They're all getting out of
Beset by higher taxes, above-average unemployment and among the highest cost of living in the USA, it's no secret that Californians have been moving out of state annually by the hundreds of thousands in recent years. This should come as no surprise with recent scandals and corruption involving California's political class coupled with onerous, intrusive and often absurd regulations for businesses passed on the state, county and municipal level.
Sensing discontent among Californians and business owners, Texas governor Rick Perry rolled out the welcome mat for Golden Staters with a PR blitz, offering lower taxes and a lower cost of living than California as well as business incentives for those companies who set up shop in the Lone Star state.
Although incumbent California governor Jerry Brown crassly dismissed Perry's efforts as 'barely a fart', it appears as though the Lone Star State's lobbying has been producing results. At the end of April, Japanese automaker Toyota announced that they would be moving their North American headquarters from the Los Angeles suburb of Torrance to Plano, TX starting in 2016. The move by Toyota [NYSE: TM] is expected to consolidate 4,000 employees from marketing, manufacturing and corporate operations to the suburban Dallas facility. In 2003, Toyota broke ground on a plant near San Antonio that produces the Tundra and Tacoma pickup trucks.
On a smaller scale, Irwindale, CA-based Huy Fong foods- maker of the Sriracha hot sauce- has been locked in a legal battle with the city council after the council threatened to declare Huy Fong a nuisance and threatening them with fines or closure after receiving complaints from four households regarding the fumes resulting from processing chili peppers. Although Huy Fong CEO David Tran stated publicly that he has no immediate plans to relocate the Irwindale facility, the company welcomed a delegation of Texas lawmakers in May. A company spokesman said that relocation wouldn't be as straightforward for Huy Fong because local producers of Sriracha ingredients such as chilis and vinegar couldn't pull up and move to Texas with them. However, botanists working on behalf of Tran have begun examining the soil in parts Texas to see if it's conducive to growing the variety of chilis used in Sriracha sauce. There's also concern over variables in the Texas weather such as flooding, hurricanes, drought and hail as well as competing bids from within California and other states.
However, not all the businesses exiting California have decided to head to the Lone Star state. Once considered the hub of the adult entertainment industry, California's San Fernando Valley has been hit hard by the advent of online pornography. The number of permits to film in the San Fernando Valley plummeted after a law requiring adult film stars to wear a condom while performing went into effect late last year. The measure was a Los Angeles county ballot initiative that was approved by voters in 2012. In response to the measure, studios and actors shipped themselves a few hours up Interstate 15 to Las Vegas where the cost of doing business was lower than in California and there were no regulations to mandate the wearing of condoms. Industry insiders say that its much cheaper to rent out warehouses for filming or mansions or hotel suites to accommodate talent for the duration of a shoot.
Nor are all the Californians leaving the state two-legged. Thanks to an ongoing drought and the closure of a massive slaughterhouse in the Imperial Valley town of Brawley, ranchers in California have been selling off cattle to Texas, Nevada and Nebraska. According to Reuters research, at least 100,000 head of cattle have left California in 2014- including breeding stock that's going to slaughter. Higher feed and transportation costs have also put pressure on California ranchers, although ranchers elsewhere are facing similar problems.
Although defenders of the current business climate in California often cite the entertainment industry and Silicon Valley as being the state's economic backbone as well as the primary source of fundraising for the state's democrat party, Hollywood has been shipping jobs out of state due to increased production and filming costs within the state. Special effects firm Sony Pictures Imageworks announced at the end of May that their headquarters will be moved from Los Angeles to Vancouver, Canada for post production work. Over the last 20 years, the area around Vancouver, BC has been dubbed 'Hollywood North' as British Columbia offered studios tax credits for filming on location. Although the exchange between the US and Canadian dollar isn't as favorable as it was in the 1990s, a number of studios are still drawn there for post-production work and location filming [the area around Vancouver can pass for a number of other settings depending on the type of film or scene- NANESB!].
The state's Democrat-controlled legislature also recently passed a bill that would raise the state's minimum wage to $13 an hour by 2017 and is expected to be signed into law by governor Brown. While the bill raises entry-level wages, many employers will likely end up cutting their workforce and retailers or restaurants will close down locations or increase prices to make up for any increased operating costs.
More damning, none of these jobs or businesses will be coming back or are unlikely to be replaced by new enterprise. Although California sits on considerable oil reserves in the Monterrey Shale, wealthy environmentalists with considerable backing from the entertainment industry are seeking to ban the hydraulic facture drilling process that has been so effective in recovering shale oil and gas in Texas, North Dakota and Pennsylvania. Meanwhile, state and local lawmakers continue to busy themselves with legislation concerning transgender bathrooms for schoolchildren or banning plastic bags and simply assume that they can get whatever revenue they need from the next Silicon valley startup such as Facebook.
