Great article from today's U-T.
Pay attention to the statistics of the cost of doing business in CA vs. Idaho.
The quote from the person working for the state about no business exodus is hogwash! Small businesses are leaving CA for Idaho, Utah, Oregon all the time. The big guys will stay because the state won't let them leave.
Buck Knives enjoying a better business life in Idaho than El Cajon By Anne Krueger
UNION-TRIBUNE STAFF WRITER
March 26, 2006
POST FALLS, Idaho – It feels almost like home inside the Buck Knives plant. Workers on the factory floor wear San Diego Chargers shirts. Machines rumble and grind as they always have, churning out a product long synonymous with El Cajon.
Step outside, and the illusion shatters like ice. Snow covers the ground and a crisp breeze gives the 9-degree air a bitter nip. Only the foolish would venture out without a heavy coat and gloves.
EARNIE GRAFTON / Union-Tribune
"To stay strong, we had to move," said Chuck Buck, 69, chairman of the board at Buck Knives, which moved from El Cajon to Post Falls, Idaho, beginning in December 2004. Buck examined elk antlers gathered by Boy Scouts to be used in making knife handles.
This is Post Falls, the northern Idaho town where Chuck Buck and his son, C.J., moved their company just over a year ago after 38 years as an El Cajon mainstay.
The Bucks said it cost too much to make their rugged outdoor knives in California, and Idaho was all too happy to welcome them with financial incentives. Fifty-eight employees came along. About 200 others were laid off.
Local leaders considered Buck Knives' departure a visible blow to San Diego County's economic landscape and a symbol of the state's problems in attracting and keeping companies.
“I'm always sorry when I see a company leave the state, but I use the experience of Buck Knives to warn elected officials to pay attention to competitiveness issues,” said Julie Meier Wright of the San Diego Regional Economic Development Corp.
A year later, the Bucks say they are reaping the rewards of their move in lower electricity and water bills and workers' compensation insurance rates, state and local officials keen to make them feel at home, and an eager labor force. When they opened in Post Falls in early 2005, hundreds of people showed up to apply for about 200 jobs.
| FIRST OF TWO PARTS |
More than a year ago, Buck Knives left El Cajon for Post Falls, Idaho.
Today: The San Diego Union-Tribune looks at how the company has fared since the change.
Tomorrow: Find out how the 58 employees and their families who moved with the company are adjusting to their new home.
The Bucks have reason to be optimistic. Last year, Buck Knives did $37 million worth of business, up $4 million from the year before. C.J. Buck is predicting a 20 percent jump this year, meaning more than $44 million in sales.
But the company also grapples with unexpected local costs and unrelenting market pressure to make their knives even more cheaply outside the United States. “To stay strong, we had to move,” said Chuck Buck, 69, chairman of the board. “I don't want my business to become smaller. I want it to grow.”
A natural fit
Moose, elk and bald eagles are plentiful in Post Falls, a town where evergreen-covered mountains rise above the clear waters of the Spokane River. Interstate 90 is the only freeway through town, and most of the businesses line one thoroughfare.
Founded in the 1870s by a German immigrant named Frederick Post, the town once relied on lumber and mining as its industries, but now emphasizes manufacturing and tourism.
EARNIE GRAFTON / Union-Tribune
This Buck knife commemorating duck hunters was made at the new 126,000-square-foot Post Falls factory in northern Idaho.
Idaho, with its large expanse of wilderness, seems a natural fit for a company that sells primarily to hunters and backpackers. The Bucks even built the lobby of their new 126,000-square-foot plant to resemble a hunting lodge.
They had considered moving to Washington or Oregon – Bend, Ore., offered a tempting incentive package worth about $1 million – but settled on Idaho because of its more conservative political climate.
“Dad said, 'I'm going to be more comfortable in Idaho, so we're moving to Idaho.' And that was the decision to move to Idaho,” said C.J. Buck, 45, the company's president and chief operating officer.
