New Study Forecast: More Companies Will Leave California

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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.

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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....... 

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  • Tim Richardson
    Silverton, OR · Member since 2016 · 43 posts · 14 votes
    10y

    @James Park

    Be grateful the Californians aren't coming to Georgia. All the Californians coming up into Oregon and Washington drive up our real estate prices. Good for appreciation if you use that model, not as helpful for buy and hold rental opportunities. I have yet to come across any "turn key" companies operating anywhere on the west coast.

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

    @Tim Richardson,

    If you look at the top two appreciating markets, they are Denver Colorado and Dallas/Fort Worth Texas. Most people think that money flowing in from China is the primary cause for micro and macro appreciation and bubbles to take place, but one appreciation factor that I definitely see is the domestic  "Californian Migration Effect" The #1 incoming migration gateway to Denver and Dallas are Californians and these two cities are also the top two highest appreciation performers. I don't think this is a coincidence.

    We Georgians also want see some of that Dallas and Denver appreciation action here in Atlanta. Unfortunately, Atlanta is not one of the top five gateway cities for Californian families moving out of California.  I don't understand how Dallas is the #1 gateway city for Californians and Atlanta is not.


    3Reply
  • Kevin Grinstead
    Realtor · Denver, CO · Member since 2016 · 499 posts · 129 votes
    10y

    @James Park

    I can attest to the many number of people moving to Colorado from California. I have lived in Colorado most of my life and there is a steady influx of Californians. The companies from California are also planning to move but some are hesitant to come here because of the cost of living and the cost of buildings for companies. It is far cheaper than California but our prices are creeping up every year.

    0Reply
  • Account Closed
    Rental Property Investor · Denver, CO · Member since 2015 · 109 posts · 34 votes
    10y

    Ah! So much to learn, so little desire to keep biding time to do it! Thanks for the post... I see more and more everyday, just how much I do not know about real estate. Much needed inspiration. 

    0Reply
  • Jason Yarusi
    Investor · Murfreesboro, TN · Member since 2013 · 430 posts · 178 votes
    10y

    Great post.

    0Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y

    @James Park Some of Texas can be extremely humid normally. Dallas and Houston I think are famous for being very humid. Far west Texas maybe not so much though. I don't think Californians are moving for a dry type climate or if they are they might be in for a huge let down. That humidity ain't no joke either....many elderly will die from it. 

    0Reply
  • James Palin
    Dallas, TX · Member since 2014 · 189 posts · 39 votes
    10y

    The businesses are attracted to Texas for the no state income tax.  (Although, we do have the third highest property tax rate in the nation)  I think the location is attractive because its right in the middle of the United States and you can reach almost any major city within 3 hours by a direct flight from DFW airport.  As far as the humidity goes, it is mild here compared to Houston, but I don't really feel it or I have gotten use to it.  (I grew up in west Texas)  The humidity is always the first thing I feel when I fly to the east coast.

    It has definitley affected our property values.  I get in a bidding war almost on a weekly basis.  I have even had several relocation clients give up and resort to renting.  Overall, I am happy living here and I don't mind the heat.  (Perhaps I have gotten use to that too.)

    1Reply
  • George Smith
    Investor · Dallas, TX · Member since 2016 · 17 posts · 3 votes
    10y

    Dallas is dry heat, not like Houston. I prefer Dallas much more than Houston

    0Reply
  • Ricardo Cortes
    Dallas, TX · Member since 2016 · 24 posts · 5 votes
    10y

    Thanks for the insight, i am from California,and i do enjoy the cost of living, No State-Income Tax of Texas.

    0Reply
  • Franklin F.Pro Member
    Investor · Crossville, TN · Member since 2016 · 58 posts · 27 votes
    10y
    Originally posted by @Matt R.:

    @James Park Some of Texas can be extremely humid normally. Dallas and Houston I think are famous for being very humid. Far west Texas maybe not so much though.... That humidity ain't no joke either....many elderly will die from it. 

     We moved from the AL gulf coast to AZ mainly because of the humidity (and rainfall, heat, hurricanes, bugs, etc).  It can be brutal and the elderly DO have a much more difficult time with it.  Texas wx can be harsh too and pretty much the whole eastern half can be very humid.  Of course, the closer you get to the gulf the more the climate is driven by it.  

