For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “30-Year Trendlines Can’t Be Reversed Overnight”
FIRST 100 DAYS…PROMISES & TROUBLES AHEAD
- Newsom Concludes 100 Days – His Top 10 Promises “Seeded”
- California Revenues $2.2 Billion Under Projections
- If April Tax Receipts Decline, State Budget Troubles Arise in May
- Governor, Legislature Should Probe Tax Breaks
WILDFIRES & WATER
- Governor’s “Dramatic Changes” for Wildfire & Catastrophe Response
- CA Water District Lawsuit Threatens Western US Colorado River Accord
ONLY IN CALIFORNIA
- California Ag Leads US; San Joaquin Valley Has Top 5 Counties
- Will California Company Lead Private Space Flights?
- Chocolate Bay Area Style: From Seed to Bar
- @overheardLA – It’s A Thing!
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
Stay current daily! For our focused updates via Twitter: @jrgualco / @robertjgore / @gualcogroup
READ ALL ABOUT IT!!
FOR THE WEEK ENDING APRIL 18, 2019
Newsom Concludes 100 Days – His Top 10 Promises “Seeded”
One hundred days into his tenure, California Gov. Gavin Newsom has taken initial steps toward many of promises he made on the campaign trail, from proposing increased funding for homeless services to speeding up firefighting efforts.
He’s far from accomplishing many of his concrete long-term goals, however, like building 3.5 million new homes and creating half a million apprenticeships. He says he’s nevertheless done a lot in his first months in office.
“Thirty-year trendlines can’t be reversed overnight, but we’ve seeded a lot of these things,” Newsom told The Bee in an interview Monday.
At this point in his term, he says he’s most focused on housing, homelessness and health care, as well as dealing with often-confusing signals from President Donald Trump. He says his priorities will be on display next month when he announces his revised budget proposal after months of negotiating with the Legislature.
Here’s a look at 10 promises Newsom made while campaigning for governor. Click or tap each topic to see what Newsom pledged and whether he’s delivering:
California Revenues $2.2 Billion Under Projections
Preliminary General Fund agency cash for the first nine months of the fiscal year was $2.22 billion below the 2019-20 Governor’s Budget forecast of $93.741 billion. Revenues for the month of March were $89 million below the month’s forecast of $8.59 billion.
n Personal income tax revenues for the first nine months of the fiscal year are $2.878 billion below forecast.
Personal income tax revenues to the General Fund for March were $93 million below the month’s forecast of
$4.679 billion. Withholding receipts were $171 million below the forecast of $6.758 billion, and other receipts were $136 million higher than the forecast of $1.242 billion. Refunds issued in March were $60 million above the expected $3.237 billion. Proposition 63 requires that 1.76 percent of total monthly personal income tax collections be transferred to the Mental Health Services Fund (MHSF). The amount transferred to the MHSF in March was $2 million higher
than the forecast of $84 million.
n Sales and use tax revenues for the first nine months of the fiscal year are $68 million above forecast. Revenues for March were $20 million above the month’s forecast of $1.8 billion. March cash includes the second prepayment for first quarter sales and use tax liabilities.
n Corporation tax revenues for the first nine months of the fiscal year are $497 million above forecast. Revenues
for March were $40 million below the month’s forecast of $1.45 billion. Estimated payments were $146 million below the forecast of $773 million, and other payments were $127 million higher than the $773 million forecast. Total refunds for the month were $22 million higher than the forecast of $97 million.
n Insurance tax revenues for the first nine months of the fiscal year were $26 million above the forecast of $1.864 billion. Insurance tax revenues for the month of March were $17 million above forecast. Revenues from alcoholic beverage, tobacco taxes, and pooled money interest for the first nine months of the year were $4 million below forecast, and were $8 million above forecast for the month of March. “Other” revenues were $73 million above forecast for the first nine months of the fiscal year and were $1 million below forecast for the month of March.
http://dof.ca.gov/Forecasting/Economics/Economic_and_Revenue_Updates/documents/2019/Apr-19.pdf
If April Tax Receipts Decline, State Budget Troubles Arise in May
It’s long been said that two things are key to successfully governing California: ample Sierra Nevada snow to keep the water flowing and plenty of income tax payments to keep state services running. Problems with either can trip up even the most charismatic politician.
