Businesses Decry State of Bureaucracy : Government: Companies say they are being driven away from California by over-taxation and over-regulation.

BUENA PARK — Last year Van Jacobsen realized he didn’t need so much space to manufacture office furniture.

With furniture sales slumping, Jacobsen saw a chance to cut production costs so he could eke out more of a profit on those desks and chairs he did sell.

He hoped to find a smaller factory in Southern California, but couldn’t get a timely answer when he asked air-quality officials if he could transfer his air-pollution permits to another local site. Eventually he gave up, packed up the plant and spent more than $1 million moving it to Greensboro, N.C.

Increasingly, California businesses--especially manufacturers--say that state policies are driving them away. They deride what they view as over-taxation, over-regulation and a state that they feel doesn’t appreciate the jobs they create for Californians. The California Chamber of Commerce and other business groups are pushing the lost jobs issue to demand that state government ease up on business.

Dave Kilby, a vice president at the Chamber of Commerce, recites a litany of changes the business group wants: “No new taxes, worker’s comp reform, permit reform, tort reform, education reform.”

These are hot issues nowadays. At the national level, Vice President Dan Quayle’s Council on Competitiveness is taking whacks at federal regulations it says are unnecessary and costly; here in California, former baseball commissioner Peter Ueberroth’s Council on California Competitiveness is supposed to do the same thing for state regulations.

Not to be outdone, even cities and counties are getting into the act: San Diego recently streamlined the process for getting business permits, while in Orange County, members of the Lincoln Club--a high-powered group of Republican movers and shakers--have been meeting informally with local business groups to complain about government regulation and red tape.

Some of the official rhetoric borders on the apocalyptic. A state Chamber of Commerce official, for instance, says we are “at the downturn of California as an economic force.”

But figuring out and fixing whatever’s wrong with California won’t be simple. A close look at Jacobsen’s company, Panel Concepts Inc., shows some of the reasons why.

Panel Concepts’ subsidiary PCI/Tandem left town for one reason: the South Coast Air Quality Management District, which regulates air polluters in Los Angeles and Orange counties. Jacobsen says the district never did say whether he would be able to move his permits to paint furniture to a new plant.

It’s an oft-told story in Southern California’s furniture industry, which lately has been moving to Mexico or other states where air-pollution controls are less stringent.

“Furniture manufacturers feel the district would be happier if we all left the state,” he says. “Our sword got dull hacking at that wall.”

On the other hand, one of the company’s biggest costs--labor--won’t be much lower in North Carolina. Panel Concepts won’t disclose its wage rates, but furniture workers in North Carolina average about $7 hourly.

And Panel Concepts isn’t moving everything to North Carolina; it plans to continue operating a 45-employee factory in Santa Ana to supply West Coast customers.

Nobody, not even the state Department of Commerce, knows how many companies actually flee the state each year. There are no hard statistics available, only anecdotal evidence, Commerce Department officials say.

One thing is certain, though: California’s economy created far more jobs over the last decade than it lost--at least until last year. And it was the recession, not companies fleeing the state, that accounted for most of those lost jobs.

Sure, lots of people have gripes about doing business in California. But only three in 100 Orange County companies are even considering leaving the state, a recent survey estimates. And that doesn’t take into account all the businesses moving to the state or starting up or expanding here.

“There is a problem, there’s no denying it,” says Kenneth L. Kraemer, a professor at the UCI Graduate School of Management who did the survey. “Last year when we went to contact some of the companies we’ve talked to before for this survey, they just didn’t exist anymore.”

On the other hand, says Kraemer, during this recession “the issue (of lost jobs) has become a powerful symbol” with which to prod the Legislature for changes the business community wants.

Most companies move, experts say, not because they don’t like where they are but because of a company consolidation or reorganization.

All this is not to suggest that North Carolina doesn’t have some big advantages over California as a place to do business. Houses and land are cheaper, traffic is lighter, crime is low and state agencies offer cushy incentives to attract business.

Corporate recruiter Mac Williams mentions all those things when he tries to persuade companies to move to Greensboro, an industrial city of 180,000 in the middle of North Carolina’s verdant Piedmont region. Greensboro is next door to the city of High Point--the center of North Carolina’s giant furniture industry.

Williams works for the Greensboro Chamber of Commerce, trying to sell the area to out-of-town businesses.

“We aren’t packed in here on top of one another,” Williams says to a caller from Southern California. “You can get around really easily.”

Sure, the arts, culture and sports don’t begin to compare to a big city like Los Angeles, admits Williams. And, fortunately for places like Los Angeles, those are the sorts of things that matter a lot to executives.

Even to middle managers like PCI/Tandem Product Manager Mike Maziar. Maziar is one of seven PCI/Tandem employees who elected to move to North Carolina (50 stayed behind). Maziar says the biggest drawback of moving to North Carolina is no pro sports. Maziar was a Rams season ticket-holder here.