    0Reply
  • James Park
    OP
    Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
    10y
    @Matt R.,
    As a native Californian, What do your think is the reason why there is $8.25 Billion of California capital flowing into Texas, but not Georgia. I don't think it is weather as Texas's weather can be just as brutal. Proximity makes sense for the other popular Californian migration cities like Phoenix, Seattle, Las Vegas, and Portland, but i can't seem to understand why Californians prefer to migrate to Dallas/Fortworth, but not to Atlanta. Gwinnett County is probably Georgia's most diverse demographics with the largest Asian population, however Gwinnett County only attracted $81 million of California capital which is an extremely small number compared to Dallas. 

    I get that state income taxes are zero in Texas which attracts businesses there, but our property taxes in Forsyth County is less than 1% vs 3% in a city like Plano. I would say that the lifestyle and quality of schools of Johns Creek and Alpharetta are very much like Plano, Texas, but we have more green trees here. Both Texas and Georgia have great universities as Texas's flagship university is UT-Austin and our flagship university is Georgia Tech where our HOPE scholarship will pay for your child's tuition if they maintain a 3.0 GPA throughout high school and college. 

    Matt, as a California resident maybe you can shed some light as to why there is such a huge capital injection from California to Dallas, but not to Atlanta. Looking at my data and research... I can't seem to figure this out.
      

    Originally posted by @Matt R.:

    @James Park Some of Texas can be extremely humid normally. Dallas and Houston I think are famous for being very humid. Far west Texas maybe not so much though. I don't think Californians are moving for a dry type climate or if they are they might be in for a huge let down. That humidity ain't no joke either....many elderly will die from it. 

    0Reply
  • Matt R.
    Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y

    @James Park You post kind of fades away on my screen...from what I can see my answer is a combination of proximity, overall culture and size. What is the percentage TX vs GA per capita of CA dollars might make up that difference IDK. The culture for business and the CA hispanic migration influences to Texas might be snowballing in Texas as well now. Some decent percentage is driven by housing cost. You could probably throw in a chunk of CA retirees in there too.

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

    @Matt R.

    You hit on a point that I completely overlooked. Texas's culture for business is obvious but the CA hispanic migration is something that I did not look at. California has the largest population of 38,802,500 then comes Texas at 26,956,958. Georgia's population is much smaller at 10,097,343. Where it gets interesting is that Texas is much more similar it its hispanic population makeup with Califonia that it is with Georgia. 34.16% of Texas's population is made up of hispanic households while 38.6% of California's population is made of up hispanic households. In Georgia, the second largest minority in our state are African Americans making up 31.5% of the state. Dallas's weather is dry heat similar to that of Californa whereas the southeast is more humid weather. The CA hispanic migration into Texas, Texas having the 2nd largest hispanic population, pro business culture - zero state income tax, Dallas/Forth Worth's dry heat weather all seem to explain to me why Texas maybe the preferred destination for Californian relocations over Georgia.

    Matt, now you are got me started on my next research project of where the Asian migration in the United States is taking place between 2000 - 2016.

    Hispanic migration photos shown below.

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

    @James Park Right on. It makes sense that hispanics would feel more at home in Texas more than any other place besides Cali. I still don't think Dallas is considered a dry heat though. Maybe compared to Houston it is dryer but still very hot and humid summers for Dallas overall. 

    1Reply
  • David GreeneBusiness Member
    Real Estate Broker · San Francisco Bay Area, CA · Member since 2012 · 225 posts · 266 votes
    10y

    Each state has it's pluses and minuses.

    My opinion is the wise investor buys in areas like CA during downturns (which will always be happening out here), rides the values back up, then sells and 1031's into higher cash flowing properties in the south or midwest. 

    Wait for the CA market to drop again and repeat the cycle. 

    This gives you the best of both worlds and can end this debate over which is the best area to invest in.

    Overall I thought this was a great article and highlights some important facts CA investors need to be aware of. We are in a bubble, just like we were in a bubble before, and it's going to do what bubbles do, just like it always has.

    Knowing where the jobs are moving is a foundational principal for real estate investors and we should all be following this closely. I'd love to see more articles like this in the future.

    Podcast Guest on Show #12
    2Reply
  • James Park
    OP
    Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
    10y
    Originally posted by @James Park:

    @Matt R.