The wet and snowy winter took water off the worry list for now. As for income tax revenues, this week will help tell the tale — and there are worries under the state Capitol dome.
If April receipts miss the mark, it could mean trouble for the agenda of Gov. Gavin Newsom and the Legislature’s Democratic supermajority.
Newsom’s first budget plan as governor, which was unveiled in January, projected the state will collect $19.9 billion in revenues this month — three-quarters of it from personal income taxes that must be filed by Monday night. Taxpayers who favor installment payments have made January and June important months, too, but April remains a key indicator. The governor will use this month’s revenue collection to revise his spending plan in May, a prelude to legislative approval of a fiscal blueprint in June.
For the April numbers to meet expectations, income tax net receipts of more than $3 billion must be received just on Tuesday — more than $2 million every minute of the day. But that still wouldn’t be enough money to fill the hole left earlier in the year, which means this month’s tally will take on special importance.
Through the end of March, total tax revenues were $2.2 billion below expectations for the fiscal year that ends on June 30. Early data for April suggest revenue is holding steady, perhaps even a little better than expected. But it would take much more cash to bring totals back in line with projections.
So what happened? That’s been one of the big questions in Sacramento over the last few months. Newsom’s budget advisors believe it’s nothing more than delayed tax payments. In February, they argued that Californians who used to pay their income taxes before the new calendar year — and write off those state taxes on their federal taxes — no longer have the incentive to do so under the tax overhaul championed by President Trump. State officials said they assumed the money would show up by the end of April. And so the month of reckoning is here.
If that theory is right, the state’s overall tax revenue picture will be back on track and so will Newsom’s winter prediction of a $21.6-billion discretionary cash reserve. Those dollars are already being counted on to boost a number of programs for needy families and education opportunities for their children. Legislators have been sifting through Newsom’s proposals over the last few weeks while embracing some additional big-ticket ideas — such as funding full access for those in the U.S. illegally to Medi-Cal, the healthcare program for low-income Californians.
But should most or all of the missing money fail to materialize, the governor and Democratic lawmakers will be faced with scaling back some of their ambitious plans now and into the future. After all, it might suggest to budget writers that larger economic forces are at play in disrupting what has otherwise been a solid six-year bonanza of state tax revenues.
Former Gov. Jerry Brown perfected the art of limiting expectations when it came to revenues — and didn’t commit to some key spending plans until long after the tax day dust had settled. Newsom’s approach was to bet big from the beginning; we’ll know in a couple of weeks whether it pays off.
Governor, Legislature Should Probe Tax Breaks
LA Times commentary
What a concept! After blindly giving out generous tax breaks for years, take a hard look to see whether they’re actually benefiting the state.
Do they create jobs? Lure businesses to California? Keep them here? Help companies expand? Fight climate change?
Our legislators and governors should have been asking these questions all along and demanding answers.
They’ve long yammered about conducting more oversight of just about everything the state does, but they invariably lose interest. There’s no political reward in wonky studies. But there’s lots of political risk in closing loopholes and requiring certain interests to pay higher taxes.
It takes only a simple majority vote in the Legislature to create a tax break. But it requires a difficult two-thirds vote to cancel the break and raise a tax. Doesn’t make sense.
Politicians hate to call anything a tax hike, and they’ll twist semantics to avoid it. So all these breaks and loopholes are referred to in government-speak as “tax expenditures.” That’s because they cost the state treasury money.
“Once these things are enacted,” state Controller Betty T. Yee says, “they’re there forever, although they may have outlived their usefulness.”
That’s assuming they ever had a legitimate use beyond enriching the beneficiaries.
Many were brokered in backroom budget deals when state spending plans required a two-thirds vote. There was a lot of vote buying back then. Californians wisely approved a ballot initiative in 2010 that reduced the budget vote to a simple majority.
Sen. Hannah-Beth Jackson (D-Santa Barbara) — considered a pesky liberal by many moderates and conservatives — is trying to shake up the comfy world of tax breaks. She is pushing Senate Bill 468, which would “sunset” — or kill — nine tax expenditures in three years unless they could be justified by the Legislative Analyst’s Office.
Those nine tax breaks are costing the state general fund $7.3 billion annually, Jackson says. To put that in perspective, the general fund for the current fiscal year is $144 billion.
“For too long,” Jackson says, “California has routinely granted generous tax credits and exemptions, which divert billions of dollars away from the general fund, without asking whether they deliver economic or social benefits to our state.
