New Study Forecast: More Companies Will Leave California

General Real Estate Investing
10yFollow

New Study Forecast: More Companies Will Leave California

James Park
Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes

Irvine , CA
Thursday, January 07, 2016 

According to a new study of companies leaving California during the last eight years, the state's business climate will worsen because of a multitude of proposed tax hikes and new regulations – measures sufficient to motivate more company departures.

The study by Spectrum Location Solutions is critical of extending the "temporary" taxes in Proposition 30, escalating fuel and motor vehicle taxes, imposing a service tax on routine transactions, raising carbon-related cap-and-trade fees, and threatening to weaken Proposition 13's protections for business property owners.

"California's public officials come across as being uncaring about the damage they inflict on businesses, investors, employees and their families, and to the towns that lose jobs," said Joseph Vranich, the study's author. "With a growing number of California activists demanding higher taxes and more regulations, look for an increase in the number of companies seeking to leave the state."

The conclusions are contained in a report that shows Fortune 500 companies down to small family-owned companies relocating and expanding in out-of-California locations that offer more satisfying business and lifestyle outcomes....

The report ranks the Top 15 California Counties in the order starting with the worst losses, which are: (1) Los Angeles, (2) Orange, (3) Santa Clara, (4) San Francisco, (5) San Diego, (6) Alameda, (7) San Mateo, ( Ventura, (9) Sacramento tied with San Bernardino, (10) Riverside, (11) Contra Costa tied with Santa Barbara, (12) San Joaquin, (13) Stanislaus, (14) Sonoma and (15) Santa Cruz.

The Top 10 States in the order starting with those that gained the most are: (1) Texas, (2) Nevada, (3) Arizona, (4) Colorado, (5) Washington, (6) Oregon, (7) North Carolina, (8) Georgia, (9) Florida and (10) Utah tied with Virginia. Texas was the top destination each year during the eight-year study period.

17Reply
303 views

Most Popular Reply

Account Closed
Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
10y

James,

As much as I dislike the taxes, politics and bureaucracy in CA, I can make an opposite argument for it. Birds of the same feather flock together. If you look at the wealth and the innovations came out from the Silicon Valley alone, they're more than all of those states combined. Rich people vote with their checkbook. Look at where VCs invest their money? Doesn't CA have been the number one state leading all other states by a mile?

When you're the king, others will try to dethrone you. Look at the people that come to the state and the people that leave the state.  Your article says the low and middle classes making $50k or less are leaving California.  It makes sense because they can't compete here. California has been the land of opportunity.  Talented people are getting handsomely rewarded.

It seems like a lot of couples in their late 20's and 30's here making a combined $250k-$350k are the norm here in the Bay Area.  It's sickening when I'm reviewing their rental application and see how much they make.  Andrew bought 3 homes from you. You saw his tax returns.  He and his wife are the norm in the Silicon Valley.  Ironically, these people consider themselves as middle class.  LOL!  Just put things in perspective.

My partner and I have been hanging out with a group of very successful business men and women.  Some of them don't even have a high school diploma, and they're making over $100k/month.  Yes, that's per month, not year.  They are some of the best and open-minded people with whom we have ever dealt. My little sister is the chosen one to be one of the partners in their biz.  She quit her W2 job to follow this path full-time. I'm investing in her now.  I'm quite sure it will pay-off at least in 10 folds.  

California is the land of dreamers and opportunists.  This is where dreams can become reality.  It's where people come to create the life that they want and desire.  It's not for the faint of heart. The sad thing is that you have all the politicians and government agencies who squeeze themselves in the middle of all these, try to justify their relevancy, and think they know better than all of us.  They're the ones that are sucking the Golden State dry.  Sigh....... 

9Reply
See this reply in the discussion

77 Replies

Jump to latestLatest
  • Ross Greene
    Real Estate Agent · Las Vegas, NV · Member since 2015 · 97 posts · 28 votes
    10y

    Good read, 

    Thank you for the info! 

