Homeward Bound

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John Lawrence and his growing business were as good as gone. The owner and founder of Lawrence Equipment Inc., a South El Monte manufacturer of tortilla, pizza dough and flatbread-making machines, had already purchased 10 acres outside Chandler, Ariz., and was ready to move 200 jobs there.


Because of the growing consumption of wheat flat bread in the Middle East, Europe and Asia, Lawrence found his equipment in high demand. About a year and a half ago, the company had outgrown its current location but the 80,000-square-foot factory straddled the El Monte border, requiring the two cities to play nice on a utility agreement and other issues if it expanded.


“I hated to even think about moving away from Southern California.” recalled the 69-year-old El Monte native with a frown. “But damn, to get anything done here, it takes years and a pile of money. We were expanding and needed more room and we had no other choice but to move.


“To get a water main moved, it took a miracle. When I went to Arizona, I got all the permits, the estimates and a contractor in under a month. Things just worked too slowly here and they didn’t even seem interested in keeping us.”


But that didn’t turn out to be the case.


Ultimately, the El Monte Chamber of Commerce worked with the San Gabriel Valley branch of the Los Angeles Economic Development Corp. to get what Lawrence called “the impossible done.” They assembled a “Red Team” consisting of members from Southern California Edison, as well as politicians from both cities with one mandate: doing whatever was needed to keep the company from relocating.


Since last year, the company has hired about 45 employees. It plans to open an office in Europe, and it will add 40,000 square feet to house 100 or so new employees and additional equipment.


“The community couldn’t afford to lose this business,” said Vance Baugham, director of the L.A. Economic Development Corporation’s San Gabriel Valley branch. “He (Lawrence) is poised for growth; he was raised here. They employ local workers, and he still lives here.”


Count Lawrence Equipment as one of the small victories in the region’s and state’s fight to keep its growing businesses. Analysts and experts continually speculate and spread sentiment about a poor business climate, declining infrastructure and other obstacles to business development all of which appeared to reach a tipping point last year amid a frenzy of media coverage.


A study conducted by the Los Angeles Department of Water & Power cited by critics of the state’s business climate found that between 1980 and 1992, California lost 1,035 facilities to other states, Mexico and Puerto Rico with around 168,000 to 224,000 jobs being the primary casualties.


However, more recent studies by the National Association of Manufacturers and the Public Policy Institute of California, paint a different picture, in which outcomes such as the decision by Lawrence Equipment to remain here are more the rule than the exception.


“Manufacturing jobs are leaving California, there’s no doubt about that,” Junfu Zhang, an author of the study released by the Public Policy Institute of California entitled: “Are Businesses Fleeing the State?” said. “But that’s happening in every state. To say that here in California companies are relocating jobs to other states solely because of an unfriendly business environment is inaccurate.”



Contrary Studies


The Public Policy Institute study found no sign of a “substantial business exodus from California.” Moreover, it found that there has been little if any change in the rate at which businesses are leaving California or avoiding California.


In any given year from 1993 to 2002, the net job loss from business relocation was never higher than one-tenth of 1 percent of the total number of jobs. Meaning that it would take more than 10 years for California to lose 1 percent of its employment to relocation.


“If anything, it should be taken as an indicator of a good business climate that favors the formation of new businesses,” said Zhang, who nevertheless warns that there are still myriad glaring improvements to be made.


Among the report’s recommendations: business retention efforts should be focused on the formation of new businesses and assisting existing businesses rather than attracting businesses from other states. Meanwhile, the national manufacturers study found that, contrary to common belief, the most successful economies are also among the highest cost.


According to the study’s index, four of the top 10 in gross state product are also four of the most expensive places to do business: California, New York, New Jersey and Michigan. Also, three of the top eight in job growth over the last 10 years California, New York and New Jersey also made the dubious cost-of-doing-business list.


Paul Sauerman. a Pasadena native who has had more than a half dozen companies, knows all about that.


He now runs El Monte-based Pacific Oil Coolers, which makes oil coolers for everything from turbo-charged cars to military aircraft. Sauerman recently purchased a company in Ohio and is moving the factory’s 40 jobs to a brand new 40,000-square-foot facility here, and even has plans for an expansion after they arrive.


“You pay a price to do business here,” Sauerman said. “But look what you get: one hour to the beach, one hour to the snow, one hour to the desert, to the ports. The infrastructure, it’s all available here. Essentially, the only price difference between here and Ohio is the land; and it’s worth paying.”


However, that feeling is far from universal among business owners, some of whom grumble but remain, while others have taken the big step of relocating.


“If things were the way they are now 10 years ago, I would have moved my company,” said Stephanie Harkness, chief executive and founder of Pacific Plastics & Engineering, a medical device manufacturer near Santa Cruz that employs about 115. “But I’m to the point now where it doesn’t make a lot of sense because I’m getting too close to retirement to deal with all of that.”


Harkness adds that all of the regular irritants, such as relatively high workers’ compensation insurance rates, expensive regulations and a 12 percent capital gains tax are all mounting straws on the back of California’s manufacturing businesses. “Nevada is looking more and more appealing,” she said.


Tim Rubald, executive director of the Nevada Commission on Economic Development, noted that the state has had 56 percent job growth over the past decade, a good share of that stemming from businesses fleeing California.


Like other lower-cost states, such as Arizona, Wyoming and Idaho, Nevada has programs to hype their “business-friendly environment,” citing its lower taxes, cost of living and utilities.


Patrick H. Gutzwiller is an executive who helped make the decision to move his company’s manufacturing outside of California. ICU Medical Inc. is relocating 300 manufacturing jobs from its San Clemente headquarters to a new Salt Lake City facility later this year. The move will cost the medical device manufacturer about $2 million, but Gutzwiller is very clear about the reasons behind the move.


“We acquired a company and initially planed to move the jobs from there to here,” he said. “But when we looked at the cost of buying land for expansion, the cost of living for our employees and the cost of doing business, it was very clear that it made more sense to move to Utah.”


But for now, at least, ICU seems to be in the minority, with many business owners, given their long ties to their communities, suppliers and customers, unwilling to pull up stakes. Lawrence, for one, has no second thoughts about staying.


“I think all of the companies that are leaving have already left,” he said. “The worst is behind us.”

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