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California: Driving Change

Stephen Gordon was mad as hell at California government, and he wasn’t going to take it anymore. So the chairman, CEO and president of Opus Bank launched a $1 billion challenge fund to provide capital to businesses that dare to expand their operations in California.

So far, Irvine, California-based Opus has disbursed more than $200 million in loans to small-business owners with revenues between $1 million and $10 million and to commercial companies with revenues of up to $100 million. “When we get through the $1 billion, we’re going to commit to another $1 billion,” says Gordon, whose commercial bank has $4.7 billion in assets.

So far, no other bank has dared to match Opus’s offer. Of course, in attempting to make California more attractive to businesses against the prevailing grain, Gordon has embarked on a quixotic quest indeed.

“I don’t want to keep waiting for Sacramento to address this from the top down; we’ve been waiting a long time for intelligent concepts to come from there. I’d rather do it from the bottom up.”

“Every day, economic developers from other states get up and thank God for California,” says Dennis Cuneo, Nevada-based founder of DC Strategic Advisors and an experienced manufacturing-site consultants.

Gordon was sick and tired of seeing California state government not only choke the ambitions of home-grown businesses with high taxes and a thicket of regulations, but also lose hundreds of thousands of jobs to other states, in an unparalleled erosion of the state’s job base. Gordon claims California has lost 77,000 businesses over the last several years, perhaps the most painful of 2014 being Toyota’s decision to uproot its U.S. headquarters in Southern California and move its 4,000 jobs to Texas.

Thus, California ranked ninth among the states in out-migration of population for the years 2003 through 2012, according to the American Legislative Exchange Council. “You’re talking about five to six times more business leaving California than any other state because of decisions made in Sacramento, with the result that the largest economy in the United States clearly isn’t living up to its potential,” Gordon says. “I don’t want to keep waiting for Sacramento to address this from the top down; we’ve been waiting a long time for intelligent concepts to come from there. I’d rather do it from the bottom up.” Last year, after seeing California land in 50th place in the annual Chief Executive “Best States/Worst States” rankings, he was beside himself. So Gordon decided to take  matters into his own hands last fall.

Opus is making loans out of the $1-billion fund only to businesses that vow to use the capital to expand employment in California only. Opus’ focus is on manufacturers, distributors, technology companies, and healthcare concerns, but its client base also includes restaurants and retailers. And the program is primarily aimed at business leaders and successful entrepreneurs who already have proven their ability to expand their companies and add jobs.

Some observers gave the state credit for the California Competes tax-credit initiative, launched last year to replace a poorly performing enterprise-zones program and aimed at “high-value”
businesses growing in the state. And California officials noted that the state added 320,000 jobs in 2014; added more private-sector jobs since the recession ended than any other state, at 1.5 million; and remains home to more venture capital, patents, tourism, Fortune 500 companies, agriculture, biotech and manufacturing output than any other state.

But Cushman & Wakefield clients “have no awareness that things are getting better in California for business,” said Andy Mace, a managing director in the supply-chain business of the real-estate consulting firm. “It’s not uncommon for companies to simply cross California off their lists without taking a look at it.”

And Gordon has tired of California relying on its crown jewels: high-tech companies. “Real America isn’t Silicon Valley,” he said. “The bulk of America is driven by businesses that aren’t sexy. You cannot bet all of California on that [sector] and then shut out the rest of America.”


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