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Utah, Virginia mount joint raid on California jobs

Published April 9, 2013 9:41 pm

Economic development • Governors of both states head to California to pitch companies on moving.
This is an archived article that was published on sltrib.com in 2013, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Los Angeles • California sends tomorrow's technology, Hollywood blockbusters and terrific pinot noir to the world. Now, the governors of Utah and Virginia want the Golden State to export more of something else, jobs.

To make that pitch to California businesses, Utah's Gary Herbert and Virginia's Bob McDonnell, both Republicans, have scheduled joint stops beginning Thursday in Orange County, Silicon Valley and San Francisco.

They intend to position their states as antidotes to California's high taxes, notorious red tape and rollercoaster state finances.

In other words, they want job-rich companies to say, "Goodbye, Santa Monica and Palo Alto, hello, Provo and Arlington."

Gov. Jerry Brown, a Democrat, won't be around when the governors descend on his state, He's on a previously planned trade mission to China.

The visiting governors say Brown shouldn't be surprised or offended by their trip because competition among states for jobs is so fierce.

"There are people coming to Virginia all the time, too," McDonnell said in an interview. "States competing with each other is a healthy thing."

Governors across the country routinely entice businesses to move or expand into their states. Earlier this year, Texas Gov. Rick Perry spent several days in California trying to lure away companies.

But it's unusual for governors from states with different economic profiles and statehouses 2,100 miles apart to tag-team another state. Not coincidentally, the visits come a few months after Utah and Virginia were ranked No. 1 and No. 2, respectively, in Forbes magazine's annual list of the best states for conducting business.

It also follows a period in which California — by itself the world's ninth-largest economy — lost luster. The 9.6 percent unemployment rate remains among the nation's worst, vestiges of the housing crash linger, and its credit rating is one of the shakiest among states. Stockton, with a population of nearly 300,000, recently became the largest city in the country to file for bankruptcy protection.

In addition, California businesses are sounding a common refrain. Heavy-handed regulation and weighty taxes slow growth and profit.

Forbes lumps California among the worst states for doing business.

California "is the low-hanging fruit. This is where you go to expand the economy in other states," lamented state Assemblyman Dan Logue, a Republican who is friendly with Perry and supported his 2012 presidential run. "Even 'The Tonight Show' is moving back to New York."

Herbert and McDonnell became friendly at governors conventions, and Virginia officials hatched the idea of doing a joint recruiting trip in California. There's a practical side because they believe their double bill will attract more attention.

The two states don't see each other as direct rivals, in part because of the distance between them.

McDonnell says Virginia's relatively low taxes and welcoming regulatory climate have made the state a great spot for a range of businesses, including technology, aerospace, even film. Steven Spielberg's "Lincoln" was filmed entirely in Virginia, and the state claims the highest percentage of U.S. high-tech jobs among all states.

McDonnell also touts the Washington, D.C., area as a draw for firms that need to stay close to Capitol Hill.

Utah's economy is one of the most diverse in the country, ranging from tourism to mining and manufacturing. Energy costs are well below the national average, and Forbes noted that a review of the state's nearly 2,000 administrative rules ended with 368 being slashed or modified after being judged a drag on the economy.

Helped by a jump in leisure and hospitality jobs, Utah's unemployment rate dropped to 5.2 percent in February, well below California's 9.6 percent. Virginia's unemployment rate — 5.6 percent in February — has been trending down since joblessness peaked at 7.4 percent from December 2009 until March 2010.

Utah's personal income tax rate is 5 percent. In Virginia, it's 5.75 percent for people making more than $17,000. California's is staggered depending on income, from a low of 1 percent to 12.3 percent on income of more than $1 million.

Despite its recent troubles, California's economy has showed encouraging signs. It added more than 300,000 jobs in the past year. That's a 2.1 percent gain, outpacing national job growth of 1.5 percent. Google Inc., Apple Inc. and Facebook Inc. all call the state home, along with a massive consumer market of 38 million people.

Los Angeles County alone has more people than Virginia's 8.2 million residents. Utah's population stands at 2.8 million.

Riley Ray Robbins, deputy director of Brown's Office of Business and Economic Development, pointed to a 2010 study by the Public Policy Institute of California that found that no more than 2.3 percent of all jobs left the state in any one year between 1992 and 2006.

As for the two visiting governors, "We'll be happy to take their double-occupancy contribution to California's number 1 tourism industry," Robbins said in a statement.

That was echoed by economist Christopher Thornberg, who thinks talk about the state's demise is wildly exaggerated. There are plenty of problems for businesses, but California's job growth was more than double the rate in Virginia for the year that ended in February, he said.

"It's no wonder they are coming here," Thornberg said.

Job numbers alone don't persuade business owners, said Jeff Miller, a prominent Republican fundraiser who moved from California to Austin, Texas. His firm works to assist companies that want to move to Texas, including poaching jobs from his former home state.

He hasn't closed any deals since his recent move, but predicts he will help thousands of jobs come to Texas this year.

In California, "the cost of business is just too high," said Miller, who is a close with Perry and has raised political dollars for him. "They want to go to a place where it's more affordable to grow their business." —

Comparing friendly rivals

Utah's personal income tax rate is 5 percent. In Virginia, it's 5.75 percent for people making more than $17,000. California's is staggered depending on income, from a low of 1 percent to 12.3 percent on income of more than $1 million. —

Timing no coincidence

Utah and Virginia recently were ranked No. 1 and No. 2, respectively, in Forbes magazine's annual list of the best states for conducting business.