Business leaders have warned about the dismal business environment in California for years, but it now appears that those warnings are becoming a reality.
Major corporations are picking up and moving headquarters elsewhere. Charles Schwab, founded in San Francisco, has decamped for Denton, TX north of Dallas after its acquisition of T.D. Ameritrade. McKesson also left for the Dallas are in Irving and in the last month Silicon Valley icon HP Enterprise announced it was headed for Houston.
Hewlett Packard as it was originally known before it split into two companies a few years around was founded in a Palo Alto garage by William Hewlett and David Packard in 1939. The Walt Disney Co. bought their first product, a resistance-capacitance audio oscillator, used to test sound equipment.
And Oracle, headquartered with a large campus in Redwood City on what was once the Marine World site, also is headed for the Dallas area although founder Larry Ellison has relocated to the Hawaiian Island of Lanai which he owns most of—yes, no typo. He owns 98% of the island, which he bought for $300 million in 2012. It’s not a tax deal for Ellison, Hawaii’s state income tax is 11% compared to California’s 13%. Thanks to his Oracle holdings, Ellison is one of the richest people in the world.
Incidentally, Oracle has owned a major facility in Pleasanton’s Hacienda Business Park since its takeover of PeopleSoft in 2004.
What the pandemic has demonstrated, at least in the short run, is that sprawling corporate campuses may not be necessary with remote work has been effective. Executives are open to looking elsewhere after paying sky-high California taxes, wages and real estate prices because the belief was they needed to be in the Bay Area where the work force is and innovation has thrived.
San Francisco voters last November passed two new tax measures on business despite corporate leaders raising concerns about the business environment. Tech companies have been willing to pay high rents in downtown San Francisco because millennial-aged workers wanted to live in that environment. Rural and suburban areas have been looking much more attractive in the pandemic.
Time will tell whether this is a trend or an aberration—here’s betting on a trend. One short-run trend is clear—high-wage workers who have a choice are leaving the state. Try pricing a one-way U-Haul truck or trailer heading out-of-state. If you happen to be coming to California, the company might pay you to haul it back.
The bail-out trend also is striking high-tax blue states such as New York, New Jersey and Illinois. Affluent people with a choice here and in those other states have moved beyond talking about leaving and are getting out of them. About 1.4 million New Yorkers have left the state, marking the first decade since the 1970s with declining population—the state may lose one or two congressional seats, something that also could happen to California.