After 145 years in California, Chevron finally threw in the towel and announced last week that the company had had enough and was relocating its corporate headquarters from San Ramon to Houston effective Jan. 1.
The San Francisco Chronicle reported that during the next few years, some 2,000 corporate positions will be shifted to Houston, joining the 7,000 corporate employees who have been relocated there in recent years.
Given California’s relentless push to eliminate the use of fossil fuels – despite the fact the state generates less than 1% of the world’s carbon emissions and thus its actions will have no significant impact on worldwide climate change – it was probably inevitable that the country’s second-largest oil company would move its corporate operations to a much more business-friendly state.
While Chevron CEO Mike Wirth said the move was made to “enable better collaboration and engagement” with other executives, employees, and partners and remains committed to its refineries and other oil-related operations, the company stated that the state’s regulatory climate was a factor.
“We have previously stated that we believe state policy makers have pursued policies that raise costs and consumer prices, creating a hardship for all Californians, especially those who can least afford it. These policies have also made California investment unappealing compared with opportunities elsewhere in the U.S. and globally,” the company said. “Texas offers a business-friendly environment, a more affordable cost of living, and better proximity to key counterparts in the service sector, our industry and academia.”
Jim Wunderman, CEO of the business-backed Bay Area Council, said state officials needed to take a hard look at what their actions are doing to the economy.
“Chasing jobs and employers out of California is no way to run the economy,” Wunderman said in a statement. “It’s an embarrassment for California that we’ve lost so many global companies because of misguided policies that make it incredibly difficult to do business here. California’s elected leaders need to take stock of the decisions they’re making that affect millions of families and workers, impact the state budget and have grave consequences for the future economic health of this state.”
FBAC has been carrying that message to lawmakers, the Governor’s Office and regulators since our founding 12 years ago. Unfortunately, too many policymakers just don’t understand how businesses and the economy work. Perhaps this blow to the state’s ego will help.
Unfortunately, Governor Gavin Newsom’s spokesperson basically said goodbye and good riddance in a statement to the Chronicle. “We’re proud of California’s place as the leading creator of clean energy jobs — a critical part of our diverse, innovative, and vibrant economy.”
But there may be more to the story. CalMatters columnist Dan Walters pointed out that Chevron’s exodus from California may not be done quite yet.
In his column today, the veteran newsman noted that Chevron has warned state officials it might close its two refineries in the state, which are major producers of the state’s unique gasoline blend.
Voters in Richmond, the site of one Chevron refinery, will decide in November whether to impose a special tax on the refinery, $1 per barrel, and the company has accused Richmond’s leaders of “playing chicken” with their largest taxpayer and employer.
Politico reported that Andy Walz, a top Chevron executive, warned in an interview about the potential consequences of the Richmond tax measure. “I’m not going to tell you that that’s the death knell, but we’re getting close,” he said, adding, “if I can’t invest there, and I can’t get a return, we will move on.”
Newsom and other California politicians openly intend to eventually shut down the oil industry to reduce the state’s carbon footprint. But they want a gradual reduction so many millions of gasoline-powered cars still on the road can run until phased out.
Were Chevron and other producers to decide, as Walz warns, that continuing operations in a politically hostile California no longer pencils out, the state could see an abrupt and economically devastating fuel shortage.
Business owners who reduce operations in California due to its onerous taxes and regulations usually don’t say much about their reasons. After all, they still have to deal with politicians and regulators who often don’t want to hear the truth. So give Eric Schnetz credit for telling the truth about why he abruptly shut down his Chicago Fire restaurant in Elk Grove.
Schnetz, the owner and founder of the Sacramento-area restaurants, told the Sacramento Business Journal last week his reasons included the state’s new $20/hr minimum wage for fast-food workers, the frequency of employment-related lawsuits within an unfavorable legal framework, higher than necessary food inflation due to current laws and regulations on food producers, and exorbitant energy costs. (The store’s monthly gas and electric bills totaled $8,500.)
