EZ Policy Blog

A colleague brought to my attention “The Business Relocation Coach” blog which claims as its mission, “to help businesses relocate and expand facilities in highly beneficial ways. This blog is maintained by JV Executive Consulting, inc., which helps design the smoothest relocation to the most desirable location that meets business goals. An experienced team serves a diverse set of clients through executive coaching for transition, relocation studies, site selection, incentives negotiation and government affairs.”

On Monday, Business Relocation Coach posted an article called, “California’s Hostile Business Climate: 100 ‘Moving-Out-of-State’ Events” in which he explains

Apparently, No state agency keeps track of enterprises that move out of California or which companies elect to expand in other states even though they are headquartered here. That lack of knowledge is quite convenient for elected officials who deny that state’s anti-business attitudes and policies hurt commercial enterprises. Hence, without a central repository, it’s difficult to determine how many jobs are lost specifically because of California’s unfriendly business environment.

In this blog, I’ve attempted to note facility moves and disinvestments in California on a catch-as-catch can basis based on incomplete media reports. Below is a roundup of activity that I’ve been able to find since I started this blog in July, 2009. This imperfect and incomplete list of 100 moving-out-of-state events is the “tip of the iceberg” about the loss of commercial enterprises in California.

Just some random examples:

Alza Corp. in 2007 eliminated about 600 jobs in drug R&D while also exiting its Mountain View, Calif., HQ. At the time the company said that its 1,200-person Vacaville facility will continue to operate. But the Vacaville Reporter on Oct. 23, 2009 revealed that the plant is being offered for sale by J&J, its parent company. It’s unclear if more layoffs are in the facility’s future.

Audix Corporation relocated from Redwood City, Calif., and to accommodate growth moved to a 78,000-square-foot facility in Wilson, Oregon.

Buck Knives after 62 years in San Diego moved to Post Falls, Idaho.

EMRISE Corp. completed its HQ move from Rancho Cucamonga to Eatontown, NJ, in May 2009. The company said the move “will result in additional annualized cost savings of approximately $1 million and facilitate improvements in operating efficiency. . . . The cost savings associated with relocating our corporate headquarters will start immediately. . . The aggregate total of these expense reductions will increase our profitability and cash flow in this and succeeding years and, over time, substantially improve our ability to further reduce our long term debt.”

Facebook, based in Palo Alto, will expand in a major way in Oregon by locating a custom data center in Prineville. It will be a 147,000-square-foot facility costing $180 million and will employ 200 workers during construction and another 35 full-time once operating in 2011.

He has 100 of these examples. The list was also featured in the Orange County Register.

As an aside, regarding the point about no government agency keeping track of businesses that leave the State, take a look at the campaign website for Damon Dunn, running for California Secretary of State. Under “Solutions,” Dunn wants to address this problem:

The Secretary of State is responsible for all the business filings in California. As Secretary of State, I will use my business experience to evaluate which companies are leaving the state and why. I will then report my findings to the Legislature as part of a package of reforms that will lead to job growth in California.

California, like every other state government, has been looking for solutions to problems that have developed as a result of the economic recession.

The Secretary of State’s office needs to be using the information it holds to be an advocate for jobs in the state. I will use my office to focus attention on the businesses that are being stolen from California by Texas, Utah, and other western states. When the Governors of other states are personally calling business leaders in California asking them to expand outside of California we are not competitive in economic development as a state.

From The Wall Street Journal:

Northrop Grumman Corp. said Monday it plans to move its headquarters to the Washington, D.C., area from Los Angeles, marking the departure of the last major aerospace firm from the industry’s birthplace in Southern California.

The shift will put Northrop’s top executives near its biggest U.S. military and intelligence customers and the congressional holders of the military’s purse strings.

“We are a global security company and when you look at where our largest customer base is located, it’s in the Washington, D.C., region,” said Wesley Bush, Northrop’s chief executive and president. Mr. Bush took over as CEO on Jan. 1.

The company will relocate about 300 jobs, though it will still have more than 20,000 employees in the Los Angeles area, according to local officials.

Still, Northrop’s move underscores a broader struggle for Los Angeles: It is the nation’s second-largest city with 13 million people in its metropolitan area, but has suffered a growing exodus of corporations. In addition to defense and aerospace industries, there has been a steady erosion of its other iconic trade, the movie business, as states lure away film productions with rich tax incentives.

This past Friday, radio host Hugh Hewitt did his broadcast from Fresno and spent his entire show highlighting the man-made water crisis in the Central Valley.  Some parts of the Valley have unemployment rates of 40%.  Of course, the Central Valley is home to 11 of California’s 42 Enterprise Zones.  Since the federal government shut off the water supply to the Valley’s farmland, tens of thousands have lost their jobs.  It’s hard to imagine the additional devastation that could be caused if Sacramento decides to chase additional employers out of the state by severely limiting or eliminating the Enterprise Zone program.

In his column for the Washington Examiner, Hewitt argues that all the government needs to do to create thousands of jobs and drive down the unemployment rate is to turn on the water:

For Fresno and California’s entire Central Valley, it should be the best of times.

With the dollar weak and the world hungry, the exceptionally fertile fields along the Golden State highway should be producing record yields of grains, fruits, vegetables and nuts.
Instead framers are struggling to keep even a third of their potential acreage in use. Mile after mile of parched land greets the approach to the city of 500,000. And angry signs along the roadside condemn the federal government that has cut off the valley’s water.

The delta smelt, a small fish that makes its home in the vast Sacramento Delta, has been declared endangered. Since late last year the water lifeline from the north to the south has been reduced to a trickle.

The pumps that power the water to the farms have been stilled for months at a time so as to avoid sucking in smelt. The smelt’s numbers have been reduced by many causes, but the one the federal government has decided to target is the pumps.

