Talking economic outlook on KKZZ radio in S. Calif.

California has become a tough place to do business. State government is a mess, pension funds are out of control, and worker's compensation costs are sky high.

It's true that those conditions may be a little more common given today's economy. The problem is California's been this way for 25 years. They simply can't seem to get their act together to run the state.

You start running the numbers and it does not take long for businesses to figure out they can save a lot of money by leaving California. I recently had a chance to discuss the challenges facing the state's business and opportunities they are finding elsewhere with Ron Tunick, a Southern California-based business coach and host of the radio program, "The Business of Life."

We talked about the benefits to small- or medium-sized businesses of looking out of state to escape the high cost of California and burden of its high-tax structure. Businesses considering relocation or expansion weigh many factors, looking for such things as:

• A stable, favorable tax structure, both business and personal, to minimize impacts on the company and the employees that follow


• Low-cost electrict utility rates


• Lower worker's compensation rates


• Low unemployment rate, such as what exists in Idaho

Tunick spoke favorably about Spokane, Wash. as a place for businesses to consider, calling the city "one of the hidden gems" and its airport "one of the best airports in the country." He is also a big booster of northern Idaho as a place to visit and work. You can access the complete podcast here.

Increased optimism, new business priorities

Unsteady economic conditions have forced widespread reconsideration of what matters most. Individuals and families have made tough choices relating to household expenses and lifestyle. Companies have adjusted their business practices to be competitive in today’s evolving marketplace.

All operational aspects have been scrutinized as part of that process. Everything from building design to process efficiency to facility location has been considered in the interest of gaining a competitive advantage. In some cases, that means better positioning to seize market share during tough economic times. In more extreme – and unfortunately, not uncommon – instances, companies are fighting to stay in business.

Every year, Area Development magazine surveys corporate executives about their business plans. The survey delves into how current economic pressures impact priorities. The magazine concluded from its most recent survey that, “The economy’s gradual recovery during 2010 has resulted in increased business optimism, a rise in new facility plans, and some changes in site selection priorities.”

A few additional noteworthy observations from the survey:

Focus on product. Nearly three out of four new facilities will serve a manufacturing, warehouse or distribution purpose.

Job growth is modest. More than three quarters of new domestic facilities will create fewer than 100 jobs, although at 77 percent that number represents a slight improvement over last year’s 80 percent.

Get goods to market. Cost effectively. Highway accessibility traded places with labor costs as the most important factor, but both are still among the three top considerations along with tax exemptions.

Think sustainably. Sustainable development is on the rise. High numbers of executives are making energy-saving modifications to existing facilities (85 percent), recycling or reusing waste products (59 percent), changing supply and distribution methods (28 percent), and seeking LEED certification for new or existing facilities (23 percent).

Market reactivity desired. Shovel-ready or pre-certified sites, which speed the development process, were cited as important nearly half the time.

Clustering matters. Businesses generally want to locate near others involved in similar activities.

Site selection can be a lengthy process

Selecting a location for relocation or expansion is an investment of significant time and an exercise in patience. Evaluating options requires culling large amounts of information and evaluating that data to arrive at a decision.

Most businesses consider real estate options, workforce quality and availability, training, and business climate among other factors. They weigh those factors against other communities that meet their geographic, transportation and other needs to select the best option. That process can take years of careful evaluation from start to finish.

Payoff comes when companies find the site selection sweet spot. Global Future Energy Holdings, Inc. recently announced that Spokane Valley, Wash. will become the site of its first U.S. manufacturing and distribution facility. The company began looking for a site in 2005.

Spokane Valley “stood out as an ideal location due to available sites, a strong workforce” and a partnership opportunity with another local company, Marius de Mos, the company’s president and CEO, said in a news release. GFEH, which will do business as Prestyl in Spokane Valley, met its expansion needs on multiple fronts. Those kind of synergies are what seal site selection deals.

Prestyl has developed a proprietary infrared, thin-film heating technology. The technology, common in aerospace and mass transportation applications, will be used to produce infrared heating panels that can be mounted to ceilings and walls. Ecolite Manufacturing, a Spokane Valley company that engaged Prestyl during its site search, and will be a partner in manufacturing the panels.

“This project has been exciting and unique in that it provides a multi-faceted win for our organization and the greater community – incorporating elements of business recruitment, business expansion and foreign direct investment,” said Gary Mallon, technology industry manager for Greater Spokane Incorporated, which recruited Prestyl.

Nurturing industry clusters beneficial to business

A supportive business environment is crucial to success, especially when it includes a group of like companies willing to set aside competition for the benefit of local industry. Manufacturers, as an example, benefit from clustering in an area. Grouping in a close proximity creates a critical mass and economies of scale that draw suppliers and bolster a workforce. Benefits include improved cost and quality controls.

It can also lead to leveraged marketing opportunities, as is the case in the northern Idaho and eastern Washington communities that share the Snake River and a growing boat building industry as a common link.

Six welded-aluminum jet boat manufacturers from Lewiston and Orofino, Idaho and Clarkston, Wash. have formed a joint marketing effort under the umbrella of the Snake River Boat Builders Export Program. The idea is to use their collective resources to draw global attention to their capabilities and products and develop viable foreign markets. And, of course, drive sales.

The group recently participated in the 42nd boot Dusseldorf, dubbed the “world’s biggest water sports show.” The show provided hands-on training for the boat manufacturers, contacts with potential buyers, a chance to see new ideas and technologies, and global industry perspective.

