“For the Privilege of Doing Business in California…”

Pete Peterson
Dean, Pepperdine University Graduate School of Public Policy

It’s one of those phrases that sticks in your head because it uniquely and simply describes a concept whose time has come. A friend who is the Chief Information Officer for a Bay Area municipality recently shared with me his department’s goal: whenever a resident engages with the City – whether it’s to obtain a building permit, sign up for a rec program, or pay a parking ticket – he wants them “to have a consumer-grade experience.” This phrase should be contrasted with a “bureaucratic-grade” experience, where residents are forced to endure long wait times and complicated online systems. It should be just as simple, he says, to accomplish such tasks as it is to buy a book on Amazon.

At the Davenport Institute we emphasize that residents must interact with our governments as citizens, but that doesn’t alter the fact that on a whole array of public services from water delivery to trash pickup to licensing and many other things, we are also customers. I believe a significant reason for our declining trust in government is the ever-widening gap between our private sector and public sector customer experiences with government seeming evermore outdated when compared to our private sector interactions – whether online or in-person.

I thought about this after a recent speech on the subject in the San Fernando Valley, when a small business owner told me that she contacted the Secretary of State’s office to inquire about where her annual $800/year Business Franchise Tax goes. After almost 30 minutes on the phone, trying to get to a human being in Sacramento, the entrepreneur was told in no uncertain terms that the tax was the yearly charge “for the privilege of doing business in California.”

The recent news of Toyota’s decision to move its corporate headquarters from Torrance to Texas further debunks the mantra that businesses will put up with anything – whether taxes, or regulation, or failing schools or high costs of living – for this so-called “privilege”.

And it’s not just mega companies like Toyota that are being courted by other states (and cities within those other states) offering actual “privileges” for moving. At a campaign event just last month in Carlsbad, the owner of a 100-employee medical device business told me, “I get a couple dozen calls every month from cities in other states offering very compelling relocation packages. It’s getting harder to say ‘no’.”

The California Secretary of State is uniquely positioned to be that first point of contact with business owners when they start up a business here in California, and that last point of contact when they leave the state or close the doors. In ten months of meeting with small business owners throughout the state I have yet to meet someone who had an enjoyable interaction with the office.

Some of these encounters are painfully described in comments on the Secretary of State’s own Facebook page. Abe writes, “For the last two weeks I have struggled to get honest, accurate information about my business filing. High-level staff refuse to even call me back let alone address the issue. California needs to pull its head out of the sand and respect and support business.” An exasperated Rob adds, “CA SOS needs to read her own Mission Statements – Her agency does just the opposite. CALIFORNIA SECRETARY OF STATE HATES SMALL BUSINESS!!!” And Stephen is left wondering, “So I call the main number and get nothing but dead end pockets. No contact email, and only physical mail addresses?”

From a website that is antiquated in its design and terribly difficult to work with to policies that seem eager to charge rush fees for fairly simple operations, the office has become the “DMV for California small businesses.” Or rather, it has become what California’s DMV used to be. In a sign that customer-facing government bureaucracies can improve, a recent nationwide DMV Customer Satisfaction study showed that Californians actually rated their DMV fourth in the United States on a set of seven metrics. Though we still rank dead last in wait times, Californians gave high marks to the Department on things like “Telephone Services” and “Price of Services”. Change can happen, but it hasn’t yet come to the Secretary of State’s office.

From the beginning, my campaign has been about improving the performance of government – for all Californians in their roles as both customers and citizens. That’s why today, we are launching a unique online platform to solicit feedback from California small businesses on particular ways the Secretary of State’s office has made it tough to start up and run your business. You can participate by either voting on presented issues, or inputting your own.

Over the next month, we will be reviewing responses and proposing solutions (beyond those already contained in my “Pete’s Plan”). It is time we “flipped the script” as the kids say: businesses aren’t “privileged” to be in California; California is privileged to have them.

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