    0Reply
  • Walker Clark
    Investor · Charlotte, NC · Member since 2015 · 27 posts · 12 votes
    10y

    Very good information, I appreciate you posting this!

    0Reply
  • Michael Fortier
    IT Director/Service Manager · Lubbock, TX · Member since 2015 · 87 posts · 24 votes
    10y

    Its amazing to me that they either don't see the writing on the walls that is the size of a mural or they just don't care. These politics are insane.

    4Reply
  • James Park
    OP
    Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
    10y

    Here is another interesting article from LA Times.

    "California's high housing costs drive out poor, middle-income workers"

    http://www.latimes.com/business/la-fi-california-m...

    2Reply
  • Ryan Hopkins
    Architect · Raleigh-Durham, NC · Member since 2016 · 76 posts · 47 votes
    10y

    This is great information. Thank you for passing it along!

    0Reply
  • Ryan Landis
    Residential Real Estate Broker · San Mateo, CA · Member since 2013 · 585 posts · 264 votes
    10y

    @James Park thanks for sharing! If it were not for the talent, I do not think that many companies would be out here. Growing up in the Bay Area, the "culture" of the area really makes a lot of people sacrifice in order to stay (it's not just the weather - that tends to be a SoCal thing).

    2Reply
  • Account Closed
    Investor · San Jose, CA · Member since 2012 · 2k+ posts · 3k+ votes
    10y

    James,

    As much as I dislike the taxes, politics and bureaucracy in CA, I can make an opposite argument for it. Birds of the same feather flock together. If you look at the wealth and the innovations came out from the Silicon Valley alone, they're more than all of those states combined. Rich people vote with their checkbook. Look at where VCs invest their money? Doesn't CA have been the number one state leading all other states by a mile?

    When you're the king, others will try to dethrone you. Look at the people that come to the state and the people that leave the state.  Your article says the low and middle classes making $50k or less are leaving California.  It makes sense because they can't compete here. California has been the land of opportunity.  Talented people are getting handsomely rewarded.

    It seems like a lot of couples in their late 20's and 30's here making a combined $250k-$350k are the norm here in the Bay Area.  It's sickening when I'm reviewing their rental application and see how much they make.  Andrew bought 3 homes from you. You saw his tax returns.  He and his wife are the norm in the Silicon Valley.  Ironically, these people consider themselves as middle class.  LOL!  Just put things in perspective.

    My partner and I have been hanging out with a group of very successful business men and women.  Some of them don't even have a high school diploma, and they're making over $100k/month.  Yes, that's per month, not year.  They are some of the best and open-minded people with whom we have ever dealt. My little sister is the chosen one to be one of the partners in their biz.  She quit her W2 job to follow this path full-time. I'm investing in her now.  I'm quite sure it will pay-off at least in 10 folds.  

    California is the land of dreamers and opportunists.  This is where dreams can become reality.  It's where people come to create the life that they want and desire.  It's not for the faint of heart. The sad thing is that you have all the politicians and government agencies who squeeze themselves in the middle of all these, try to justify their relevancy, and think they know better than all of us.  They're the ones that are sucking the Golden State dry.  Sigh....... 

    9Reply
  • James Park
    OP
    Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
    10y

    @Minh Le,

    I am not arguing that California isn't the home to some of the most innovative companies in the world or that there are more millionaire and billionaire households living in California than any other states. 

    The point of this article is that jobs are leaving California due unfavorable business climate. 
    Many of the valley technology companies are branching out to different states. For example, Facebook just opened a 5045 sq ft office in Northwest Atlanta close to Georgia Tech. You can see that among the 247k households who moved out of California, 1/3 of the Californians moved to Texas due to its business friendly climate. California maybe the economic powerhouse of the past, but Texas may very well be the economic powerhouse of the future. Please take a look at some of links below to show you want I am talking about.

