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California’s Poor Business Atmosphere Drives More People to Colorado

Wednesday, June 29th, 2016 Published By: Cynthia Nieb 0 Comments

For many years, California was the state that everyone wanted to move to in pursuit of success. While it still has a comfortable climate and a very talented labor force, these attributes aren’t enough now to keep people from leaving California. A recent study performed by Joseph Vranich of Spectrum Locations Solutions aims to assess the growing trend of people leaving California and to identify how much of it is due to California’s unfriendly business atmosphere.

Vranich found that there are three types of people and companies that leave the state: Those that leave the state completely; those that are developing in states other than California; and those that originally intended to permanently locate in California but later decided not to. As it turns out, scenic Colorado stands alongside Texas, Nevada, and Arizona as one of the most popular destinations for businesses that relocate from California.

Divestment events

Vranich used more than 1,500 divestment event reports that occurred in the Golden State from 2008 to 2014. However, those reports only represent a small percentage of the true number. Experts typically agree that a minimum of five such events are not reported for each one that is. This would indicate that the true total may be over 9,000 divestment events during this time frame.

Smaller companies aren’t as likely to receive media attention when they move, but they comprise the largest percentage of divestment events. In addition, the costs and legal requirements of California’s property taxes and laws are more difficult for small companies, which can’t pay for the law firms and CPAs that large businesses can.

In all fairness, California’s Silicon Valley has experienced a growth increase within the past few years. However, according to The Economist, while investors and programmers may be hurrying to California, lots of others are eager to move. The golden piece of land connecting San Francisco with San Jose is a different California. This unfriendly location is tormented by overly strict regulations, high property taxes, and ongoing lawsuits, not to mention having the country’s highest minimum wage and income taxes.

Expenses and regulations

Small business owners who make it through the challenge of collecting all the licenses necessary to start a company – which can take several years in California – are then over-controlled by labor regulations. These regulations tell business owners exactly when and how to pay employee overtime, among other business aspects. They also must deal with electricity costs that stand among the highest in the US. These costs might increase even more to satisfy the state’s lofty goals for reducing atmospheric CO2.

After that there’s the CEQA (California Environmental Quality Act), a well-meaning regulation for limiting developmental damages that has grown into a major problem. Virtually anybody can bring a CEQA claim against any company they don’t accept. The plaintiffs go on to win 50% of the lawsuits they file, and if they lose a case, they don’t have to pay the defendant’s court costs. Building firms are thus motivated to employ high-cost labor union employees to help prevent being threatened with unwarranted CEQA lawsuits filed by companies that don’t want any competition.

The total amount of damage these policies have caused to California’s economic system can’t possibly be calculated. In addition to employment losses, there has been evidence revealed of about $62,000,000,000 in invested business capital that was rerouted to other states. The decline in entrepreneurs and employees has also had an adverse influence on California’s charities. Companies that have moved from California took along with them the folks who contributed to California charities, planned new ones, and did volunteer work.

Other factors

There has been an indication that businesses abandon California for Colorado for factors over and above just lower expenses, like the Centennial State’s welcoming small-business atmosphere. In addition, companies relocating to Colorado enjoy better property privileges that allow businesses to construct new bases and industrial facilities in weeks rather than the years it often takes in California.

Regrettably for the businesses that remain in California, their financial futures seem rather dim. Vranich’s study indicates that California’s government is planning to apply even more rules and costs to companies during 2017. He believes this will set the toughest requirements on small-business budgets in the state’s history. Should that day come, California’s residents will be even worse off, but in Colorado none of those fears are an issue.

LJED Helps You Relocate Your Business to Colorado

LJED (La Junta Economic Development) helps California-based companies that wish to relocate to the more economical Southeastern Colorado. We are focused on building a healthy, thriving business climate and social community in the area. As such, we strive to help people who want to come live in and contribute to our city. If you have any questions about moving your business, give us a call today at (719) 384-6965. You can also Contact Us via email.

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