The Economy Hub
July 30, 2009
Wilbur D.Curtis invented the globular glass coffeepot, that staple of coffee counters everywhere, in 1940. Since then his son and grandsons have turned Wilbur Curtis Co. into a manufacturing concern that earns revenue approaching $100 million by turning out commercial coffee brewing equipment from a sprawling factory in Montebello.
But their long history in California doesn't exempt the Curtis family from the costs and hassles that give this state its reputation as one of the hardest places in the country to do business.
Their concerns are what brought me one morning this week to the company's plant a few miles off Interstate 5. I was there at the invitation of Joe Laws, a former entrepreneur who joined the company nine years ago as chief operating officer, for a tutorial in what underlies the state's bad name.
The answers may surprise you.
There's no point pretending that the state's anti-business reputation is a right-wing rap on the liberal Golden State, or a plot by the Chamber of Commerce to pump the Legislature for special favors, or -- here's the bottom line -- undeserved. It's as real as rush-hour traffic, and anyone concerned about improving the quality of life for all Californians needs to take it into consideration.
There are lots of sound reasons for a business to locate in California. It might want to be closer to its suppliers and customers in the biggest market in the country, for example.
"But if your customers and vendors are out of state, like ours, that advantage goes out the window," Laws told me.
Indeed, most of what Curtis makes gets shipped out of state; its direct customers are typically coffee roasters, who provide brewing equipment to the convenience stores and restaurant chains buying their beans and teas on contract. A company that exports its products across the state line and imports revenue into California, Curtis is exactly the kind of business the state should be working feverishly to protect.
Yet it's also the kind of business whose issues tend to fly under the radar of legislators, governors and (let's face it) newspaper columnists.
Curtis' modern, 186,000-square-foot factory is filled with the sounds of stainless steel being cut, stamped and folded to make brewing apparatuses adorned with the company's swooping "C" insignia.
The company prides itself on staying atop innovations in the trade. Leading me on a plant tour, Mike Curtis, the vice president of operations and one of Wilbur's two grandsons in the executive ranks, stops in front of a rack of squat stainless steel coffee urns -- the kind with a glass level indicator and a spigot with a plastic handle in the front that virtually screams "diner."
"We've been building these since the 1950s," he says. "Today they're the smallest part of our business, and declining." That's because they've been superseded by the company's “Gemini” brewers, which use digital technology to brew coffee and keep it at a precise temperature. Digital automatic cappuccino dispensers are another fast-selling item.
The Gemini assembly line, which used to turn out about 32 machines with 13 workers, has been refined to the point where it can turn out 40 machines a day with six workers.
"That's what you have to do to survive," Laws says.
Not all the issues Laws raised with me in our conversation over coffee (naturally) are the direct result of action by the Legislature or the governor or are easily resolved in Sacramento. Some are the consequence of life in a teeming region.
High housing prices, for instance. Some of the plant's workers have to commute 100 miles so they can live in reasonably priced communities. The real estate market is a high barrier to recruiting management talent from outside the state. Trying to fill an executive position a few years ago, Laws narrowed the search to two candidates living back East. "At the end of both interviews I said, 'Do you have a quarter of a million dollars?' " he recalled. " 'Because that's what you'll need for a down payment on a house here.' " Neither took the job.
Yet it's plain that the state government has failed in precisely those areas where it can make a difference. Laws' main concern isn't strictly how much money the state spends -- it's that the bucks don't go where they count.
His two biggest issues are education and infrastructure. "We pay a fortune here to educate people on basic things like writing and math skills that they should have learned in high school," he says. The company, whose workforce is mostly Latino, also provides training in English as a second language -- including for some employees who came through the public schools.
What does that tell you? The state's educational spending per pupil ranks 26th in the country, according to the U.S. Census Bureau. Lest you think that California teachers are wildly overpaid, the bureau says the state ranks 25th in salaries per pupil and 28th in benefits. Any way you cut it, we're not spending enough to stay competitive, and the reverberations rattle the shop floors of companies like Curtis.
Then there's that lifeblood of any firm whose products can't be shipped through cyberspace -- transport.
Traffic congestion in the L.A. basin has become a round-the-clock hassle. Laws says one of his biggest customers, a coffee company with a national reach, opened a local facility here to be near its own big customers, only to find that navigating the overstressed road system drove its costs to twice its expectations.
When I mentioned that to an L.A. Chamber of Commerce official, he told me those conditions may be alleviated by $40 billion in projects to be funded by Measure R, passed by county voters in November. But the half-cent sales tax imposed by that measure has driven the overall rate in L.A. County to a ridiculous 9.75%, thanks largely to Sacramento's taste for insane budget and tax policies and the voters' penchant for oddball spending mandates.
That brings us to a fundamental issue: the dysfunctional state government. One reason the state doesn't have enough money to provide essentials like decent education and adequate roads is that it squanders resources on lower-priority items, such as jailing marginal criminal offenders and giving grandchildren of elderly homeowners a property tax break.
"What does the government of California have to do with stem cell research?" Laws asks, referring to the $6-billion program voters blithely added to the state Constitution in 2004. Our discussion didn't touch on the morality or justice of stem cell research generally, by the way, but about the foolishness of dictating such spending to the Legislature while roads and schools are crumbling.
To Laws, ineffectual political leadership is a business issue. "Something isn't working here," he says. The ideological divide between Democratic and Republican lawmakers means gridlock, as does the inexperience of our elected representatives. "Term limits are a disaster. Government is so complicated today that you need professionals -- I think we ought to pay legislators more, to attract the best and the brightest."
Yet he says Wilbur Curtis isn't a candidate to move out of state. "We've been here since 1941. The third generation is here and the fourth generation is starting to work here. We're not going anywhere. We're Californians. We want to get it fixed."
Michael Hiltzik's column appears Mondays and Thursdays. Reach him at firstname.lastname@example.org, read past columns at www.latimes.com/hiltzik, and follow @latimeshiltzik on Twitter.
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