    1. Toyota to move headquarters from Torrance, CA to Texas
    http://www.latimes.com/business/autos/la-fi-toyota...
    http://www.forbes.com/sites/dalebuss/2014/04/27/it-makes-sense-for-toyota-to-leave-california-for-texas/
    http://mobile.bloomberg.com/news/2014-05-15/toyota-texas-move-could-generate-7-2-billion-analysis-finds.html

    2. Nissan moves out of LA for Tennessee

    http://wardsauto.com/news-analysis/why-nissan-leav...               

    3. Apple announces $2B global commander center in Arizona

    http://www.cnbc.com/2015/02/02/apple-announces-2b-...

    4. Chinese buyers feed new energy into Texas real estate

    http://www.cnbc.com/2015/02/02/apple-announces-2b-...

    5. Gov. Jerry Brown pleads with companies to stay in California, and scolds those that are leaving. He, too, recognizes the storm clouds over his state’s business climate

    http://www.washingtontimes.com/news/2015/feb/17/editorial-businesses-flee-californias-high-taxes-a/

    An American icon, the Campbell Soup Company, is closing its plant in Sacramento, leaving 700 people without jobs. The plant was built in 1947, and some of its workers have worked there for forty years or more. 


    Most of the items produced in Sacramento will be transferred to Campbell’s plants in Texas, North Carolina, and Ohio.

    Comcast announced two days ago that it will close all three of its call centers in Northern California, including one in Sacramento. 1,000 Comcast employees, including 300 in Sacramento, will have to pull up stakes.

    That’s 800 jobs out the door which gives Chevron a larger presence in Texas than it still has in California

    Charles Schwab's plans to move about 1,000 jobs from San Francisco to Texas inflamed Texans who fear that more Californians will ruin the Lone Star State

    1Reply
  • Joe Bertolino
    Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
    10y

    People from other states latch onto the limited negative information because they are not here and they don't get it.  They likely never will.  With all of the negatives mentioned and companies leaving, blah, blah, blah... California led the nation in job growth over the past 12 months.  498k job which was almost 30% higher than the #2,  which was Texas.  When you track job migration we are losing lower tier jobs to cheaper states handing out huge tax incentives while CA is still attracting the brightest minds in the country and the world.  We lose call centers and processing plants with large body counts while companies like Salesforce are being created.   For every 100 Comcast call center jobs paying $42k a year that we lose... a company like Solarcity is adding 200 six figure jobs. 

    Facebook opened a little 5000 square foot satellite office near GA Tech to recruit and train.  It's not a sign that they are leaving the Golden State.  

    The media can and does latch onto a few negative items but the facts are that CA is breaking records for VC funding,  exports,  tourism and tech growth.  Negativity is much easier for simple minded people to understand so news sources lead with that.   

    Its not all roses with a shrinking middle class and large service class but as Minh said... Those with special talents (I'll add in tenacity) are handsomely rewarded.  

    8Reply
  • Franklin F.Pro Member
    Investor · Crossville, TN · Member since 2016 · 58 posts · 27 votes
    10y

    I just wonder how much more those people with "special talents" can take.  There may be some bright spots in Cali but imagine what it'd be like if they weren't running companies off and the free market economy were allowed to function.  I think it is very telling and gives a preview of what the whole country will look like after a socialist presidency.  Our system already looks very socialist and is getting worse.  And it can still get a lot worse.  Not to get into politics but socialism is the very antithesis to a free market economy.  When considering the monstrous socialists from history it scares me to death.  I shudder to think of the millions who've been killed in the name of "socialism" by Lenin, Stalin, Hitler, Mao, Pol Pot, Castro, Tito, etc.  Socialism is a very small step away from communism or fascism.  Am I over-thinking the situation with the control freaks on the left?  I don't think so.  

    3Reply
  • Gene HackerPro Member
    Flipper/Rehabber · Lake Isabella, CA · Member since 2011 · 969 posts · 488 votes
    10y

    California's regulations are crippling to business and many businesses leaders will move to more friendly states.  

