In February, another California-based manufacturer broke ground on its new headquarters in Hutto. JRS Co. Inc., a sign frame manufacturer, announced it was relocating to Williamson County from Covina, California, a city approximately 20 miles east of Los Angeles and the company’s home since it was founded in 1965. JRS CEO Brad Jaques said the manufacturer will bring with it “at least” 25 employees from California.
Additionally, at least three West Coast companies have either opened offices or relocated entirely to Pflugerville in the past three years, according to Pflugerville Community Development Corp. figures. LifeLast, which designs and makes protective linings for pipelines and other industrial purposes, opened its new plant and headquarters off SH 130 in 2015, relocating 9 employees to Pflugerville from Vancouver, Washington.
“It was a pretty straightforward business decision,” said Jeff Burrato, president of LifeLast.
These three companies have all attributed two major factors for leaving their longtime homes on the West Coast and relocating their bases to Central Texas—quality of life and lower costs across the board for the company and its employees alike. Overall, 256 companies have either expanded or relocated entirely to the Austin area since January 2013 from outside of Texas, according to figures from the Austin Chamber of Commerce.
Central Texas’ relative affordability and high quality of life continue to draw not just out-of-state residents, but also other Texans, according to Mark Sprague, state director for Independence Title.
“I don’t see growth slowing barring anything catastrophic. We’re still affordable compared to the rest of the country,” Sprague said.
MIGRATION NUMBERS
Migration continues to spur the tremendous growth of the region, with Travis and Williamson counties experiencing a combined net migration total of 43,848 in 2016, according to Internal Revenue Service data.
While out-of-state migration to the region continues to grow, residents moving to Central Texas from within Texas leads the migration trend. The 2016 county-to-county IRS data shows that Dallas County, Harris County and Bexar County account for three of the top migration counts to Williamson and Travis counties.
Two California counties constitute a large portion of migration into Central Texas. Los Angeles County and San Diego County accounted for 1,278 and 608 new residents to the region, respectively.
The IRS data shows that people are moving to Central Texas from all across the nation, though. Miami-Dade County in Florida, Maricopa County in Arizona and Cook County in Illinois—the counties of Miami, Phoenix and Chicago, respectively—round out the top five counties residents relocated from in 2016.
In all, 33,633 people moved to Travis or Williamson counties from other states. An additional 478 residents moved to the area from outside the country. The Texas Department of Transportation charges a $90 new resident tax for new Texas residents registering cars with the state. If all of those out-of-state and foreign residents registered cars and paid this tax, the state would collect about $3.07 million in revenue from Central Texas alone.
COST COMPARISONS
Burrato stated the proximity to Mexico and industrial hubs in the Gulf states wound up as a greater appeal for his company than any other operating cost. LifeLast is now headquartered next to SH 130—a major toll road—and is mere hours away from seaports and the U.S.-Mexico border.
But the Bullets2Bandages owners realized the company would have to leave California if they wanted to continue to expand due to high operating expenses, according to Montgomery.
“Everything from payroll taxes to worker’s compensation cost to utilities to rent—everything that goes into the cost of running a business, it’s a lot cheaper here [in Texas] than there [in San Diego],” Montgomery said.
Bullets2Bandages is located in a roughly 1,700-square-foot warehouse on the southern end of Round Rock’s city limits. Montgomery stated the company would have paid more for rent for less space if it had remained in San Diego.
Texas’ more relaxed regulations and lower tax rates for businesses were other reasons Bullets2Bandages moved to Round Rock, according to Montgomery. When the company decided to leave California, it immediately began looking at states with no personal income tax.
Texas does not have a corporate income tax, either, though the state does impose gross receipt taxes.
The Tax Foundation, a Washington, D.C.-based tax policy research think tank, lists Texas 13th on its 2018 State Business Tax Climate Index. California ranks 48th in the report, while Wyoming is listed as the top state in the country.
That report analyzes and ranks states based off corporate and personal income tax rates, property taxes, sales tax rates and unemployment insurance taxes.
“[Our employees] didn’t get a salary increase coming here, but they’re taking home a lot more money just because the state of Texas isn’t taking nearly as much out of their paycheck as the state of California was,” Montgomery said.
Nestor Tamares, one of the Bullets2Bandages employees who relocated from California, said that in addition to taking home more pay, he is paying 40 percent less for rent in north Austin than he paid for rent in San Diego.
“And it’s a much nicer neighborhood, too,” Tamares said.
Other employees at Bullets2Bandages noted the area offers cheaper gas, lower utilities prices and cheaper price tags on common amenities, such as furniture.
When JRS broke ground on its new facility in Hutto in February, Jaques at the time said that many of his employees in Texas will be able to afford a house for the first time.
In Los Angeles County, the former home of JRS, the median home price is $255,600 more expensive and more than double the median home value in Williamson County, according to data from the U.S. Census Bureau’s 2016 American Community Survey. The median monthly rent price in Williamson County is $140 less a month than in Los Angeles County and $275 less than in San Diego County.
Despite that, the average annual wage in the Los Angeles and San Diego is just $5,000 more than the average annual wage in the Austin-Round Rock metropolitan area.
“Once [the employees] saw the cost of living here … they said, “OK, I can envision moving here,’” Montgomery said.
Cost of living does not appear to be a major factor for other relocating out-of-state residents, however. Median home values in Miami-Dade County, Cook County and Maricopa County are all lower than the median home value in Travis County and comparable to the value in Williamson County.
In-state movement
Similar trends can be seen in migration numbers for residents who moved to Central Texas from across the state. Median home prices are lower in Dallas County, Harris County and Bexar County than in either Travis County or Williamson County.
At the same time, the Austin area has the lowest unemployment rate of any of those metropolitan areas. Only Midland, Amarillo and College Station have lower unemployment rates than the Austin-Round Rock MSA, according to April figures from the U.S. Department of Labor. These migration numbers suggest Texans and others are moving to the area for quality of life and opportunity—not affordability.
“People really want to be in Austin. Pflugerville and Hutto are welcomed alternatives,” Sprague said. Sprague relayed that a peer had recently told him that Austin was considered the second most popular tourist destination in the United States, behind only Las Vegas.
Burrato said Austin’s culture was one of the driving factors that caused LifeLast to choose Central Texas over other regions of Texas. The president said that at one point raw material suppliers were actually requesting the company relocate to Houston.
“When we invited our employees to come down with us, there needed to be a place that was somewhat similar feel and culture to where we were leaving. Austin was as close to the Portland-Vancouver area than anywhere else in Texas,” Burrato said.
Before Bullets2Bandages relocated to Round Rock, Montgomery and the company’s executives paid to bring Tamares and its other employees to visit the area. The trip served as a recruitment pitch of sorts to its own employees.
“The reason we didn’t go to Lubbock or Waco or El Paso was I wanted some of our employees to come with us,” Montgomery said. “If I wanted to entice them to move from San Diego it would have to be to move to a desirable place to live.”
See the rest of the real estate trends in Round Rock, Pflugerville and Hutto here.