When Washington, D.C., ordered the water shut off, jobs went down the drain. Tens of thousands of farm jobs have been lost, and unemployment in some farming towns has hit 40 percent.

Secretary of the Interior Ken Salazar and Sen. Dianne Feinstein, D-Calif., posture about their concern (Sen. Barbara Boxer, D-Calif., can’t even be bothered to meet with local officials), and the region’s Democratic congressmen like Reps. Dennis Cardoza and Jim Costa pledge action, but the president, his senior officials and congressional allies have done nothing. A new, man-made dust bowl is taking shape, and the devastation is palpable.

Former Fresno Mayor Alan Autry was a guest on my broadcast from the city’s downtown last week and told the audience about a food distribution day that drew 15,000 people. Pastor Jim Franklin of Cornerstone Church spoke about the growing desperation among many in his flock.

Third-generation farmers admitted on air that they couldn’t imagine how they could hold on to their farms if the water wasn’t turned back and with the assurance of stability so the annual cycle of preparation and planting that must begin now can proceed backed by financing that wouldn’t be forthcoming unless the banks see the near certainty that the water will flow throughout 2010.

President Obama doesn’t need a jobs summit or a second stimulus to create thousands of jobs overnight. All he has to do is order — order — his staff to insist that the Congress include relief in the appropriations bills headed his way.

Or President Obama could order — order — Secretary Salazar to conduct a rapid review by serious science of the deeply politicized findings that led to the water cutoff. There is much suspicion about the agency’s deliberations here that a National Academy of Sciences review of the data has been promised by Salazar and Commerce Secretary Gary Locke, but it will take months and months to complete. The president could demand his team work like their jobs were in as much jeopardy as those in the valley.

Alternatively, U.S. District Judge Oliver Wanger could order that the restrictions on water delivery imposed by the U.S. Fish and Wildlife Service on Dec. 15, 2008, be lifted until an environmental impact statement is prepared by the Department of the Interior’s Bureau of Reclamation that wholly and fairly assesses the consequences of the service’s job-destroying diktat. The judge ruled just last week that farmers and water agencies were entitled to summary judgment on their claim that the feds had acted contrary to the National Environmental Policy Act.

The court has scheduled a hearing on potential remedies for Nov. 24, two days before Thanksgiving. If he orders the suspension of the draconian “biological opinion” that imposed the water cutoff and mandated the drought, it will be a festive Thanksgiving in the valley.

Christmas will be brighter for tens of thousands of workers and farmers and their families who have seen their livelihoods imperiled by radical environmentalists and bogus “science.” (Details on the hearing are available at pacificlegal.org.)

But if the judge doesn’t act and President Obama continues to give speeches and hold “summits” instead of ordering relief, a grim 2009 will turn into a catastrophic 2010.
Examiner Columnist Hugh Hewitt is a law professor at Chapman University Law School and a nationally syndicated radio talk show host who blogs daily at HughHewitt.com.

According to the San Jose Mercury News, Toyota has made a decision to close NUMMI:

Toyota Motor Corp. plans to end production in March 2010 at a California joint venture where it has built vehicles with General Motors, the company said Thursday.
The decision would mean the shutdown of the sole auto assembly plant on the West Coast if no other carmaker emerges to keep it going.

Toyota’s board voted early Thursday to end the company’s production contract at the Fremont.-based New United Motor Manufacturing Inc., spokeswoman Cindy Knight confirmed.

Update: Here is a video of a news report on the decision from ABC-7 in San Francisco:

I like the ad, but will they buy it?

Here’s the back story from Capitol Alert.

And here’s one of Nevada’s ads for comparison:

Senator Corbet’s bill SB 483 has been amended to simply direct HCD to create a new Enterprise Zone, in addition to the existing 42, if the City of Fremont applies.

The San Francisco Chronicle reports on a rally held with the intention of keeping the plant open:

Several hundred auto workers rallied near New United Motor Manufacturing Inc. in Fremont Thursday afternoon in support of an incentive plan, backed by Gov. Arnold Schwarzenegger, designed to persuade Toyota to keep building cars at the plant.

“We have a package of bills to let Toyota know that we love them and we want them to stay in Fremont,” said state Sen. Ellen Corbett, D-San Leandro, who drove from Sacramento to catch the tail end of the rally organized by the United Auto Workers, which represents about 4,500 factory employees.

Nummi’s fate has been in doubt since June, when General Motors pulled out of a 25-year-old partnership with Toyota to build cars for both companies at what is the only auto plant on the West Coast.

Unofficial press reports out of Japan have suggested Toyota is likely to quit the plant in March. But Toyota, which has never before shut a factory, has not yet announced a decision and is still negotiating with the old GM over how to dissolve their joint interest in Nummi.

The rally drew local business leaders and elected officials who are working with the governor’s office and state legislators, as well as with the Port of Oakland and PG&E, on a plan that includes tax breaks, improved transportation facilities, and lower electricity costs to make it economical for Toyota to stay in Nummi.

“We’re not ready to throw in the towel,” said Joe Joly, chairman of the Fremont Chamber of Commerce, which fears that a shutdown will affect thousands of jobs at supplier firms as well as local merchants who depend on the factory.

“There are tremendous costs involved in shutting down a factory and starting up production elsewhere,” Joly said, adding that Toyota officials are “business people, and they’re looking for something that really makes sense for them.”

Assembly Majority Leader Alberto Torrico, D-Fremont, was in session in Sacramento and could not attend the rally but said in a phone interview that the Legislature would pass three bills vital to the incentive plan by the end of August and that he expected they would be signed into law.

“The governor is on board to do everything we can as a state to keep this factory open,” Torrico said.

