Taco Bell to Stay in Irvine : Business: Big reduction in rent and $4 million in remodeling at headquarters wins out over Texas bid. Decision saves 1,000 jobs.

Marking an important symbolic victory for California’s efforts to keep businesses from leaving the state, Taco Bell Corp. announced Friday that it has abandoned a yearlong nationwide search for a headquarters site elsewhere.

Offered half-price on its office rent and a $4-million remodeling package by its hard-pressed Japanese landlord, Taco Bell said it would stay in the same 12-story headquarters in Orange County that it had earlier declared to be too small for its expansion plans.

Taco Bell’s decision to stay in Irvine brought cheers and high-fives from the 1,000 anxious employees and full-time contract workers who gathered in the huge employee restaurant early Friday to hear the news.

The announcement by Orange County’s sixth-largest employer was hailed as a boost to the state’s efforts to convince corporate executives around the country that California is becoming more friendly to business.

“We are delighted,” Gov. Pete Wilson said. “We think that is very, very good news, first and foremost because this is a very good and aggressive company with very realistic but very exciting plans for future growth. They are also of symbolic importance in that we are specifically trying to woo corporate headquarters in California.”

A team of state and local government officials as well as corporate leaders had scrambled to keep Taco Bell in California for fear that its departure would make a dispiriting statement about the state’s ability to keep even white-collar headquarters.

The Mexican-style, fast-food chain said that it was too expensive to build a new headquarters elsewhere in Orange County or in Texas, where it was eyeing property in the north Dallas suburb of Plano. Texas had aggressively sought to lure Taco Bell with $10 million in tax breaks as well as the standard fare: no personal income tax, inexpensive land and less onerous government regulations.

Taco Bell chose to stay even though a committee of the state Legislature earlier this month rejected a bill that would have provided tax credits to large corporations that moved into California or expanded. Assembly Speaker Willie Brown, who authored the bill, expressed optimism about pushing through some corporate tax relief this year, a factor that he said may have helped to persuade Taco Bell to remain. Taco Bell on Friday called on lawmakers to pass the tax legislation.

The decision to remain in Orange County is “a major victory . . . more symbolic than actual,” Brown said. “If we had lost them, it would have just been another nail in the coffin. We’re slowly but surely reversing the perception that companies ought to leave.”

Local officials also were elated about the news.

“This is a tremendously satisfying victory,” said Orange County Supervisor Thomas F. Riley. “We spent a lot of time talking with them. I’m very proud of what the city, the county and the state did here.”

Irvine Mayor Michael Ward said the decision shows that “the political winds in California have changed, and leaders are realizing that they not only have to court business to move to the state but they also have to court those who are already here to remain.”

The public officials also applauded H. Fred Mickelson, a Southern California Edison executive who led the so-called “red team” in its efforts to keep Taco Bell in the state. Red teams are ad hoc groups of public officials and business executives that gather as needed to try to head off companies considering moving out of state.

Mickelson said the team’s efforts to keep Taco Bell should serve as “fair warning to other states that we’re drawing a line in the sand and will fight to the death to keep our companies here.”

Employees, nervous about their job prospects, were jubilant over the decision.

“It’s an emotional thing that’s been hanging on forever,” said Tim Johnson, who designs the signs and image of Taco Bell restaurants. “The rumor mill has been rampant, and so there’s a great deal of relief now.”

Cynthia Tapas, an administrative specialist for Taco Bell, said she almost cried when she heard the news. “It would’ve broke my heart if we left,” she said. “My family is from Sweden and they love coming out here. The first thing they want to do when they visit is go to Taco Bell.”

Taco Bell Chief Executive John E. Martin had long said that the company preferred to stay in California but needed room to grow and a sympathetic political and business environment. The company had forecast a doubling of its headquarters staff by the turn of the century.

Erecting a larger headquarters structure in Orange County was considered, but on Friday the company officially rejected that idea because the “economics of building a new facility just didn’t make sense in today’s environment.”

The rental concessions granted Taco Bell by its landlord, Shuwa Investments Corp, come at a time when the slumping real estate market is wreaking havoc on the Tokyo-based firm. The beleaguered real estate investment company had borrowed heavily to expand its portfolio of properties in the 1980s, at the height of the market. Fearful of losing a major tenant, Shuwa offered Taco Bell rock-bottom rent.

Under a new 15-year deal, Taco Bell will pay a monthly rent of $1.50 a square foot for the first five-year period beginning next Feb. 1, said a Shuwa executive who requested anonymity. The chain’s current rent, on a lease that would have expired in November, 1996, is about $2.85 a square foot.

After five and 10 years, rent for the company headquarters increases or the company can end the lease.

Taco Bell, which now occupies 280,000 square feet in the high-rise and a floor in a smaller adjacent building, may later be able to lease up to four additional floors in a nearby building.

“We are delighted to continue to call California our home,” Martin added. “The creative spark, energy level and employee talent base that exists here will enable Taco Bell to maintain its tremendous growth momentum in the years ahead.”

Martin and other Taco Bell executives declined Friday to comment on their decision beyond issuing a press release.

The company, in what is believed to be an unrelated action, will move its accounting processing functions in August to the Albuquerque suburb of Rio Rancho. The company will move 15 employees there and give 45 others a chance to apply for Taco Bell jobs in Irvine. The company expects to hire up to 90 people in New Mexico.

The company also made a change in top management Friday by giving Martin the newly createdpost of chairman and turning over his position as president to Kenneth T. Stevens, an executive vice president. Martin remains chief executive.

