Governor’s Staying Power

SANTA ROSA, Calif. —  On a recent afternoon, the phone rang in the home of Andy and Rachel Berliner, the husband and wife owners of Amy’s Kitchen Inc., an organic food company here.

“Berliner, huh?” came the famous voice on the other end of the line. Then, in German: “Ich bin ein Berliner!”

Having delivered the joke -- President Kennedy made that line famous during a speech in Berlin -- Gov. Arnold Schwarzenegger got quickly to the purpose of his call: What could he do to keep the Berliners from moving their business and its 750 jobs out of California?

Such personal appeals from Sacramento are common these days. Schwarzenegger has asked aides to pass along the names and phone numbers of businesses thinking about quitting the state and has schedulers build time into his day to make calls.

The conversations often run 20 minutes or longer. The governor and the business owners talk about an array of expenses, from workers’ compensation premiums to electricity charges to land prices. In several cases, Schwarzenegger has followed up by creating so-called A-teams of senior aides to work with individual businesses. (The A is for Arnold.)

“He makes as many of these calls as I bring to his attention. He’d like me to bring him more,” said David Crane, a senior advisor to Schwarzenegger on jobs and economics. “He’ll talk to businesses of all sizes. The message is: ‘Please don’t leave. Give us a chance.’ ”

The governor’s experience with Amy’s Kitchen suggests the benefits of the personal touch -- and its limitations.

Flattered and impressed by the personal attention, the Berliners told the governor they would delay their move at least until November to give him time to reduce business costs. He is, after all, close to a deal with lawmakers on a reform of the costly workers’ compensation system that might reduce premiums.

But considering that they figure they could save $4 million a year by relocating to Oregon, the Berliners say they can’t rule out heading north.

“We love California. It’s home. If this was simply about making money, we would already have moved our plant somewhere else,” Rachel Berliner said. “We are hoping the state can change some things that will give us reasons to stay.”

The Berliners, Democrats and vegetarians who don’t own a television, met in India in 1979 on a spiritual retreat. They married in 1985 and had daughter Amy -- for whom their business is named -- in 1987.

After Amy’s birth, they were often too busy caring for the baby to cook. When they had a difficult time finding prepared vegetarian meals from natural ingredients, they thought they smelled an opportunity.

Working out of the old dairy farm in Petaluma where they still live, they started a small business making frozen, organic vegetarian potpies. The first office was their barn.

Amy’s Kitchen grew steadily as the Berliners added to their product line. They occupied four buildings in Rohnert Park before moving into their current 107,000-square-foot facility in Santa Rosa in 1995.

At first, there was so much extra space they rented out part of the plant to a winery. Now, their facility is no longer big enough for a firm that makes 120 products, from frozen foods to soups and pasta sauces, and generates annual revenue of $100 million.

The Berliners say they tried to limit growth to 25% a year, but the number of employees has doubled in the last five years. Jobs start at $7.50 an hour. The Berliners offer a 401(k) retirement plan, medical and dental coverage, 21 English classes each week for employees and a scholarship program for employees’ children; there’s also a company soccer team.

A year ago, the Berliners began looking for a new, larger facility. A businessman in Chico who prints their packaging gave them a worksheet that compared the costs of doing business in California to other locations: Grand Junction, Colo.; Reno and Sparks, Nev.; and Medford, Ore.

The biggest issue for them is workers’ compensation. Like many in the high-cost, high-quality end of the food business, Amy’s Kitchen has resisted automation; it has employees devoted to hand-folding enchiladas, for example.

Medford, not far from the California border, appealed to them. A workers’ comp premium in Oregon to insure a pizza dough maker -- pizza being one of the most popular products from Amy’s Kitchen -- would be 70% less than what they pay in California. The estimated annual savings would be $2.4 million on workers’ comp premiums alone.

Oregon also boasts lower electricity prices than most places in California. With the cost per kilowatt-hour in Medford less than one-third what Amy’s Kitchen pays PG&E; Co., the savings would add up to more than $1 million a year. And Amy’s Kitchen would save an estimated $225,000 on sales taxes and $148,000 on state income taxes.

In June, Andy Berliner told a local newspaper that the firm might be leaving California.

The Berliners have considered other options in the state. The Central Valley towns of Modesto and Turlock, for example, are appealing because their irrigation districts provide water and power at costs comparable to Oregon’s. Modesto officials brought the firm to the attention of Schwarzenegger’s business, transportation and housing secretary, Sunne McPeak.

“This is so emblematic of the kind of employer that has made California what it is,” McPeak said. “We need to keep them here.”

In the last two months, McPeak has arranged discussions between the Berliners and water agencies in Santa Rosa and Modesto. State officials took part in conference calls with the couple and the city of Modesto about acquiring land for Amy’s Kitchen.

The governor’s phone call was made in large part to reassure the Berliners of his commitment to changing the workers’ comp system, according to his aides. After beginning with his “Ich bin ein Berliner” line (“he said that a few times; he really liked that,” Andy Berliner said), Schwarzenegger said he was committed to delivering meaningful workers’ comp reform this year. If there is no legislative deal, he pledged to the couple -- as he has publicly -- to sponsor an initiative on the November ballot.

“Please be patient,” the governor said, asking them to commit to delaying any move for a few months.

“He said if we could wait and see how successful he’ll be with workers’ comp, we should stay,” Rachel Berliner said. “It was really sweet.

“Very often in dealing with bureaucratic situations, I’ve felt placated. I did not feel like I was being placated. I felt he was leveling with us.”

This month, Schwarzenegger’s aides asked Rachel Berliner to become a member of a private, not-for-profit commission charged with keeping businesses in the state. She agreed. And she and her husband postponed a meeting with Oregon’s governor, who had been scheduled to visit them last month.

“We’re going to give Arnold some time,” Andy Berliner said, before quickly adding: “We’re going to continue to look at our options.”