“People really should interpret the closure of this Chicago Fire as the canary in the coal mine,” Schnetz told the paper in an email. “Many more restaurants will close until the perspective of the state legislators changes. If California residents don’t start electing legislators that understand microeconomics and the impact of their endless costly initiatives and regulations, our full-service restaurant choices will be reduced to only the largest chains.”
FBAC will continue making those points in the halls of the Capitol. Fortunately, at least for now, Sacramento-area pizza connoisseurs can still enjoy Chicago Fire’s offerings in Folsom, Roseville, and midtown.
While California continues to raise taxes and impose even more costly regulations on the state’s #familybusinesses, Denmark is taking a different approach, according to @Forbes:
“Denmark’s policy shifts reflect a concerted effort to retain its invaluable family-owned enterprises…Bloomberg reported a new initiative from the Danish government, valued at 1.8 billion krone ($260 million), aims to ease the tax and regulatory burden on family-owned companies during generational transitions. The goal is clear: the initiative aims to prevent these companies from being compelled to sell to foreign investors due to stringent taxation and current rules.”
JaniTek Cleaning Solutions, a Stockton-based commercial cleaning company serving the Central Valley and Central Coast, has joined FBAC as a Founding Member. Blain Bibb purchased two commercial cleaning franchises in 2007, then left the franchise and started JaniTek in 2014. The company employs more than 400 people and services more than 800 facilities.
Also joining as an FBAC Member is Golden State Strategy Group, a nationally recognized political strategy and fundraising firm founded by Molly Parnell in 2012. She began her career in 2003 working on Arnold Schwarzenegger’s campaign and later served as finance director and chief financial officer for the California Republican Party before forming her company. She has raised over $200 million for campaigns in the past 17 years.
Welcome to both new members who understand the importance of family businesses standing together against new laws and regulations that negatively affect them.
Attendees at this year’s FBAC Capitol Conference heard important updates on key issues from top political experts. Here’s a sampling.
Nevada governor gives Newsom a dose of his own medicine
Political consultant Rob Stutzman, founder of Stutzman Public Affairs and a chief strategist for former Governor Arnold Schwarzenegger, told Capitol Conference attendees that Governor Gavin Newsom, who has happily traveled to red states to lecture them about the need to adopt California’s liberal leanings, recently got a dose of his own medicine.
“Joe Lombardo, the Republican governor of Nevada, sent him a letter opposing California’s proposed oil refineries profits cap because 88% of Nevada’s gasoline supplies come from California refineries. If more refineries close because of the tax and there’s less supply, that wouldn’t be good for Nevada drivers – and Nevada is an early presidential caucus state in 2028,” he said. (Newsom responded by accusing the Nevada governor of politicizing the issue.)
Businesses are starting to fight back against government policies
After years of trying to reach some accommodation with progressive Democrats, business interests have decided that approach isn’t working and that they need to aggressively fight back against government policies that harm businesses. Both Stutzman and Rob Lapsley, president of the California Business Roundtable, said businesses are starting to be less willing to play around the edges and are fighting harder.
Stutzman noted that McDonald’s franchise owners were livid when Democratic lawmakers passed legislation that almost overnight increased the minimum wage for fast food workers to $20 an hour. They were also livid that they were not at the table when the behind-the-scenes negotiations were going on. (Remember the old political adage – if you’re not at the table you’re going to be on the menu.)
So the owners, mainly family businesses, banded together to defeat Asm. Chris Holden, D-Pasadena, during the March primary in his bid for L.A. County supervisor, and narrowly missed knocking Asm. Kevin McCarty, D-Sacramento, off the November ballot as he seeks to become mayor of Sacramento.
“This is a sign of coming attractions for the business community. Politicians need to start worrying about business coming after them,” Stutzman said.
Lapsley said that newfound recognition that businesses needed to fight back is also manifested in several measures likely to appear on the November ballot (see below). “We are going on offense,” Lapsley declared.