But even if California puts together the incentive plan, it would be an uphill battle to persuade Toyota to remain in the state at a time when the slump in auto sales has idled about 40 percent of its factory production worldwide.

Nummi is also the only factory in North America where Toyota would have to deal with the UAW, and industry observers have suggested that union concessions would have to be part of any deal to keep the plant open.

Freddy Martin, a 35-year-old forklift driver who has worked at Nummi for nine years, reflected on the situation as he joined the throng at the rally.

“I’m definitely worried about my future,” said Martin, who said he could understand why Toyota might pull out of Fremont given the state of the economy.

“I’m only hoping that all the tax incentives and business breaks the state is offering will make it possible for Toyota to stay,” said Martin, who said he is personally willing to make wage concessions part of the package but isn’t sure a majority of the union membership feels the same.

There is a video of the rally at KTVU.

Things are not looking too good for NUMMI at the moment.  Efforts are continuing to create a new Enterprise Zone as part of a package to save the plant.  The Lt. Governor was quoted as saying:

Lt. Gov. John Garamendi said today that, “The fight to keep the New United Motor Manufacturing Inc. plant in Fremont is far, far from over” despite news reports that Toyota Motors Inc. will end all production at the facility by next March.

Elsewhere, the movement to expand the new Oakland EZ is moving forward. From The Berkeley Daily Planet:

Berkeley officials confirmed Friday that plans are in the works to try to provide tax incentives to Bayer, the city’s largest private-sector employer, to keep the company from leaving the city.

According to East Bay officials, Bayer Healthcare could decide within two weeks whether to relocate or commence manufacturing the next generation of Kogenate, a drug for the treatment of hemophilia, at their 43-acre campus next to the Berkeley Aquatic Park.

Senior company officials plan to make the case to the Bayer AG Governing Board that the company should stay in Berkeley.

In an effort to retain the company, the mayors of Berkeley, Oakland and Emeryville are collaborating to expand Oakland’s enterprise zone to include West Berkeley. An enterprise zone is a state-mandated area that gives companies tax credits to hire and train workers.

On July 28 the Oakland City Council unanimously approved a motion to ask the state to include West Berkeley businesses within Oakland’s enterprise zone. If the cities succeed in getting Bayer included within the zone, the company could receive as much as $19 million in benefits over a 10-year period, including $13 million in tax incentives, $1.5 million in worker-training reimbursements, and $4.5 million in reduced electric rates from PG&E.

The East Bay Development Alliance, an organization that lobbies to increase jobs and improve economic activity in the East Bay, assembled the package of economic incentives for Bayer that includes the reduced PG&E rates.

Officials from the East Bay Development Alliance could not be reached for comment by press time.

Berkeley Mayor Tom Bates, Oakland Mayor Ron Dellums, and Emeryville Mayor Richard Kassis sent a joint letter to Bayer board member Hartmut Klusik last month urging the company to remain in Berkeley.

“We recognize that Bayer, as a publicly traded corporation, must make location decisions based in part on cost considerations,” the letter said. “Therefore, the cities are working with the state to create a powerful set of economic incentives.”

Although the cities may all agree to expand the enterprise zone, the final decision is up to state officials.

Bayer officials are reluctant to speak about the issue before scheduled meetings among top company officials in Germany.

Company spokeswoman Trina Ostrander issued a statement late Friday.

“Bayer is proud of its long-standing commitment to the Bay Area, and especially our 30-year Development Agreement with the City of Berkeley,” said Bayer spokeswoman Trina Ostrander. “We value our local ties and have continuously worked to enrich the communities in which we operate and live.”

Ostrander said that expenses would be a major factor in their considerations.

“We cannot forget that by various indicators doing business in California is very expensive,” said Ostrander. “To strengthen the economic diversity of the East Bay and encourage the growth of the biotech sector and green corridor requires forward-looking economic development strategies such as Enterprise Zones. We are currently exploring various options, however at this point it is premature to provide any speculation on future plans.”

Berkeley city officials are anxiously waiting for Bayer’s decision.

“We are fearful that any step to move production of Kogenate could mean a move out of Berkeley,” said Michael Caplan, the city’s economic development manager. “We are doing everything within our power to get them to stay here.”

Caplan explained that expanding the enterprise zone is a regional issue, citing his office’s statistics, which show that most Bayer workers live outside of Berkeley and 3,000 Oakland residents work in West Berkeley.

Founded in 1863, Bayer, based in Barmen, Germany, is the third-largest pharmaceutical company in the world.

Bayer’s Berkeley campus is the company’s global center for hemophilia and cardiology pharmaceuticals, including Kogenate. CNN reported that in January 2001, the FDA halted shipments of Kogenate FS after it was found that harmful bacteria were present in the drug’s manufacturing process.

Lt. Gov. John Garamendi speaking today at a meeting of the California Commission for Economic Development, is supporting the State’s efforts to make the NUMMI plant in Fremont an Enterprise Zone, but is also calling on the federal government to contribute as well:

Lt. Gov. John Garamendi says that he thinks federal stimulus money should be used as one of several steps to help keep the New United Motor Manufacturing Inc. plant in Fremont open.

NUMMI is a 25-year-old joint venture between General Motors and Toyota and Garamendi said he thinks it’s too big to fail.
GM announced in June that it will withdraw from the partnership and Toyota, which is still making Toyota Corolla cars and Toyota Tacoma trucks at the Fremont facility, said two weeks ago that it is also considering withdrawing from the joint venture but a final decision hasn’t yet been made.

Garamendi said that at a meeting of the California Commission for Economic Development, which he chairs, in Livermore on Thursday he will present information showing that the possible closure of the NUMMI plant is a statewide issue because it works with a vast supplier network of more than 1,000 companies located in 35 counties in the state and employing 20,000 people.

