April 17, 2016
G0-Biz tax credit program gives millions to CA. companies that pledge to invest, hire here
Like many successful chief executives in Orange County, Chris Cook gets come-ons from other states eager to lure his business from California.
But a few months ago, the Golden State awarded his company, CHC Consulting, a $2 million tax break for its plan to hire more than 200 engineers and invest in $740,000 worth of equipment over five years.
“It’s not a life changer for us, but it certainly helps,” Cook said. “It gives me the sense that California is interested in competing with our neighbor states. It stops me from returning Texas emails.”
At a time when local executives regularly grumble about an unfriendly business climate, the 3-year-old California Competes program is awarding $200 million a year to companies that commit to expanding in the state. And the state has led the nation in job creation for the past two years.
True, the tax breaks pale in comparison with some corporate subsidies elsewhere. And California has suffered high-profile losses, including Tesla Motor’s 2014 decision to build a $5 billion battery factory in Nevada after that state offered $1.25 billion in tax incentives over two decades.
On Thursday, California Competes, under the aegis of the Governor’s Office of Business and Economic Development (GO-Biz), awarded its latest batch of credits on the state’s corporate income tax: $70 million for 103 businesses projected to create 9,369 jobs and $1.3 billion in investments.
Companies must prove over the five-year span of the credits that they are meeting their commitments of jobs and investment. “The state is not writing blank checks,” said Will Koch, chief deputy director at GO-Biz. “There is accountability.”
So far, in fiscal year 2016, 17 Orange County companies have received $10 million in tax breaks. Five companies earned at least $1 million, and several small businesses got less than $80,000 each.
CHC, which employs 111 in Orange and 138 in Carlsbad and San Diego, was awarded the largest slice. The new hires and investment will expand the company’s footprint in an exploding industry: designing fiber-optic networks for telecom companies.
Other big awards:
- $1.5 million to Cerner Corp., a global health care-software company based in Kansas City with outlets in Garden Grove, Carlsbad and Culver City.
- $1.15 million to Ambry Genetics, an Aliso Viejo biotech company that opened a highly automated lab in February to test genes involved in breast cancer and other diseases. The company, with some 700 employees, pledged to hire another 268 and invest $40.2 million.
- $1 million to Glidewell Dental Ceramics, a Newport Beach manufacturer of crowns and dentures. The company committed to invest $19.5 million and hire 117 new employees.
- $800,000 to NCSoft, a giant South Korean video game developer with a fast-growing subsidiary in Aliso Viejo and a smaller outlet in San Mateo. The company, with 250 employees, pledged to hire another 132 and invest $3.1 million.
- $550,000 for MicroVention, a 700-employee Aliso Viejo medical-device maker owned by Japan’s Terumo Corp. The company’s new $108 million headquarters, which is under construction, is slated to open in May 2017, adding 66 workers with an average salary of $50,000 a year.
- $375,000 for Cohen Ventures, a 90-employee energy-efficiency consultancy with offices in Oakland and Long Beach. The firm is using its credit to hire another 103 people and is opening a new office in Orange with 10 to 15 employees, according to Mike Laffey, vice-president of Finance.
Officials at Cerner, Ambry, Glidewell, NCSoft and MicroVention declined to discuss the impact of their tax breaks.
However, in the instances of MicroVention’s headquarters, NCSoft’s developer hiring and Ambry Genetics’ laboratory, the expansions were publicly announced well before any GO-Biz awards, indicating the tax credits functioned less as incentives than as rewards.
For CHC’s Cook, the timing of his $2 million was key.
“We would have expanded, but not as aggressively,” he said. “The whole telecom world is moving from copper wire to fiber-optics. Whoever gets there first, wins. Speed to market is the name of the game.”
The California Competes program was enacted in 2013 along with two other tax incentive programs to replace the state’s $750 million-a-year enterprise zone subsidies, which were widely criticized as a waste of money.
Any business can apply, but the program is competitive. In the latest round, 298 companies sought credits and 103 won them. The emphasis, according to GO-Biz, is on “industries with high economic multipliers that provide their employees good wages and benefits.”
Other factors: the extent of unemployment or poverty in the area where the business is located, and the incentives available to the business in other states.
So far, in tune with California’s push to slash climate-changing greenhouse gases, the biggest tax breaks have gone to two electric car manufacturers. Despite its big Nevada play, Tesla received $15 million last year for its promise to hire 4,500 workers in California.
On Thursday, the program awarded $12.7 million to Faraday Future, a Chinese-owned startup based in Gardena, which has pledged to add 1,990 workers and invest $311 million in California.
Nonetheless, Faraday is making its biggest splash in Nevada, which offered $216 million in tax incentives for the car maker’s planned $1 billion factory.
Applications for the next round of awards will open in June. Workshops will be held across the state for interested businesses. Information is on the program’s website at calcompetes.ca.gov.
Contact the writer: firstname.lastname@example.org; on Twitter @MargotRoosevelt