California Officials Persuade Taco Bell To Stay in State

CHALK one up for the Golden State.

Taco Bell, one of California's best-known fast-food companies, has decided not to make a run for the Texas border. Since company officials announced their intention to consider transferring headquarters from Irvine, Calif., to Dallas in March, top state officials had been trying to halt the move. A tug of war ensued involving calls from both California Gov. Pete Wilson (R) and state Assembly Speaker Willie Brown (D), as well as the rejection of a bill that would have given tax credits to large corporations that expanded operations in California.

The announcement came last Friday that this subsidiary of PepsiCo Inc. would keep its headquarters and about 1,000 jobs in Orange County.

``The move will have repercussions because the company is so high-profile, and others have been watching closely,'' says Joel Kotkin, senior fellow for the Denver Center for the New West. California has lost 500,000 to 800,000 jobs since 1990, and scores of companies have been wooed to nearby states such as Utah and Arizona by state delegations offering lower taxes, fewer environmental restrictions, and less regulation.

MR. Kotkin says the Taco Bell case will help stop the appearance of a business exodus at a time when more indicators show that the state is starting to rebound.

Taco Bell had been offered dozens of sites in Georgia and Texas and had also been wooed personally by Texas Gov. Ann Richards (D). The Richards offer included $10 million in tax breaks, no state income tax, and fewer governmental regulations than California.

Shuwa Investment Corporation, a Tokyo-based real estate firm, is credited with helping convince Taco Bell to stay. Because California's regional slump in commercial real estate has continued longer than that of the nation as a whole, Shuwa was anxious not to lose another high-profile tenant. The firm offered half-price on office rent and a $4 million remodeling package to accommodate Taco Bell's need to expand by up to 50 percent.

According to John Martin, chief executive officer of Taco Bell, the company's change of heart - as well as its decision to scrap plans to build headquarters of its own in Atlanta or Charlotte, N.C. - was dictated by the bottom line.

``The economics of building a new facility just didn't make sense in today's environment,'' Mr. Martin said on Friday in a press release.

``It's a symbolic victory for the state at a crucial time,'' says Jack Kyser, president of the Los Angeles Economic Development Corporation. Last summer, the state legislature passed a reform package that included a revamp of costly workers' compensation, insurance laws, and tax credits for investments in new machinery. Governor Wilson and Democratic challenger Kathleen Brown are head-to-head in a gubernatorial race with both sides claiming job creation as a No. 1 priority. And Sacramento lawmakers are now trying to shore up the projected $3 billion to $4 billion deficit in the state budget.

``It shows others that the state is trying to improve the business climate and is taking business flight seriously,'' Kotkin says.