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SMALL BUSINESS | Special Report: Small Business Survey

Small Business, Big Disillusionment

Poll: 15% of Southland firms say senseless fees, unresponsive bureaucracies have them considering leaving the state.

September 23, 1998|DON LEE | TIMES STAFF WRITER

On the wall of Lisa Deem's machine shop in Santa Ana are nine color photos. Taped together, they show a panorama of her 2 1/2-acre ranch near Flagstaff, Ariz., under a big blue sky and the snow-capped peaks of the San Francisco Mountains.

"My building's going to go right there," she said, her grimy finger pointing to a spot next to a gray house on her spread. "Golden eagles hunt over my property. You don't have the congestion and the people are friendly."

As owner of Deem Enterprises, her convictions for leaving California are more than personal. From a white file cabinet in her sparse office, she pulled out an invoice for $35 from the fire department for a self-inspection fee. "No, they don't make it easy for you," she said, opening another drawer chock-full of more bills and regulatory forms from the city, county and state.

"It's not worth it here anymore," said Deem, 43, a small woman with a ruddy face and big green eyes. She has three employees and has been in business in Orange County for 20 years. "As soon as my girls are out of school, I'm gone."

Deem has plenty of company. About 15% of small-business owners in Southern California are considering leaving the state, according to a survey by the Los Angeles Times and USC's Marshall School of Business.

That may not seem like much given the extraordinary flight of businesses and people from Southern California during the recession earlier this decade. It's also true that even in the best of times, some businesses can always be expected to pull up stakes, for whatever reason.

Still, by most national measures, economists and small-business advocates say, 15% is a disturbing number. Although the figure doesn't mean they will all actually leave--in fact, some of those interviewed said they had no idea where they would go--it does mean that a significant chunk of small enterprises feel that doing business in Southern California is so torturous that they would leave if they could.

"It's surprisingly high given that the economy is doing well and that California has started to address a lot of the issues that in the past were problematic," said John Rooney, president of the Valley Economic Development Center, a small-business resource group in Sherman Oaks.

Rooney said his organization and others have had some success in retaining businesses by knocking on their doors in the San Fernando Valley in the last couple of years. But he said that is not enough.

"It's going to take a regionally organized collaboration and some funding to reach out to all the small companies systematically," he said. "We need to be organized as a small-business economy, and we're not."

Disillusionment Spans the Region

Survey respondents who said they are thinking about leaving included many manufacturers and a number of retailers and services. And surprisingly, the poll of 1,670 businesses earlier this summer found no marked geographic difference in this regard. From San Diego to Ventura to San Bernardino, a similar percentage of businesses expressed a desire to relocate.

In interviews, owners in Los Angeles County seemed to voice the harshest complaints, often about small annoyances such as senseless fees and unresponsive bureaucrats. These, they said, when combined with the state's high corporate taxes and other business costs, all conspire to drive the small-business operator out of town.

The owner of a silk-screen printing business in Vernon recalled phoning a county official recently to ask a tax question. He said he got a recording that said, "We can't talk to you now. Goodbye."

"I felt like jerking my phone out of the wall," he said.

"It's like standing on a bridge," he said of himself, his son and his grandson, all of whom work in the business. "We don't know whether to jump or not. If somebody pushes us, we'll go."

That somebody, he said, could be government, or it could be a representative of another state. The survey showed that 13% of small-business owners, including some of those who are considering leaving, had been contacted by other states, notably Arizona and Nevada.

At the same time, California officials say they believe that business conditions in the state have improved significantly in recent years.

Jesus Arredondo of the California Trade and Commerce Agency, for example, spoke about workers' compensation reform, new tax credits and other business rules that have been relaxed. He said his agency has no evidence that the number of business relocations has slowed. But he added, "If there was a significant number of companies leaving, we wouldn't have an eight-year low in unemployment."

Perhaps. But other economists see reasons to be worried in the Southern California Business Climate Survey.

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