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Long-time Bay Area corporations are packing up and moving out

Uploaded: Jan 12, 2021


Business leaders have warned about the dismal business environment in California for years, but it now appears that those warnings are becoming a reality.

Major corporations are picking up and moving headquarters elsewhere. Charles Schwab, founded in San Francisco, has decamped for Denton, TX north of Dallas after its acquisition of T.D. Ameritrade. McKesson also left for the Dallas are in Irving and in the last month Silicon Valley icon HP Enterprise announced it was headed for Houston.

Hewlett Packard as it was originally known before it split into two companies a few years around was founded in a Palo Alto garage by William Hewlett and David Packard in 1939. The Walt Disney Co. bought their first product, a resistance-capacitance audio oscillator, used to test sound equipment.

And Oracle, headquartered with a large campus in Redwood City on what was once the Marine World site, also is headed for the Dallas area although founder Larry Ellison has relocated to the Hawaiian Island of Lanai which he owns most of—yes, no typo. He owns 98% of the island, which he bought for $300 million in 2012. It’s not a tax deal for Ellison, Hawaii’s state income tax is 11% compared to California’s 13%. Thanks to his Oracle holdings, Ellison is one of the richest people in the world.

Incidentally, Oracle has owned a major facility in Pleasanton’s Hacienda Business Park since its takeover of PeopleSoft in 2004.

What the pandemic has demonstrated, at least in the short run, is that sprawling corporate campuses may not be necessary with remote work has been effective. Executives are open to looking elsewhere after paying sky-high California taxes, wages and real estate prices because the belief was they needed to be in the Bay Area where the work force is and innovation has thrived.

San Francisco voters last November passed two new tax measures on business despite corporate leaders raising concerns about the business environment. Tech companies have been willing to pay high rents in downtown San Francisco because millennial-aged workers wanted to live in that environment. Rural and suburban areas have been looking much more attractive in the pandemic.

Time will tell whether this is a trend or an aberration—here’s betting on a trend. One short-run trend is clear—high-wage workers who have a choice are leaving the state. Try pricing a one-way U-Haul truck or trailer heading out-of-state. If you happen to be coming to California, the company might pay you to haul it back.

The bail-out trend also is striking high-tax blue states such as New York, New Jersey and Illinois. Affluent people with a choice here and in those other states have moved beyond talking about leaving and are getting out of them. About 1.4 million New Yorkers have left the state, marking the first decade since the 1970s with declining population—the state may lose one or two congressional seats, something that also could happen to California.


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Comments

 +   10 people like this
Posted by DublinMike, a resident of Dublin,
on Jan 12, 2021 at 11:10 am

DublinMike is a registered user.

Texas is a mixed bag for taxes. No income tax but in some counties, not all, the residential property taxes are three times higher than California.


 +   18 people like this
Posted by Kevin, a resident of Castlewood,
on Jan 12, 2021 at 12:46 pm

Kevin is a registered user.

Taxes and cost of living are higher here in the Bay Area. For companies with mature products and low level / no new innovative product lines (HPE, Oracle, etc.), it makes sense to relocate their HQs to lower tax states. This is countered by new innovative companies that are forming here around tech and university hubs like Stanford, UCB, UCSF, etc.

HPE, Oracle, etc. will continue to have presence in the Bay Area - just like Tesla with its presence in Palo Alto and Fremont.

Take a look at all the biotech / pharma companies- Bay Area is the largest bio pharma hub in the country. Even Roche / Genentech, one of the largest pharma companies in the world, is more than doubling its size in South San Francisco.

How about in Pleasanton - 10x Genomics, Roche, Veeva Systems - just a few examples of innovative companies that have grown and are growing.

I am optimistic about Bay Area. I am not worried about rich people leaving - they will come back or there will be new even richer people here.

We do need to clean up San Francisco - it is getting worse with drugs, homeless and mentally ill people.


 +   11 people like this
Posted by Maskedman, a resident of San Ramon,
on Jan 13, 2021 at 7:59 am

Maskedman is a registered user.

It's not just the taxes. California's regulations and environmental laws are also driving big corporations out of the state. Did you know that California has a cap and trade law, even though the state shares the atmosphere with the rest of the planet? The state also regulates what a corporation's Board of Directors shall look like.


 +   12 people like this
Posted by Skooter, a resident of another community,
on Jan 13, 2021 at 8:39 am

Skooter is a registered user.

Thanks Gavin...what is the next company to leave CA?


 +   4 people like this
Posted by DublinMike, a resident of Dublin,
on Jan 13, 2021 at 2:41 pm

DublinMike is a registered user.

Skooter, it's clear that you don't like Gov. Newsom but the moving out of California started long before his tenure. In the seventies companies were moving out.

I agree with Kevin.


 +   3 people like this
Posted by Kevin, a resident of Castlewood,
on Jan 13, 2021 at 7:10 pm

Kevin is a registered user.

Scooter, I cannot name the next company that will leave California but I know the types of companies that are leaving:

1. Their profit is mainly from price increases and cost cutting such laying off their employees

2. Minimal or no innovative new products. They may acquire small innovative companies to get new products.

3. They are outsourcing jobs to countries with cheap labor - I guess this is the same as 1 but worth pointing out.

Oracle and HPE are perfect fit.



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