    All my investments are in Kern County and what I have noticed is that manufacturing and energy/pollution intensive industries are the ones in our county which are being forced out.  Eastern Kern county is big in space travel development.  One of the bigger players recently moved to Texas.  The CEO/owner (don't remember exactly) made a statement that they had to spend so much time/energy/resources keeping up with the ever-changing regulations that they were not able to focus on what they actually do.  

    The good thing about much of the industry and jobs in Kern County is that they are location dependent and cannot be moved.  Agriculture, oil, and logistics Kern Counties strong suites and all three are here for a reason. There is a chance that CA aggressive regulatory environment will severely hamper these activities.  Bands on fracking, and limiting ground water usage would be a big hit, so I don't rule anything out.  

    2Reply
  • Assaf Furman
    Wholesaler · Campbell, CA · Member since 2014 · 187 posts · 70 votes
    10y

    @James Park 

    The article and other pieces of information are very interesting but are only half of the picture. While it seem to forecast a dire future where companies will continue migrating out of CA, it doesn't take into account the number of companies that are being born on a regular basis. True, low-tech and low education level are being forced out but they're quickly being replaced by those who can afford to pay for housing and other living costs. 

    Regarding opening new locations at other states, again that's only part of the big picture. What about the new offices companies are building in Silicon Valley? Apple, Netflix, Google, LinkedIn, NVIDIA are just some of the names that are currently undergoing massive  developments which will attract many skilled individuals. 

    2Reply
  • Will F.
    Investor · Los Angeles County, CA · Member since 2012 · 962 posts · 279 votes
    10y

    Some of the stats are skewed making it appear to be a bigger issue than it is.  I mean I do agree that some of the tax laws and tenant rules are just plain stupid in CA, there's also a lot of opportunity here and it's one of the best places to live.

    First, California is the most populated state at 40 Million+.  LA County alone has over 10 Million population and beats so 40 states in total population.   So a lot of times the numbers seem so large when you compare state-state. 

    The net migration stats are also skewed because there are a lot of foreigners moving to California (net Immigration)  The stats others mentioned are domestic migration (within the US) not accounting for the net immigration from foreign countries. The net migration in 2015 was 83k according to the San Diego Tribune article.   

    So a lot of these comparisons are of California with a population of 40 Million population and several major economies to smaller state of less than 10 million.  Within a 50 mile drive of Los Angeles City alone there are more than 10 major 200k+ population independent cities like Irvine, Long Beach, Anaheim, Glendale etc.  Each having their individual sub-market economies and RE markets.  Similar major and minor markets around SF

    It's like up and coming countries trying to compare their markets to US stabilitiy

    2Reply
  • Joe Bertolino
    Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Franklin F.:

    I just wonder how much more ythose people with "special talents" can take.  There may be some bright spots in Cali but imagine what it'd be like if they weren't running companies off and the free market economy were allowed to function.  I think it is very telling and gives a preview of what the whole country will look like after a socialist presidency.  Our system already looks very socialist and is getting worse.  And it can still get a lot worse.  Not to get into politics but socialism is the very antithesis to a free market economy.  When considering the monstrous socialists from history it scares me to death.  I shudder to think of the millions who've been killed in the name of "socialism" by Lenin, Stalin, Hitler, Mao, Pol Pot, Castro, Tito, etc.  Socialism is a very small step away from communism or fascism.  Am I over-thinking the situation with the control freaks on the left?  I don't think so.  

    You are under the false assumption that we ever had a free market.  

    2Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y

    This is not really a new story. 

