The Morning Report
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It’s tough doing business in San Diego.
At least that’s the message local business groups and business owners regularly trumpet. That perspective has gotten even more traction recently amid headlines about San Diego companies moving to Texas and discussions about hiking San Diego’s minimum wage and affordable housing fees.
We’ll spend coming weeks separating fact from fiction but before we dive in, here’s some reading that can get you primed on California’s business climate and efforts to keep companies here or draw them elsewhere.
• The Sacramento Business Journal analyzed California businesses’ dealings with tax policies and state regulations last year and found the benefits and tradeoffs associated with those rules difficult to untether. Some business leaders and economists acknowledged the very laws the business community often opposes help make the state more desirable for their workers.
This quote from Christopher Thornberg of Los Angeles-based Beacon Economics sums up the story’s findings well: “The state is shockingly unresponsive (to business concerns about regulatory and tax burdens). California is like the cutest girl in my high school class. … She doesn’t have to be very friendly, but it’s amazing how popular she is.”
In a separate post, several business owners told the Business Journal the quality of life in California – like the sunny climate – makes them determined to remain in the state even as they grumble about its unfriendly business climate.
• Surveys and polls regularly name California among the most business-hostile states. Chief Executive Magazine, for instance, has named it the worst state for business for 10 years running.
• Despite all the headlines about businesses leaving California, the San Francisco Chronicle found states don’t track state-to-state business moves.
Two economists told the Chronicle that job losses tied to relocations aren’t that big of a deal for the state’s economy.
State tax increases such as Prop. 30, which spiked state income tax rates for Californians who make more than $250,000 a year, also hasn’t ticked state job growth below the national average.
Tax policy expert David Cay Johnston recently wrote in a Sacramento Bee op-ed that California actually saw a 2.8 percent hike in job creation from 2012 to 2013, which is higher than the national average.
• Texas Gov. Rick Perry is spending lots of time and capital wooing California businesses, including a handful in San Diego. His high-profile PR campaign inspired The Texas Tribune to evaluate the regulatory differences between the two states earlier this year. The Tribune found Texas business owners enjoy more lax labor and environmental laws that make business expansions – and real estate development –less cumbersome.
The Tribune explored some of the tradeoffs associated with its limited regulation.
• Texas isn’t the only state trying to lure California businesses.
Arizona launched a full-court press in 2012 after California voters approved Prop. 30. Last February, the president of the Greater Phoenix Economic Council told Sacramento’s KCRA that 24 California executives had committed to leaving the state.
• California is taking some steps to try to retain companies. The Los Angeles Times laid out Gov. Jerry Brown’s $750 million tax break package for businesses that’s meant to discourage departures. The Sacramento Business Journal took a deeper look at lawmakers’ focus on tax credits for manufacturers.
• Last month, the Associated Press reported that four San Diego County companies will receive income tax credits thanks to the state’s California Competes program. More incentives are up for grabs this year and business analysts told the North Bay Business Journal they expect far more companies to seek them.
• As he sought San Diego’s mayorship, Mayor Kevin Faulconer pledged to cut regulations and bureaucratic time-sucks that stifle business in the city. I outlined those promises in a January guide to mayoral candidates’ plans.
• Like the state, the city is increasingly offering incentives to retain businesses.
Last month, the city signed off on expansion subsidy deals with AleSmith and Ballast Point that’ll essentially cancel out the craft breweries’ spending on city permitting.
Earlier this week, KPBS reported on the City Council’s approval of an up to a $1.5 million sales tax rebate for Illumina, a genomic sequencing firm that had apparently considered relocating to Poway or Memphis, Tenn.
San Diego CityBeat raised some questions about whether Illumina was really planning to move . Officials in both other cities said they knew nothing about efforts to attract Illumina, CityBeat found.
This is part of our quest digging into the difficulties – real or perceived – of doing business in San Diego. Check out the previous story in our series, The Challenges of Doing Business in San Diego, and the next installment, What San Diego CEOs Say as They Leave Town – or Threaten to.