Has California Reached a ‘Tipping Point’ for Businesses?

The latest company to leave California is San Francisco-based Circa of America, which got its start in that city in the late 1960s, and which makes leather goods in the largest manufacturing facility remaining in the city. Circa is closing the plant, laying off 92 employees, and moving its headquarters to Atlanta.

“Circa had reached its tipping point, when the disadvantages of operating in San Francisco outweighed the advantages,” wrote journalist Dan Walters on CalMatters.

In a devastating critique, Walters added: “The larger question is whether California as a whole could reach a tipping point when high taxes, regulation, soaring housing, utility and fuel costs, choking traffic congestion, disease-ridden encampments of the homeless and other negative factors overwhelm the positives of living and doing business here and the state begins to experience economic and social erosion.”

“What might be California’s tipping point? Could it be one or more of the bills just passed in the Legislature? … Or could it be one of the measures that voters might face next year to raise property taxes on commercial real estate or boost income taxes on the highest income Californians?” he asked.

Read the entire CalMatters column at Is there a California tipping point?

“Circa apparently isn’t alone. Joseph Vranich, who helps businesses relocate, has published a report, entitled ‘Why Companies Leave California,’ claiming that between 2008 and 2016, “at least 13,000 companies moved out of state during that nine-year period,” Walters wrote.

According to the company’s website, “The origins of CIRCA date back to 1967 when the company began handcrafting belts for individual customers in a small studio on Haight Street in San Francisco. The company grew into The Leather Shop Inc. in 1970 when a small factory was opened to handle the order flow. In 1980, the company changed its name to CIRCA of America.”

The company’s customers include Banana Republic, J.Crew, Under Armour, Dillard’s, Disney, MadeWell, Ann Taylor, Allen Edmonds, Nordstrom, Brooks Brothers, Tanner Goods, Lands’ End, Johnson & Murphy, Calvin Klein, Eddie Bauer, Polo, Amazon Fashion, Alex Mill, BØRN and Boeing.

The San Francisco Chronicle quoted a company spokeswoman citing “changing economic conditions in the city” as among the reasons for the business decision to move.

The Chronicle said Circa also supplies the Gap, Old Navy and Target. The layoffs and closure of the facility will begin Nov. 1; it’s unclear if manufacturing will stay in the U.S. Several years ago the company indicated that it can make 10,000 finished products per day in the factory.

Joseph Vranich is a Site Selection Consultant providing location advisory services to companies looking to enhance the success of their enterprise through location or relocation projects. His motto is “Helping Businesses Grow in Great Locations!” One focus of this blog has been to address California’s perennially difficult business environment. In recent years, he has discussed California’s harsh business climate with countless businesses and more than 100 economic development agencies located in North America and Europe. His company is Spectrum Location Solutions LLC.

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