180,000 reasons to thank a small manufacturerPosted by Gino DiCaro, Vice President, Communications on Aug. 15, 2008
Bishop-Wisecarver Corp. purchased it for $180,000 more than they would have paid in other states because of California's lack of a sales tax exemption on the purchase of manufacturing equipment.
I was in Bishop-Wisecarver's Pittsburg, California facility this week on a plant tour, where this $3 million, 50-ton "grinder" was bought and placed to process extremely precise linear steel guides that help other manufacturers move product from one place to another. Think of an automobile manufacturer that has to move a large suspended transmission through its facility acreage. There's a good chance that those engines are guided through the air by Bishop-Wisecarver's products and this grinder helps them produce those materials faster and better.
Competitive pressures are increasing for Bishop-Wisecarver and its 56 employees in California. According to company President Pamela Kan, it was those pressures that made them purchase this $3 million miracle machine that makes them more productive. Shouldn't they be rewarded for making the sacrifice to compete in California's costly business climate? Instead they are faced with cost pressures that force them to buy more efficient equipment, then the State collects 6 percent on top while other states allow these highly coveted companies to keep the tax because of the larger economic benefits they produce for the region.
This decision would have been easier to make before the State's manufacturers investment credit expired in 2003. I can't speak for Bishop-Wisecarver, but the additional $180,000 could have gone into more employees, more salary, more benefits, more research and development, more electricity efficiencies, or price reductions to help make Bishop-Wisecarver more competitive in the marketplace.
I don't know which line item this money would have bolstered, but a $15 billion State budget deficit tells me that, wherever it went, it would have had better economic impacts supporting the hard working employees of Bishop-Wisecarver, its 466 California suppliers and even BWC's consumers than it would have had buffering the State's checking account. 180,000 "thank you's" go out to Bishop-Wisecarver and it's owner Bud Wisecarver (Bud's story) and President Pamela Kan for making the sacrifice! On another but similar note, buying equipment will be much easier for the much ballyhooed Tesla Motors who received the 6 percent credit through an end-around detailed in the Governor Schwarzenegger's press release. Why only them? Who knows.
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Manufacturing 'free agent,' Tesla Motors, reveals California support for equipment tax exemptionPosted by Gino DiCaro, Vice President, Communications on July 1, 2008
announced it will manufacture its Model S electric vehicle here in California right next to their Research and Development facility. Last year they made a semi-public, and what we thought was a final decision to build their manufacturing operation in Albuquerque New Mexico. Now a sales tax exemption on all of their manufacturing equipment purchases, along with at least $1 million in training funds has turned them around and brought them back to California.
This exemption is similar to the one all of the State's manufacturers received before 2003. The Legislature allowed it to be eliminated and, since 2004, California manufacturers have been operating in one of only 3 States that fully tax this equipment. It's one of the most significant competitive issues that contributed to the loss of almost a quarter of our manufacturing community since 2001.
The Gov. put out a two-page press release touting the incentive and Tesla's decision. That press release will be bronzed and framed here at the CMTA offices because it is the first acknowledgment of a sales tax incentive to grow manufacturing. And it's a recognition that substantial costs have to be overcome in California for an operation to pencil out.
What the release and the details also show is that the State is only interested in incentives to grow the highly coveted green product manufacturers. This is a good start no doubt. But what about companies that don't fall directly under a green banner or produce the Holy Grail of global warming products? Why is it good for one manufacturer and not another? Why is it not good for Intel and the $70,000 a year jobs that produce the semiconductors that run the world? Why is it not good for Sheffield Platers in San Diego, with major environmental awards, 50 employees making everything from golf clubs to aerospace plating and supporting 300 small businesses? Why is it good to keep them uncompetitive and provide relief for Tesla?
The Governor's actions prove something we've all known for some time. The State will put up cash if it makes us greener (even though we are already one of the most greenhouse gas efficient states in the country). But it won't put up cash if it makes us wealthier in the future. I expect it's because the resulting press release is too far down the road for any politician to fully embrace such a dynamic concept. The economic benefits will be a future politician's credit and not their own.
The fact that the Governor and some California Agencies made this happen doesn't mean they can make it happen over night for the rest of the State's wealth creators. But the Governor can push our biggest challenge - the Legislature - to include in the budget as an economic stimulus a broad 5-cent sales tax exemption on equipment and offset the 23 percent higher costs out here in California.
CMTA has received little attention over this issue since 2004 and I suspect the coverage will last as long as the Governor's press release stays dry on my desk before a rogue diet Pepsi washes it away forever. But maybe, just maybe, this can be the day this "deal-breaker" got off the ground for the rest of California's manufacturing free agents and made us all a lot more competitive.
See CMTA's "Stay True" for more on manufacturing importance
See CMTA's California Manufacturers Leading the Way for more on manufacturing's economic footprint from supplier networks.
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California Needs a Fresh StartPosted by Gino DiCaro, Vice President, Communications on March 7, 2008
The first was a 1998 5-pound notebook from the now defunct California Trade and Commerce Agency titled, The California Location Book -- a book created to give corporations every reason to grow in the state. (see table of contents)
The second was a study done in 2006, titled Manufacturing Prosperity Initiative, proving the decline in wages and requesting the reinvigoration of the Jerry Brown instigated -- but never implemented -- California Commission for Industrial Innovation. (see letter / summary)
The third was a 2004 Proclamation by Gov. Arnold Schwarzenegger to "Reaffirm California's commitment to the success of our manufacturing industry." (see Proclamation)
The recruitment tool, the original Commission (and the 2006 request), and the Proclamation were meant to be important cylinders in the engine of high wage manufacturing growth and certainty in California. All are lifeless. All need a fresh start.
First the fact that there is no California recruitment agency (AKA someone accountable for the loss of 400,000 lost manufacturing jobs) charged with the State's economic security as it pertains to our biggest wealth creator is at the least, worrisome, at the worst, negligent (See Tesla Motors ... Buck Knives ... Intel's wafer fab ... Oregon's new solar cluster). The Local Economic Development agencies are doing yeoman's work at the local level -- and usually understaffed -- but we need a statewide organization that can lead, oversee, track, market and advocate. If we had one, they'd be diligently working on new recruitment tools, much like the 300-page brochure unearthed in my office this week, and making a case for competitive tax incentives and some degree of certainty in policies affecting job creators.
While corporate decisions aren't made on recruitment books and marketing materials, the absence of such things means no one is asking what incentives to market. (Granted, the Gov. has done his own sporadic marketing in between governing the largest state in the union)
Second, the Manufacturing Prosperity Initiaitive proved the State is slouching toward a service-sector economy. Most importantly showing data on the growing sectors versus declining sectors: growing sectors average wages were $15,000 less than the declining sectors. CMTA updated these numbers to reflect 2001 to 2006 data. The difference increased to $26,000. (see chart)
Third, the Legislature and Governor, in these times of budgetary debate, need to once again affirm that manufacturing and the always-to-follow R&D jobs are the lifeblood of Californians -- not to mention new global warming innovations -- and provide the much needed revenue and growth needed to help pull the State out of it's $16 billion deficit.
March 28 is my fresh start. I'll be at our new digs at 1115 11th Street working on California's fresh start.
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