“These are dollars that could be spent on classrooms, addressing the housing crisis or combating wildfires and climate change.”
There needs to be “transparency and accountability,” she says, so “Californians can be sure their taxpayer dollars are being spent prudently, fairly and wisely….
“This is about shining light into some dark corners of our state budget that haven’t had sunshine for decades, if at all.”
Allan Zaremberg, president of the California Chamber of Commerce, says he’s all for studying everything, including the tangled web of state regulations.
“But frankly, for some of these measures — like the [research and development] credit — you don’t have to sunset it to look at it,” he says. “You don’t have to threaten people to have a good evaluation.”
Jackson’s bill is strongly backed by the California Teachers Assn. and the California School Boards Assn. They have gleams in their eyes: Roughly 40% of the state general fund goes to K-12 schools.
Few legislators, I suspect, know much about these complex tax breaks. The only real experts are lobbyists for the benefiting interests.
One loophole in Jackson’s sights is called the “water’s edge” provision. It allows multinational corporations to choose their method of taxation. The state’s cost is $2.2 billion this year.
Another target is that tax credit for research and development — a $1.6-billion item.
“It’s a great idea if California wants to relinquish its role as the epicenter of innovation and job creation. Otherwise it’s a terrible idea,” Silicon Valley Leadership Group President Carl Guardino told CALmatters, a nonprofit news group.
Jackson wants to investigate a $634-million state sales tax exemption on animals used for human food, and on feed for that livestock. Also covered by the exemption are edible plants and their fertilizers.
She also hopes to look at a $172-million sales tax exemption for farm equipment and an exemption for custom computer programs. The state doesn’t even know how much it’s losing on the software, except that it’s more than $100 million a year.
Jackson is barely scratching the surface of state tax breaks.
She isn’t even looking at all the income tax loopholes. They total $49 billion this year, according to the state Finance Department. But some thankfully are politically untouchable, such as the home mortgage interest deduction. It costs $4 billion. But are interest deductions on vacation homes justified?
“If we’re looking for some funding,” Yee says, “I’d say second homes is a place to go when many don’t even have a first home.”
The Finance Department counts up $6.6 billion in corporate tax loopholes and $9.6 billion in state sales tax exemptions.
Practically all should be looked at by our elected representatives.
“That’s a good idea,” Jackson told reporters. “But rather than take on the whole world, I thought we’d take one step at a time. This is low-hanging fruit. Why are we giving tax breaks to these programs?”
https://www.latimes.com/politics/la-pol-sac-skelton-tax-expenditures-20190418-story.html
Governor’s “Dramatic Changes” for Wildfire & Catastrophe Response
Saying the costs of wildfires must be spread more broadly as climate change worsens, Gov. Gavin Newsom said California must consider dramatic changes in California law Friday to give bankrupt PG&E and other big utilities greater legal protection against liabilities that can spiral into the billions of dollars.
Releasing a wide-ranging suite of proposals from a “strike force” he created two months ago, Newsom stopped short of endorsing what is likely the most controversial recommendation: a shuffling of costs that would likely take money from insurance companies and utility ratepayers, while potentially trimming damage payouts to wildfire victims and their lawyers. So far the Legislature, angered by the wildfires blamed on PG&E, has shown little appetite for letting utilities off the hook for wildfire damages and explicitly rejected a similar recommendation last year.
But Newsom, calling for swift action from the Legislature, said changes to the liability laws must be under consideration.
“Everyone wants everyone else to pay for it,” Newsom said as he gestured to a slide showing the billions of wildfire damages incurred the past two years. “We’re all in this together …. We all have a burden and a responsibility.”
The task force wrote: “No single stakeholder created this crisis, and no single stakeholder should bear its full cost. Any real plan must allocate costs resulting from wildfires in a manner that shares the burden broadly among stakeholders, including utilities (ratepayers and investors), insurance companies, local governments, and attorneys.”
News of a possible change in the liability standards sent PG&E Corp.’s stock price up $3.95 a share, to $23.08.
Still, Newsom and his panel were unsparing in their criticism of PG&E, noting that the utility has been at fault for numerous fires and other disasters over the years. Newsom was urged to consider the “municipalization of all or a portion of PG&E’s operations” — a government takeover — or carve the utility into smaller and potentially safer pieces.