A total of 35,000 jobs are at risk, including those of the 4,700 people who work at the plant, Garamendi says.

In a phone interview, Garamendi said the Obama administration announced Wednesday that it is awarding grants to Ford, General Motors and other manufacturers to develop alternative vehicle technology, so he thinks “NUMMI should get part of it” as well.

Garamendi said he also hopes that Toyota will still consider building its popular Prius cars at the NUMMI plant even though the carmaker said it would build the cars at a new facility in Louisiana instead.

He said that he’s been told that the new plant in Louisiana “is not moving forward at this time” so he thinks stimulus money would be an incentive for Toyota to build Priuses in Fremont.

“We want to make sure that Toyota knows we want them in California and will do anything we can to keep them in California,” Garamendi said.

He said he also supports several bills in the state Legislature that aim to help keep NUMMI open.

Garamendi said state Sen. Elaine Corbett, D-San Leandro, has written a bill, SB 483, that would create an enterprise zone in Fremont, while a bill by Assemblyman Alberto Torrico, D-Fremont, ABX4 31, would provide a sales and use tax exemption for capital equipment used by automobile manufacturers.

He said the federal government bailed out Detroit when its auto industry was threatened, so now the federal government should help California keep its part of the auto industry.

Here is a Bay Area NBC affiliate report on the Lt. Gov.’s stance:

The San Francisco Chronicle reports on continued and more specific overtures being made to Toyota by the California Legislature, Governor Schwarzenegger and Senators Feinstein and Boxer:

California officials have offered Toyota Motor Corp. tax breaks and other help, including the ability to buy cheaper electricity, in an effort to preserve the New United Motor Manufacturing Inc. plant in Fremont.

The fate of Nummi, which employs 4,500 people and supports 35,000 peripheral jobs, has been in doubt since June, when General Motors quit the 25-year-old partnership with Toyota that has run the plant.

A letter obtained by The Chronicle puts no overall value on a combined federal, state and local aid package to keep Toyota in Fremont, where 80 percent of the cars built last year carried its brand.

Toyota has said it will decide soon about the plant, the only auto manufacturing facility on the West Coast.

Nummi officials have said they have orders from Toyota that will keep the plant busy at least through October.

The letter, co-signed by Gov. Arnold Schwarzenegger, says the Legislature is working on a bill to designate Nummi an enterprise zone, one effect of which would be to let Nummi carry forward current operating losses to offset future profit for up to 15 years.

That designation would also waive sales taxes on $20 million a year in plant machinery upgrades.

Other proposals would create a special utility rate to let Nummi buy electricity at lower prices.

The letter also outlines an array of efforts to improve highway and rail access, including $20 million in state help to improve shipping facilities at Nummi.

Alameda County Supervisor Scott Haggerty and Fremont Mayor Bob Wasserman joined Schwarzenegger in pledging up to $29 million in interest-free financing to help Toyota and Nummi retool the plant and keep it viable.

The letter was sent to Toyota chief executive Akio Toyoda, grandson of the company’s founder and a former Nummi executive, who spoke Wednesday at an industry conference in Michigan.

A spokesman said Toyoda mentioned Nummi but simply repeated that a decision was coming soon without saying exactly when or what the company might do.

A spokeswoman for Sen. Dianne Feinstein said she and fellow California Sen. Barbara Boxer have “communicated their concerns to the (Obama) administration” that a way be found to preserve the Fremont factory.

A White House official said Wednesday that the administration has been “urging the old GM and Toyota to engage with all parties on this issue.”

As with the zone expansion initiative in Oakland and Berkeley to save the Bayer facility, there is a union component to the NUMMI deal:

All this occurs at a time when the United Auto Workers, which represents workers at the Fremont factory, is negotiating a contract renewal with Nummi that will have a big influence on efforts to keep Toyota interested in the plant.

“There is a willingness to make wage concessions,” Betty Sall, a rank-and-file union member said. “Most people are hopeful we will have a union contract and that Nummi will continue.”

Here is a follow up story in the Contra Costa Times discussing the sense of urgency surging through the legislature to save the NUMMI auto plant:

With as many as 20,000 jobs — as well as the health of a number of local economies across the state — on the line, Democratic lawmakers are saying the state needs to step in with tax relief to help the NUMMI auto plant in Fremont stay open.

The cost in revenues could be $20 million or more, but would be far cheaper than allowing the New United Motor Manufacturing Inc. plant to close, followed by the ripple effect of lost jobs throughout the state, lawmakers said at a Capitol news conference Thursday.

Wait, is the reporter suggesting that by providing some tax incentives there could actually be an increase in revenue?

“We can no longer afford to lose even a single job here,” said Assemblyman Alberto Torrico, D-Fremont, who introduced ABX4 31, which would establish a sales and use tax exemption for machinery and equipment. “Particularly those that pay well, provide health care benefits and whose workers, when they are working, pay income tax, buy things and we collect sales tax. Most troubling is when people lose jobs, they lose their homes.”

General Motors recently announced it is pulling out of its joint venture with Toyota as part of GM’s restructuring plan with the federal government. And last week, Toyota said it was considering closing down the plant, which employs 4,700 workers and makes Toyota Corollas, Toyota Tundras and Pontiac Vibes.

Another 15,000 jobs are indirectly tied to the plant — through suppliers, vendors and small parts manufacturers throughout the sate, representing $523 million in annual payroll and benefits, lawmakers said.

“The plant is a major force in California and countless thousands of jobs can be hurt if the plant does close,” said Sen. Ellen Corbett, D-Fremont. “It would not only impact the suppliers and vendors but the local economy — the grocery stores, the local health care providers.”