“And because of the time difference, Lakers games are on TV at like 11 o’clock,” Maziar says. “I never see ‘em anymore.”

On the other hand, he doesn’t miss the daily commute to Buena Park from Fontana, where he bought a home because prices were more affordable. He has a bigger house now, eight miles from the plant. “People here think 20 minutes is a long commute,” he says.

Panel Concepts actually opened the plant in Greensboro in 1984 when it needed a handy way to supply East Coast customers. The company makes metal-and-fabric divider panels for office cubicles, as well as desks and chairs.

In 1986, Panel Concepts was looking for ways to grow. It bought a bankrupt maker of wood office furniture that it later renamed PCI/Tandem. The timing could have been better: A year later, the $8-billion-a-year office furniture industry stalled and a year after that it began to shrink.

“Our business is pegged very closely to white-collar employment,” says Jacobsen, the company president. “And when you see bank mergers like Bank of America and Security Pacific, for instance, where 15,000 people are going to lose their jobs, well, those people won’t need chairs and desks to sit at anymore.”

Wood furniture is snazzier, more expensive and often more profitable than metal; at some companies, you can tell how far up the corporate food chain an executive is by how much of his furniture is wood. But wood furniture also costs more to make; it takes more skill and more time. So there’s less room to cut your overhead and squeeze more profit out of the business in bad times.

And PCI/Tandem, Jacobsen admits, had grown too fat. It hired as many as 150 people, 90 of whom had to be laid off in the last few years.

Two years ago, Jacobsen had his managers redesign the wood-furniture factory in Buena Park to make it more efficient. But the new plant was so efficient the company no longer needed so much room.

And the pressure was on to economize. In 1990, the last full year for which figures are available, Panel Concepts’ sales slipped from $32 million to $29 million. The company racked up an operating loss of $816,000. The company says 1991’s loss--because of the move--will be more than $1 million.

Meanwhile, the lease was due to expire on the Buena Park plant at the end of 1991. Jacobsen wanted to move it closer to Panel Concepts’ other plant and its headquarters, which occupy a two-story, stucco-and-tinted-glass building surrounded by trees in a new industrial neighborhood of Santa Ana.

But under a new rule, the AQMD had to treat a relocated plant much like a brand-new one, which would be subject to more stringent air-pollution regulations, says Panel Concepts’ consultant. And even if it made the changes the district wanted, Panel Concepts says it still would have had to wait months for an assurance that the new factory could ever open.

At that point, Panel Concepts started to think about North Carolina, where it owned its own plant. Directors of the company and its parent firm--Costa Mesa home builder Standard Pacific Corp.--thought long and hard about it, Jacobsen says. And then they did it.

“We started in early September and we had our permits before the end of December,” Jacobsen says. “Our AQMD permit cost $16,000; in North Carolina the permit was less than $1,200. Even our consultants there cost us a lot less.”

On the other hand, there’s not much difference in utility rates or labor costs, says Jerry Freeland, the company’s senior vice president and treasurer. Panel Concepts was already without a union, so taking off for anti-union territory in North Carolina didn’t gain the company anything.

There will be some significant savings in the cost of worker’s compensation, a sore point with some California employers, who say the system here is a mess. That will cost the company about $170,000 less a year; and group insurance costs will be $42,000 less a year.

For all that, California still has a lot of allure left.

Jacobsen lives in Newport Beach, owns a sailboat and says he has no intention of moving to North Carolina. The Santa Ana operation--the factory and the headquarters with its 35 employees--will stay right where it is.

“I’m a native of this state, and I’m proud of it,” Jacobsen says. “We live here, we like it here. I don’t think we’ll ever move. “

Fleeing Orange County A special report from the Orange County Executive Survey found that an average of 10% of the firms surveyed plan to relocate outside the county within the next five years. Nearly 200 chief executives were surveyed about their firms’ plans to expand, downsize or relocate during that period.

WHY FIRMS STAY Good place to live: 20% Customers are here: 14% Available work force: 14% Available services: 12% Central location: 11% County is a growth area: 8% Diverse economy: 8% Local affluence: 7% Others: 6%

WHY FIRMS LEAVE Transportation problems: 90% Lack of affordable housing: 84% Land costs: 74% Building costs: 68% Environmental regulations: 58% Difficulty hiring skilled labor: 53%

WHERE FIRMS ARE GOING Riverside County: 6 firms Los Angeles County: 2 firms San Diego County: 2 firms Elsewhere in California: 2 firms Outside California: 6 firms Outside the U.S.: 1 firmTotal: 19 firms NOTE: Numbers do not always add up to 100% because respondents could choose from more than one category. Source: Orange County Executive survey, UC Irvine Researched by DALLAS M. JACKSON Los Angeles Times