But the task force, made up of Newsom’s in-house advisers plus officials from Cal Fire, the Public Utilities Commission and other agencies, offered few details about either of those ideas. Nor did it provide a concrete plan for dealing with the company’s immediate crisis — the estimated $30 billion in wildfire liabilities from 2017 and the Camp Fire in 2018, which drove PG&E into bankruptcy shortly after Newsom took office in January.
Newsom said “all options are on the table” PG&E’s future if the company doesn’t cooperate with the state. “The state has suffered because of their neglect.”
PG&E, in a prepared statement, said it is “embracing the calls for change” and will work with the governor and others to “make the energy system safer.”
The task force was adamant that PG&E and other utilities must be held accountable for their role in causing wildfires. It recommended changes to how the Public Utilities Commission regulates the companies by linking the rate-setting process and company profitability to fire safety performance.
At the same time, it also said it’s time to consider ways of shifting more of the cost burden to others, while acknowledging that any effort will cause enormous complications — particularly in the insurance business.
As it is, the panel said insurance companies are already raising rates and refusing to renew homeowner policies in fire-prone regions of California, and changes in the liability laws could make insurers even more reluctant to offer coverage in fire zones. Insurers are already suing PG&E to recover the more than $8 billion in claims they expect to face from the Camp Fire alone.
“Shifting more of the direct financial burden of wildfires to insurance companies may also affect the cost and availability of property insurance” in high-risk areas, the panel wrote.
And Newsom, without adopting any specific proposal, acknowledged that getting major changes through the Legislature won’t be easy.
“This is tough stuff; this is the sausage making,” he said, before taking a swipe at his nemesis Donald Trump: “Unlike the president of the United States, I’m not a dictator.” Still, he called on the Legislature to “get something big done” before the session ends July 12. And he said the political climate has likely changed after the devastation of the Camp Fire, which drove PG&E into bankruptcy and left the other big utilities saddled with severely weakened credit ratings.
“It’s a different world completely,” he told reporters at a press conference at the Office of Emergency Services operations center near Mather business park.
The panel offered up multiple ideas for shifting costs. One would be the creation of a state-run “wildfire fund” to help utilities deal with the immediate costs of mega-fires, enabling them to pay claims to victims more quickly. The fund “would create a buffer to absorb a significant portion of the wildfire liability costs that might otherwise be passed on to ratepayers,” the panel wrote.
The fund would be financed by “a substantial contribution” from utility shareholders. But a key element in making the program work would come from the insurance industry, which would have to “accept a cap” on how much carriers could collect from utilities when they sue for reimbursement.
As an alternative, the panel suggested that utilities be given greater legal protection against fire liabilities — an idea likely to turn into a major fight in the Legislatu
In passing SB 901 last year, lawmakers gave the Public Utilities Commission more leeway to allow utilities to pass wildfire costs onto ratepayers. But they refused to enact the broader legal reforms the companies sought and are now being recommended by the governor’s strike force.
State Sen. Bill Dodd, D-Napa, author of SB 901, said he’s willing to “partner and refine a package of reforms to protect the state in this ‘new normal.’”
Specifically, Newsom is being urged to seek changes to the legal doctrine known as “inverse condemnation.”
Under the current system, inverse condemnation makes California utilities liable if their transmission wires or other facilities cause a fire, regardless of whether the companies were negligent or not. The Public Utilities Commission can allow the utilities to charge ratepayers for those costs — if the utilities acted “prudently” — but the process can take years and in the meantime utilities’ finances can deteriorate rapidly. Wall Street has already downgraded the credit ratings of California’s other two big utilities, Southern California Edison and San Diego Gas & Electric, and Newsom’s task force warned they could be in danger of bankruptcy if changes aren’t made in the law.
Replacing the current legal model with what Newsom called a “fault-based standard” would alleviate some of the utilities’ burden, but make it harder for insurers and fire victims to get compensated.
Dario de Ghetaldi, a Bay Area lawyer who represents fire victims suing PG&E, called the idea “dumb.”
“It puts the burden on all the innocent people … who were damaged,” he said.
An insurance industry representative said homeowners’ rights to recover damages should remain a top priority, but didn’t comment directly about the task force’s proposals. “We stand ready to work collaboratively to tackle these challenging issues,” said Jeremy Merz, a vice president with the American Property Casualty Insurance Association, in a prepared statement.
