Dean Barber

This Ain’t Rocket Surgery

In Corporate Site Selection and Economic Development on May 18, 2014 at 6:45 am

I remember my brother, who was then a resident of Los Angeles County, telling me something that was hard for me to fathom at the time but has stuck with me.

Jim has since passed away, but I distinctly recall him saying that he had to get permission from local government to cut down a dead oak tree in his back yard.

I was living in Alabama at the time and said something to the effect, “Jim, if you lived here in Alabama, that would be your tree on your property. You wouldn’t have to get permission from anybody to cut it up for firewood.”

Another friend, also a resident of California, told me about all the rigmarole it took for him to get a contractor to remove a buildup of bird crap off a roof section at his home. The environmental regulations did not permit what should have been a relatively simple task to be so simple, involving hazmat suits and a litany of red tape.

So last week I wrote about California’s not-so-friendly business climate soon after Chief Executive magazine had released its annual Best & Worst States for Business survey. As in years past, California was ranked 50th by the 500 CEOs participating in the poll.

Now I will grant you that a magazine survey is not all encompassing as to the realities on the ground. But if the widespread perception by CEOs is that you have problem, trust me, you have a problem.

One Mayor Fumes

A first step in taking corrective action to a problem is to admit that you have a problem. Apparently, Frank Scotto, the mayor of Torrance, Calif., was at least initially in denial upon learning that Toyota will be moving its North American corporate headquarters from Torrance to Plano, Texas.

“Toyota gets 30 years there, tax-free. It’s pretty amazing that Texas is that desperate,” said Scotto as reported by Automotive News.

Maybe it’s human nature upon learning bad news to lash out. But rather than to admit that his city in Los Angeles County could or should work toward reducing the regulatory burdens on business, Mayor Scotto blamed others for his city’s misfortune.

And while I am certain that there are unemployed and underemployed people in Plano, a place where I actually live, I can tell hizzoner from personal experience that this suburb community of 300,000 people to the north of Dallas is hardly a desperate place.

All around me are corporate headquarters and within a couple blocks of my home, two large office buildings are currently under construction. Economic developers from around the nation who come to call on me are amazed by the new construction and the general economic vibrancy exhibited by the Dallas-Fort Worth metro area. (It’s hard for me to keep abreast of all the new developments and I live here.)

While Another Mayor Smiles

Last week, the city council in Plano, approved an economic incentive package for Toyota that links $6.75 million in grants to construction of the headquarters that will provide 3,650 full-time jobs.

“It’s a very good day in Plano,” a beaming Mayor Harry LaRosiliere said after the unanimous vote.

The council also approved a 50 percent property tax abatement for 2018-2027 and a 50 percent tax rebate for the 10 years after that. Based on the $350 million value of the property, the tax abatement would “cost” (It’s hard to cost something you didn’t have coming in) Plano $8.5 million over the decade.

But even with the abatement, the Toyota project is expected to generate more than $70 million in property tax revenue and an equal amount in sales tax revenue over the 10-year period for Plano.

Now that is not a bad deal for Toyota or Plano. But such win-win business friendly scenarios are possible only if you only make it so. In Texas, they make it so.

A $40 million incentive from Gov. Rick Perry’s Texas Enterprise Fund helped convince the world’s largest auto dealer to move to Plano. More important than the deal incentives, which I think were actually rather modest, is the fact that there is a political will in Texas to keep taxes and regulatory measures in check.

Texas has no state personal income, capital-gains or estate tax, and is ranked as having the fourth-lowest tax burden in the nation by the Tax Foundation. The Tax Foundation ranks California, which has a personal income tax system consisting of 10 brackets and a top rate of 13.3 percent, 48th.

According to Dun & Bradstreet, 2,565 California businesses with three or more employees have relocated to other states between January 2007 and 2011. David Tran’s company may join the list of companies either leaving the state or expanding elsewhere.

We’ll Take Your Rooster

For months, Tran has been battling the Irwindale City Council over complaints that fumes from his plant that makes Sriracha, the hot sauce with trademark rooster logo, are causing neighbors to get sick.

It is not surprising then that a delegation of Texas legislators toured Tran’s plant last week. “We’re not here to offer any specific incentives, but just to let it be known there are incentives,” said state Sen. Carlos Uresti after their visit, according to the Associated Press.

A second delegation from Denton, Texas, leaves today for California with the aim of visiting the Sriracha plant and telling Tran how much he would be welcomed in that North Texas city. There is something to be said for being wanted.

