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EZ Business Owner Strugles to Justify Staying in California

Here is an editorial that appeared in today’s San Bernardino Sun by the owner of Cannon Safe. Cannon Safe was the venue for Meg Whitman’s tour of the Enterprise Zone back in March.

I recently took a trip to Sacramento to talk to state legislators about the pressing economic issues facing the state of California. I was part of a delegation of business owners who were invited to Sacramento by the San Bernardino Valley Enterprise Zone. Our goal was to educate legislators and their staff members as to the importance of the enterprise zone.

An enterprise zone is an area that has been deemed economically depressed by the California Department of Housing and Community Development. Businesses located in an enterprise zone qualify for special tax incentives. The goal of the enterprise zone program is to stimulate business and job growth in economically challenged areas of the state.

I found the trip to be frustrating, because it seems that many legislators are not aware of the difficulty of doing business in California. When I travel around the country for business meetings, I am constantly met with the question, “Why are you still in California?” Business leaders look at California’s high state taxes, workers’ compensation costs, and red tape regulations and they think I am crazy to keep my business in the state.

State legislators need to understand that there is fierce competition for California companies from other more business-friendly states. A few years ago, when I was considering relocating my business, I was heavily recruited by New Mexico Gov. Bill Richardson, who is very pro-business. I was also recruited by other states such as South Carolina, West Virginia, Texas and Arizona. Most of these states had attractive offers for companies interested in relocating. For example, West Virginia offered to give my company 20 acres of land and also construct a building, which I would later own. Arizona offered to pay my employees’ wages for a year, at the prevailing state wage. In addition, many other states have low state taxes compared to California’s state tax which is 10 percent.

When people ask me why I stay in this state, I tell them that I love California, and I am committed to raising my family here. But a major factor for me staying here is being in a California enterprise zone.

My company, Cannon Safe, originally started in El Monte in 1965. We moved to Pico Rivera in 1968 and eventually decided to relocate in 1999. We were attracted to San Bernardino because of the tax credits and other assistance offered by the San Bernardino Valley Enterprise Zone.

However, even with the benefits offered by the enterprise zone, it is still less expensive to do business in other states. If I moved my company to Utah or various other states, I would see as much as a 20percent increase in profits.

I realize that moving my business would have a devastating impact on the local economy. Cannon Safe employs 200 workers and our 2009 payroll contributed $7.2 million to the local economy. Manufacturing companies like Cannon Safe have a ripple effect on the local economy, because we also employ hundreds of local support businesses.

Cannon Safe also employs 500 vendors who provide trucking, freight, steel, legal and accounting services. Seventy percent of our gross sales goes back to the local economy, and that accounts for millions of dollars.

California enterprise zones also provide a significant economic impact to local communities. According to information from the California Association of Enterprise Zones (CAEZ) website:

Enterprise zones have generated more than 700,000 jobs in a 10-year period.

Wages and salaries in enterprise zones grew 3.5 percent more than the rest of the state.

Poverty decreased 7.35 percent in enterprise zones compared to the rest of the state.

I love California, but I can’t continue to throw my money away.

Without the enterprise zones, there is little reason for me, and other entrepreneurs, to keep our businesses in California.

Aaron Baker is president and owner of Cannon Safe, a manufacturer of home safes and other security products headquartered in San Bernardino within the San Bernardino Valley Enterprise Zone.

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