California is one of three states that charges sales taxes on the purchase of manufacturing equipment. With NUMMI as the last auto manufacturing plant in California — and only one in the West — lawmakers need to “look at the right way to regulate and tax them so they can thrive, and we can get that entrepreneurship and growth occurring in California,” said Assemblyman Ted Gaines, D-Roseville, who chairs a select committee on the auto industry. “We gotta stop the bleeding. NUMMI is the No. 1 priority.”
…
The legislation, under ABX 31 and SB 830, introduced by Sen. Rod Wright, D-Los Angeles, would give the governor authority to, as part of his negotiations with Toyota: eliminate the sales tax on manufacturing equipment, declare the plant an enterprise zone, give the plant a 70 percent reduction in the Public Goods Charge through the Public Utilities Commission for two years; and require that the state give priority to the plant in purchasing cars and trucks built by the plant.

Gov. Arnold Schwarzenegger does not typically comment on pending legislation, but a spokeswoman, Camille Anderson, said the governor is “actively engaged with Toyota, NUMMI partners and relevant stakeholders and looks forward to working with them to ensure the facility’s future.”

In the low revenue climate the state is in, lawmakers should offer to close some corporate tax loopholes to make the deal revenue neutral, said Lenny Goldberg, executive director for the California Tax Reform Association.

“And is there an agreement they can make that would be clear that they’re not just throwing money at a problem,” Goldberg asked.

Legislators called the situation urgent, saying they’d like to approve the tax exemptions by the end of the summer session in August.

So Goldberg is suggesting that since we need to lower taxes in this case in order to make it viable for Toyota to continue to do business in California, we should therefore raise taxes on a bunch of other businesses.

The Los Angeles Times reports on the desperation in the Legislature to try and save an auto manufacturing factory in Fremont, CA.  Perhaps even by using the Enterprise Zone program:

State legislators are scrambling to save the last remaining car plant in California.

The Bay Area factory, which makes Toyota Corollas, Toyota Tundras and Pontiac Vibes, would receive sales tax benefits potentially worth millions of dollars under legislation introduced in the Assembly on Wednesday.

Another, more sweeping, bill, which would grant a host of tax and other incentives, is expected to be introduced in the state Senate today.

The moves were prompted by the increasing likelihood that the plant, New United Motor Manufacturing Inc., or NUMMI, based in Fremont, could close permanently.

The plant, which employs about 5,000 people, was opened as a joint venture between Toyota Motor Corp. and then-General Motors Corp. in 1984 and long praised as one of the nation’s most advanced car factories — a successful experiment combining Japanese and U.S. manufacturing techniques.

But as part of its bankruptcy process, GM said in June that it would abandon the relationship, prompting Toyota to say last week that it “must also consider taking necessary steps to dissolve” NUMMI.

“We believe that plant is a public good,” said state Sen. Roderick Wright (D-Inglewood), who co-wrote the Senate bill. He added that his own Los Angeles County district is home to parts suppliers that would be affected should NUMMI close. “The fact that we could lose our last car manufacturing facility is unconscionable.”

But amid Sacramento’s grinding budget crisis, there is considerable doubt about how much money would be available to provide tax cuts to one of the world’s largest companies — and whether any amount of taxpayer-funded goodies would be sufficient considering the depths of the auto industry’s woes.

“How many extra millions do taxpayers have to give Toyota to stay?” said Lenny Goldberg, executive director of the California Tax Reform Assn., who questions whether those kinds of incentives even work. “If you’re going to give it away, give it away right.”

Manufacturers have long complained about the cost of doing business in California. The legislation proposed this week would, in part, reduce that burden for the auto industry, sponsors said.

The bills, ABX4 31 and SB 830, would exempt NUMMI and other auto plants from sales tax on improvements and retooling of the plant, a process that can cost hundreds of millions of dollars. Toyota is not currently retooling NUMMI, but it could in the future to build fuel-efficient vehicles such as hybrids.

The Senate bill goes further. It would designate the plant and the area around it an enterprise zone, which provides a variety of other tax benefits. In addition, the bill would cut state fees that NUMMI pays for utilities, and it would encourage state and local agencies to buy vehicles made at the plant.

Legislators say they will urge Gov. Arnold Schwarzenegger to use the incentives as leverage with Toyota to keep the plant operating.

A spokeswoman for the governor, Camille Anderson, said he had already “reached out” to Toyota and was working to coordinate a variety of efforts to keep NUMMI open.

U.S. Sen. Dianne Feinstein (D-Calif.) is preparing a letter from the state’s congressional delegation to Toyota’s president, Akio Toyoda, that asks what California can do to preserve the factory, a spokesman for the senator said.

Toyota, however, has given no sign that any incentives of the kinds proposed would sway it. Mike Michels, a spokesman for the automaker’s U.S. operations, said the company was aware that legislation was in the works, but it had not requested any specific aid.

He said the decision on NUMMI’s future would be made in Japan, but he could not provide a timeline. “The economy remains a challenge, and we are still under capacity at most of our plants,” Michels said.

According to trade publication Automotive News, production at NUMMI is down 47% to date this year, compared with the same period a year ago, while Toyota’s overall U.S. sales are down 38%.

Unlike NUMMI, which is unionized, Toyota has nonunion plants in Mexico and Canada that also make the Corolla and the Tacoma, as well as a never-used new facility in Mississippi. GM said last month that production of the Vibe would cease in August.

The United Auto Workers union is negotiating a new contract with NUMMI. The current, four-year contract expires next month.

Assembly Majority Leader Alberto Torrico (D-Newark), who represents Fremont and is co-author of the Assembly bill, was among lawmakers who toured the plant last week.

