Twenty-five years ago, San Diego County was home to the headquarters of nine of the Fortune 500 companies. That number had dwindled to three in recent years, and one of the companies announced September 24 that it is moving its headquarters out of state, leaving just Sempra Energy and Qualcomm in San Diego.
Science Applications International Corporation, or SAIC, will move its headquarters to McLean, Virginia. The good news for California is that most of the company's 4,500 San Diego employees are expected to keep their jobs. (Cal-Tax: However, the company's highest paid executives will now be located in Virginia, so California undoubtedly will lose a significant amount of income tax revenue.)
A columnist for Xconomy.com wrote: "The departure of a Fortune 500 headquarters with a 40-year history in one city used to be the stuff of wounded civic pride – and great newspaper copy. I expected to hear at least some wailing and gnashing of teeth among San Diego's economic development leaders, municipal elders, and other community kingpins. Big companies with established roots are often a crucial source of corporate philanthropy and financial support for symphonies, museums, and other cultural centers – so the loss of a Fortune 500 company headquarters is not just about bragging rights, either. Yet San Diego heard barely a discouraging word about the announcement last week, while the governor of Virginia was crowing about SAIC's arrival as the state's fourth-largest company."
The now-retired founder of the company, J. Robert Beyster, said, "I felt it was inevitable that the move would occur because so much business is done in Washington."
But the San Diego Union-Tribune noted that California is having a tough time building and retaining major corporations. The paper wrote: "Atlanta, which has less than half the population of the city of San Diego, has 18 Fortune 500 companies. Minnesota's twin cities of Minneapolis and St. Paul have 17; Charlotte, N.C., 11; Milwaukee, 10; and Englewood, CO., 5."
Los Angeles and Orange counties also have been losing corporate headquarters. The Union-Tribune reported: "Since early 2008, the region has lost four firms: Computer Sciences Corp., or CSC, which moved from El Segundo to Virginia; Hilton Hotels, which moved from Beverly Hills to Virginia; dialysis maker DaVita, which moved from El Segundo to Denver; and Countrywide Financial, which was acquired by Bank of America. That leaves Los Angeles and Orange counties with a total of 13 Fortune 500s."
"We have a high cost of living and a number of regulations that make it difficult for businesses to operate in California," said Jack Kyser, an economist with the Los Angeles Economic Development Corporation. "Other states and localities are scouting for businesses in California – seeking companies that are having financial difficulties and offering them tax incentives or other ways to save money." (Sources: San Diego Union-Tribune, September 23; Xconomy.com, September 29.)
In related news:
Cruise Ship Sails Away From California Berth. Bordering on the Pacific Ocean and with a year-round beautiful climate, California ports would seem to be ideal for cruise ships to operate year-round. Not so.
According to the San Diego Union-Tribune, next spring the city will lose its only year-round cruise ship, as Carnival Cruise Line relocates its ship "Elation" to Mobile, Alabama, of all places.
The move will cost the San Diego economy millions. A 2005 study by the Port District found that each cruise ship stop contributed $2 million per ship.
Carnival Cruise Lines said the revenue generated by using San Diego as a year-round home port was insufficient to keep the ship in California.
Rita Vandergaw, a spokeswoman for the Port District, said, "It's extremely disappointing." (Source: San Diego Union-Tribune, September 28.)
Cal-Taxletter, October 2, 2009
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