Pro-business initiatives headed for November ballot
Two of those measures are strongly supported by FBAC:
The Taxpayer Protection and Government Accountability Act (TPA), which would give voters the final say on all new and higher taxes;
And the Fair Play and Employer Accountability Act, which would overturn the ruinous Private Attorneys General Act (PAGA) that has caused employers to pay millions of dollars over often-minor labor laws – most of which went to trial lawyers, not employees.
Lapsley, who is helping lead the campaign to enact the TPA, said the measure would restore 2/3 approval thresholds for all future tax proposals and would require local governments to put any tax or fee measure approved with less than a 2/3 vote since 2022 before the voters again. Governor Newsom, the Democratic leadership in the Legislature and local governments fiercely oppose the measure and are trying to remove it from the ballot. The state Supreme Court recently heard arguments but signaled they were unlikely to do so. The court must rule by the June 27 deadline to put measures on the November ballot.
“During the Supreme Court hearing, the governor’s attorneys said TPA would cause a major disruption to government services and that the power to tax should stay with the Legislature and its staff because they’re the only ones who understand it. The government will never willingly share that power with the public. The governor and the legislature do not want to see anything on the ballot about taxes at all,” he said.
Lapsley warned that if TPA is defeated in November, it will open the door to billions of dollars in new taxes.
FBAC Political Director Robert Rivinius said the power to raise taxes must be in the hands of the voters, not the politicians.
“California is becoming too expensive for working families and family businesses. We need to give Californians the final decision on raising their taxes and better accountability for how state and local governments spend their money. FBAC will work hard alongside our coalition partners to pass the TPA this year,” Rivinius said.
Brian Maas, president of the California New Car Dealers Association, which is leading the campaign to reform PAGA, said lawmakers don’t want several pro-business measures on the November ballot, and that conversations are taking place between proponents and government leaders to come up with a compromise.
“We want PAGA reform however we can get it,” Maas said. “Conversations are taking place – let’s see if we can get the Legislature to fix the problem they created. We have until June 27. If the Legislature has enacted effective PAGA reform by then we might be disposed to remove the measure from the ballot.”
“PAGA lawsuits are the bane of family businesses, and the law must be reformed,” Rivinius said. “Family businesses have become major targets of predatory lawsuits because it’s almost always far cheaper to settle a case than take it to court. We hope the Legislature will fix its mistake, but if they don’t FBAC and our members will work hard to ensure the ballot measure succeeds.”
FBAC Member briefs attendees on Board of Equalization
Ted Gaines, owner of FBAC Member Gaines Insurance and vice chair of the state Board of Equalization (BOE) reminded attendees that having an elected board to hear appeals on taxation rulings is important. The BOE today administers 34 tax and fee programs and acts in an oversight capacity to ensure compliance by county assessors with property tax laws, regulations, and assessment issues. The Board also hears various taxpayer appeals. But he pointed out that two new tax administration and appeals agencies created in 2017 and 2018 with members appointed by the Governor uphold virtually all findings by the agencies.
PAGA expert offers tips for business owners
Bruce Scheidt, managing shareholder with FBAC Regional Sponsor Kronick, Moskovitz, Tiedemann & Girard, discussed the PAGA reform measure but offered tips to business owners to follow until the law is reformed.
Make sure you classify your exempt employees correctly.
Have legally compliant policies. Courts like to see that you’ve done that when determining whether to give you the benefit of the doubt.
Monitor your time punches.
Make employees sign every pay period that they didn’t work off the clock.
Have mandatory arbitration agreements with employees. If an employee loses arbitration, he loses standing to file a PAGA claim.
Thanks to legislators for addressing Capitol Conference
Two business-oriented legislators – Assembly Members Vicente Valencia, D-Anaheim, and Diane Dixon, R-Newport Beach – made time to stop by the conference and say a few words. Valencia mentioned that he grew up working in his parents’ minimart in Orange County and appreciates the importance of family businesses. Dixon said the state should encourage family businesses to remain in California and not see businesses as the enemy.
Schnetz, the owner and founder of the Sacramento-area restaurants, told the 