Wow, I Wonder Why Job Creation Isn't Occurring in California?

I wonder if its because companies have to beg for government permission, and then pay a hefty bribe, to get permission to hire more employees:

The city council in Menlo Park, Calif., is set to approve a deal that will let Facebook employ thousands more people at its headquarters there.

Mayor Kirsten Keith says officials are expected to green light the environmental impact report and the development agreement at a meeting Tuesday night. City staff has recommended the city approve the deal.

That means Facebook employees, currently numbering about 2,200 in Menlo Park, will soon be able to stretch out. If the deal is approved, Facebook will be able to employ about 6,600 workers in Menlo Park, up from its current limit of 3,600. That was the constraint on Sun Microsystems, which previously occupied the campus.

Facebook will pay Menlo Park an average of $850,000 a year over 10 years to compensate for the additional load on the city. It will also make a one-time payment of more than $1 million for capital improvements and set up community services such as high school internship and job training programs. Facebook is also creating a $500,000 local community fund that will dole out grants and charitable contributions to communities surrounding Facebook's campus.

Facebook is making the payments because Menlo Park can’t collect sales taxes from Facebook.

The last is a dodge - this is a protection racket, pure and simple.  Presumably Facebook pays property taxes on its corporate offices, as do its employees who live nearby.  Also, these new employees will all spend money in the local economy that will generate sales taxes.  Facebook presumably pays for water, sewer, trash and other utilities, and their employees are paying gas taxes as they drive that pay for the roads.  Facebook pays California income taxes, as do their employees.  What are these mystery costs that are not getting covered?  The community services bit is a hint that this is a stick-up, with Menlo Park demanding its cut of the recent IPO.

The truth is that cities and counties in California see business expansion plans the same way that Tony Soprano looks at the Museum of Science and Trucking -- as a way to maximize their skim.  I operate a campground in Ventura County that DOES pay sales taxes the County so far will not let me increase my live-in staff without making a big payment.  Even the remodeling of our store required 7 separate checks written to Ventura County agencies.

Update:  Minutes after I posted this, I see this at Reason about Ventura County's efforts to use zoning laws to shut down businesses.  Another Ventura story -- we tried to put a small trailer, really just a booth, in a large asphalt parking lot so my employee there could get out of the sun.  Putting a portable shed on a parking lot apparently required permits - lots of them.  At one point we were asked to get a soil sample, meaning they were asking us to cut through the paving and sample the dirt underneath.  Eventually we just gave up.


  1. Brian:

    I'm reminded of Steve Jobs' presentation to Cupertino City Council about the plans to build a new Apple campus. All the city parasites could think to ask was if they'd get free WiFi and iPads.

  2. Mark2:

    I wonder about all the cities that pay subsidies to keep companies in. Was Facebook just too inexperienced to play "Hard to Get?"

    When Menlo Park started making demands, they should have said - You know Reno, is a nice place to expand, and quite a few of our new millionaires would like to move their to avoid CA tax when the finally cash in their options.

    The other possibility is that Facebook wants to be a "good citizen" with their shareholder's money and decided they wanted to give the money away for the social good of Menlo Park. Lots of Lefty CEO types any more willing to give away the corporate funds for lefty/government causes.

  3. Mark2:

    Another interesting point about CA and why cities have to do this.

    In CA the Sales tax mostly goes to the state, and 1% to 1.5% goes to transportation projects - allowed by the state, and the city gets maybe 0.5% of that. Property taxes have been taken over by the state, and are given back to the city by some state apportioned system. Income taxes - again go to the state.

    Ca has been trying to balance the budget by withhold funds from the three typical types of taxes from cities, so if Menlo Park really does need a road repair - it needs to extort it from businesses. The Jobs program, is complete bull though.

    Menlo Park has always been a bit strange. Even though Middlefield road and Willow road are main thoroughfares, and need to be traveled to get to Palo Alto, and Menlo Park, the city has refused free money to time the lights properly, - in fact the lights are purposely "untimed" speed limits purposely set to 30 rather than 35 - 45 because they think it will prevent traffic from going through their city. It really just frustrates everyone and creates traffic jams.

    Something else of note - may not be an issue any more. But when I was a kid the residents of Menlo Park liked to celebrate New Years by shooting guns into the air. This was deemed dangerous, and after years of no solution, the city installed doppler radar to locate the folks who were firing guns. Menlo Park was the only town on the Peninsula with this sort of problem.

  4. DensityDuck:

    Another thing to remember is that there are acres upon acres of empty office buildings all over Silicon Valley. (If you own a vacant lot, you have to pay property taxes on it; but if you put up a building that sits there empty, you can claim it as a tax write-off.)

    So the city councils generally want people to rent out new buildings in other locations, rather than expand existing ones or add people to them (or god forbid build a new one!)

    A similar thing happened to Tesla. Up until the NUMMI plant closed down, Tesla was going to be in Texas, because when they tried to move to Milpitas the city wouldn't let them build a factory!

  5. epobirs:

    It is bizarre that the article even mentions sales taxes. Does anyone likely to be reading need to have it explained that Facebook isn't a retail operation?

    I spent some time in Ventura for the first time in a long while yesterday. The area around Johnson Road, where I used to stop at the TRU to check for good clearance deals on video games, has become an utter shithole with tons of vacancies.

    Good job, Ventura County!