Out of California

REVIEW SUMMARY
Company. Accutek Packaging Equipment Companies
Industry. Manufacturing
Key. Florida could benefit from companies fleeing high-tax states such as California.

Florida Gov. Rick Scott may want to add California to his list of high-tax states from which to recruit employers.

Consider the case of Accutek Packaging Equipment Companies, a privately held manufacturer of packaging equipment now based near San Diego.

Darren Chocholek, the company's chief financial officer and vice president, says he's so impressed with Florida's favorable tax and regulatory climate that he's considering moving his company's headquarters to Fort Myers.

Chocholek formed a separate company in Florida and recently acquired enough industrial space in Fort Myers and Cape Coral to fill two football fields. The 133,000 square feet of space Chocholek acquired in the Fort Myers area is more than the 118,000 square feet Accutek owns in California, where 70 employees work.

When you factor in taxes and regulations, Chocholek estimates labor in Florida costs 20% to 25% less than in California. It's also less expensive for executives to live in Florida, which has no state income tax. California taxes 11% of high earners' income.

Still, Chocholek (pronounced cho-ho-lek), 42, says his neighbors don't understand why he's moving to Florida. “Everybody thinks we're crazy,” he says. “But all our customers think it's great.”

Fact is, many of Chocholek's customers have already moved out of California for the same reasons Accutek is expanding to Florida. “Every third customer is moving out of state,” Chocholek says.

Accutek currently has about 11,000 customers, which range from industry giants such as Procter & Gamble and L'Oreal to small entrepreneurs who make small batches of hot sauces. Accutek makes equipment that fills bottles, caps them and labels them. The machines cost from about $500 for a handheld capper to as much as $400,000 for one that fills, labels and caps 700 bottles a minute.

Those customers who remain in California tell Chocholek: “Wow, I wish we could do it.” What's more, Accutek's Florida location now allows it to be closer to customers on the East Coast and South America.

Chocholek is somewhat of a pioneer by moving across the country. Jerry Messonnier, a broker with the commercial real estate firm Grubb & Ellis 1st Commercial in Fort Myers, says it's hard to lure Californians out of that state.

“People from California don't want to live in this weather,” says Messonnier, who has lived in California's temperate climate and helped Chocholek find space in Fort Myers. “You get someone to move from L.A. to Fort Myers or Naples, that's a culture shock.”

But Chocholek says he grew up in the Midwest and finds the Gulf Coast of Florida more hospitable than its east coast.

Taxes and regulations
For manufacturers like Accutek, California's regulations are so burdensome that they've become an everyday aggravation.

For example, at least four agencies regulate occupational safety in the San Diego area. Federal, state, county and the local fire marshal all have a say in how the company operates. Recently, for example, San Diego County ordered Accutek to obtain a $300 permit to store cans of spray paint. “The county is the worst,” he says.

Still, Chocholek was surprised when Lee County officials told him he needed a permit to adjust the sprinkler system in his new Fort Myers building. Changing building interiors in California isn't as strict as it is in Florida, he grumbles.

But clearly the lower cost of manufacturing in Florida is much more advantageous than California. “Energy is way cheaper here,” he notes. That's because power companies in Florida don't have to subsidize “renewable energy” projects and low-income households like they do in California, which lightens the burden on employers.

Chocholek is most concerned about the disappearance in California of the small, risk-taking entrepreneur. He says those are the kinds of customers Accutek can help grow into large operations.

For example, Chocholek says the small operator who makes sauces in his kitchen may grow his operation substantially and buy Accutek's filler machines over the business's lifetime. “That guy has disappeared in California,” Chocholek frets.

On the tax front, California's state income taxes create dilemmas for employers and employees alike. For example, Chocholek warns employees that a raise may vault them into the next tax bracket and they might actually bring home less money after a raise than they did before.

“Taxes are huge,” says Chocholek. “My Dad moved here.”

Florida headquarters
While Chocholek has acquired more space in Florida than in California, moving the company's headquarters to Fort Myers remains under consideration.

Initially, doing business as Accutek Factory Outlet in Florida, Chocholek plans to start with a sales office of about a half dozen people who will service customers on the East Coast, the Caribbean and Latin America. “Eventually, I'd like to do manufacturing here,” Chocholek says.

Accutek, which is a privately held, family-owned business, generates between $10 million and $20 million annually, Chocholek says.

The last few years have been a challenge, in part because the 220 finance companies that helped Accutek's customers have been reduced to three or four by the financial crisis.

Chocholek says it will take about a year to decide on expanding Florida's operations. “Once I build up sales, I'm going to have to look at shipping costs,” he says. With the exception of real estate, the company has grown since 1987 without debt.

Depending on the success of Florida's expansion, Chocholek says he might replicate the model elsewhere.

Moving the company's headquarters from California isn't going to be an easy decision. What's more, Chocholek says he plans to maintain the company's California manufacturing facility.

Chocholek says Florida state officials haven't been particularly aggressive about courting the company. Economic development officials in the Tampa area didn't return Chocholek's calls and only Lake County was responsive.

While California's business-retention efforts are nonexistent, Chocholek says the state of Florida should take a more aggressive approach to recruiting companies to the state and not leave it up to each individual county.

Chocholek's first choice was Fort Lauderdale because of its airport access to the east coast and South America. But commercial real estate costs were excessive and people were rude, he says.

While Fort Myers was more competitive for commercial real estate, Chocholek says Southwest Florida International Airport isn't as accessible as Fort Lauderdale's airport.

“The flight schedule is really poor,” he says. “They need more international flights.”