Report: Exclusory economic policies spur CA’n business exits

Writing for the Hoover Institution, Lee E. Ohanian reports on the pervasive phenomenon of “Silicon Valley giants” like Tesla, Oracle, and HP abruptly leaving the Golden State. Ohanian traces recent mass business departures to California’s imprudent economic policies—which uphold ridiculously high office space prices, worker costs, and taxes. To receive daily updates of new Opp Now stories, click here.

It is widely agreed that economic policies are the key reason why California housing is so expensive. One key policy is the California Environmental Quality Act (CEQA), which is abused routinely to block or delay development, as interest groups that range from labor unions to community activists to competing businesses, leverage the ability to file or threaten to file a CEQA lawsuit to extract developer concessions, often under the false guise of an environmental group.

The most egregious abuse of CEQA that I am aware of occurred with the Newhall Ranch development, near Valencia. A host of CEQA lawsuits delayed final approval of Newhall Ranch for nearly 25 years, in which the developer agreed to install 20,000 EV charging ports for a city which will have about 20,000 autos. Given that only one percent of California cars are EV, this means that Newhall Ranch will have an excess supply of EV charging ports of about 100-fold. The approval legacy of Newhall Ranch highlights much of what is wrong with building in California.

In terms of exit reasons on the firm side, high taxes, burdensome regulations, and a high cost of doing business, including expensive workers (which partially reflects high housing costs), and expensive office space, are the major reasons given by firms who are leaving California. A representative response for California firm exits was made by Walt Disney Co. very recently, which stated that Florida’s “business-friendly climate” was a major factor in expanding their Florida workforce, which already stands at 60,000…

California’s business losses largely reflect economic policies that have driven up housing and business costs, which in turn have made relocation to other states superior choices. While California remains the home of remarkable companies, entrepreneurs, and employees, all face substantial economic challenges that become more severe each year. The losses of Tesla, Oracle, Hewlett-Packard, and other leading companies could have been avoided had policy reforms been implemented to make California more business friendly, more household friendly, and more competitive with other states. The solutions to these problems are straightforward, reflecting commonsense economic thinking founded on the view that creating a more cooperative and productive public sector – private sector partnership is the way forward.

This article originally appeared in the Hoover Institution. Read the whole thing here.

This article is part of an exclusive Opp Now series on California’s outmigration crisis:

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Jax Oliver