“It’s not a stretch to say that we’re in very grave danger of losing the factory,” said Torrico, who has been talking with local officials and leadership at the UAW about NUMMI’s future. “We’re talking about 5,000 jobs and all the income and sales and property taxes those generate.”

Dan Walters points to a very interesting article in the Economist comparing Texas with California.  He chose his favorite paragraphs for Capitol Alert, but this was the key paragraph from my perspective:

No state has quite so many overlapping systems of accountability or such a gerrymandered legislature. Ballot initiatives, the crack cocaine of democracy, have left only around a quarter of its budget within the power of its representative politicians. (One reason budget cuts are inevitable is that voters rejected tax increases in a package of ballot measures in May.) Not that Californian government comes cheap: it has the second-highest top level of state income tax in America (after Hawaii, of all places). Indeed, high taxes, coupled with intrusive regulation of business and greenery taken to silly extremes, have gradually strangled what was once America’s most dynamic state economy. Chief Executive magazine, to take just one example, has ranked California the very worst state to do business in for each of the past four years.

By contrast, Texas was the best state in that poll.

Rick Newcombe, president of Creators Syndicate, writes in the Wall Street Journal about their decision to leave Los Angeles:

Why We’ll Leave L.A. The business climate is worse than the air quality.

If New Yorkers fantasize that doing business here in Los Angeles would be less of a headache, forget about it. This city is fast becoming a job-killing machine. It’s no accident the unemployment rate is a frightening 11.4% and climbing.

I never could have imagined that, after living here for more than three decades, I would be filing a lawsuit against my beloved Los Angeles and making plans for my company, Creators Syndicate, to move elsewhere.

But we have no choice. The city’s bureaucrats rival Stalin’s apparatchiks in issuing decrees, rescinding them, and then punishing citizens for having followed them in the first place.

I founded Creators Syndicate in 1987, and we have represented hundreds of important writers, syndicating their columns to newspapers and Web sites around the world. The most famous include Hillary Clinton, who, like Eleanor Roosevelt, wrote a syndicated column when she was first lady. Another star was the advice columnist Ann Landers, once described by “The World Almanac” as “the most influential woman in America.” Other Creators columnists include Bill O’Reilly, Susan Estrich, Thomas Sowell, Roland Martin and Michelle Malkin — plus Pulitzer Prize-winning political cartoonists and your favorite comic strips.

From the beginning, we’ve been headquartered in Los Angeles. But 15 years ago we had a dispute with the city over our business tax classification. The city argued that we should be in an “occupations and professions” classification that has an extremely high tax rate, while we fought for a “wholesale and retail” classification with a much lower rate. The city forced us to invest a small fortune in legal fees over two years, but we felt it was worth it in order to establish the correct classification once and for all.

After enduring a series of bureaucratic hearings, we anxiously awaited a ruling to find out what our tax rate would be. Everything was at stake. We had already decided that if we lost, we would move.

You can imagine how relieved we were on July 1, 1994, when the ruling was issued. We won, and firmly planted our roots in the City of Angels and proceeded to build our business.

Everything was fine until the city started running out of money in 2007. Suddenly, the city announced that it was going to ignore its own ruling and reclassify us in the higher tax category. Even more incredible is the fact that the new classification was to be imposed retroactively to 2004 with interest and penalties. No explanation was given for the new classification, or for the city’s decision to ignore its 1994 ruling.

Their official position is that the city is not bound by past rulings — only taxpayers are. This is why we have been forced to file a lawsuit. We will let the courts decide whether it is legal for adverse rulings to apply only to taxpayers and not to the city.

We work with hundreds of outside agents, consultants, independent contractors and support services — many of whom pay taxes to the city of Los Angeles. This spurs a job-creating ripple effect on the city’s economy. Yet I suspect many companies like ours already have quietly left town in the face of the city’s taxes and regulations. This would help explain the erosion of jobs.

Regardless of the outcome of our case, the arbitrary and capricious behavior of some bureaucrats is creating a lose-lose situation for everyone involved. If we win in court, the taxpayers of Los Angeles will have lost because all those tax dollars will have been wasted on needless litigation.

If we lose in court, the remaining taxpayers in Los Angeles will have lost because their burden will continue to swell as yet another business moves its jobs — and taxpayers — to another city.

As long as City Hall operates like a banana republic, why is anyone surprised that jobs have left the city in droves and Los Angeles is teetering on the brink of bankruptcy?

From the Denver Post:

A new state law was critical in the decision by the country’s largest kidney-dialysis provider to move its corporate headquarters to Colorado.

Currently based in El Segundo, Calif., DaVita Inc. is No. 433 on the Fortune 500 with nearly $6 billion in annual revenue and more than 1,400 dialysis clinics in 43 states.

Incentives in a new law that takes effect in August “were relevant and necessary,” DaVita chief executive Kent Thiry said Wednesday at a news conference.

Thiry called the incentives the “necessary lubricant” to assist the company with the time and financial commitments of relocation.

Thiry credited Gov. Bill Ritter and Denver Mayor John Hickenlooper with “thoughtfully designing” their presentations and said he was impressed with their work on the environment, public education and light rail.

Denver’s central location, lower costs and status as a desirable place to live and work, as well as building on DaVita’s regional presence, played into the decision, Thiry said.

California and Colorado were on the list of five possible sites. Thiry declined to identify the others.

How much incentive money flows to DaVita “is yet to come,” said Don Elliman, director of the Colorado Office of Economic Development and International Trade.

Elliman said the law gives a state income-tax credit of 3.8 percent for up to five years to companies if they select Colorado over competitors and create at least 20 jobs.

DaVita will have to apply to the Colorado Economic Development Commission for the tax break. Elliman said area counties and cities will have to provide other incentives.

