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Texas Gov. Rick Perry tries to woo California businesses

Perry and others are courting California companies ready to bolt with promises of low taxes, loose regulations and a hard stance on organized labor.

February 12, 2013|By Shan Li, Los Angeles Times
  • “You fish where the fish are,” says Texas Gov. Rick Perry, talking about his campaign to lure California businesses to his state during an interview in Beverly Hills.
“You fish where the fish are,” says Texas Gov. Rick Perry,… (Al Seib, Los Angeles Times )

Texas Gov. Rick Perry is on a hunting trip in California. And the prey is Golden State businesses — and jobs.

Perry kicked off his in-your-face campaign to woo companies to the Lone Star State this month with radio ads declaring that "building a business in California is next to impossible." Now the governor is on a whirlwind trip through the state courting companies in person.

"You fish where the fish are," Perry said Tuesday during an interview in Beverly Hills, his slow drawl emphasizing each point. "You're at a tipping point in California from the standpoint of high-wealth innovators. Many are looking for somewhere else to go, and we'd like them to consider Texas."

Perry's not the only one who has come knocking.

The Arizona Commerce Authority recently opened offices in California staffed with employees to pitch businesses full-time. Nevada has hired recruiters as well. And Iowa Gov. Terry Branstad said last year that he was making calls to California companies looking to move.

Although interstate job poaching is nothing new, many states and cities have gotten downright aggressive about recruiting California businesses ready to bolt with promises of low taxes, loose regulations and a hard stance on organized labor. They're betting that myriad new policies will push more corporations to look for a new home.

California voters in November approved Proposition 30, which hiked income taxes for the state's wealthiest residents and nudged up the sales tax. They also voted yes on closing a corporate tax loophole for out-of-state businesses. And California's cap-and-trade program requires businesses to pay for emitting carbon dioxide or other greenhouse gases above a certain threshold.

Gov. Jerry Brown has publicly dismissed both Perry and the idea of firms fleeing California. In a statement, his Office of Business and Economic Development noted that 257,000 private-sector jobs were added last year and that firms such as Samsung Electronics Co. and Amazon.com Inc. were expanding in the state.

"No state has ever poached their way to long-term prosperity," the statement said. "This is something so many governors have done before and with the same ineffective results."

Successful or not, poaching "does seem to have surged in the last few years," said Greg LeRoy, executive director of Good Jobs First, a group that tracks government subsidies. "More public officials want to appear aggressive on the economy."

But are California companies really susceptible to the siren call to flee?

Many economists say companies griping over higher taxes or new regulations is nothing new, but relatively few of California's lost jobs can be blamed on businesses moving out of state.

From 1992 to 2006, for example, only 2% of job losses in the Golden State were because of firm relocations, according to a study from the Public Policy Institute of California. Fewer than 1% of the state's jobs leave annually, and that has remained consistent through times of boom or bust.

"It's a tiny percentage of the economy overall," said Jed Kolko, coauthor of the study. "But when a business does actually move, it does get a lot of attention and the public debate about businesses moving is very visible."

After 15 years of being based in Northern California, trash and recycling firm Waste Connections Inc. moved its headquarters to Texas last year. Chief Executive Ron Mittelstaedt said the board also considered Nevada, Arizona and Colorado. But he said one thing was clear: California's high taxes, pricey real estate and budget shortfalls meant that it was imperative to move.

"The overall cost of living and working in California just became too burdensome relative to other options out there," Mittelstaedt said, pointing to the company's top three rivals, which are headquartered in the low-tax states of Florida, Arizona and Texas.

"We didn't make the decision to save dollars and cents, though," he added. "We did it so over time we could retain and recruit the best level talent at a lower price point. Over time we believe it will save several million [dollars] a year."

Such tales don't surprise Joseph Vranich, a business relocation specialist from Irvine. Vranich scoffs at economists who insist that few companies are exiting California, and points out the extreme difficulty of tracking all businesses that flow in and out of the state. He said the number of local firms seeking his advice for relocation has doubled since November.

"The number of calls is literally unprecedented," Vranich said.

The Greater Phoenix Economic Council has already flown out four CEOs from the Golden State this year who were interested in seeing what the region had to offer for companies.

Implemented after the November elections, the tours are a big departure from the council's normal strategy of pitching businesses on expanding in Arizona rather than leaving California altogether, spokeswoman Melissa DeLaney said

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