Taco Bell quietly began its search for a new headquarters a year ago. The company wanted to build its own corporate headquarters--preferably a series of interconnecting low-rise buildings arranged in a campus-like atmosphere with room to grow to 600,000 square feet.

The company gathered a team of experts, including Cushman Realty Corp. real estate agents and Gensler & Associates architects to search the nation for a new headquarters site.

By late fall, the team was concentrating on sites in and around Atlanta and Charlotte, N.C., as well as Orange County and Dallas-Ft. Worth. The Orange County sites included the Irvine Spectrum, Rancho Santa Margarita and two locations on either side of UC Irvine, one promoted by the university and the other by the Irvine Co.

UCI submitted a proposal to Taco Bell in February for a campus-like headquarters as part of a planned $150-million corporate park, which would include 300 homes.

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, the company scratched downtown Ft. Worth and nearby Circle T Ranch, a business and residential project owned by H. Ross Perot Jr., son of the 1992 presidential candidate.

By the end of March, the search had been narrowed to the Irvine Spectrum and the Legacy business park in Plano.

A last-ditch effort by California was mounted March 28 in a meeting at Irvine City Hall. It was the biggest gathering of local and state officials and business leaders to meet with Taco Bell executives. Gov. Wilson three days earlier had talked with Martin by telephone, urging him to stay.

Martin said later that until that meeting, the company was “this close” to moving to Texas, but California officials “got religion” and began to offer inducements to keep the company here. The biggest potential lure was Assembly leader Brown’s effort to legislate a 6% tax credit for companies relocating headquarters or expanding existing California headquarters.

Few states could match the package of incentives that Texas offered along with its lower living costs and business-friendly laws. A $10-million package of tax credits and other inducements for Taco Bell included about $4.5 million in property tax relief over 10 years and the suspension of permit and developer fees.

Though the tax incentives proposed in the California legislation fall short of the offer from Texas, the estimated $20-million cost of relocating to the Dallas area and the hassle of replacing staff members who did not move--along with the deal from Shuwa--were enough to keep Taco Bell in Irvine.

Times staff writers Eric Bailey in Sacramento and Debora Vrana in Costa Mesa contributed to this report.

No Run for the Border

After a yearlong search, Taco Bell announced that it isn’t pulling up stakes after all. The firm’s corporate headquarters is staying in Orange County.

What Decision Means

Saves 1,000 jobs

County keeps a non-polluting industry

County retains approximately $50 million in wages and tax revenue

Local charities continue to receive Taco Bell contributions, which average hundreds of thousands of dollars annually

280,000 square feet of office space remains occupied

“In short, it’s very good economic news.”--Gov. Pete Wilson

“We believe our decision is in the best interests of our employees and shareholders alike.” --John E. Martin, Taco Bell chairman and CEO

Source: Taco Bell, Times reports; Researched by JANICE L. JONES and JAMES S. GRANELLI

Taco Bell Time Line

1962: Founder Glen Bell opens first restaurant, in Downey.

1964: Bell sells first franchise.

1967: Company headquarters moves to Torrance.

1969: Taco Bell goes public.

1976: First international restaurant opens, in Guam.

1977: Headquarters moves to Red Hill Avenue in Irvine.

1978: PepsiCo Inc. acquires Taco Bell chain.

1982: Taco Bell moves into second building for headquarters operations, on Armstrong Avenue in Irvine.

1983: John E. Martin joins company as president and chief executive. Company reports $500 million in revenue, 1,500 stores.

1987: Taco Bell consolidates offices at its current Von Karman Avenue site in Irvine.

1988: Martin cuts menu prices, setting stage for “value” strategy that features 59-, 79- and 99-cent value menu.

September, 1993: Company sparks immediate concern by conceding it may leave Irvine when lease expires in 1996.

October, 1993: Taco Bell acknowledges discussions with officials in Atlanta, Dallas and other locations.

November, 1993: Gov. James B. Hunt Jr. pitches North Carolina as potential Taco Bell home. Officials from other states actively recruit. Company sets December, 1993, deadline for decision.

December, 1993: California officials meet with company executives to discuss possible alternatives. Taco Bell extends self-imposed deadline to end of March, 1994, reviews land at UCI as possible headquarters location.

March, 1994: North Carolina and Atlanta ruled out as possible relocation sites; Texas and California still being considered.

June 24, 1994: Taco Bell announces it will remain in Irvine. PepsiCo executive Kenneth T. Stevens appointed president; Martin remains chief executive.

Source: Taco Bell, Times reports; Researched by GREG JOHNSON / Los Angeles Times

Comparing Two Locales

Here’s how Irvine compares to Plano, and California to Texas in some important demographic qualities:

Location Irvine Plano 50 miles south 20 miles north of Los Angeles of Dallas Population 104,838 128,600 Home prices (2-3 bedrooms) $250,000 $150,000 Median household income $71,500 $53,905 Sales tax rate 7.75% 8.25% Unemployment rate* 5.3% 5.3%

Population California Texas 29.6 million 16.9 million Median household income $41,053 $31,553 Maximum income tax rate 11% 0% Education ** Bachelor’s degree 15.5% 13.9% Advanced degree 8.1% 6.5% Unemployment rate*** 8.3% 6.7%

* Metropolitan area, May 1994

** Among those 25 and older

*** May 1994

Sources: California Employment Development Department, U.S. Census; 1993 Statistical Abstract of the United States; Dallas Morning News; Researched by JANICE L. JONES / Los Angeles Times

* CORPORATE ORDERS: Chain seized on demand for value, with great success. A21

* LEASE WITH THE MOST: Company wrested “sweetheart deal” from landlord. A21