Leaving Town Is Becoming Big Business : Manufacturing: This city exists to generate commerce, so the exodus is all the more alarming. Officials blame high workers’ comp costs, ground-water pollution and stringent air quality regulations.
The City of Industry--designed especially to make life easier for manufacturers--is scrambling to hold onto its businesses as a steady stream pack up and leave.
The sheer density of manufacturing businesses in the 14-mile-long strip of a city, perched atop a portion of the largest Superfund site in the United States, has placed it in the lead of a slow but steady exodus from the San Gabriel Valley, studies show.
The climate of discontent is fed by fear of liability for the pervasive ground-water contamination, not to mention complaints shared of many Los Angeles County companies: high workers’ compensation costs and stringent air quality regulations.
According to the Industry Manufacturers Council, the city’s chamber of commerce, at least 20 companies have moved or made plans to move since late 1991. And a survey released in December by the Economic Development Corp. of Los Angeles County listed 53 San Gabriel Valley companies that have moved out of state over the past three years, a third of them from Industry.
Although real estate experts say the San Gabriel Valley is markedly healthier than the rest of the Los Angeles Basin, and some businesses have recently moved into Industry, the steady trend sending manufacturers out is nevertheless alarming to the region’s business community.
“It’s becoming more and more a serious problem,” said Dick Register, assistant executive director of the Industry Manufacturers Council, which is working closely with Southern California Edison to identify businesses considering a move and try to persuade them to stay.
“We have 936 members. They show us the letters from Utah, Arizona, Nevada, Kentucky, basically enticing them to come,” he said.
As Industry’s labor-intensive manufacturers are supplanted by small, high-tech companies and warehousing operations, it is clearly losing jobs--nearly 4,000 alone from the companies that Register’s group has identified as gone or going.
And the high number of businesses in the city pegged by the federal Environmental Protection Agency as potentially liable for pervasive ground-water pollution means that when they move out, their facilities tend to sit empty.
The departing companies “don’t get away from their Superfund liability (when they move). But the sad thing is, the property goes unused because no one wants to come in,” said Jeff Lebow, San Gabriel Valley project manager for Edison’s business retention program. “So what you have is this industrial dead spot. . . . It ceases to be a revenue-generating piece of property.”
If there ever was a city that could unabashedly label itself pro-business, Industry is it. Zoned 96% industrial and 4% commercial, the city imposes no business license or utility tax and touts itself as wholly dedicated to manufacturing’s efficiency, from the timing of its traffic lights to the width of its streets.
Although the frustrated Manufacturers Council has teamed up with city officials to knock on doors of businesses planning a move and remind them of the city’s open arms and beneficial business location, what can they really offer once they’re in the door?
“Not a darn thing,” Register said.
“That’s the sad part. You go and call on them, and the dialogue says, ‘Gee, you’ve been here since 1956 and you’ve got the plant paid for, and you’ve got a steady work force who all average 15 years with the company. Think of the cost of retraining?’ ” Register said. “Then they come back with workers’ comp, the Air Quality Management District, the EPA and quality of life. Can we say, ‘Gee, we’ll give you a $50,000 tax break?’ No! We can’t say that.”
Edison has a modest bag of goods to offer: energy efficiency incentives, environmental counseling, and a program that hooks business up with loans and bonds to help clean up polluted soil and reduce air emissions.
But retention visits to would-be defectors often take place more than a year after a company started considering a move, and after other states have enticed them with low taxes, clean air and a higher standard of living.
Take the Industry manufacturer recently visited by Lebow and city officials:
“I couldn’t begin to start to tell you the problems that we heard: from ground-water contamination liability, workers’ comp costs--both premiums and an increased number of filings--to graffiti, to health care costs, insurance costs, what they have to pay their people here versus other states because of housing costs, just the basic cost of doing business,” Lebow said of the company, which employs more than 200 people and plans to move out of state.
Although businesses throughout California complain that workers’ compensation and environmental regulations are too costly, Industry offers a magnified glimpse at common frustrations.
About 70 businesses in Industry have been placed on the EPA’s list of “potentially responsible parties” that might be required to finance cleanup of polluted ground water. Dozens have been asked by the Regional Water Quality Control Board to perform costly tests to measure the extent of contamination in the poisoned plume below their properties--one of four plumes slowly seeping through the San Gabriel Basin aquifer. In 1984, the entire basin was put on the federal Superfund list.
For some, the fateful letter from the EPA, a string of requests to drill wells and perform regular tests, and prospects of a future costly cleanup factored heavily into the decision to move.
Of about 70 companies named as potentially responsible, at least eight have moved or are considering a move.
One of those--Sealco Air Controls Inc., which manufactures air brakes--has been happily situated in Phoenix since October, 1991, with no regrets, general manager Jerry Holland said.
“We paid $150,000 in workmen’s comp a year there. Our first year here cost us $7,500. We saved in one year the amount of money it cost us to move,” said Holland, whose company employed between 70 and 100 people in Industry.
The ground-water issue was just one of several that eventually forced out the company, which is headed by Roy Herrig, a former president of the Industry Chamber of Commerce and Industry Man of the Year.
“We probably spent, not counting man hours, about $25,000, and it’s going to go on. You can’t run away from it, you can just move away and make enough money to pay for it,” he said.
Other companies are committed to staying in the state, but they want to get off the Superfund site and out of the reach of the state Regional Water Quality Control Board’s Los Angeles-area officials.
After spending more than $175,000 digging wells and taking soil samples, Valley Detroit Diesel Allison, which distributes and services diesel engines, has decided to dig in its heels and refuse the regional board’s latest request for more testing.
Furthermore, the company has purchased land near Riverside and will start moving some of its operation out this year, a decision that was prompted in part by the ground-water issue, said James Price, manager of indirect sales.
“Our question is, OK, we do this. Then what next? When does it end? I wish they would just issue a cleanup and abatement order and leave us alone,” he said.
The regional board says the company’s soil tests were incomplete and inadequate. Regardless of liability, the frustration is widespread.
“We are aware of other companies with whom we do business and have commercial relationships who have already chosen to leave the state largely to avoid what we have encountered and are facing,” Clark Lee, the company’s president, wrote in a January letter to Gov. Pete Wilson.
Other big companies that have recently pulled out of Industry--air-conditioner manufacturer BDP and Stoody Co., which manufactures welding wire--also appear on the EPA list, but say the moves had much more to do with corporate consolidation and location. The companies employed nearly 1,400 people here.
Others who have moved in the past year include Ace Hardware Co., Scott Container Products Group, and Lucas Western Inc., which employed 750 people in Industry and is phasing out manufacturing here, according to the Manufacturers Council. Pickle-maker Vlasic Foods will close down its plant March 31, a spokesman for the company said.
There are other indications that the exodus is continuing at a steady clip.
Halbert Brothers Inc. just finished moving BDP, the air-conditioning division of United Technologies, to Tyler, Tex., leaving nearly 50 acres sitting empty.
The moves out of state and to Mexico have shot up over the past year, said John Miller, the moving company’s president, and arrivals from other states are virtually nonexistent.
“It’s all over Southern California, but I think the City of Industry might be indicative of the entire area,” Miller said. “Probably, coming into the state versus going out, we might have a ratio of 100 to 1. I’ve been in this business since 1965, and during the ‘70s everyone was coming into California.
“It’s a little scary.”
