Californians could be looking east

Workers at the Fort Collins Area Chamber of Commerce are hearing the cry from Californians.

They want out.

The chamber routinely sells packages of relocation information about Fort Collins. Of those requests, 17.5 percent have come from California this year, up from 10.9 percent last year.

Not scientific by any means, but another indication that growing numbers of residents in the Golden State are frustrated by the economic and political climate there and are looking for haven somewhere else.

In fact, one leading bank economist believes California is in the early stages of an exodus to mirror the wave of out-migration experienced in the early and mid 1990s. At that time, 1.3 million Californians left the state, many of them landing in the Rocky Mountain region.

In his recent quarterly newsletter, Jeff Thredgold, corporate economist for Vectra Bank Colorado, said California’s budget deficit and other economic missteps “establishes a foundation for another round of California out-migration of ?talented people and their money’ to Colorado and all other Western states in coming years.”

Supporting Thredgold’s analysis is a survey conducted recently by the California Business Roundtable, an economic-development agency. Out of 400 businesses polled by the CBR, 17 percent said they planned to move or expand out of state, the highest ratio in the 12-year history of the survey.

In addition, Economy.com, an economic analysis firm, said 108,500 more Californians left the state than arrived from other states in 2002, tripling the out-migration figures from 2001.

Helping hands

If California businesses are willing to move, Colorado’s economic developers are willing to help.

Citing the CBR survey results, a group of economic developers from Front Range counties are forming a coalition called the Colorado Jobs Initiative. The goal of the program: raise $500,000 to launch a marketing campaign in California about the fruits of doing business in Colorado.

Earlier this year, Colorado Gov. Bill Owens and Denver mayor John Hickenlooper led a delegation of business interests to tour Silicon Valley with the message that Colorado has set out the welcome mat.

When he recently attended a food-processing-industry trade show in Las Vegas, Ron Klaphake, president & CEO of the Greeley-Weld Economic Development Action Partnership, said he walked away with “a dozen really good leads” for future business expansion in Weld County “including some from California.”

At the crux of California’s troubles are the state’s budget deficit — projected at $8 billion this year — and a tax environment that makes it one of the most expensive states in the country in which to conduct business. Economy.com ranks California the sixth-highest state in the nation for business costs and the only Western state among the top 10 (Colorado is No. 12). The Tax Foundation ranks California 49th in business-tax friendliness.

Thredgold expects the combination of “tax hikes and painful spending cuts” could be the last straw for some Californians who already live with high prices for energy, transportation and housing.

“Who will see their taxes hiked? You guessed it — the wealthy, the middle class, and thousands of small-business owners,” Thredgold said. “Tens of thousands of these people will relocate to other Western states. Colorado will get its share.”

Even so, if some Californians were sitting on the fence about relocation, the recent scourge of wildfires in Southern California might be decisive.

A series of earthquakes in the early 1990s caused a “bump” in Californians moving to Northern Colorado, recalled Larry Kendall, chairman of The Group Inc. Real Estate.

“A lot of times, if a home is destroyed and people receive insurance proceeds, they just look at that and say, ?If we’re ever going to make a move, maybe now is the time,'” Kendall said. “We have a suitcase full of money, we don’t have a house. Instead of buying another or building, maybe we should reconsider.”

Standing their ground

Still, Californians are circling the wagons.

Some are hoping that Governor-elect Arnold Schwarzenegger can ease their burdens.

Referring to his trade-show encounters, Klaphake said, “We got two kinds of responses. One is, ?Ah, things are going to change now that Schwarzenegger’s governor.’ The other is, ?My worker’s compensation rate just went up 400 percent. I got a small business, and I gotta get out of here now.'”

In a recent address to the Silicon Valley Manufacturing Group, Wilf Corrigan, CEO of LSI Logic Corp., called the ouster of Gov. Gray Davis “an opportunity to start again.”

Silicon Valley interests are pushing for Schwarzenegger to extend the state’s manufacturer’s investment tax credit, worth about $600 million a year.

Not all economists agree with Thredgold that an exodus is brewing.

“Just in terms of getting people to move, it’s not a slam dunk,´ said Stephan Weiler, a Colorado State University economist who previously lived and studied in California.

Weiler noted that in the period of 1995-2000, California ranked No. 7 among states for migration of young, single and college-educated people in the 25-to-39 age group.

“This is the cream of the crop, right?” he said. “Folks who tend to move and shake and are most likely to open new businesses.”

Despite the economic ills, California’s cultural amenities and physical attractions are still an asset, he said.

Stephan Cochrane, who follows California for Economy.com, said some critics of California’s economy are painting with too broad of a brush.

“When you look across the regions of the U.S. economy, one of the most-stable economies is in the Southwest from L.A. over to Phoenix and Tucson, including Albuquerque ? So much of the weakness in California has been concentrated in the San Francisco Bay Area.”

As long as clusters of expertise continue to exist in California — for instance, aerospace engineers in southern California, or software engineers in Silicon Valley — companies will want to be close to the talent pools, Cochrane said.

Additionally, the real estate cost advantage of moving from California to the Front Range or other Western cities has been narrowed since the mid-990s. Rising prices for land, housing and office space, while not in California’s league, are less enticing than in years past.

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