California's Competitiveness

Two More California Firms Move to Lower-Cost States

ca leaving slide

Two California-based companies announced this week that they are moving some or all of their operations to lower-cost states: real estate referral company Homelight is moving its headquarters from San Francisco to Scottsdale, Arizona, and knife manufacturer Cangshan Cutlery is leaving Chino for a new facility in Leander, Texas.

The San Francisco Business Times reported August 24 that Scottsdale is now Homelight’s largest employment center, and the company also is expanding in Colorado.

Homelight Chief Executive Officer Drew Uher said Scottsdale has “a more favorable cost of living” and “the environment there is just more conducive to growing businesses.”

Uher said the company still plans to have a “major presence” in San Francisco.

The Business Times wrote:

“Larger companies could save millions of dollars in taxes now or in the future by moving their headquarters out of San Francisco, given the city’s administrative office tax. That 2.9 percent tax on San Francisco payrolls, which includes the Prop. C homeless services levy, affects companies based in the city that meet three conditions: They have more than half of their payroll expense in San Francisco tied to headquarters functions; have more than 1,000 U.S. employees; and have more than $1 billion in revenue.”

Homelight, which provides cash offers and trade-in plans for homeowners to expedite real estate deals, is “on a growth tear,” the newspaper reported. The company doubled its workforce to more than 500 employees over the past year. Uher said the company is “hiring aggressively” and added: “We’re going to create a lot of jobs. Let’s just put it that way.”

Cangshan Cutlery announced that it is moving its international headquarters to a new facility in Texas in 2023 and will expand with the help of $5.5 million in property tax and sales tax rebates from the city of Leander. The city and county governments also jointly committed up to $1.6 million in reimbursements for road improvements contingent upon the final construction of the proposed Cangshan facility, the Austin American-Statesman reported August 26.

The company plans to spend $40 million to build a 400,000-square-foot facility expected to produce an estimated $150 million in annual revenue. The facility is expected to bring up to 300 jobs to the city and will include production capabilities along with sales, marketing, and administrative operations.

“As a first-generation immigrant, I am inspired by the possibilities of the promise of America,” founder and Chief Executive Officer Henry Liu said. “I see it in the spirit and creativity of my employees and I see it in the town of Leander, Texas. I am truly excited about bringing the vision of creating a premium American-made cutlery line to life.”

In related news:

Headquarters Are Leaving California in Unprecedented Numbers, Report Says. A paper that provides “the most detailed and comprehensive data on relocations of California business headquarters between 2018 and 2021” found that headquarter exits have more than doubled so far in 2021. The report by Joseph Vranich and Lee Ohanian was published August 23.

“We discuss several economic factors that have led to these departures by raising business costs, reducing productivity, and reducing profitability, including tax policies, regulatory policies, labor costs, litigation costs, energy and utility costs, and concerns about a declining quality of life within the state,” the authors wrote in an abstract. “Unless policy reforms reverse this course, California will continue to lose businesses, both large established businesses, as well as young, rapidly growing businesses, some of which will become the transformational giants of tomorrow.”