Fresno Manufacturing Summit Testimony
"The state of California makes more money off my business than I do"

By Loretta Macktal, Executive Assistant to the Vice President, Government Relations

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On Monday, December 8th, in the County Supervisors’ Chambers, the Fresno Manufacturing Summit produced some of the most revealing testimony yet in CMTA’s push to educate regional officials on the costs associated with operating a business in California. On hand were all five Fresno County Supervisors, media representatives, economic development officials and approximately 75 attendees from the manufacturing community. The Summit, convened by Fresno County Supervisor and Chairman, Juan Arambula, witnessed some of the most dramatic testimony by manufacturers yet presented in a series of Summits being held across the California.

County Supervisor Juan Arambula welcomed everyone and thanked them for coming out to this very important special workshop meeting of the County Board. He outlined the important roles of the Greater Fresno Area Chamber of Commerce and the Fresno Economic Development Corporation in making the event happen.

Ken Maul, Chairman of the Chamber’s Governmental Review Committee outlined the agenda and introduced CMTA President Jack Stewart, who led off the testimony. Stewart presented a snapshot of the State’s economic warning signs and problems. Stunned by Stewart’s presentation on California’s costs and decreasing job base, the Supervisor’s engaged him on many issues, including California’s high tax burden and workers’ compensation insurance rates.

Alan Feld, President and CEO of Sportsmobile, a company specializing in the design and manufacture of 2-wheel and 4-wheeldrive vans, van campers, and cargo vans, employs 50 workers and relies upon some 37 regional suppliers. Feld outlined how in the past year Sportsmobile’s sales, employment, and gross profit had increased significantly yet net profits were down 46 percent as a result of a consortium of cost increases – most importantly, a 234 percent hike in workers’ compensation rates over the last three years. “The state of California makes more money off my business than I do,” Feld explained in exasperation. Sportsmobile's California facilities pay $31 per $100 in salary while its other facilities in Texas and Indiana pay only $5 and $2 per $100 respectively. “Basically, we pay $1000 a day in work comp rates to operate in California,” said Feld, “That’s money I can’t put back into my business.”

Alan Jurkonis, President of American AVK, a manufacturer of valves and hydrants for the waterworks industry, questioned how California expects to retain businesses when surrounding states have a lower tax base and far less expensive workers’ compensation costs. He revealed that his work comp costs alone have increased 150 percent over the last two years. Jurkonis indicated that the suspension of the “Net Operating Loss” (NOL) – a tax treatment that reduces the immediate cost of investment for firms that don't have a current year profit – will hurt his company. He explained that the absence of the NOL five years ago would have prohibited AVK from purchasing the equipment it uses now to stay competitive.

Fernando Morisson, Plant Engineer, with CMTA member PPG spoke effectively on the significant challenges his company faces with the electrical energy issues in California; and, Roger Isom, VP and Director of Technical Services for the California Cotton Ginners & Growers Association described the out-of-control regulatory costs on his industry and the fact that stationary source regulations are driving his association's members out of the state.

David Bryant, Vice President of Maxco Supply, a manufacturer of corrugated packaging materials concluded the formal testimony with an attention grabbing anecdote about a workers’ comp claim filed against his company. He went on to state that his overall wage costs had gone up $800,000 in the last year.

David Spaur, President and CEO of the Economic Development Corporation (EDC) serving Fresno County, testified that Fresno and others cities in California appear to be losing their bid to recruit a new Boeing facility for the 7E7 because of the state's outrageous costs. He indicated that the Fresno region may only successfully attract 4 of the 28 companies currently being recruited to the area. Spaur commented that it is easier to retain businesses than attract new ones.

The Summit was closed with comments from each of the County Supervisors. Perhaps in frustration, one of the Supervisors quipped, “We should all start manufacturing anti-depressants in the state.” The Supervisors agreed they will develop a plan for a Fresno contingent of public and private sector officials and manufacturers to sit down and talk with legislators, regulators and administration officials. The Supervisors voted unanimously to draft a resolution to the State Legislature recommending policies to lower costs and create business incentives to grow manufacturing employment.

Earlier in the day, CMTA President Jack Stewart and EDC President David Spaur met with the Fresno Bee Editorial Board on business costs in the state. Fresno Bee article .

The December 8, Fresno Manufacturing Summit was the last for 2003. CMTA has scheduled more in early 2004 and hopes to convene a statewide Summit in late February.

Summit Information
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