Some of the recommendations unveiled Friday dovetail with initiatives Newsom has already taken, such as redeploying National Guard troops from the Mexican border to help with firefighting and working with the federal government to manage forests more aggressively. The panel urged the state to consider a funding mechanism to help homeowners retrofit their homes for fire resiliency — one day after a McClatchy investigation revealed that homes built to modern fire-resistant standards were far more likely to survive November’s devastating Camp Fire.
https://www.sacbee.com/news/politics-government/capitol-alert/article229153379.html?cid=DM14148&bid=166864019#storylink=cpy
CA Water District Lawsuit Threatens Western US Colorado River Accord
A dispute between two major California water agencies is threatening to derail a hard-won agreement designed to protect a river that serves 40 million people in the U.S. West.
The Imperial Irrigation District, the largest single recipient of Colorado River water, on Tuesday sued a Los Angeles water utility that agreed to contribute most of California’s share of water to a key reservoir under a multistate drought contingency plan.
The action came the same day President Donald Trump approved federal legislation to implement the plan, which Arizona, California, Colorado, Nevada, New Mexico, Utah and Wyoming spent years negotiating.
The agreement is meant to keep the country’s two largest reservoirs on the Colorado River from dropping so low they cannot deliver water or produce hydropower amid prolonged drought and climate change.
The Imperial Irrigation District said it wouldn’t join the drought plan unless it secured $200 million in federal funding to address health and environmental hazards at the Salton Sea, a massive, briny lake southeast of Los Angeles.
The Metropolitan Water District, which serves Los Angeles, essentially wrote Imperial out of the drought plan to prevent delays in implementing it. It took on the amount of water that Imperial pledged to contribute to Lake Mead. With that, Metropolitan’s contribution could top 2 million acre-feet through 2026 when the drought plan expires. An acre-foot is enough water to serve one to two average households a year.
Imperial’s lawsuit claims the Metropolitan Water District sidestepped an environmental law.
“Where the water supply would come from and what environmental impacts could result from Metropolitan’s need to acquire such water to fill this sizable hole in its water supply are entirely unknown,” Imperial wrote in court documents filed in Los Angeles County Superior Court.
A California law requires state and local agencies to identify any potential environmental effects of their actions and address them if possible. Imperial is asking the court to force Metropolitan to comply with that law, which could delay the larger drought plan from being implemented.
Metropolitan has said storing water in Lake Mead under the drought plan doesn’t require review under the California Environmental Quality Act because any changes to its facilities would be minor.
“We are disappointed that the Imperial Irrigation District is using litigation as a tool to block implementation of the drought contingency plan,” Metropolitan general manager Jeff Kightlinger said in a statement Wednesday. “Parties on the Colorado River need to collaborate during this time of crisis, not litigate.”
Imperial took the stance in December that the drought plan would be exempt from the environmental law. District spokesman Robert Schettler said Wednesday that came before Metropolitan strayed from a version that Imperial approved with stipulations.
The seven states and U.S. Bureau of Reclamation have said the drought plan won’t affect the Salton Sea, but the Imperial Irrigation District isn’t convinced.
“The logic in going forward without IID was that the DCP (drought contingency plan) couldn’t wait for the Salton Sea,” general manager Henry Martinez said Wednesday. “This legal challenge is going to put that logic to the test, and the focus will now be where it should have been all along, the Salton Sea.”
Tom Buschatzke, director of the Arizona Department of Water Resources, said it’s unclear what would happen if a California judge sides with Imperial and prohibits the Metropolitan Water District from signing final documents for the drought plan.
“We certainly will have to have some conversations among the basin states and Reclamation on how to move forward and what we can or can’t do at that point in time,” he told reporters in Phoenix.
The states were expected to sign final documents next month in line with a timeframe for Mexico also to begin contributing water next year, Bureau of Reclamation spokeswoman Patti Aaron said. She said the agency is reviewing the lawsuit for its potential effects but declined to comment on it.
https://apnews.com/fc500d05bb5243ee99d72b3f9fe89df0
California Ag Leads US; San Joaquin Valley Has Top 5 Counties
California once again led the nation in agricultural sales in 2017, with six Valley counties — along with one along the state’s Central Coast — topping ag sales across the nation.
This according to the U.S. Department of Agriculture’s 2017 Census of Agriculture, which gathers information annually on U.S. farms and ranches and the people who operate them.