Joe Knows

My friend and fellow site selection consultant, Joe Vranich, a California resident for nearly 18 years, has tried to alert state legislators as to the dangers posed by overregulation and the need for reform. He likened it to talking to doorknobs.

“A lot of people don’t realize that if you go back 30 years ago, California was the No. 1 place to move your business to or to start a business. How far we have fallen in relative terms is really remarkable,” said Vranich, principal of Spectrum Location Solutions and a frequent blogger on California’s business climate.

Joe alerted me to a scathing piece written by Arthur B. Laffer, chairman of Laffer Associates, an advisor to President Regan and co-author of “An Inquiry into the Nature and Causes of the Wealth of States.”

“While the state’s economy may wax and wane, California is in a death spiral,” Laffer wrote in the May 8th article in Investor’s Business Daily entitled, “California’s High-Tax, Big-Government Comedown.”

Not surprisingly, people and businesses are voting with their feet, flocking to Texas while exiting California en masse. As my fishing buddy Flavis Long explained it, people, like geese, will migrate to greener pastures.  “Hey Dean, this ain’t rocket surgery.”

The truth is that the cost of living and doing business in California is simply too much for too many.

“Texas has produced hundreds of thousands of well-paying jobs across most industries since 2000, making Texas the top destination for domestic migrants since 2006,” wrote Melissa LoPalo and Pia M. Orrenius, two researchers with the Federal Reserve Bank of Dallas in March.

More Good Than Bad

I do not hold that there is a one and only best place for business, because different businesses have different requirements. (Which is the reason why I am engaged in corporate site selection and economic development consulting nationwide.) But selling Texas short is not a good idea.

“Texas has also created more ‘good’ than ‘bad’ jobs,” wrote Fed researchers LoPalo and Orrenius. “Jobs in the top half of the wage distribution experienced disproportionate growth. The two upper wage quartiles were responsible for 55 percent of net new jobs.

“A similar pie chart cannot be made for the rest of the U.S., which lost jobs in the lower-middle quartile over the period.Between 2000 and 2013, Texas household survey employment overall grew 24.9 percent, while employment in the rest of the U.S. expanded just 4.7 percent.”

Texas cities dominated Wallet Hub’s recent ranking of the best U.S. cities for jobs, with five Texas cities listed in the top 10. Fort Worth was recognized as the top city for job seekers. Arlington ranked fourth, Dallas fifth, Austin sixth, Houston 10th. Corpus Christi nearly cracked the top ten, ranking 12th on the list.

It’s no surprise that Texans are a proud and boastful lot, and I understand that can be off putting to some folks in other states. But as the old saying goes, “It ain’t brag if it’s fact.” So Texas won another bragging right when it surpassed California in global technology exports in 2012.

Texas exported $45.1 billion in technology goods, growing 7.3 percent from $42.1 billion in 2011. California’s $44.8 billion in tech goods exports marked a decline by 2.8 percent in 2012, dropping from $46.1 billion in 2011.

There is one thing California takes the top spot in – highest poverty rate in the nation, 45 percent higher than in Texas.

Texas desperate? I reckon not. But California, well, maybe it ought to be.

 I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a site selection and economic development consulting firm based in Plano, Texas. If your company needs an optimal location for future operations anywhere in North America, we can help. If your community needs to improve its competitive standing, we can help. All requests for information are considered confidential.

If you liked what you saw here, invite me to speak at your next meeting.

© Unauthorized use of this blog is strictly prohibited. Excerpts and links may be used, but only if expressed permission has been granted.




  1. Breaking Bad: California vs. the Other States
    by Richard Rider – Chairman, San Diego Tax Fighters
    Version 1.889 Revised: 10 May, 2014
    Updated version online at:
    Email: Phone: 858-530-3027
    Rider Blog:
    Facebook “blog” page:

    Here’s a depressing but documented comparison of California taxes and economic climate with the rest of the states. The news is breaking bad, and getting worse (at least once a month, I update crucial data on this fact sheet):

    Prior to Prop 30 passing in Nov. 2012, CA already had the 3rd worst state income tax rate in the nation. Our 9.3% tax bracket started at $48,942 for people filing as individuals. 10.3% started at $1 million.
    Now our retroactive (to 1/1/2012) “millionaires’ tax” rate is 13.3% – including capital gains (CA total CG rate now the 2nd highest in the world!). 10+% taxes now start at $250K.
    CA now has by far the nation’s highest state income tax rate. We are 21% higher than 2nd place Hawaii, 34% higher than Oregon, 48% higher than the next 2 states, and a heck of a lot higher than all the rest – including 7 states with zero state income tax.
    CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd. Plus the 5th and 7th. Table #12

    CA has the highest state sales tax rate in the nation. 7.5% (does not include local sales taxes).