The state offered $690,000 to Buck Knives for training new employees, or up to $3,000 for each new worker. So far, the company has used more than $450,000 of those funds, state officials said.
C.J. Buck said he's saving about $1 million a year in lower costs for workers' compensation insurance compared with California. Electricity and water cost 60 percent less than in El Cajon, where environmental regulations and the cost of importing fuel and water drive up rates.
The Bucks had hoped the move would bring lower labor costs. Idaho has no state minimum wage and is covered only by the federal minimum wage of $5.15 an hour. The minimum wage in California is $6.75.
Shop floor workers at Buck Knives make an average of $10.25 an hour, compared with $13.50 an hour at the El Cajon plant. Labor costs in Idaho also have been reduced because so many longtime El Cajon employees were replaced, Vice President Phil Duckett said.
But they haven't saved as much as they expected.
Soaring job growth in Kootenai County, where Post Falls is located, has caused unemployment to fall to its lowest level recorded there, meaning wages must be competitive to attract workers. And Post Falls is just four miles from the state line with Washington, where the minimum wage recently increased to $7.63 an hour.
When Buck Knives opened in Idaho, starting workers were offered $7 an hour. That has since gone up to $8.50 an hour.
Property taxes and the cost of medical benefits have also been higher than expected, but those costs are far outweighed by the decrease in workers' compensation insurance, Duckett said.
“The net result is it's a lot cheaper to do business up here,” he said.
A return to Idaho
The move to Idaho was a homecoming of sorts for the company and the Buck family. In the 1930s, Chuck Buck's grandfather, Hoyt, made knives in a church basement after moving from Kansas to Mountain Home, Idaho.
Buck Knives employee Jeff Legerton worked at the new factory in Post Falls, Idaho. Though many workers say they enjoy living in a more peaceful environment, some say they miss the San Diego area.
After World War II, Hoyt Buck moved to San Diego and with his son, Al, formed H.H. Buck & Son. They incorporated in 1961 and in 1968 opened a 180,000-square-foot plant in El Cajon because land was cheaper there. Eventually, Chuck Buck learned the business and took over from his father.
The company became known for its reliable knives with a lifetime warranty, especially the Model 110 Folding Hunter. Designer knives, like the custom-made Bowie knife with an elk antler handle, sell for up to $600.
Each knife comes packaged with a biblical quotation: “For God so loved the world that he gave His only begotten son; that whoever believeth in Him should not perish, but have everlasting life.” (John 3:16)
Chuck and C.J. have side-by-side offices. The elder Buck, an easygoing storyteller, travels around the country to etch his signature on knives during store visits, and to speak at prayer breakfasts. C.J. leads the company's day-to-day operations.
Sometimes C.J. thinks his dad gave him the reins too soon. He wryly notes that Buck Knives lost money in 1999, the year he became president and chief executive officer. The company was starting to recover from that dip in 2001 when the 9/11 terrorist attacks caused a backlash against the knife industry. The public was more turned off to weapons, C.J. said, and traveling with knives became a hassle under new airport restrictions.
The Bucks fought back by setting up a more efficient manufacturing process. They banked on a highly touted new multipurpose gadget, the BuckTool, then saw it flop because of its steep price.
Meanwhile, major retailers like Wal-Mart, Buck Knives' biggest customer, were demanding lower-cost products the company couldn't afford to make in El Cajon. So in 2000, Buck Knives opened a plant in China. The company now imports 30 percent of its knives from there, mostly for outdoor recreationists and selling for less than $30.
EARNIE GRAFTON / Union-Tribune
Jeff Legerton (left), Jim Hypes (center) and Chuck Buck shared a laugh at the factory on a winter day in Post Falls. "I had no idea it was quiet when it snows," said Chuck Buck about an experience in his new hometown.
The decision to go overseas was agonizing for the Bucks. Chuck Buck winces when he hears from customers upset to see “Made in China” on a Buck knife.