Agricultural sales in California exceeded $45 billion in 2017 — about 12 percent of total U.S. ag sales — far outpacing the No. 2 state, Iowa, which had sales totaling about $29 billion, followed by Texas, Nebraska, Kansas, Minnesota, North Carolina, Wisconsin and Indiana.
But while the USDA lists the same top ag counties as the California Department of Agriculture, they don’t list them in the same order.
Most notably, the federal agency lists Fresno County as the top ag county in the nation for 2017.
CDFA placed Fresno County as third in sales that year, behind Kern and Tulare counties, respectively.
CDFA officials couldn’t be immediately reached to determine if the USDA census used different criteria in determining total ag sales.
The other four top ag counties were, in order, Monterey, Stanislaus, Merced and San Joaquin, all of which also are among the top seven ag counties on the USDA’s list.
The top commodities produced on farms nationally were cattle and calves, followed by corn, poultry and eggs, soybeans and milk. California lead the nation in milk production, a total of 18 percent.
Other California highlights from the farm census:
– The state’s top commodities were fruits and nuts, with $17.5 billion in combined sales; vegetables, with $8.2 billion; milk, with $6.5 billion; cattle and calves, with $3.1 billion; and horticulture, with $2.9 billion.
– Total farm production expenses for California totaled $37.8 billion.
– The average age of the California farmer was 59.2 years old, compared to the national average of 57.5 years old.
– Military veterans accounted for 10 percent of California farmers, compared to about 11 percent, nationally.
– At 14,552 farms, California was the top state using renewable energy-producing systems in agriculture. Solar was the most common renewable energy-producing system on farms and ranches in the state.
https://www.thebusinessjournal.com/central-valley-tops-list-of-u-s-ag-counties/
Will California Company Lead Private Space Flights?
Virgin Orbit is poised to complete the first flight of its new space launch system in the coming months in what many see as a key milestone in the burgeoning market for small satellites – in this case placed in orbit via the LauncherOne rocket outfitted on “Cosmic Girl,” a modified Boeing 747-400.
But the California company’s CEO Dan Hart says he’s worried whether the Federal Aviation Administration and other oversight agencies can handle what one of billionaire Richard Branson’s upstart space companies envisions will be hundreds if not thousands of launches in the coming years.
“What they are going to have to do looking forward is they are going to have to respond to an increasing launch rate,” Hart tells POLITICO. “That will be the challenge for them. Everything from the tools that they use and the communications equipment and the staff that they have are going to have to flex to meet the launch rate.”
He added: “If what we see forecast by like every third party analyst out there happened, there will be hundreds of launches a year and the current system, just from a resource standpoint, won’t really be able to step up to that…there needs to be a much tighter communication between launch activity and air travel, so there is no need to close down air space for long periods of time for a launch that gets from the ground to outer space in 10 minutes.”
Hart, who has spent much of his career in the space industry – including working on the Space Shuttle program and the launch of the first GPS satellites — spoke about the company’s big goals for this year; how it is navigating regulatory challenges; and what he sees as the company’s domestic and international competition in the small satellite launch market.
He also urged world governments to “pick up the pace” on the thorny issue of space traffic management given the explosion of satellites and other space-based technologies around the globe.
“It is really time to pick up the pace on space traffic management,” Hart admonished. “The Commerce Department was kind of given the baton last year and that was good to see. There is a lot of work to be done on norms of behavior in orbit, all the coordination, and getting the whole globe on the same page, so that everyone known what is going on in space like they do on airplanes. That is going to take a lot of work and a lot of time.
Interview:
https://www.politico.com/story/2019/04/12/virgin-orbit-dan-hart-space-1271107
Chocolate Bay Area Style: From Seed to Bar
As soon as Todd Masonis opened Dandelion Chocolate’s doors on Valencia Street, he realized he’d need to build another, bigger factory.
“Almost instantly, we were maxed out,” said Masonis, CEO and co-founder of Dandelion, San Francisco’s most prominent bean-to-bar chocolate company.
Now, after about five years of permitting and construction, Dandelion Chocolate’s new 34,500-square-foot factory on the edge of the Mission is ready to debut on Saturday, April 20.