The Jefferson Economic Council has been working on a package to keep DaVita in Jefferson County, where it already has a building with 250 employees.

“We’re doing everything we possibly can to create a winning proposal for DaVita to stay here,” said Jefferson County Commissioner Kevin McCasky.

As for incentives, McCasky said, “You name it. If we have the authority, it will be considered.”

Thiry said no decisions on a headquarters location have been made.

About 800 of DaVita’s 32,000 employees work in Colorado. Thiry and several other senior executives will make the move. Other headquarters employees are being given the option to move.

California better be careful. Here’s an article from the AP: “Official: NC considers Apple for massive tax break“:

North Carolina lawmakers are pushing to give Apple Inc. a multi-million dollar tax break should the company bring an East Coast computer server farm to the state — an estimated $1 billion investment, according to a state official with knowledge of the recruitment efforts.

State and local governments offered Google an incentive package worth up to $260 million over 30 years, one of the largest incentives packages in state history, to land the data complex. If the Apple project also remained active for 30 years, its server farm could save more than $300 million on its corporate taxes, based on legislative staffers’ estimates that the tax break would mean a savings of $3 million from 2011 to 2018, and then $12.5 million each year after that.

Google, Microsoft and other technology giants have responded to booming Internet use by building server farms: huge, climate-controlled computer warehouses that can store enormous amounts of information and process vast flows of data. They are heavy users of power and water and are usually spread over large spaces.

Though the Apple site is initially expected to employ fewer than 100 full-time workers, legislators said the potential prize was so juicy it justified changing the state’s corporate tax formula to benefit a single company. North Carolina’s unemployment rate remained at 10.8 percent in April, marking a third-straight month it was in the double-digits, the state Employment Security Commission reported Friday. Four non-urban counties have unemployment rates of more than 16 percent.

A sobering article in the Los Angeles Business Journal, “Outsiders Make Bolder Moves to Steal L.A. Companies:”

For Carmen Murray, owner of a custom carpet company in Commerce, the siren song from other states offering free land and lower business costs has finally become too enchanting to ignore.

Murray, who owns Rodeo Carpet Mills Corp., has been getting calls and brochures from other states for years, and she has generally ignored them. But now, faced with a combination of a brutal recession and soaring taxes, Murray is giving serious consideration to the thought of moving her 22-employee company to states as far away as North Carolina.

“The economy has hit us hard,” Murray said. “We’re looking at everything we can look at to cut expenses and to go forward with our company and that includes locating to a lower cost area.”

All over Southern California, business owners are receiving phone calls, e-mails, fancy brochures and even personal visits from economic development offices in other states. In recent years, most have come from states in the Western United States, chiefly Arizona, Nevada, Utah and Colorado. But other more distant states are now getting into the act, such as North Dakota and North Carolina.

The article contains the following curious Enterprise Zone reference:

Meanwhile, local skin-care products maker Dermalogica Worldwide has also received a barrage of brochures and phone calls from other states. Founder and Chief Executive Jane Wurwand said North Dakota has been “extremely aggressive,” while North Carolina and Kansas have been “persistent.”

Wurwand said Dermalogica, which has 340 employees in Carson, is not interested in moving to North Dakota or anywhere else outside of Southern California.

“We’re about to launch a California brand, so we’re staying,” she said.

But Wurwand’s frustration level with California – especially government agencies – is rising. The company was recently turned down in its attempt to receive state enterprise zone tax credits for new hires. In addition, she’s very nervous about what the impending increases in state and local sales taxes will do to her business.

Topping it all off, Wurwand has not received calls offering any assistance from state or local government officials.

“We’re a bit miffed,” she said. “They’ve completely ignored us.”

There is this ray of hope with the appearance of long-time Enterprise Zone advocate Carrie Rogers:

Situations like that concern local economic development officials, who say they have stepped up the frequency of calls to local businesses.

“We’re trying to find out if these businesses have any issues that we can address,” said Carrie Rogers, vice president of business assistance with the Los Angeles County Economic Development Corp. The organization’s workers are going through databases and calling companies to offer whatever assistance they can.

Rogers said that the use of so-called red teams of local government officials has been expanded to address these problems. Red teams, which originated in the aerospace industry as impromptu fix-it teams, were widely employed to retain California businesses in the 1990s. These ad-hoc groups of state, local government and utility officials gathered to meet with companies and take whatever actions were feasible to keep the companies from leaving, from lowering utility bills to waiving permit fees.

But will it be enough?

It’s been a while since I’ve had a story for the “Not Enough” category, but here is a new one from the Redding Record Searchlight:

It’s possible that nothing anyone in Shasta County could do would have persuaded executives at Millipore, a bioscience- and medical-device manufacturer, to keep the Anderson plant that it acquired in 2006 with the purchase of Newport Biosystems.

A multinational company that employs nearly 6,000 people, Millipore said last week that it was consolidating production at a headquarters plant in Massachusetts. The Anderson factory wasn’t suited for Millipore’s planned expansion of the product lines. It’s hard for economic-development leaders to swim against that tide.

But the Economic Development Corporation of Shasta County wasn’t even in the water.

The May closure’s announcement blindsided EDC President Greg O’Sullivan, even though the group has refocused its efforts, in a year when expansions are rare, on retaining local jobs. In disappointed reaction, O’Sullivan told a reporter, “I don’t know if the company was taking full advantage of all the enterprise zone tax credits.”

It’s a little late to wonder about tax incentives. That’s the kind of thing the EDC needed to be asking Millipore six months ago.

