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Top States for Doing Business 2013: Texas on Top....Again

Area Development Magazine Special Presentation (Q3 / Summer 2013)
As the economy improves and states continue to vie for new investment and jobs, they also seek the attention of site consultants who help companies make their new facility and expansion decisions. With that in mind, Area Development’s fourth annual Top States for Doing Business survey of site consultants ranks the states based on their number of mentions in 17 categories (scores were weighted based on position in each category and then overall).

States were ranked on factors in the following categories: Business Environment (costs, taxes and regulations, incentives, etc.), Labor Climate (diversity, costs, development programs, etc.); and Infrastructure and Global Access (rail/highway access, shovel-ready sites, utility rates, logistics access). Following is more detailed information on the attributes of the top-10 states that provides insight into the rankings. Additionally, several site consultants who participated in the survey offer their comments.

Top States For Doing Business 2013

  1. 1.Texas
  2. 2.Georgia
  3. 2.tSouth Carolina
  4. 4.Alabama
  5. 5.North Carolina
  6. 6.Louisiana
  7. 7.Tennessee
  8. 8.Florida
  9. 9.Mississippi
  10. 10.California
Full Rankings and Results
1. Texas Simply put, it’s hard to beat Texas — which maintains is number-one ranking among the surveyed consultants.

“We've worked hard to make Texas the best state in the nation to raise a family and own a business,” says Governor Rick Perry. “We’ll continue to strengthen the economic pillars that have helped us become a national example of job creation and economic strength.”

Those pillars include a pro-business environment, strong work force, and an infrastructure that allows efficient access to global markets. Texas has no personal income tax and no corporate income tax — a huge incentive for companies to locate or expand in Texas. Therefore, it is not surprising that Texas has accounted for 33 percent of the nation’s net job gains over the past decade. It also sweetens the pot with the Texas Enterprise Fund (TEF), which provides funding and incentives to close deals on high-value business locations or expansions. To date TEF has invested about $500 million that has resulted in $20 billion in capital investment and more than 67,000 new jobs. Texas also offers a highly skilled, productive work force of over 12 million people with a wide range of skill sets. The unemployment rate is currently about 6.5 percent — the lowest of the 10 most-populated states. The state’s Skills Development Fund has provided more than $22 million to help companies offset the costs of employee training. From March 2012 to March 2013, Texas employment grew the fastest of the 10 largest states.

Key growth industries include energy, advanced manufacturing, aerospace and defense, biotechnology and life sciences, electronics, and IT. Manufacturing and distribution are well-supported by a modern, highly integrated transportation infrastructure of rail, highway, air, deepwater ports, and several large, well-planned intermodal complexes. Texas’ central location within North America facilitates domestic and international transportation, as well as easy access to markets. This infrastructure support has helped Texas be the number-one exporting state in the U.S. for 11 years in a row, with more than $264.7 billion in exports in 2012.

2. Georgia Georgia’s “pro-business” environment is the result of state statutes and sound economic development practices. For example, Georgia was the first southeastern state to pass single-factor corporate tax apportionment. This legislation applies the 6 percent corporate tax rate only to the portion of income earned inside the state. Georgia also consistently maintains one of the nation’s lowest debt-per-capita levels.

A modern and extensive transportation and logistical infrastructure allows Georgia to compete effectively in a global marketplace. Hartsfield-Jackson International Airport is the world’s busiest passenger airport and 10th-largest in the nation for cargo. Georgia’s deepwater ports and inland barge terminals are a major reason Georgia now ranks second nationally in exports. Atlanta is also the rail center of the South, with nearly 5,000 miles of railroad track and the largest intermodal facility on the East Coast.

Quality and cost of labor is a key driver in every location decision. Georgia’s Quick Start work force development program is one of the best in the nation and provides customized training at no cost to qualified companies in an array of industries. Nearly one million workers at 6,200 companies of all sizes have benefited from Quick Start.

Georgia’s pro-business policies continue to attract new business investment. Thirty Fortune 1000 companies have headquarters in Georgia. General Motors, Hitachi, and Greenway Medical Technologies are just some of the companies that continue to invest and expand in Georgia. AT&T recently announced plans to build a research center in Atlanta to develop the company’s latest technologies and applications. “AT&T has been investing and innovating in Georgia since 1879,” comments Sylvia Russell, President of AT&T Georgia. “Our decision to locate this unique facility in Atlanta is recognition of the hard work Georgia has done to create a welcoming environment for businesses to invest, innovate, and create jobs.”

