and a half.

The “leakage” is the anticipated loss of businesses to other states, due to the implementation of AB 32, California’s Global Warming Solutions Act of 2006, and the significant additional costs to businesses in the state.

Occidental Petroleum, the nation’s fourth-largest oil company, and a significant employer in California for the better part of a century, announced its relocation to Houston, earlier this year.

Comcast closed four call centers in the Sacramento area, leaving 1,000 Sacramento area employees out of work.

Waste Connections, which had 5,000 total employees, announced in 2012 that the large company planned to leave California for Texas, because of the unfriendly business climate, high taxes, and the hefty regulatory burden on the private sector. California lawmakers are “shoving businesses out,” Waste Connections CEO Ron Mittelstaedt said, and that California is “the worst state in the country to do business in,” the Sacramento Bee reported. “There doesn’t seem be any improvement on the horizon.”

Campbell’s Soup, the world’s largest soup maker, closed its Sacramento facility, leaving 700 employees unemployed. Built in 1947, Campbell’s Soup reported that it cost the company far more money to produce a case of soup in Sacramento, than in any of their other plants. Campbell’s Soup not only had its own energy plant on site, because the company is a food processor, it was considered a “polluter” by the California Air Resources Board.

When a reporter asked Senate President  pro Tem Darrell Steinberg, D-Sacramento about the closure, the lawmaker replied that people just aren’t eating as much soup as they used to. Steinberg then suggested that the 700 employees would go out and get better union jobs in the Sacramento area.

Vision Service Plan was threatening to leave the state because the Legislature had refused to include vision plans in the state’s new Obamacare health exchange. That’s another 2,100 employees who could have lost jobs. Instead, the state agreed to rewrite the rules governing California’s sputtering online insurance market, a crucial piece of President Barack Obama’s overhaul of the health care system.
The revision gives companies like VSP – which insure eye care only – much greater access to sell coverage in the online market.

Chevron moved 800 technical, non-oil rig jobs, to Houston.

Even non-manufacturing businesses are also moving or expanding operations where labor, land, energy and capital are cheaper, the Wall Street Journal reported.

FacebookeBay and LegalZoom have opened up Texas offices in the past few years, while PayPal, Yelp and Maxwell Technologies have pushed into Phoenix.”

And now Toyota is leaving California for Dallas, Texas. Approximately 5,300 people work at the Toyota plant in Torrance, CA.

“In late 2005, Nissan announced it was moving its North American headquarters from Gardena to Franklin, Tenn., just outside of Nashville,” the Los Angeles Times reported. “About 550 employees left for Tennessee; an additional 750 left jobs at Nissan to stay in Southern California.” Nissan cited the high cost of doing business in Southern California as the reason for the move — “much higher than the costs of doing business in Tennessee,” Nissan Chief Executive Carlos Ghosn said. “He cited cheaper real estate and lower business taxes as key reasons for the move.”

Fritz Hitchcock, who owns several Toyota dealerships in Southern California, said Toyota’s decision represents an “indictment of California’s business climate.”

California named as business-unfriendly

California is consistently named as business-unfriendly. The state is cited for having very high taxes, too much regulation, high business costs, and an overall anti-business climate.

Texas, North Carolina, South Carolina, Tennessee and Florida are always named as the top favorable business climate states for having a more favorable tax climate and a pro-business climate, being right-to-work-states, having a strong and talented workforce, and economic development support.

The “high quality of life”  California Governor  Jerry Brown always refers to when asked about businesses leaving the state, is quickly diminishing. Without enough jobs, Californians may be following their employers to other states.

Cross-posted in FlashReport.

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