Taco Bell Weighs State, O.C. Pitches in Decision : Business: If effort to keep Irvine company rooted works, other firms may follow. Officials watch and wait.
Concluding a high-stakes bidding war between California and Texas, Taco Bell Corp. is expected to announce as early as this week whether it will expand its corporate headquarters in Orange County or move to the Dallas suburbs.
Only an 11th-hour pitch two weeks ago by local and state officials--including talk of tax credits and other enticements--persuaded Taco Bell officials to hold off on a decision. Chief Executive John E. Martin said afterward that the company was “this close” to announcing a move to Texas.
“In the end, it comes down to a decision I have to make, and this is a tough decision,” said Martin, 48, a highly regarded fast-food executive who rose through the ranks at Burger King before being picked 10 years ago to head Taco Bell, a Pepsico Inc. subsidiary with 1,000 employees at its Irvine headquarters.
In recent weeks, Gov. Pete Wilson has lobbied the company heavily. Assembly Speaker Willie Brown (D-San Francisco) has weighed in with personal entreaties and a promised package of legislation to ease the tax burden and other restrictions on all corporations. Billionaire Donald Bren, chairman of the Irvine Co., is involved, as well as committees of local government officials and business boosters.
While Taco Bell executives have played their negotiations close to the vest, those involved in discussions say that the decision seems to be narrowed to two sites: an industrial park in the Dallas suburb of Plano or a new headquarters in Orange County, probably in the Irvine Spectrum office park just north of the El Toro “Y” in the southern part of the county.
“Taco Bell’s is a pivotal decision,” said Terry Hartman, president of the Irvine Chamber of Commerce. “If they leave, we’ve lost a major effort to retain somebody. If they stay, we’ve got a major win that we could use to anchor down others.”
At stake is not only 1,000 jobs and the economic, social and philanthropic benefits to Orange County, but also the very efforts of local and state politicians to convince the nation’s corporate leaders that California is again becoming a good place for business.
The Mexican-style, fast-food chain is only the second major company in California that has threatened to pull its headquarters out of the state, state officials said. The other one, Hughes Aircraft Co., decided last year to keep its headquarters in the state after the Legislature reformed workers’ compensation laws. But it consolidated its California operations.
“Corporate headquarters are symbolic in many ways,” said Julie Meier Wright, secretary of the state Trade and Commerce Agency, about the importance of Taco Bell’s continuing presence in California.
Unlike so many companies that have fled the state in recent years, Taco Bell is a financially sound operation that is not being forced by economic considerations to seek a cheaper locale. Moreover, it represents the very kind of company that California thought it always could attract and keep in the state--non-polluting service firms with hundreds of white-collar and clerical jobs.
The importance of the company’s decision is not lost on state and local politicians or community leaders.
“Taxes, taxes and more taxes. That’s what it’s all about,” said Orange County Supervisor Thomas F. Riley. He is a member of the so-called red team, a task force of local and state officials and local business leaders that is trying to persuade the company to remain here.
In a March 28 meeting with the red team at the Irvine City Hall, the company asked the state for tax credits on new wages created by expansion and construction jobs it generated and on construction costs and land purchases, a state government source said. It also sought relief from air quality car-pool requirements.
The red team presented its “best and final offer” of tax incentives and inducements to keep the company here. Taco Bell responded by delaying the scheduled March 31 announcement of its decision.
“I’ll tell you, they have got new religion, and it’s come only within the last two or three weeks, quite honestly,” Martin said about state officials. Even Riley conceded that local leaders “haven’t had the support from the state that we’ve had recently.”
Martin acknowledged that California, with its high cost of living and restrictive business and environmental laws, can’t compete economically with Texas.
The Lone Star State has cheap land, a lower cost of living and no corporate or personal income taxes. Yet it has pockets deep enough to offer Taco Bell $10 million in tax incentives, training grants and low-cost loans that few states can match.
The company told California officials, the government source said, that the inducements Texas is offering include about $4.5 million in property tax relief over 10 years and the suspension of permit and developer fees. In addition, Taco Bell employees and their families who move to Texas would not have to pay out-of-state tuition if they enroll in state colleges and universities.
