San Gabriel Valley business leaders discuss challenges of doing business in California

By Kevin Smith, San Gabriel Valley Tribune

Doing business in California is no picnic.

Strict regulations, high taxes and tough environmental laws have made day-to-day operations increasingly costly and tough to navigate.

That was the consensus of a group of local business leaders who met Wednesday in Walnut to discuss the challenges they face.

The round-table “Doing Business in California” forum was hosted by the San Gabriel Valley Economic Partnership and held at Sysco, a business that sells, markets and distributes food products to restaurants and healthcare and educational facilities.

When asked how California’s regulations are affecting their operations, Mike Mulhausen, president of California Custom Fruits & Flavors, was quick to respond.

“Since 2009 our workers comp insurance has gone up 300 percent,” he said.

Wayne Ratkovich, president and CEO of The Ratkovich Co., said construction projects are frequently bogged down by California Environmental Quality Act (CEQA) regulations and the litigation that often follows. His company’s mission is to profitably build developments that improve the quality of urban life.

“It’s had a dramatic impact on the ability to build facilities that are needed,” he said. “It’s rare to find an institutional investor who will invest in California condos because of all the litigation.”

Charlie Klinakis, a La Puente Councilman who also owns Alert Insulation, said he deals with unnecessary lawsuits all the time. Alert installs acoustic ceiling tiles and also applies insulation to structural steel in high-rise buildings.

“I deal with 10 to 15 lawsuits a year,” he said. “There’s never anything to them on our part … but it’s a constant process.”
In structural defect lawsuits, attorneys typically cast a wide net, Klinakas said.

“They will sue every single person who worked on the job,” he said. “And it usually will cost us $2,000 to $5,000 just to get our name removed from a lawsuit. It’s almost like you’re held hostage. There may have been 30 to 40 contractors who worked on the job and the attorneys will try to get maybe 30 of them to settle. So they’ll pick up $100,000 in chump change. Then they go after the real culprits.”

Blaine Fetter, a principal with Samuelson & Fetter, a Monrovia-based real estate development firm, said environmental impact reports always seem to take precedence over economic factors when projects are being proposed.

“Why hasn’t someone come up with an economic impact report to see whether a negative economic impact is taking place?” he asked.

Mike Hilgert, president of Superior Duct Fabrication in Pomona, said his company deals with workers compensation claims. Some are legitimate, he said, but others are questionable.

“Something needs to be done about this,” he said. “It’s costing us a lot in attorney fees.”

Hilgert said insurance companies need to investigate more of the claims to ensure they are legitimate.

Ratkovich offered a few recommendations to improve California’s business climate.

“Taxes should be lowered and simplified,” he said. “We should reduce regulations to 1987 standards and litigation should be ‘loser pays.’ ”

In that scenario, the loser of a legal action would pay the lawsuit winner’s attorney fees. That’s designed to discourage frivolous litigation.

Cynthia Kurtz, president and CEO of the San Gabriel Valley Economic Partnership, acknowledged that California’s stifling taxes, regulations and environmental mandates won’t be revamped to more reasonable levels anytime soon.

But expressing those concerns and potential solutions to state lawmakers certainly can’t hurt, she said.

“There are little bites we can go after,” Kurtz said.