    The mentality of the politicians is insane. For example they jacked DMV fees 250% overnight it seems. Reasoning was since everyone started to buy hybrids and the rest the state was losing big on gas taxes. ( Already highest in nation). They were the ones that made policy to encourage better gas mileage in the first place. They just raised DMV fees to make up difference. Net difference for consumer gets wipe out as result. They come up with new ways to tax population as policy and proud of it too. Don't get me started on 60 biliion high speed rail waste coming soon. It is endless tax insanity out here. Not sure how much effect of any company leaving is having as tech is still exploding all over. I am sure they are thinking of new ways to fleece them hardcore soon. They basically have lost their minds because they can still get away with it.

    Now with that said Google is doing a 900,000 square foot deal in LA. And Toyota in Torrance left behind all the highest paying jobs. So you get the picture. 

    4Reply
  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y

    https://www.bing.com/search?q=california+dreaming+...

    It's all good.  Over 50 years of going to hell in a hand basket.  Dang, now I'm craving tofu.

    3Reply
  • Martin Scherer
    Rental Property Investor · Liberty Hill, TX · Member since 2014 · 285 posts · 166 votes
    10y

    Yes, many people are leaving CA for the cheaper greener pastures in other states.  I have left twice and both times returned.  The lifestyle here in NorCal is just too valuable and I am willing to pay for it.  I am surrounded by mountains, vineyards and microbreweries.  The weather is outstanding most of the year.

    Sonoma County where I live (it is listed on your chart #14) there is less than 2 months inventory of homes for sale and rentals are insanely difficult to find but people keep moving here. I wrote offers for clients recently one having 7 offers and one having 11 offers.  Most of those were all cash so while some folks are moving out there are many others moving into the county.  More than 30% of offers, no matter the price, are all cash. Does that sound like there is a shortage of people to buy or that there are homes sitting waiting for a buyer?

    I have sold off all but one of my out of state rentals and moved the money back to CA real estate.  All of my out of state rentals were positive cashflow from day one which is great but after 13 years of owning most of them they had increased a whopping 2% in value and rents had increased less than 20%.

    So while I am not sad I purchased all those out of state rentals I would have done much better here in CA had I spent my money buying rentals even with negative cashflow.

    7Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y

    @Will F. Not that we need more advertising or something but this video addresses some of those sub markets. Figure it is nearly cement for 100 miles straight, bring a hoverboard:) 

    2Reply
  • Matt Mason
    Investor · Los Angeles, CA · Member since 2013 · 231 posts · 260 votes
    10y
    Originally posted by @Assaf Furman:

    @James Park 

    The article and other pieces of information are very interesting but are only half of the picture. While it seem to forecast a dire future where companies will continue migrating out of CA, it doesn't take into account the number of companies that are being born on a regular basis. True, low-tech and low education level are being forced out but they're quickly being replaced by those who can afford to pay for housing and other living costs. 

    Regarding opening new locations at other states, again that's only part of the big picture. What about the new offices companies are building in Silicon Valley? Apple, Netflix, Google, LinkedIn, NVIDIA are just some of the names that are currently undergoing massive  developments which will attract many skilled individuals. 

    Very true.  Also, these domestic migration stats don't seem to take into account the fact that places like CA and NY are immigrant magnets and gateway cities so they miss counting a huge portion of the population growth.

    Some regulations and taxes are concerning, but that has been the case for many years.  The biggest gripe I read about is the concern for housing for employees not regulations or taxes, but that depends on the type of business. Manufacturing could certainly use a boost, but that is the case in most of the US. 

    CA did add 464k jobs last year so by far the most in the US (about as much as the next biggest two states combined) and on a percentage basis, we have been outperforming the rest of the US for quite a few years now.  It doesn't seem to get much press for whatever reason like when Texas led in job growth around 2010.

    If anything, what I see in my area is concerns about gentrification and rising rental and housing costs and local tech companies like Snapchat taking up so much office space that they are pushing office vacancy down so low there is little room for anyone else to expand.