2T. South Carolina The Palmetto State has one of the fastest-growing economies and one of the fastest-growing manufacturing sectors in the country, according to the U.S. Department of Commerce. South Carolina’s real GDP growth rate of 2.7 percent in 2012 put it above the national average of 2.5 percent and the southeastern regional average of 2.1 percent.

South Carolina exports totaled a record of more than $25.1 million in goods in 2012, thanks in part to a highly efficient transportation infrastructure, which includes the booming Port of Charleston. An inland port will open in September that will extend the capabilities of the Port of Charleston 212 miles inland, enabling goods to be shipped via container overnight along an existing Norfolk Southern rail line between Spartanburg and Charleston. The inland port will convert an estimated 25,000 containers that are currently being trucked on Interstate 26 to rail in one year. Annual capacity is estimated at 40,000 containers initially, with potential for expansion. As a right-to-work state, South Carolina has the lowest private-sector unionization rate in the country, at 1.3 percent. ReadySC™, a work force development program that operates through the technical college system, is a key part of South Carolina’s economic development success. In fiscal year 2011–2012, readySC provided recruiting, assessment, training development, management, and implementation services for nearly 4,500 workers from 82 companies.

A friendly business climate, highly integrated transportation network, and capable work force are key drivers for the resurgence of manufacturing in South Carolina — especially aerospace and automotive. Boeing is investing $1 billion in its operations and adding an engineering design center. For the second consecutive year, South Carolina ranked first in tire exports with close to a 30 percent share of all U.S. tire exports. When new Bridgestone, Continental, and Michelin plants coming online, it is predicted that South Carolina will be the biggest tire-producing state.

4. Alabama Alabama has a proven track record in economic development and 2013 promises to be another strong year. State and local leaders are working together to carry out Accelerate Alabama, the state’s long-term economic development plan based on three economic development drivers: recruitment of new business and industry, retention and expansion of existing businesses and industry, and creating jobs through innovation, entrepreneurship, research and development, and commercialization.

Alabama is well known for its skilled work force and AIDT, one of the top training programs in the country that provides innovative solutions for Alabama’s new and expanding businesses, especially manufacturers. These companies are also attracted to Alabama’s solid transportation and shipping infrastructure — an asset that is increasingly important in a competitive global economy. Located on the Gulf Coast, Alabama has over 4,000 acres of port — including the Port of Mobile, an intermodal facility that will become the sixth-busiest port in the world after a $300 million expansion.

Alabama’s ports are also connected to a 3,000-mile rail system and six interstate highways. Aerospace, automotive, bioscience, advanced manufacturing, distribution, IT, and chemicals are key, high-growth industries for Alabama. Major investments by Mercedes, Honda, Hyundai, and Toyota continue to drive the automotive sector. The new $600 million Airbus assembly facility being developed in Mobile will start producing the A320 family of jets in 2015.

“The site was perfect, with an airport and ocean port and adequate land,” indicates Allan McArtor, chairman for Airbus Americas. “Work force was also vital — we were encouraged by the auto industry’s success in Alabama because its manufacturing aspect is a trained skill similar to that of aircraft assembly.”

5. North Carolina North Carolina’s diverse economy is supported by pro-business economic policies, a strong work force, and a modern and efficient transportation infrastructure. The state was ranked fourth-best state for business and second-best state for business costs by Forbes in December 2012. Key growth industries include advanced manufacturing, aerospace, automotive, biotechnology, sustainable energy, and information technology.

A big reason North Carolina is a good place for business is because its business tax rate is one of the lowest in the country — and it just got even lower. In July, Governor Patrick McCrory signed legislation further reducing the corporate income tax from 6.9 percent to 6 percent in 2014, and then to 5 percent in 2015, a 29 percent tax decrease.

North Carolina also has a world-class transportation system for shipping products around the globe. The state is within a two-day drive of 170 million U.S. and Canadian consumers and 65 of the country’s top 100 metropolitan areas. International trade is boosted by two deepwater ports, two strategically located inland terminals, and the sixth-largest major airline hub in the nation. North Carolina is a right-to-work state and has the lowest overall unionization rate in the nation at 2.9 percent. Employers are attracted to North Carolina’s diverse pool of highly skilled and productive workers, as well as the state’s comprehensive work force development network and exceptional educational opportunities.

