Some out-of-state recruiters see a silver lining to the rejection of California Gov. Arnold Schwarzenegger’s reform initiatives in this month’s statewide election.
A week after the governor’s Nov. 8 measures were defeated by voters, Bob Potter, director of the Inland Northwest Economic Alliance, was knocking on doors in Orange County in a bid to lure businesses out of the area.
“I bring the idea of relocation to them,” Potter said.
He said he’s enticed more than 70 companies since the late 1980s to move from Southern California to the Coeur d’Alene region of Idaho and eastern Washington’s Spokane,no matter the region’s rain or snow.
Things got a little harder for out-of-state recruiters after Schwarzenegger came to office promising reform. And while major reform has been slow in coming, a stronger Golden State economy and some gains in workers’ compensation insurance have made California more palatable.
Potter is realistic: He said he isn’t looking to lure the county’s big companies, like Ingram Micro Inc. or Broadcom Corp. Most of the companies he’s attracted have been family businesses and small manufacturers.
“I’m getting more phone calls expressing interest,” said Theresa Sanders, executive vice president of the Spokane Area Economic Development Corp., who was traveling last week with Potter.
Potter’s pitch arrives first as a letter outlining the cost benefits of moving to the Pacific Northwest. The letter touts the area’s lower wages for blue-collar workers, lower workers’ compensation rates, substantially cheaper electricity costs, lower lease rates and cheaper housing.
Potter isn’t the only one who’s seen opportunity in California’s reform standoff. Recruiters from Arizona, Nevada and Utah have kept up a steady drumbeat on local businesses to move out of California.
Nevada Boosting Marketing
The Nevada Development Authority plans to spend more than $2 million next year on a marketing campaign to attract businesses, said Somer Hollingsworth, the state agency’s president and chief executive. That’s the most the agency ever has spent.
The defeat of the Schwarzenegger-backed propositions on voter redistricting, state-spending controls, teacher tenure and union dues sent a signal to Nevada that California’s business climate is unchanged.
“Losing those ballot initiatives didn’t help,” Hollingsworth said.
Johnson Controls Inc. recently announced plans to move its Fullerton auto battery plant to Arizona, cutting about 115 jobs, according to the Milwaukee-based company. It had run its battery factory on Fullerton’s Kimberly Avenue since 1978.
“It’s very expensive to do business in California,” said a company spokeswoman in a prior interview.
This month, automaker Nissan North America Inc. said it planned to shift its corporate headquarters in Torrance to Tennessee, citing California’s business costs.
Some believe Schwarzenegger still has a few tricks up his sleeve to encourage businesses to stay here.
Lucy Dunn, chief executive of the Orange County Business Council, expects Schwarzenegger to lure companies back to the state.
Dunn is the former director of California’s Department of Housing and Community Development under Schwarzenegger before taking the business council post earlier this year.
“California will continue to be attractive to business,now and in the future,” Dunn said.
She noted discussions by the Schwarzenegger administration to craft a statewide public works measure to improve roads, water and sewer systems that could be financed by the largest bond sale in state history.
Tony Berendes, owner of Tab Distribution Inc., was one of the ones who bolted.
Berendes said he was paying about $33,000 a month to operate a 30,000-square-foot warehouse along Atlantic Ocean Drive in Lake Forest.
In May, eight Tab workers and their families loaded up moving vans and followed Berendes to the company’s new home in Spokane.
Tab, which has about $15 million a year in sales, distributes computer software, video games, coffeemakers, blenders and grills.
“I have no regrets,” said Berendes, 37, about moving to the Northwest. “The cost of business was just really high, and we weren’t doing well the last couple of years, so I decided to take the plunge and move.”
John Helwich, chief executive of Advanced Field Services, said similar reasons led him to move the company’s headquarters to Coeur d’Alene, Idaho, from Lake Forest a couple of years ago.
Advanced Field Services does surveys of homes to determine whether insurance carriers should underwrite policies.
“If I had the opportunity to pull my entire company out of California, I would,” said the 42-year-old Helwich.
He said he’s had trouble recruiting qualified workers to OC, where median home prices are more than $600,000.
“The only thing I miss is the weather and the sports franchises,” said Helwich, who still has about 40 workers at Advanced Field Services’ data processing center at Lake Forest.