    CA has the nation’s highest gas tax at 71.3 cents/gallon (April, 2014). National average is 49.9 cents. Yet CA has the 4th worst highways. (CA has nation’s 5th highest diesel tax – 74.0 cents/gallon). and

    California in 2010 ranked 19th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But the median CA property tax per owner-occupied home was the 10th highest in the nation in 2009.
    and (2009 latest year available)

    Average 2012 CA impact fee for single-family residence was $31,100, 90% higher than next worst state. 265% higher than jurisdictions that levy such fees (many governments east of the Sierras do not). For apartments, fee averaged $18,800, 290% above average outside state. The fee is part of the purchase price, so buyer pays an annual property tax on the fee!

    CA has now instituted the highest “cap and trade” tax in the nation – indeed, the ONLY such U.S. tax. One study estimates the annual cost at $3,857 per household by 2020. Even proponents concede that it will have zero impact on global warming.

    California has a nasty anti-small business $800 minimum corporate income tax, even if no profit is earned, and even for many nonprofits. Next highest state is Oregon at $150. A few others under $100, with most at zero.

    California small businesses failed in 2011 at a rate 69% higher than the national average — the worst state in the nation. (based on Dunn & Bradstreet study)

    CA corporate income tax rate (8.84%) is the highest west of the Mississippi (our economic competitors) except for Alaska. Table #1 – we are 5th highest in nation in per capita corporate tax collections

    NEW: California’s 2013 “business tax climate” ranks 3rd worst in the nation – behind New Jersey and anchor-clanker New York state. In addition, CA has a lock on the worst rank in the Small Business Tax Index – a whopping 8.3% worse than 2nd worst state. and

    The American Tort Reform Association ranks CA the “worst judicial hellhole” in U.S. for 2nd year in a row – most anti-business. The U.S. Chamber of Commerce ranks CA higher – “only” the 4th worst state (unfortunately, sliding from 7th worst in 2008). and

    CA driving tickets are incredibly high. Red-light camera ticket $490. Next highest state is $250. Most are around $100.

    CA needlessly licenses more occupations than any state – 177. Second worst state is Connecticut at 155. The average state is 92. But CA is “only” the 2nd worst licensing state for low income occupations. and

    CA has the 3rd highest state workers compensation rates, up from 5th in 2010. CA had a 3.4% rate increase in 2013. and

    Tax Foundation study ranks CA as the 4th worst taxed state. But if counting ONLY in-state and local taxes, we are arguably the 2nd highest.

    NEW: CA is tied for the 4th worst state unemployment rate (March, 2014) – 8.1%. National unemployment rate 6.7%. National unemployment rate not including CA is 6.5%, making the CA unemployment rate 24.4% higher than the average of the other 49 states. (Sadly, one of the better performances we’ve managed in several years – we were at 4.8% in Nov, 2006 – vs. national 4.6%).
    Using the average 2013 U-6 measure of unemployment (includes involuntary part-time workers), CA is the 2nd worst (after Nevada) at 17.3% vs. national 13.8%. National U-6 not including CA is 13.3%, making CA’s U-6 29.9% higher than the average of the other 49 states.

    CA public school teachers the 4th highest paid in the nation. CA students rank 48th in math achievement, 49th in reading. page 36 and

    California, a destitute state, still gives away community college education at fire sale prices. Our CC tuition is the lowest in the nation. How low? Nationwide, the average community college tuition is more than double our California CC’s.
    This ridiculously low tuition devalues education to students – often resulting in a 25+% drop rate for class completion. In addition, because of grants and tax credits, up to 2/3 of California CC students pay no net tuition at all!

    Complaints about increased UC student fees too often ignore one crucial point — all poor and many middle class students don’t pay the “fees” (our state’s euphemism for tuition). There are no fees for most California families with under $80K income. and

    1 in 5 in Los Angeles County receiving public aid.,0,4377048.story

    California’s real poverty rate (the new census bureau standard adjusted for COL) is by far the worst in the nation at 23.8%. We are 48.8% higher than the average for the other 49 states. Indeed, the CA poverty rate is 20.2% higher than 2nd place Nevada. page 13

    California has 12% of the nation’s population, but 33% of the country’s TANF (“Temporary” Assistance for Needy Families) welfare recipients – more than the next 7 states combined. Unlike other states, this “temporary” assistance becomes much more permanent in CA.

