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MAY 2004
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Stanching the Flow

This rendering captures the vision of Lennar Partners for its new 1,000-acre (405-hectare)
Meridian development, on the grounds of the former March Air Force Base in Riverside Co.


In the first installment of a three-part series on the Golden State, Site Selection looks at the Southern California climate for corporate facility investment.

n late February 2004, a group of Southern and Central California economic developers known as The Keystone Group released findings of a study looking at the vanishing rate of manufacturing jobs. The study found that between 1990 and 2003, the state lost 400,000 manufacturing jobs, with 288,000 of those disappearing between 1998 and 2003. The defense, space, computer and electronics sectors were the hardest-hit.
        No wonder the first executive order signed by new Gov. Arnold Schwarzenegger – the California Performance Review, designed to re-engineer how state government works – has the unfortunate but necessary moniker CPR. But another initiative – the California Commission for Jobs and Economic Growth, announced at the Port of Long Beach in March 2004 – could go a longer way to resuscitating the state's flagging economy, albeit with a similar, emergency-room lingo.
        Once it learns of a firm's relocation plans, said the Governor, "within 24 hours, the commission's rapid-response efforts will contact the company, identify the issue and work with them to bring their business to California."
Dick Kovacevich
Dick Kovacevich, chairman and CEO of Wells Fargo and Co. and the chairman of the California Business Roundtable

        According to a survey by Bain & Co. commissioned by the California Business Roundtable, the commission needs to spring into immediate action. That survey, released in February 2004, revealed that 40 percent of companies with operations in the state planned to move at least some jobs out of state. Even more ominous, a full 100 percent of the executives surveyed viewed the state's business climate as "unfavorable."
        "The tech bubble merely masked the erosion of California's competitiveness, and Bain's analysis reveals that California has lost its edge," said Dick Kovacevich, chairman and CEO of Wells Fargo and Co. and the chairman of the Roundtable. Among the executives' chief complaints is the state's highly uncertain and complex regulatory environment: California enacted 15 labor law changes per year between 1992 and 2002, four times the national average and three times the average for New York.
        Among the recommendations from the Roundtable for bold action – many of which are part of legislative measures in the current session – are an immediate overhaul of workers' comp, reform of the state overtime law to allow more flexibility in work scheduling, performance targets for agencies with regard to approval times and application processing.
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