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Sriracha post-mortem

The Motley Fool wonders if State Rep. Jason Villalba should get the credit for the resolution of the Great Sriracha Dispute of 2014.

In early January, Texas state representative Jason Villalba made a public invitation to David Tran to pack up and move Huy Fong to Texas. In his announcement, Villalba contrasted “excessive government interference” by “government bureaucrats” in California to Texas’ “low regulations and limited government interference.”

This could have come across as one-off political grandstanding, but Villalba didn’t let go of the issue. His pitch later expanded to include the notion of Texas’ Rio Grande Valley as a possible pepper-farm location—despite the fact that the valley and Dallas are 500 miles apart, which would hike Huy Fong’s transport costs considerably. And on May 12, he brought a delegation of state legislators and Texas officials to Irwindale for a high-profile tour of Huy Fong’s plant and a private meeting with Tran.

Whether or not Tran was seriously considering relocating or expanding to Texas, the visit and the publicity it generated gave him leverage in his conflict with the city. And it gave GOP leaders both in Texas and in California a national platform to criticize what they saw as shortcomings in the Golden State’s business climate.

The dispute’s endgame began Tuesday, when representatives from Democratic governor Jerry Brown’s office held a private meeting with Tran and city officials. Wednesday night, Irwindale’s council voted to drop the issues.

Whether that settles the matter for residents living near the plant won’t be clear until this summer when the pepper harvest comes in for processing. But for now, it looks like Huy Fong will stay put and its most popular sauce will keep flowing.

This was of course a local dispute, one that had nothing to do with state regulations, and the leading suitor for a relocated Huy Fong factory was surely elsewhere in California. Be that as it may, California Gov. Jerry Brown wasn’t taking any chances.

Afraid of losing a few hundred jobs and the world’s best hot sauce, Los Angeles officials urged Brown’s office to take action. The Governor’s Office of Business and Economic Development and the Los Angeles Economic Development Corp. began reaching out early this year to try to get the two sides talking, an adviser with knowledge of the meetings said.

Brown’s economic development team got the South Coast Air Quality Management District to evaluate Irwindale’s air — they found no significant odorous problems — and arranged for the mayor of Irwindale, Mark Breceda, and a city council member to visit the factory and begin making peace.

Leslie McBride, deputy director of business investment services in the economic development office, represented the Brown administration during the walk-through on Tuesday. Huy Fong showed city officials their new filtration system upgrades, which should help mitigate future air quality problems.

Brown was briefed several times on the progress of negotiations, the adviser said, though the governor’s office didn’t offer any specific incentives.

This LA Times story has more detail on the backstage activity. Honestly, I think this was more of a communications problem than anything else. For whatever the reason, the city of Irwindale and David Tran dug in their heels as the rhetoric escalated, and it wasn’t until the cooler heads from Gov. Brown’s office intervened, and the reality of maybe actually turning the business completely upside down as represented by the arrival of Team Villalba seeped in, that everyone came to their senses and worked out a resolution that should have been obvious six months ago. You can give credit to Brown, and if there is a real expansion opportunity in the future – still no word on that as far as I can tell – you can give plenty of kudos to Villalba, but from where I sit this was always how this should have ended up. Stuff does happen sometimes – ask a Cleveland Browns fan, or a Baltimore Colts fan, for two such examples – but what really mattered in the end was that the two sides finally started talking to, and listening to, each other. Isn’t that usually how it goes?

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