    California ranks 48th worst for credit card debt and 49th worst for percentage of home ownership.

    California now has the 2nd lowest bond rating of any state – Basket case Illinois recently beat us out for the lowest spot. We didn’t improve our rating – Illinois just got worse.

    Average California firefighter paid 60% more than paid firefighters in other 49 states. CA cops paid 56% more.

    Of 100 U.S. real estate markets, CA contains by far the least affordable middle class housing market (San Francisco). PLUS the 2nd, 3rd, 5th, 6th and 7th. San Diego is #5 (w/homes avg. 1,056 sq. ft.)

    CA has 2nd highest annual cost for owning a car – $3,966. $765 higher than the national average.

    California residential electricity costs an average of 27.6% more per kWh than the national average. CA commercial rates are 44.4% higher. For industrial use, CA electricity is 74.4% higher than the national average (October, 2013). NOTE: SDG&E is even higher.

    A 2011 survey of home water bills for the 20 largest U.S. cities found that for 200 gallons a day usage, San Diego was the highest cost. At 400 gal/day, San Diego was third highest.

    In 2012, our supply of California businesses shrunk 5.2%. In ONE year. NOTE: That’s a NET figure – 5.2% fewer businesses in CA in 2012 than were here in 2011. Indeed, in 2012, CA lost businesses at a 67.7% higher rate than the 2nd worst state!

    The top U.S. CEO’s surveyed rank California “the worst state in which to do business” for the 10th straight year (May, 2014).

    From 2007 through 2010, 10,763 manufacturing facilities were built or expanded across the country — but only 176 of those were in CA. So with roughly 12% of the nation’s population, CA got 1.6% of the built or expanded manufacturing facilities. Stated differently, adjusted for population, the other 49 states averaged 8.4 times more manufacturing growth than did California. — prepared by California Manufacturers and Technology Association

    California is now ranked as the worst state to retire in. Easily the lowest percentage of people over age 65. We “beat” ’em all – NY, NJ, etc.

    The median Texas household income is 18.1% less than CA. But adjusted for COL, CA median household income is 16.1% less than TX.

    Consider California’s net domestic migration (migration between states). From 2003 through 2012, California lost a NET 1.43 million people. Net departures slowed in 2008 only because people couldn’t sell their homes. But more people still leave each year — in 2011 and again in 2012, we lost about 100,000 net people to domestic out-migration. Again, note that this is a NET loss.

    These are not likely the welfare kings and queens departing. They are primarily the young, the educated, the productive, the entrepreneurial, the ambitious, the wealthy (such as Tiger Woods) – and retirees seeking to make their nest-eggs provide more bang for the buck.

    NOTE: To see more such fact-based disclosures, go to my blog at, or my more active Facebook “page” (“friend” me). The very latest two-page fact sheet Word file (a wonky handout) is available free upon request.

    • Richard, all I got to say is “Wow.” And thanks for sharing.

      • Thanks, Dean. The sad part is that there’s MORE. I limit my fact sheet to two printed pages of small type. I’m constantly having to decide which CA misstep is less worse than the rest — and edit accordingly.

  2. Dean – I reposted on a huge circ blog… Enjoy. Great piece

    • Thank you, Frenchy. My readership numbers certainly skyrocketed, which is what I want. Can you tell me more about this blog? Please provide me a link and thanks again.

  3. Dead:
    It’s a conservative blog – despised by hypocrites
    of all ilk but especially liberals. Run by Kate Macmillan in Saskatoon who’s
    an artist and breeder of champion Schnauzers (not personally). She regularly
    runs a feature called “O, Sweet Saint Of San Andreas – Hear my Prayer” and
    gets picked up by MSM every now and again.
    She takes no prisoners, but is otherwise a sweet and innocent observer of life.

  4. Dean,
    The obvious and unique brand of Texas pride and the enthusiasm with which they and others take delight in bashing California has always been a source of entertainment for me having lived and worked in both states. Every state in this country has its benefits and its challenges – Texas is no exception and neither is California. But for those of us engaged in economic development, we know that companies taking advantage of hand-outs, subsidies and tax deferments to this level are not supporting the infrastructure or environment in which they conduct business. Those of you who think that’s appropriate, continue to cheer. But there will be a price to pay – the ony question is how big will the tab be and who will pay it. .

    • Linda, businesses are NOT leaving CA for incentives in Texas (or other states). Such a move is hugely disruptive in both cost, lost business and lost experienced personnel. Management as human beings generally do NOT want to leave CA for hot, muggy, buggy TX.