It’s a beautiful, gleaming mass of a factory, designed by Gensler, the same architecture firm behind Facebook Headquarters in Menlo Park and Shanghai Tower in China. Not only does the new factory allow for Dandelion to make a lot more chocolate — potentially 10 times its current 300,000 bars a year once it’s fully up and running — but it also features a small cafe, chocolate salon and classroom.
“Opening this factory is not the end, even though it feels like it because we’ve worked on it for so long,” Masonis said. “It’s really the beginning of a whole new chapter.”
The cafe will be more to-go-oriented than Dandelion’s current Valencia Street space, which will remain open, but will offer a similar selection of bars, drinks and treats.
The salon, meanwhile, will encourage guests to linger over hot chocolate, laminated pastries and intricate desserts via Dandelion executive pastry chef Lisa Vega, formerly of Gary Danko. It’s modeled after chocolate salons and chocolate-focused tea rooms in Paris.
“There’s almost none of that in America,” Masonis said. “We want this to be a destination.”
Dandelion’s stunning new factory at 298 Alabama St. fits into today’s San Francisco, where tourism has hit a record high and wealthy locals are always looking for new experiences — think Instagram-bait spaces like the Museum of Ice Cream.
Between the salon, factory tours and classes, Masonis hopes Dandelion becomes a major draw for both locals and international visitors, a place where someone could easily spend a full day. A Disneyland for chocolate.
Even as a functioning industrial factory, it carries Dandelion’s distinct aesthetic: sleek and modern with black furnishings and gold accents against exposed brick walls. In a nod toward transparency, glass walls divide the cafe, salon and main factory floor. Guests can nibble on a chocolate croissant while gazing at a huge yellow roaster, or they can stroll along a catwalk, hot chocolate in hand, for a closer look at the grinding process.
But for Masonis, it’s not all about the Willy Wonka-esque fun of the factory. He wants Dandelion to be the de facto place in the United States to learn about American craft chocolate.
Most American chocolatiers buy their chocolate from one of a few large companies and then melt it down into bars, truffles and other confections. Dandelion’s chocolate, for example, is made of only cacao and sugar, while milk, vanilla and emulsifiers are common ingredients in other chocolate bars.
When Dandelion launched, Masonis counted only a handful of American bean-to-bar makers. Now he counts more than 200. This new generation of American bean-to-bar makers has led the movement against industrial chocolate, crafting their own wares, developing relationships with cacao farmers and coaxing out the nuanced flavors of cacao beans.
That comes at a cost: Dandelion’s 2-ounce bars go for $8.50 to $12.
“If someone sees our chocolate bar on the shelf, they’re like, ‘Why is your chocolate bar so expensive? I could go buy something else for a third of the price,’” he said.
“It’s really important we educate and explain why chocolate of this style is different.”
At the existing Valencia Street cafe, Dandelion has for years hosted public classes about tasting and making chocolate, but it has lacked an ideal space for such events. There might be one class a night in the cramped office space, and the classes would often sell out months in advance, according to marketing director Jennifer Roy.
The new factory, however, has a dedicated classroom, equipped with chocolate-making stations, adjustable tables and plenty of space for larger presentations.
Already, the April calendar is packed with new classes, and a wider range of them: an exploration of ingredients, a crash course in sourcing, the history of chocolate, plus sessions geared toward kids and families. Tours — with samples of chocolate and cacao sprinkled throughout — are on offer multiple times a day. The standard ($15) covers Dandelion’s entire chocolate-making process, while a family-friendly version ($5) moves at a slower pace.
In a sense, the classes and tours — most of them aimed at regular people who love chocolate — are the kinds of things that Masonis wishes were around when he began tinkering with chocolate in a friend’s suburban garage a decade ago. After selling his tech company in 2008, he started Dandelion in 2010.
This focus on education is one reason Masonis wants to carefully control the growth of Dandelion. New machinery — a mix of vintage and state-of-the-art, like an optical sorter that uses a neural network — will slowly be rolled out, allowing Dandelion to make millions of bars per year, in a few years.
He’s interested in adding more wholesale accounts, but not too many. He’d rather open more Dandelion storefronts — perhaps some smaller cafes like the existing Dandelion kiosk in the Ferry Building or outposts that sell only bars and gift items.
“When people are able to come into a store and try samples and talk to someone who is knowledgeable, that’s a really great experience,” he said. “Up until now, we just didn’t have enough chocolate.”
