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Why so many businesses are fleeing California for Phoenix — and why a lot more may be on the way

by Dalton Herring on August 18, 2016
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caliCalifornia’s tax and regulatory policies have made the cost of doing business more expensive than other states and prompted about 10,000 companies over the last eight years to leave the state or shift or curtail operations to reduce costs, according to a report from Spectrum Location Solutions.

Phoenix has been one of the biggest beneficiaries of the trend.

The Irvine-based company, which helps companies find places to locate their operations, issued a report titled “ California Business Departures: An Eight-Year Review 2008-2015,” which provides details about such events by company name, ranks the popularity of destination states and cities, and outlines the difficulties of doing business in the Golden State.

The study found at least 1,687 California disinvestment events occurred from 2008 through 2015, but the report said that number is understated since it reflects only those that became public knowledge, such as through company announcements or regulatory reports. Spectrum President Joseph Vranich, who authored the study, said at least five events fail to become public knowledge for every one that does.

“Thus it is reasonable to conclude that a minimum of 10,000 California divestment events have occurred during that period,” Vranich said.

California disinvestment events are defined as companies that:

  1. Relocate entire offices and facilities to an out-of-state location
  2. Remain in the state but expand elsewhere with facilities that heretofore were built in California
  3. Close completely with production moving to competitors in dispersed locations
  4. Shift work to a foreign nation through offshoring, outsourcing or relocation
  5. Cancel a project after it has been announced, or
  6. Perform a “U-Turn” – which means considering a California location but rejecting it after studies favor a location outside of the state’s borders.

The report said the top 15 California counties with the most events were

1. Los Angeles
2. Orange
3. Santa Clara
4. San Francisco
5. San Diego
6. Alameda
7. San Mateo
8. Ventura
9. (tie) Sacramento
9. (tie) San Bernardino
11. Riverside
12. (tie) Contra Costa
12. (tie) Santa Barbara
14. San Joaquin
15. Stanislaus.

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