These costs become a significant factor in the Medium Cost and especially the High Cost cities. There aren't many such cities in California, but usually they are next to less-costly cities where real estate and labor costs are similar. Some of the High Cost cities can overcome their relative disadvantages in the short run. But these cities are betting they can out-race the cyclical nature of business. And the impact of high taxes is magnified by their high real estate costs.
Local taxes are but one of the many factors that influence business location decisions.
Accordingly, High Cost cities must better position themselves for future economic challenges. Like any downsizing corporation in a competitive global economy, more High Cost cities need to cut fixed expenses. Infrastructure burdens are one contributing factor - some larger, older cities like Los Angeles are providing a disproportionate level of infrastructure for their neighbors. Cities' bureaucracy-swelling labor practices also contribute to high business costs. The Cost of Doing Business Survey includes data on number of city employees per 1,000 residents.