Not that every local employer isn’t a prize, but Millipore is the type of company that deserved special attention. It’s in the heart of an industry, medical-device manufacturing, that the EDC has long targeted. Not only is the region losing the nearly 80 jobs Millipore provided, but it’s also lost the ability to point to a successful local company in the field. Even in our networked world, industries still cluster. Sad to say, in this case the cluster is forming back East.

Shasta County’s job boosters can’t control the economy or major companies’ decisions. They can at least ensure their efforts match their stated goals. It’s hard to see how that was happening here. That makes the loss of Millipore doubly disappointing.

Apparently, the Enterprise Zone was not enough for this business:

When a company decides to leave town, community leaders sometimes try to downplay the impact. But Affymetrix Inc. has been too important to the area’s biotech industry for that.

The company confirmed Friday that it’s closing its 9-year-old factory in West Sacramento next spring and will transfer most of its functions to its plant in Singapore.

About 100 jobs will be affected, although some employees will likely find work elsewhere at Affymetrix, said spokesman Andrew Noble from the company’s headquarters in Santa Clara.

Area officials were candid about the significance of the loss. They called Affymetrix a major employer and pioneer in the region’s biotech business.

“Affymetrix was … one of the early companies in the life sciences area,” said J.D. Stack, chief executive of the Sacramento Area Regional Technology Alliance. “Kind of an iconic company in the Sacramento area. It really hurts to lose them.”

Last year I wrote about electric car manufacturer Tesla Motors‘ decision to locate its new facility in Albuquerque instead of the Pittsburg Enterprise Zone.

Today Motor Trend reports that Tesla has been wooed back to the Golden State:

Like a major-league baseball team threatening to leave for a new city out West unless its rundown, depressed hometown builds a shiny new stadium, “zero-emissions” carmaker Tesla Motors was looking to move its fledgling electric auto manufacturing to New Mexico. California has come through with the equivalent of Baltimore’s Camden Yards. It will waive the sales tax for Tesla’s investment in business equipment, resulting in “millions of dollars in savings,” governor Arnold Schwarzenegger announced Monday. “If they choose to build their factory in an enterprise zone, they’ll save millions more,” he says.

The Governor made a presentation at Tesla, here is the full video of the event and press release. Of particular interest is the description of this brand new tax incentive in California:

Last Wednesday, CAEATFA [California Alternative Energy and Advanced Transportation Financing Authority] approved a new program that exempts new ZEV [Zero Emissions Vehicles] manufacturers from paying sales and use tax on the purchase of manufacturing equipment to encourage ZEV manufacturing in California. For Tesla, these incentives will mean millions of dollars in savings when the company invests in building their new plant in California. And if they choose a city that is in an Enterprise Zone, they will save millions more. Tesla will also be eligible for at least $1 million in Employment Training Panel Workforce Development Funds to train employees.

Gov. Schwarzenegger at Tesla Motors from Max Shenker on Vimeo.


It’s nice to hear the Governor promote the Enterprise Zone specifically. And another nugget from the speech transcript:

Now, last year it looked like Tesla Motors would build its electric cars in New Mexico. Now, you have to understand, I myself bought one of the first Tesla cars and so for me to see this company build a manufacturing plant in New Mexico drove me absolutely insane. But, the fact of the matter is my good friend, Bill Richardson, offered better incentives than we could offer here in California and so, therefore, they were thinking about going with a plan through New Mexico.

So, we left no stone unturned and we started going to work and thinking and thinking, what can we do, what other incentives can we offer?… And we were sitting down and we came up with all kinds of great ideas for business incentives to attract companies like Tesla that make zero-emission vehicles here in California, because we both want these cutting edge companies not just to start here in California, do research and development in California, but actually manufacture here in California.

The Los Angeles Times tells the story of a local textile company that was considering a move to Las Vegas:

Sometimes, what happens in Vegas can stay in Los Angeles.

Or, more specifically, in a vacant industrial building in Sylmar. That will be the new home of a 25-year-old Calabasas business named Drapes 4 Show Inc., which has made linens for Air Force One, swanky hotels, exclusive celebrity weddings and Hollywood movie sets.

The company had been leaving for Las Vegas, where many of its products are used, because it couldn’t find a suitable site for growth. Everything the company looked at in Los Angeles and Orange counties was too small, too expensive or too far from its workers.

But the company that was founded in a schoolteacher’s garage had learned that it pays to look for expert help when problems arise. This time, it came from a $900,000 grant and loan package from the Community Redevelopment Agency of Los Angeles, approved by the City Council last week.

It’s interesting that the topic of Enterprise Zones is not raised – parts of the Sylmar area are within the new Los Angeles EZ.

From the Desert Dispatch:

BARSTOW — A relatively new manufacturing facility is leaving Barstow, taking with it the jobs of several residents.

Ecolite Concrete decided to move to Moreno Valley and into a 81,000 square foot facility — nearly four times larger than its Barstow site on State Street. Ecolite representatives did not respond to calls seeking comment, but workers were removing office furniture and supplies at the facility on Wednesday.

Ryan Travis, commercial associate with Colliers International BradCo, which rents out the building, said that Ecolite’s departure was unexpected.

“I don’t think they were planning to leave Barstow,” he said.

…

The city’s economic development director Ron Rector said that he thinks the company’s Army contract ended. He said he doubts Barstow’s economy will be overly impacted.

“I don’t think it will have any effect,” he sad “Businesses are always coming and going; it’s my job to make sure there’s more coming than going.”

Rector said that the company had planned to expand its Barstow operations and employ as many as 45 workers. He said he wasn’t sure how many people Ecolite employs in Barstow but said only five or six would likely lose their jobs.

Rector said that the city had spoken with Ecolite officials to consider moving to the city’s Enterprise Zone, where they would be eligible for tax benefits but the company declined. The city is working with the business community and developers to fill the soon to be vacant space, Rector said.