    2Reply
  • Dan H.Pro Member
    Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
    10y

    in San Diego the demand for both business and residential space is much higher than supply.  If anyone moves out their vacated area is quickly filled.   This is in spite of most San Diegans wanting some anti-growth passed but they cannot agree on which one.  Any anti-growth is either too stringent or too lax for certain people so even though a very high percentage of San Diegans want an anti-growth they typically fail.

    Cities are by necessity passing rules to try to curtail jamming every open space with buildings.  I could not imagine how bad it would be if the costs did not drive some companies to depart the region.

    My family has invested out of state but we currently only invest in San Diego County.  We typically have a short open house for a rental and have the place rented such that we have to be quick to turn around the unit to accommodate the desire of the new tenants.  Rents have gone up a lot in the last 2 to 3 years.  Where most of my units are there are two large high density complexes being built.  I am sure they will be full and I will still be finding tenants in an hour open house.

    I am unconcerned about departures in this market.  If high cost of living or cost of doing business drives some away it does not concern me.

    1Reply
  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    10y

    @James 

    @James Park good supportive evidence, agnostic to the political environment.

    A while back I recall Michigan offering ZERO Corp Tax and 10 year forgiveness on property taxes for companies moving their business' there.

    How is that some get it and others are and will remain blind?  Sigh

    0Reply
  • Frank Eimiller
    Rental Property Investor · Fond Du Lac, WI · Member since 2015 · 261 posts · 78 votes
    10y

    Bring them all to the Midwest, I'll find them units to occupy :-)

    0Reply
  • Amit M.
    Rental Property Investor · San Francisco, CA · Member since 2013 · 1k+ posts · 1k+ votes
    10y

    interesting. I think the turn key/out of state cash flow/2% rule/50% rule crowd should read very carefully what both @Martin Scherer and @Dan H. - they have experience with out of state and CA properties, and are both back to CA only RE.  Take heed- Valuable lesson folks!

    As for the jobs thing, yes, basically CA is replacing lower end jobs with higher end jobs-  it's quite pronounced.  How people see it as a social justice question is another matter; but for RE investors it's the bomb!

    Take San Francisco, always a great example in extreme absurdities ;)  during the recession our mayor actually made some concessions so Twitter's HQ stays in SF, while at the same time revitalizing mid market street, which was a run down and drug infested.  As soon as the economy began growing out comes the protesters to complain about basically everything: Twitter tax credits; Google busses; "luxury condos"; building moratoriums; tech people moving here; displacement of low income rent controlled tenants; etc, etc. all this while our city has an $8 billion (yes billions) dollar budget.  And our politicians still sit with their thumbs up their butts complaining that we can't build enough affordable housing.  Well yes, increase regulations, restrict new construction, increase impact fees on the construction you will permit, and this is what you get!  And this parody of success will continue until the next recession.  Same thing happens every time.  And it's the same phenomena, though on a less absurd scale, in CA in general.  So I just say, wait until the next recession and those lesser jobs and companies will filter back here anyways. (But the nice thing as CA landlords- at least in prime CA areas- it's heads you win, tails you win!  Just ride out the ups and downs :)

    Ok, back to my Puerto Vallarta beach vaca...

    5Reply
  • Mike Jury
    Investor · Plano, TX · Member since 2015 · 74 posts · 22 votes
    10y

    Being a Texan, I wish you all would keep the people in California.  Not that Texas is hostile to people migrating from other states.  And we welcome a lot of corporate headquarters from other states.  Its just that after moving to this great state, people start trying to change Texas to be like "home".  And quite frankly Texas doesn't need changing. 

    5Reply
  • Kelly Wali
    Los Angeles, CA · Member since 2015 · 18 posts · 1 vote
    10y

    There are areas in Southern California that are still affordable and there is government grants to help with the down payment to purchase homes in these areas. Los Angeles county has Antelope Valley which is very affordable.  It seems like everyone just wants the more congested areas which is why rents are going higher and higher.  Owning an apartment building in the more populated cities is a very hot commodity and will continue to be so.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free