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Haas

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By BENJAMIN MARK COLE

Senior Reporter

Haas Automation Inc. was one of L.A.’s more dramatic business success stories.

Born in a 5,000-square-foot Sun Valley job shop in 1983, it had grown into a $89 million (annual sales) company with hundreds of employees working in a big Chatsworth factory by 1994.

Haas, in fact, is one of the fastest-growing machine-tool manufacturers in the world, and listed by Inc. magazine in 1995 as one of the nation’s 500 fastest-growing companies.

With 550 employees, most earning good wages, Haas is projecting 1997 sales at $300 million. It has just recently moved into a new, 415,000-square-foot factory, where it is investing an additional $30 million in plant and equipment.

But Haas is no longer an L.A. success story; its new factory is in the Ventura County city of Oxnard.

How and why did this gem of local business escape the Los Angeles economy?

The short answer is: crime, business fees and taxes, and lack of open land.

“One of the cheapest places in California to do business is Oxnard, and one of the most expensive is Los Angeles,” said Denis Dupuis, Haas general manager, referring to a recent local study. “The City of Los Angeles offered us options, but in the end, they just couldn’t match Oxnard.”

And some of the options the City of Los Angeles did put on the table caused Haas employees to blanch.

L.A.’s Business Team, a business-retention unit formed by Mayor Richard Riordan, tried to entice Haas into the now-abandoned GM plant in Van Nuys.

Haas officials and employees said “Thanks, but no thanks,” after taking a look at the surrounding area.

“There was talk about the GM site, but our employees just did not want it. It was a neighborhood our employees were not happy for,” said Dupuis, referring to the specter of crime.

City officials promised to “clean up” the area, but Haas officials and employees were skeptical. “Just how do you clean up a neighborhood?” Dupuis asked.

The Haas story exemplifies the troubles Los Angeles, and many other major cities, have in retaining growth businesses, said David Birch, founder of Cambridge-based Cognetics Inc., and an analyst of urban growth patterns.

Big urban areas have trouble convincing growth companies to locate within the urban core, due to problems of congestion, subpar public education systems, crime and limited availability of land, said Birch.

But key is the quality of life for employees, said Birch.

“The bottom line (for growth companies) is securing a work force,” said Birch. “Companies have to locate where employees want to locate.”

Employees want low-density living, good schools, easy parking and easy commutes, he said.

Indeed, Haas employees were eager to move into the cleaner, greener reaches of Oxnard, said Dupuis. “They were saying, ‘Let’s get out of the city; it would be nice to be somewhere where there was some space,'” said Dupuis.

Topping matters off, land was substantially cheaper in Oxnard than in the San Fernando Valley, said Dupuis. “We needed quite a bit of land, and bought 86 acres. It was about half the cost of land in the Valley.”

The advantages of Oxnard were so impressive, that it is difficult to envision circumstances that would have kept Haas in the City of Los Angeles, said Dupuis. “Maybe a 10-year moratorium on taxes,” he said.

Even a free building wouldn’t have meant all that much. “You can depreciate a building that you had built to your needs,” said Dupuis. “If you just take over another building, you lose the depreciation, and maybe it wouldn’t suit your needs as much.”

The City of Oxnard has been very responsive to Haas’ needs, said Dupuis. One result of Oxnard’s alertness is the fact, “that we went from (buying raw land) in December 1995, to having a building up in December 1996,” said Dupuis.

Experts told him that in Los Angeles the process would have taken twice as long.

In a prepared statement, founder Gene Haas said: “We were impressed with Oxnard’s streamlined permit process.”

Haas Automation’s experience with Oxnard contrasted sharply with its experience with Los Angeles. For example, in the early 1990s, the City of Los Angeles slapped an “arts fee” on an expansion at Haas’ former Chatsworth plant. Under L.A. city rules, buildings costing more than $500,000 pay a fee equal to 1 percent of constuction costs to a city art fund.

Thus, a $2 million Haas addition ran up a $20,000 fee for the arts something that really stuck in the craw of company founder Haas, said Dupuis.

Too, the permitting process was slow.

Some of those problems in the City of Los Angeles’ permitting process have been addressed by the Riordan administration, said Steve MacDonald, director of L.A.’s Business Team.

“We have worked hard to make the permitting process more business-friendly,” he said.

But the city arts fee remains in place, he said.

Analyst Birch said urban efforts to attract growth businesses are likely to be futile, unless the quality of life in cities is perceived as high, or at least as high as pleasant suburbs.

Improving public education systems, reducing crime and congestion, cleaning up the air, are all moves Los Angeles should make in short, very heavy spending on city infrastructure and schools, Birch said.

“I’d bend myself into a pretzel to let businesses and employees know you are creating a city for them,” he said.

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