Ivan Natividad

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June 2, 2014
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Grass Valley officials: No incentives offered to keep KACO New Energy

After KACO New Energy announced that it would be relocating its Grass Valley facility to a 60,000 square-foot location in San Antonio, Texas, Grass Valley city officials admit that there is not much in the way of incentives that they can offer businesses, such as KACO, to stay in Grass Valley or the county as a whole.

“It’s a loss, but this is just typical of what we’re experiencing throughout California right now,” Mayor Dan Miller said. “You’re talking about tax breaks, things that we can offer at a local level, but at a state level you can’t offer them. And right now the way our economy is locally, we can’t afford to be offering tax breaks because in Grass Valley, tax breaks are 43 percent of our general fund.”

KACO New Energy’s director of Sales and Marketing Scott Sullivan said that the company will move out of the current Loma Rica Drive facility in Grass Valley by the end of June, taking the majority of the location’s employees with them to San Antonio.

“There’s a part of me that’s sad,” Sullivan said. “Because it’s a culture; it’s a really, really cool place. But at the same time it’s not capable of sustaining the growth pattern that we are in now.”

Sullivan said that through the years the company has grown, going from a small residential inverter company to a bigger inverter company that services a larger clientele, from small solar residential inverters to very large two megawatt pre-wired and pre-manufactured heavy inverters mounted on skids.

According to Sullivan, the company’s San Antonio location will be more than double the size of the Grass Valley facility, and the relocation will increase the company’s ability to expand its workforce and manufacturing capacity to serve North American, as well as Central and South American, customers.

By December 2014, KACO expects to have more than 70 employees at the Texas facility to produce components for a large solar project in partnership with a San Antonio solar company.

“We have a contract with OCI Solar for 400 megawatts going all the way through the end of 2016,” Sullivan said.

“So that was also a big factor. We need to have a factory close by for logistical reasons.”

Grass Valley Community Development Director Tom Last said that an additional deterrent to businesses staying in Grass Valley, and California in general, are the state’s tax rates for businesses.

“Most cities don’t have as many financial tools as available anymore as far as local incentives to keep them here,” Last said. “There’s some little things that they can do, but as far as the big ticket items like taxes, there’s so many things driven by the state. I mean, the state has more influence and effect on businesses leaving our area then we do right now.”

Miller, though, said that the state is working counter to business growth and that surrounding states are taking advantage.

“Texas is doing a good job; they’re offering incentives,” Miller said. “What’s California’s response? Well, the state senate wants to raise the minimum wage to 13 bucks an hour. That’s a business killer there, because what you’re going to see is people losing their jobs rather than employers hiring more.”

According to the Tax Foundation, a research group that produces data and analysis on nationwide state fiscal issues, in 2013 California ranked 48th in state business tax climate, leaving them in the bottom 10 lowest ranked states. Of the 10 states ranked with the best state business tax climate, three either border or are regionally close to California — Nevada, Washington and Texas.

Whether implementation of pro-business policies truly produce economic growth in the long run or just make it easier for leaders of big businesses, solely, to become more profitable and wealthy, is up for debate, but Last says that locally, agencies don’t really have a say in stopping businesses who are leaving due to monetary reasons.

“Some of those business decisions are based on dollars more than other factors sometimes,” Last said. “And in order to stay in business, they have to make adjustments sometimes, and it’s hard to do that in California.”

While it is unclear whether or not Texas offered KACO any monetary incentives to relocate to San Antonio, Sullivan said it is generally less expensive to do business in Texas than in California.

“It will reduce our overhead costs, and there’s a larger pool to draw from for skilled labor and nonskilled labor,” Sullivan said. “I’m not aware of any efforts from Grass Valley to keep us there.”

Nevada County Economic Resource Council Executive Director Jon Gregory said the KACO relocation is just another sign that Nevada County should do more to encourage new businesses to relocate in the county.

“It yet again heightens the need for a collective sense of urgency around implementing economic development efforts,” Gregory said.

“We need to enable the opportunity for growth for local existing companies here and give direct outreach to compatible companies that are located most likely in the Bay Area, to move to our region, and we are in the works of doing that.”

While KACO will relocate around 15 Grass Valley employees to San Antonio, more than five elected to stay. Gregory said that locally the county should focus on job growth to give workers dedicated to the community opportunities for employment.

“The biggest message that it tells me is that people need to buy into the fact that jobs are really important,” Gregory said. “And we need to differentiate ourselves as a community and a county, versus other places that want those jobs.”

Gregory added, “If we demonstrate the opportunities from a quality-of-life perspective for companies that otherwise might look to Texas and Nevada, we can show them that we think we’ve got a good solution for them here.”

To contact Staff Writer Ivan Natividad, email inatividad@theunion.com or call 530-477-4236.

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The Union Updated Jun 2, 2014 12:34AM Published Jun 2, 2014 04:51PM Copyright 2014 The Union. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.