It was the return engagement to a European trade mission delegation that visited the Snake River Boat Builders last year. The group toured factories, tested boats and became the focus of the first annual Snake River Boat Expo.

Companies turning to programs that support business growth

Access to business incubators and other resources that support business development is an important consideration for any company. Such organizations and programs are valuable sources of grant money, knowledge, low-cost space and other benefits.

In the case of grant funding, the money can be used to jump start production that leads to increased revenues and creates jobs. The Sirti Foundation, which helps business-assistance agency Sirti to accelerate growth of technology-based companies in the Inland Northwest, is one such example. The privately funded tax-exempt entity recently awarded $1.5 million from its Energy Innovation Fund to:

• Demand Energy, which is developing distributed electricity storage devices and network management software
• Great Northern Spokane for a geothermal heat pump demonstration project
• Greenwood Clean Energy in support of enhancing EPA-approved biomass boiler manufacturing
• NuElement, Inc., a company commercializing bio-aviation, fuel battery extender auxiliary power unit
• WISErg Corporation, which is using an anaerobic digester to derive bioresources from municipal organic compostable materials

Sirti, an agency of the state of Washington, is a collaboration of business, higher education and government to accelerate the development and growth of technology-based companies in the Inland Northwest.

Manufacturing rallies in Spokane County

Manufacturing, a legacy industry in so many parts of the country, has been forced to reinvent its business model like so many others to stay competitive. Areas with inexpensive electricity rates, excellent infrastructure/transportation systems, strong regional workforces and favorable tax structures have emerged as major beneficiaries.

For those same reasons, the advanced manufacturing sector is on-the-grow in Spokane County, Wash. Employment increased 18 percent in the sector in during 2010, including more than 1,100 new jobs in the third quarter. The majority of advanced manufacturing firms – those working in chemical, composites, metal, energy and aerospace – employ 20-100 people.

Look for communities investing in workforce training

Specialized skills and workforce training are important to any successful business, large or small. Relocating and expanding businesses often make workforce quality a top priority because everything else becomes moot without it. Communities with a dynamic, demand-driven workforce system prove the best solution for a growing company.

Progressive communities are expanding their training offerings. These programs improve marketability for those just entering the workforce and retrain displaced workers who likely already have considerable skills, but need additional industry-specific training. The result is a better prepared employee for companies.

Voters in three North Idaho school districts recently approved two-year property tax increases to build a $9.5 million professional-technical high school. The Kootenai Technical Education Campus is a partnership between business and industry leaders, local school districts and manufacturers. The school will accommodate 180 students and initially provide specialty training in health occupations, welding, construction and automotive technology when it opens in 2013. Curriculum is being developed to expand the instructional offering to include training in hospitality, drafting, manufacturing, and airframe and power plant mechanics.

Those plans follow the opening of the Kalispel Career Training Center in Priest River, Idaho. Programs in advanced welding, metal fabrication and culinary arts are available. Additional programs are being developed to address upcoming workforce needs. Program partners include the Kalispel Tribe of Indians, Pend Oreille County Economic Development Council and Public Utilities District, Seattle City Lights, Cusick School District, Selkirk School District, Newport School District, Community Colleges of Spokane, Washington State University Extension Office, Port of Pend Oreille, Teck, Heater Craft, Work Source, Institute for Extended Learning, and Pend Oreille County.

Retaining strong companies important priority

Taking care of prospering companies is every bit as important as recruiting the next big thing, especially in these days of a “new normal” economy. Regions that can package affordable and available real estate, a talented workforce, and a reasonable regulatory environment in a supportive business climate have a leg up on their competition.

Schweitzer Engineering Laboratories (SEL) has found that in the Inland Northwest. The homegrown power protection industry leader is growing in its own backyard. Work is underway on a new 105,800-square-foot, mixed-use engineering office and manufacturing facility in Lewiston, Idaho. The site-cast concrete tilt-up building is being constructed on 25 acres in the Lewiston Business Technology Park, just across the state line from SEL’s corporate headquarters in Pullman, Wash. SEL is also planning a new 70,000-square-foot Solution Delivery Center in Pullman. The three-story building will include six customer-training rooms, conference rooms and engineering and research space.

SEL, which creates products that minimize blackouts and electrical damage, is part of a major federal Pacific Northwest Smart Grid Demonstration Project. The company benefits from its proximity to Washington State University and the University of Idaho, located eight miles apart in Pullman and Lewiston, respectively. Both have strong engineering schools, and WSU graduates have been ranked by the Wall Street Journal among the Top 25 most sought after by corporate recruiters.

Quality of life part of relocation decision

Companies looking at relocation or expansion consider the business case first. A clear understanding of real estate, labor, power and other costs of doing business are a must, especially in today’s economic environment. Communities without a business case that makes sense are excluded from consideration early in the process.

Once the numbers become enticing, evaluation typically turns to other factors. Quality of life is one of those hard-to-quantify, but important intangibles. Everyday influences such as housing costs, commute times and recreational opportunities all help set communities apart.

Titan Springs, an aerospace parts manufacturer founded in Southern California, moved to Hayden, Idaho. The ability of its employees to own a home without having to commute an hour and a half from Lancaster to Los Angeles was an important factor in that decision. Learn more about quality of life and its impact as a relocation consideration in this interview.