Many of the state’s workers have the experience and technical training for advanced manufacturing operations, including automotive and aerospace. For example, GE Aviation will be expanding its manufacturing operations at four facilities in North Carolina. The project, which will create 242 new jobs at a capital cost of $195 million, will be assisted by a Job Development Investment Grant from the state.

6. Louisiana Since January 2008 Louisiana has enjoyed 33 consecutive months of private-sector job growth, an unemployment rate well below that of the nation and the South, and record levels of business investment and job creation. In the past five years, Louisiana has secured economic development projects that are creating more than 63,000 new direct and indirect jobs and more than $28 billion in new capital investment, along with hundreds of millions of dollars in new sales for Louisiana’s small businesses.

This resurgence is largely due to the innovative economic policies put forth by Governor Bobby Jindal and the state legislature. Action items have ranged from removing unconventional business taxes to reining in government spending, reforming governmental ethics laws, revamping work force development programs, and implementing landmark education reforms for Louisiana students.

These initiatives — combined with a highly productive and well-trained work force and a modern rail-air-highway transportation infrastructure that is well connected to more than 30 bustling ports — make Louisiana an ideal location for major capital investment. Key sectors are energy, IT, digital media, aerospace, automotive, and advanced manufacturing. Louisiana has also averaged 10 FDI projects per year over the last decade, with an average of 271 jobs per project and capital investment totaling $45 billion. One of the largest projects is Sasol’s gas-to-liquid and ethane cracker complex in Southwest Louisiana, worth an estimated $16 billion to 21 billion. The South African company’s facility will be one the largest manufacturing projects in state history and one of the largest foreign direct investments in the history of the nation.

“Working with Louisiana Economic Development has been really a pleasure for us,” says André de Ruyter, senior group executive for Sasol’s Global Chemicals and North American Operations. “We found them to be very businesslike, focused, supportive, and understanding of the needs of a major investor.”

7. Tennessee Low taxes and fiscal stability are key reasons why many companies choose a city or state for expansion or relocation. According to Fitch Ratings, one of the country's top bond rating agencies, Tennessee has the lowest debt ratio of any state in the country. In 2012 Barron’s magazine ranked Tennessee as the third-best-run state. Tennessee is a right-to-work state, has no personal income tax, and enjoys the second-lowest cost of living in the United States.

Tennessee is also known for its manufacturing — the number of workers employed in manufacturing in Tennessee is almost a third greater than the national average. Education and work force partnerships that advance manufacturing in the state include the Regional Center for Advanced Manufacturing in Kingsport, a state-of-the-art training facility that helps create a pipeline of well-prepared applicants for manufacturing positions. In Chattanooga, Volkswagen and Chattanooga State Community College have partnered to create the Volkswagen Academy, which prepares new employees to work at the Volkswagen plant.

Nissan, Volkswagen, and General Motors all have major production hubs in Tennessee. In fiscal year 2012–2013, 44 automotive projects created 6,662 new jobs in Tennessee and investments totaled nearly $1.1 billion. The state’s more than 900 auto manufacturers and suppliers are supported by a well-maintained transportation infrastructure that is one of the top-ranked in the country. Components include three rail systems, six commercial airports (including the world’s second-busiest cargo airport in Memphis), over 1,000 miles of navigable waterways, and interstates 24, 40, and 75 — all of which improve access to global markets.

8. Florida Florida is starting to get some serious attention as a place to do business. Over the last two years, Florida has added 330,000 private-sector jobs and unemployment currently stands at about 7 percent. Florida’s Consumer Confidence Index rose to 82 points in June 2013, the fourth straight month of increases and the highest level in six years. This optimism is also reflected in migration patterns. The Demographic Estimating Conference expects more than 177,000 people will move to Florida by the end of this fiscal year and more than 200,000 per year until the end of the decade, resulting in a net in-migration.

Governor Rick Scott has cut taxes and streamlined regulation and government operations. In 2012 he doubled the tax exemption for business income, eliminating the business tax for more 70 percent of businesses. So far the state legislature has eliminated about 2,500 regulations on business, including a tax on manufacturing equipment.