Taco Bell won’t comment on the offer or its negotiations.
But regardless of the economic benefits in Texas, Martin said in an earlier interview, “my druthers would be to stay in California. We’re a California company.” He said he values highly the “creative and intellectual capital” in the state and the “energy and access to the Pacific Rim.” Evaluating such intangible assets, however, has been difficult.
“What is the value of a big idea?” he said. “In our case, a big idea could add $600 million to $700 million in sales in one year to our business.”
Martin and other executives insisted last week that they truly haven’t made up their minds. Thus speculation has run rampant, both inside the company and outside.
While many suspect Taco Bell will move to the Dallas area, others like Bren of the Irvine Co. believe that Taco Bell will remain in Orange County.
In some ways, the county may be a victim of Taco Bell’s success. Under Martin’s leadership, the fast-food chain has grown from a regional operation to a national concern, requiring executives to take long flights frequently to the East Coast. Company executives already have said that a central location makes more sense.
In addition, Taco Bell has been working closely with sister company Frito-Lay Inc. on a line of products for grocery stores. Frito-Lay is based in Plano, Texas, and that North Dallas suburb is believed to be the city where Taco Bell might move.
In fact, says Jon P. Goodman, a professor and director of USC’s Entrepreneur Center, the real question is whether a decision to move to Texas represents a rejection of Southern California or persuasion from parent Pepsico to consolidate some operations in Plano.
Taco Bell executives have maintained previously that the decision to move is theirs alone to make and that Pepsico has not interfered.
Some economists, like Adrian Sanchez at First Interstate Bank in Los Angeles, downplay any negative effect a Taco Bell relocation out of state might have on other companies.
“Companies make decisions to move based on their own long-term planning and interests, not on what other companies do,” he said. “So this isn’t going to start a mass exodus.”
But other business leaders aren’t so confident. Bob Hagel, vice president of business consulting for Premier Relocations Services in Irvine, said a decision to move to Texas would be a slap in the face to state efforts to keep the company here.
Taco Bell “is a big enough name that its decision to move will say to the state that we are not capable of keeping a good solid corporate citizen here,” he said. “It points up the need for more business retention efforts by the state, never mind efforts to attract new businesses.”
Taco Bell eventually will have to move out of its current quarters, a 12-story mirrored office building near Jamboree Road and the San Diego Freeway. Employees already are crammed into 285,000 square feet, and the company is figuring that it will double in size by the turn of the century.
Its lease expires in November, 1996, but the company would need two to three years to design and build its own corporate headquarters--preferably a series of interconnecting low-rise buildings arranged in a campuslike atmosphere with room to grow.
Early last summer, the company gathered a team of experts, including Cushman Realty Corp. agents and Gensler & Associates architects to search the nation for a new headquarters site.
By late fall, the team was concentrating on sites in the Atlanta and Charlotte, N.C., areas as well as Orange County and Dallas-Ft. Worth locations.
The Orange County sites included the Irvine Spectrum and two locations on either side of UC Irvine, one promoted by UCI and the other by the Irvine Co.
UCI submitted a proposal to Taco Bell in February for a campuslike headquarters as part of a planned $150-million corporate park, which would include 300 homes. But a university spokeswoman said discussions with Taco Bell ended shortly thereafter.
Business and political leaders in Atlanta and Charlotte tried hard to attract the company, but Taco Bell decided in early March to drop those areas and downtown Dallas from its list. Later, a Texas state official said, the company scratched the Circle T Ranch near Ft. Worth, a business and residential project owned by H. Ross Perot Jr., son of the presidential candidate.
By the end of March, the search had been limited to the Irvine Spectrum and the Legacy business park in Plano, where Frito-Lay is located. Another Orange County site, South County land owned by the Mission Viejo Co., was a surprise addition to the short list under consideration, but it is unclear whether the site is still under consideration.
Times staff writers John O’Dell and Ann Conway contributed to this report.
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