      Often a new business complex must be built in the new location. Toyota, for instance, will spend $300 million on its new facility, far exceeding the $40 million in Texas state subsidies. Even with the additional local subsidies, it’s not worth moving — not even close. Do you REALLY think that Toyota’s move to Texas is not an economic benefit to Plano and the state? Honestly??

      What these incentives DO influence (to a certain degree) is which state a fleeing California company moves TO. So MAYBE it’s why Toyota picked Texas vs. other states. Maybe not.

      But the decision to LEAVE California is usually made by the hostile business and tax climate of California. Such a fleeing company decides to leave the misnamed Golden State BEFORE they do their state search as to where to go to.

    • My basic wisdom about companies locating or relocating a business is that the reason for their decision is… “they gotta”. Toyota had an imperative to relocate, They had to, in this case, to avoid an unfriendly business climate. And all the economic development promotion done by the smart people of Cali won’t change this; then the decision becomes where.
      And the drivers of the decision – in logistics, sourcing, operating and capital costs (including taxes at all levels) will be studied. I’ve worked with the Texas team and they are durn friendly and helpful and keep their promises. The incentives for a project on this scale are modest, and 5000 jobs x $50,000 x 10 years, as well as other plant and operating costs pays for a whole lot of infrastructure.
      All my colleagues in this business are telling the same stories, and we’re seeing a similar situation in parts of Canada. What have the legislators done for their big employers lately? Have they managed their own costs so as not to place a burden on tax payers? Are they facilitating the least expensive and most sources of energy or ploughing billions into subsidies for energy sources that are unbelievably uneconomic.
      Don’t blame companies for doing what they do. Blame politicians that make their jurisidictions non-friendly to businesses.

    • Linda, If you believe that I take delight in bashing California, you are quite mistaken and do not understand the point of the blog.

      If you read my previous blog, I told about a California with rich tradition in innovation. But the truth that tradition has been usurped by regulatory and tax climate that now makes the Golden State a business unfriendly place. That’s not me just saying, but a majority of polled CEO’s and The Tax Foundation.

      I would very much like to see the competitive position of California improve. Denying there is a problem, however, which you seem to do, serves nobody’s purpose.

      Finally, I will not go into a lengthy discourse on your your views on financial incentives. Leave it to say, the incentives granted to Toyota — I think you would call them “handouts” — are quite modest in comparison to the overall economic impact.

      • Dean, you’ve done an excellent (and fair) job describing the circumstances in California and, just as important, the role incentives play in economic development overall. The ROI on the aforementioned incentives has been, and will continue to be, extraordinarily good. This is a fact critics consistently fail to realize or refuse to accept. Florida by example has reduced taxes, lowered or eliminated fees and simplified regulations for several years with the result being increased revenues and increased job creation. Indeed, while your commentary extols the virtues of Texas, Florida ranks a very close second in virtually every positive business ranking, nipping at the heels of the lone star state at every step! States like Florida and Texas who “get it” are reaping the benefits while others like California live in denial.

      • John, I am most impressed with Florida. I’m not sure if “turnaround” would be an apt description, but good things are happening in your state. I would hope circumstance would permit that I would be able to work a project in your state. Stay tuned!

  5. Brian, Richard, well said.

  6. I guess the corollary discussion associated with this state of affairs in California and some other places (Ontario has lost some 300,000 industrial jobs) is whence economic developers in the areas? Some will go to work for consultants. Some will try their best to get their governments to understand the impact of their policies and some will have success. Others will wait it out, because the impact of some policies will result in a reverse effect down the road. “Nobody loves you when you’re down and out” but you do become more attractive for infill investments looking for hungry places.

  7. I suspect that Plano – correct me if I’m wrong – has a slim government – 6-10 part time councillors that meet every second Wednesday evening, staff without any extra time to work on pet projects and a Mayor that won’t tolerate waste.

    • In addition to more “slim” city government, Plano (and all Texas government entities) pay FAR less for government employees than CA. As a result, we hapless Californians often have too few police and firefighters available — they just cost too damn much.

      The “Golden State” is owned and operated by the public employee labor unions — which results in both astronomical labor costs and restrictions against contracting out many government services.

      FACT: The average California firefighter is paid 60% more than paid firefighters in other 49 states. CA cops are paid 56% more.

  8. Here’s an interesting SAN DIEGO U-T column by a California journalist (normally a booster of California and its high taxes and “quality living”) who visited Plano to see for himself how terrible Texas is. Didn’t go as he had probably hoped:

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