“We feel like we have to do it,” he said. “Most of the time they don't agree.”
Even with the imports, the company's business costs in California were out of control. State workers' compensation insurance and utility costs were skyrocketing. The threat of rolling blackouts in 2001 made the Bucks anxious about having a reliable source of electricity.
The Bucks, both lifelong San Diego County residents, announced in April 2002 they were thinking about moving out of the state. Hoping to keep them here, county Supervisor Dianne Jacob called a meeting of utility officials and other local leaders to see how Buck Knives' costs might be reduced. Rep. Duncan Hunter, R-El Cajon, convened a summit on whether California was unfriendly to business.
The last-ditch efforts didn't raise the company's bottom line, so the Bucks went ahead with the move.
EARNIE GRAFTON / Union-Tribune
Searching for a less expensive place to do business, Buck Knives moved its operations from El Cajon to Post Falls, Idaho, in December 2004.
EARNIE GRAFTON / Union-Tribune
Kelly Vredenburg packed knives.
Some of the company's problems stemmed as much from its line of business as where it was located.
Although the Buck name on a knife is highly regarded, the company has only about a 9 percent market share. The knife industry is not like soft drinks, C.J. Buck explained; there are no huge companies like Coke or Pepsi dominating the market.
Like other U.S. manufacturers, the industry has faced intense pressure to make products at prices competitive with imports. One of Buck's biggest rivals, Imperial Schrade of Ellenville, N.Y., closed in July 2004 after a century because it couldn't compete with imports. About 250 workers lost their jobs.
C.J. Buck said he and his father vowed their company would not suffer a similar fate.
“Making products in the U.S. would not have been possible without relocating to Idaho,” he said. “The move to Idaho really is a testament to our dedication of not losing our manufacturing background.”
A new business climate
When Buck Knives began moving in December 2004, the company exchanged one of the most expensive business climates in the United States for one of the cheapest.
A study by the Milken Institute found that California had the fourth-highest business costs in the country as of 2004, behind only Hawaii, New York and Massachusetts. Idaho had the fourth-lowest costs.
Other Western states have run ads in California seeking to lure companies away, and officials from Gov. Arnold Schwarzenegger on down have fretted about the loss of businesses.
Schwarzenegger backed an overhaul of the California workers' compensation system that is estimated by the state to have saved businesses $8.1 billion since it was passed by the Legislature in March 2004.
Despite fears over companies like Buck Knives leaving the state, at least one study suggests the economic impact may be less than thought.
A 2005 report by the Public Policy Institute of California, a nonprofit research organization based in San Francisco, found that job losses from company relocations have never been more than a tenth of 1 percent of all of the state's jobs.
“There has been no substantial business exodus from California, and there has been little if any change in the rate at which businesses are leaving California or avoiding California,” the study said.
C.J. Buck still sees problems ahead for California. He felt San Diego County officials backed the company, but politicians in Sacramento didn't.
“I don't know what California needs to do,” he said. “Maybe they just need to get in trouble before an entire state can embrace a different mind-set.”
In Idaho, he said, he's found an atmosphere where his business is welcomed and supported. There aren't as many restrictive regulations or laws that raise costs.
“From the governor to your next-door neighbor, there's an understanding that being kind to business is good for the state,” Buck said. “People celebrate our success knowing it's good for the state. It's a heartfelt philosophy.”
It's unclear whether another generation of Bucks will continue to run the family business. C.J. Buck doesn't mention any of his five children and stepchildren as a natural successor. Chuck Buck said he hopes his 23-year-old granddaughter, Sarah, might one day take over. She works in the company store, leads tours and helps organize the annual sales.
For now, C.J. Buck said he's enjoying running the company and developing new products. He said he misses the people he left behind in California, but enjoys his new life in Post Falls.
“I'm not worried about power, water and politics, and it's great,” he said. “We're set to shine.”
Anne Krueger: (619) 593-4962; firstname.lastname@example.org