A strong business climate only goes so far — a state also needs a talented work force and strong transportation infrastructure. Florida has a large pool of highly skilled workers that is especially strong for high-tech industries and international trade. Workforce Florida also provides customized training programs and incentives to help companies become more efficient and profitable.

Florida has one of the world's most extensive multimodal transportation systems, including international airports, deepwater shipping ports, extensive highway and rail networks, and multiple hubs. Over $162 billion in products were transported through Florida's airports and seaports in 2012.

These business advantages are giving companies confidence to invest in Florida again: announcements include Amazon (3,000 jobs, $300 million), Hertz (700 jobs, $50 million), Boeing (550 jobs, $163 million), Navy Federal (700 jobs, $6 million), and Verizon (750 jobs, $50 million).

For Verizon, its new location in Orlando will centralize its accounting, finance, and back office operations. “The region’s talent pipeline, which is full of finance and accounting graduates, was an integral factor in Verizon choosing to invest in Central Florida,” states Senior Vice President Michelle Robinson.

9. Mississippi Mississippi is on an economic roll. So far in 2013, 22 companies have announced new locations or expansions in the state, totaling more than $663 million in new investment and 3,700 new jobs. One of the biggest projects is Yokohama Tire Corporation’s plan to build a $300 million commercial truck tire plant in the city of West Point. The first phase alone will create 500 new jobs, with the possibility of an additional 1,500 jobs as the plant expands.

Governor Phil Bryant was recently ranked 14th by On Numbers for job creation among current governors. Mississippi offers customized incentive packages that fit the individual needs of companies looking to expand or locate in the state. Mississippi’s low energy costs, low cost of living, and competitive tax structure make it a prime location for facility location or expansion. The Kauffman Index ranked Mississippi fifth in its Index of Entrepreneurial Activity — an indication that the state supports all levels of business growth, including small start-ups.

Manufacturing is one of Mississippi’s specialties, thanks to the pro-business environment, highly skilled work force, and outstanding shipping infrastructure. The state has a low rate of unionization among its workers. Partnerships with state colleges and universities have developed training opportunities for workers, attracting high-tech industries to the state. Mississippi’s modern highway-rail-air transportation system connects to all major U.S. markets, as well as the Mississippi River, Tennessee-Tombigbee Waterway, and major ports along the Gulf of Mexico.

In May, the Governor signed landmark legislation that positions Mississippi as a leading destination for energy-related economic development. It provides sales-tax exemptions on energy for manufacturing and a 25 percent rebate on research and development costs for companies.

10. California California added jobs at the fastest year-over-year pace in more than a decade, thanks to strong growth in key industries and several important economic policy changes by state government that have incentivized companies to invest in the state. Recent relocation and expansion announcements include Samsung (2,000 jobs, $300 million), Amazon (1,785 jobs, $450 million), Advanced Call Center Technologies (2,000 jobs, $25 million), Vision Service Providers (400 jobs, $50 million), and Caterpillar (150 jobs, $25 million).

The state government also recently passed legislation that will phase out the enterprise zone program and replace this 25-year-old program with statewide sales tax exemptions on manufacturing, biotech, and R&D equipment; a hiring credit for businesses in existing challenged areas on wages between $12 and $28 per hour; and a new unit that will offer corporations and small businesses tax credits as part of a new, more flexible incentive to create jobs in California.

California continues to be a global export leader, with over $162 billion in annual sales of goods and services. It has the modern infrastructure to support high levels of trade, including 11 cargo airports and 11 cargo seaports. The ports of Los Angeles, Long Beach, and Oakland are among the busiest in the country. California also has 18 foreign-trade zones that facilitate shipping on goods and raw materials.

With this high level of economic activity, it is no surprise that California is the number-one state for foreign direct investment. According to Ernst and Young, California received almost 50 percent of all venture capital financing in the U.S. in 2011. Much of this is invested in high-tech industries — especially information technology. California remains the top state for IT jobs, which continues to drive venture capital investment, patents, innovation, and the development of a well-educated and highly skilled work force.

And there have been other recent signs that California is on the right track: Governor Brown’s recent trade mission to China secured over $1.8 billion in deals, and California also opened a foreign-trade office in Shanghai — the first for the state in a decade.
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