When Kris Holt goes to work each morning in Carson City, he has one thought: entice new businesses to Nevada. Thus far, he’s succeeding, and most of them are coming from California.
Holt heads a private group called Nevada Business Connections that he founded to aggressively lure companies to Nevada. He focuses on four counties – Douglas, Carson, Storey and Lyon. But he works with Nevada’s economic development groups and the chambers of commerce in 17 counties to pitch Nevada statewide as a desirable destination. A former California resident – Holt lived in Campbell in the Silicon Valley and in Bakersfield – he goes after businesses with his persuasive come-on: Nevada has fewer taxes, fewer regulations, lower property costs, less pollution, better public schools and a government sympathetic to the entrepreneur.
True or not, the pitch is working: At least 93 companies have relocated in Nevada in the past four years, and more are coming, he said, citing Nevada government figures.
“The majority are in Clark County (the Las Vegas area) and most of them are ‘mom and pop’ businesses. That is a target for us, although of course we want large companies as well,” Holt said.
The issue of businesses leaving the state is a hot — and largely partisan — topic in California. It is an article of Republican faith that businesses are fleeing the state in order to escape what businesses and their allies characterize as the costly and over-regulated world of the Golden State.
At a recent gathering in Reno, a group of California Republican lawmakers – and a couple of Nevada officials — heard testimony from California business owners about the difficulties of the Golden State and their desire to leave.
“The over-taxation and over-regulation in California is among the highest in the nation,” said Assemblyman Dan Logue, R-Chico, a sponsor of the Reno meeting. Indeed, Nevada is focusing more and more attention on its next door neighbor.
“Their strategy is no longer going overseas to attract industry to Nevada. They were saying it’s to go to California to get 10 small businesses with a total of 1,000 jobs, which is so much easier,” Logue said.
Business interests contend that there is little empirical data on precisely how many businesses are actually relocating outside the state and whether the depletion in jobs is linked to relocations. California’s taxing agencies – the Franchise Tax Board and the Board of Equalization – do not keep relocation figures.
In 2005, a study by the Public Policy Institute of California noted that, "in reality, little is known about the trend of out-of-state business relocation and, in turn, almost nothing has been done to measure how this relocation may be affecting employment change in California.”
But in a 2007 report, PPIC reported that it had developed a massive database of "virtually every business that employed California workers at any point from 1992 to 2004," and determined that job loss due to out-of-state company relocation was negligible.
"The authors find that the small number of jobs moving to other states due to business relocation is relatively inconsequential — about 11,000 jobs per year out of more than 18 million (.06 percent). Business births, deaths, contractions and expansions have a much greater effect on employment," the nonpartisan PPIC said.
Despite the PPIC's findings, the debate over company relocation continues.
Earlier surveys by pro-business groups, such as one by the California Business Roundtable, reported that a fourth of some 1,462 California companies were considering departing California. Later, a joint survey by the Roundtable and the state Chamber of Commerce of 400 companies reported that a fifth of the firms said they planned to expand or relocate outside the state.
“There is an ongoing effort to identify with empirical data the companies that are fleeing California. Clearly and anecdotally, the reasons abound about how much a struggle it is and frustration it is in California not only to do business but to reach out and attract new business,” said John Kabateck of the National Federation of Independent Business.
“Certainly, businesses are leaving and California government has been doing very little if anything to keep businesses here,” he added. The state, he said, continues to “heap massive taxes and regulations upon struggling businesses during a recession and record unemployment rate.”
California, with the world’s 10th largest economy, the nation’s largest and most diverse population, Hollywood, 1,100 miles of beaches, Silicon Valley and a genial climate, isn’t sitting still. The state’s Labor and Workforce Development Agency maintains programs to encourage new business to come to the state and convince local companies to stay, and Gov. Schwarzenegger has personally lobbied businesses to stay.
"It is no surprise that so many other states are targeting California businesses. The fact is that California is the most remarkable place on earth to do businesses. Not only is our economy more diverse in terms of leading industries – but we have built a business ecosystem that makes the best and the brightest want to live and work here," said Brian McGowan, a deputy secretary in California's Business, Transportation and Housing Agency.
But for Holt, the anecdotal stories of business people unhappy with California are sufficient. His pitch is made easier by Nevada’s lack of corporate or income taxes, by California’s aging infrastructure, crowded schools, freeway traffic, crime, increasing divisions between rich and poor, a state government perceived as mired in dysfunction and a myriad of other factors.
Holt’s group known as NBC is a private, dues-based advocacy organization with 135 members that makes regular sales and recruitment pitches to Golden State companies. About 80 percent of his ‘leads’ come from California. In earlier, times his California targets were located mostly in Southern California. Now, he says, they are distributed evenly across the state.
Not all his targets are in California. This week, for example, he headed to Oregon where, he said, breweries face an unprecedented tax boost on beer – from the current $2.61 per barrel to a proposed $49.61 per barrel. Such a tax spurs his recruitment pitch.
But beer tax or not, companies have come to Nevada. Between 1998 and 2002, 210 companies relocated to Nevada, between half and two-thirds came from California. In Holt’s four-county area, with a population of about 150,000, about 20 companies come in each year, most of them – again – the mom and pops.
“That’s my target market, the companies from two to 80 people. I’ll take those all day long. That’s my low-hanging fruit,” he said.
Eds: This story deletes dated material and updates with information from 2007 PPIC report.