    You hit on a point that I completely overlooked. Texas's culture for business is obvious but the CA hispanic migration is something that I did not look at. California has the largest population of 38,802,500 then comes Texas at 26,956,958. Georgia's population is much smaller at 10,097,343. Where it gets interesting is that Texas is much more similar it its hispanic population makeup with Califonia that it is with Georgia. 34.16% of Texas's population is made up of hispanic households while 38.6% of California's population is made of up hispanic households. In Georgia, the second largest minority in our state are African Americans making up 31.5% of the state. Dallas's weather is dry heat similar to that of Californa whereas the southeast is more humid weather. The CA hispanic migration into Texas, Texas having the 2nd largest hispanic population, pro business culture - zero state income tax, Dallas/Forth Worth's dry heat weather all seem to explain to me why Texas maybe the preferred destination for Californian relocations over Georgia.

    Matt, now you are got me started on my next research project of where the Asian migration in the United States is taking place between 2000 - 2016.

    Hispanic migration photos shown below.

    0Reply
  • James Park
    OP
    Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
    10y

    sorry posted on error.
    0Reply
  • James Park
    OP
    Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
    10y
    The concept of buying at the bottom of the California market and 1031 exchanging at the peak to the south to preserve your capital is an interesting concept as the California housing market is usually cyclical with 5 year forward and 2 years back, but will cyclical trend continue? Back in the mid 90s the ratio between median home price and median income were between 3-4. Today parts of northern California is now between 12-14. The question is ... is this bubble sustainable and the cyclical trend continue to rise 5 years forward and 2 years back as the average w2 employee can no longer afford a home in socal and the bay area?

    Sorry posted photos accidently and cant seem to delete on my phone. Duplicate post.

    Originally posted
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  • Account Closed
    Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
    10y
    Originally posted by @James Park:
    The concept of buying at the bottom of the California market and 1031 exchanging at the peak to the south to preserve your capital is an interesting concept as the California housing market is usually cyclical with 5 year forward and 2 years back, but will cyclical trend continue? Back in the mid 90s the ratio between median home price and median income were between 3-4. Today parts of northern California is now between 12-14. The question is ... is this bubble sustainable and the cyclical trend continue to rise 5 years forward and 2 years back as the average w2 employee can no longer afford a home in socal and the bay area?

    Sorry posted photos accidently and cant seem to delete on my phone. Duplicate post.

    Originally posted

     Why kill the Golden Goose?  Better to cash out refi the appreciation and reinvest in CA or speculate in low appreciation markets.  Bouncing in and out is expensive just for the actual costs and the loss of Prop 13 bases.  SF has been gentrifying for over 40/50 years.  People that can't afford CA will migrate to Texas.  People that didn't sit around and complain about how expensive property was in 1976 and actually bought will take their $1,000,000 equity and add a $300,000 mortgage and move up. 

    3Reply
  • David GreeneBusiness Member
    Real Estate Broker · San Francisco Bay Area, CA · Member since 2012 · 225 posts · 266 votes
    10y

    Can you PM me or reply with a link to this report please?

    Podcast Guest on Show #12
    0Reply
  • Aaron Mazzrillo
    Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
    10y

    My only wish is if I can get a list of all the companies leaving and the names of the people getting fired so I could market to them and buy their houses.

    3Reply
  • Dean Weltman
    Investor · The Colony, TX · Member since 2014 · 192 posts · 66 votes
    10y
    Originally posted by @Mike Jury:

    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. 

     Amen. Last time I was in northern New Mexico the locals I spoke to had the same complaints. Flame on...

    0Reply
  • James Park
    OP
    Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
    10y
    0Reply
  • James Park
    OP
    Real Estate Broker · Johns Creek, GA · Member since 2009 · 870 posts · 664 votes
    10y

    California's skyrocketing housing costs, taxes prompt exodus of residents


    During the 12 months ending June 30, the number of people leaving California for another state exceeded by 61,100 the number who moved here from elsewhere in the U.S., according to state Finance Department statistics. The so-called "net outward migration" was the largest since 2011, when 63,300 more people fled California than entered.
    "The main factors are housing costs in many parts of the state, including coastal regions of California such as the Bay Area," said Dan Hamilton, director of economics with the Economic Forecasting Center at California Lutheran University in Thousand Oaks.

    "California has seen negative outward migration to other states for 22 of the last 25 years."

    A recent poll revealed that an unsettling sense of yearning has descended on people in the Bay Area: About one-third of those surveyed by the Bay Area Council say they would like to exit the nine-county region sometime soon.

    "They are tired of the expense of living here. They are tired of the state of California and the endless taxes here," said Scott McElfresh, a certified moving consultant. "People are getting soaked every time they turn around."

    http://www.mercurynews.com/business/ci_30037774/greener-pastures-beckon-some-beleaguered-residents

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

    Poor California

    http://www.businessinsider.com/california-gdp-crus...

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