No new shops are confirmed yet, but Masonis is eyeing major American cities like New York and Los Angeles. Given the success of the four Dandelion locations in Japan, he also foresees a bigger expansion in Asia. And maybe across Europe, too.
It’d be easy to look at the trajectory and think Masonis will look for a big corporation to purchase Dandelion, in the same way that Hershey Co. bought former Berkeley chocolatier Scharffen Berger. Acquisitions of Bay Area craft companies have become increasingly common: In 2017, for example, Nestle bought Blue Bottle Coffee, Heineken took over Lagunitas and New Belgium purchased Magnolia Brewing.
But that’s not the case here.
After all, Masonis has already had his big payday. He and his business partner Cameron Ring — also a co-founder of Dandelion — sold their tech company Plaxo to Comcast in 2008 for a reported $150 million to $170 million. Dandelion is Masonis’ passion project.
“If all we do is become industrial chocolate, then there’s no point,” Masonis said. “If we got bought, I guess I’d have to start another chocolate company.”
After decades as the butt of jokes by Johnny Carson, by Steve Martin, by Larry David — basically, by everyone — Los Angeles may seem beyond satire. But over the last year, the West Coast capital of excess has been a target for parody from an unlikely source: random citizens, courtesy of an Instagram feed called @overheardLA.
The account, which has caught on with celebrities like Vanessa Hudgens, Jennifer Lopez and Kat Dennings, and even the city’s mayor, Eric Garcetti, is a repository of random conversational snippets submitted by thousands of eavesdropping Angelenos as they hang out in the city’s nightclubs, cold-pressed juice bars and yoga classes.
The submissions skewer the city as brilliantly as any stand-up hopeful at Hollywood’s Comedy Store, even if many appear to have been uttered in all seriousness:
“Sometimes, I think I want to have a baby and then I just think I am not even responsible enough for white jeans.” — Sept. 16
“She has 22K likes on a picture of a gourmet donut and I can’t get anyone to read my script.” — Aug. 1
Overheard LA popped up, unsigned, in August 2015 and quickly became popular with the city’s entertainment class (it now has 281,000 followers and an East Coast spinoff, @overheardNewYork). Despite efforts to unmask its founder, he has remained anonymous — until deciding to reveal his identity to The Times.
He is Jesse Margolis, who works in development for reality TV and docu-series.
Mr. Margolis, who was born in New York and lives in West Hollywood, Calif., asked that his age not be printed, in order to keep some mystery alive. He also declined to have his face photographed for this article. But he was happy to discuss what the crowd-sourced humor — or is it sociology? — reveals about the ever-evolving relationship between America’s warring cultural capitals, New York and Los Angeles.
- Where did the idea come from?
- I was sitting around this health food store in West Hollywood, and these two women were having this long, rambling conversation that led from egg freezing to pit bulls. I wrote it down and posted it. Instead of the usual 12 likes, it got 30, and a screenwriter friend of mine said, “You have to do a page!” A couple of weeks later, Ireland Baldwin, who is Alec Baldwin’s daughter, found it and reposted it. It just took on a life of its own.
More than half your followers come from outside California. Why do they care?
A lot of the trends start here — hot Pilates, aura photography — and a lot of culture gets exported from here. Or anti-culture. People all over the world see the Kardashians in Calabasas, “The Price Is Right” from the CBS studios on Beverly Boulevard. At the end of the day, they care about Los Angeles because it represents an ideal reality. It’s where the myths have been made for the last hundred years.
Isn’t Los Angeles outgrowing its role as America’s punch line?
L.A. has gotten a lot cooler and a lot more interesting. You have all the tech companies here now. It’s a lot more international, with better food, art and fashion. But the stereotypes are real for a reason. It still remains a wonderfully superficial fantasy land. A lot of my close friends from New York have moved out here in the last five years, and they are always saying, “I’m taking New York with me.” But even the hard-core New Yorkers end up getting overly attached to their yoga teacher or getting acupuncture for their dog. The culture of L.A. inevitably converts you.
In cities as big and crazy as those two, do you get bombarded with material?
We get close to 100 submissions a day, by D.M. or email. I do my best to curate it. I like one-sentence pearls of wisdom about what younger people are going through on topics such as dating, fitness, work, partying, ennui. I like each post to feel like a six-second sitcom.
It’s really about comedy, and hopefully, a little bit of community self-reflection: “This may be extreme, but I’m 10 percent like this.”