California Go-BIZ, and who is Johnny Morris?
Happy Monday again, folks. This week is almost all about a state sponsored program for California businesses. If you wondering if you will keep you business in California or move out of state, this program may be for you. If you have already decided to move, never mind. This probably won’t change your mind. Or maybe there are some capital improvements you are looking to do that will increase your workforce. If so, read on…
Before the boring, academic material on the state program and the reveal of Johnny Morris…
Yes, rates have gone up.
The prime rate – in theory the rate that lenders charge their better borrowers – has gone from 3.25% in the last year to 5.5% today.
If you borrow at Prime + 1.5%, you are now paying 7% to borrow. You were paying 4.75%.
That’s a 47% increase in your borrowing costs. Ouch.
Yes, the second quarter numbers are in, and GDP fell. That would indicate a recession.
The hullaballoo about it NOT technically being a recession is technically correct.
It turns out a non-profit is in charge of making that determination but they really need to crunch a lot of numbers before they declare it a recession.
That can take up to a year; I have no idea why.
So, to keep things simple, 99% of finance and economic folks just use the two consecutive quarters of reduced GDP. And there you are.
OK, those were the two main news items this past week.
On to California Go-Biz.
What is a GO-Biz? The Governor’s Office of Business and Economic Development. Really.
I guess the California Governor did not think GO-BED had a good ring to it so they went with GO-Biz.
GO-Biz is now accepting applications for the California Competes Tax Credit (CCTC) and California Competes Grant Program (CCGP).
There are $85 million in tax credits and $120 million in grants available during this application period for businesses that are expanding and adding quality, full-time jobs in California that might not otherwise be created by the business or any other business.
The key words are “in California”
The deadline to submit applications is Monday, August 15. The online application can be accessed here.
This is not a gimme – it takes time and effort to put it together and the funds/tax credits are not guaranteed. You may apply and not be approved. The application is fairly detailed and hinges upon how much you are going to commit to spending in California, be it wages, capital investments, or both. You are also competing with firms like Microsoft and Zoom, both recipients in the past year (I won’t tell you how much – it would just be depressing). But smaller companies also win – see the success stories below.
There are three timeframes when you can apply. The first is now through August 15th.
The next period is January 3, 2023 through January 23, 2023.
The last is March 6, 2023 through March 20, 2023.
To qualify for a tax credit, you need to explain why you need the credit. This would imply detailing the use of your own funds and then calculating how the use of either the grant or the refund would make the project work.
On the flip side you can also show how if you don't get the credit you're just going to pick up your toys and leave California. That’s a key part of this.
The intent of the project is to keep jobs in California or to attract jobs to California.
Since so few American companies are moving to California, what the state is successfully attracting are foreign companies that promise to hire a certain number of employees.
This is not a bad thing since it’s always good to have jobs in California. The downside is that the funds go to a foreign company albeit operating in the state.
Some questions you will have to answer:
What does the business do?
What are its products or services?
Where are its customers/clients located?
Do the jobs it is proposing to create have to be in California?
Are its competitors located in or outside of California?
Are these kinds of jobs reliant upon local market demand?
How will the amount of credit the business is requesting over the 5-year period enable or incentivize its decision to proceed with the California expansion?
Is the business considering expanding (or moving operations) outside of California?
If so, has it identified a specific site or city?
Has it conducted a comprehensive cost comparison between the sites?
Key Criteria are:
Qualifying based on a ratio of credit requested to investment and wage spending. I would not focus on that though. It literally is a moving target – the number changes every year.
The applicant’s project may or will occur in another state, or the applicant may or will terminate or relocate all or a portion of its employees to another state.
Because you threaten to leave, the state may incentivize you to stay.
Or, at least 75% of the applicant’s net increase of full-time employees will work at least 75% of the time in an area of high unemployment or high poverty.
Local Success Stories
June 16, 2022 - Response Envelope in Ontario received $1,500,000 tax credit on a commitment of $10,000,000 in capital investments and adding 35 employees.
April 21, 2022- Finova LLC (Excel Gaskets) in Riverside received a $500,000 tax credit on a $750,000 investment and a commitment to adding 36 employees.
November 4, 2021 – Diamond Wipes in Chino received $3,220,000 in tax credits on a $16,000,000 investment and adding 98 jobs.
While it is unlikely you can put an application in by the 15th, you can start planning to apply for the next series of awards. You have to meet the criteria, though.
Whew! Now to the fun stuff.
So, who is Johnny Morris?
He was born in the Ozarks 74 years ago, in Springfield, Missouri. If you watch the show, you know where it is. If you don’t, it is a mountain range that is in Arkansas and Missouri. Just google it.
His father owned a liquor store.
He loved to fish.
When he was 10, the construction of a hydroelectric dam on the White River created Table Rock Lake.
This became the center of a nationwide bass fishing boom.
By the time he had finished college, he had been selling fishing tackle from the back of his father’s store. Demand was high, so he started a mail-order catalog business.
This was the start of Bass Pro Shops – yep, that’s his store. 50 years later, 177 locations, 40,000 employees and $6.5 billion in revenue. From the back of a liquor store.
And now you know who Johnny Morris is. What a country.
