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2011 Top States For Doing Business: A Closer Look at the Top Overall States

An examination of the top-10 states' site selection attributes offers insight into the 2011 rankings. Here, we examine these individual states and find out what their leaders have to say about the survey results and the reasons their states were singled out by the consultants.

Fall 2011
1. Texas
Texas is the surveyed consultants #1 site location choice. The Lone Star State also received the enviable first place ranking for its overall cost of doing business, business friendliness, corporate tax environment, and incentive programs (tied), as well as recognition as being the "top dog" leader in the economic recovery. And the state placed third for its rail and highway accessibility, access to global markets (tied), and certified sites and shovel-ready programs (tied).

From June 2010 to June 2011, Texas added more net new jobs - 222,000 - than any other state. But it's certainly not a newcomer to job creation. Between May 2006 and May 2011, Texas was home to more than 538,000 new jobs - more than all the other states combined.

So what exactly is the "secret recipe" Texas is using to become America's foremost example of how to foster a climate allowing businesses to create jobs and opportunity? Governor Rick Perry attributes this amazing success to the ability of Texans to "build a legacy of living within our means, balancing our budgets, keeping taxes low, and maintaining a jobs-friendly environment that encourages investment and enables employers and employees alike to keep more of their hard-earned money. In an uncertain world, people everywhere have grown to know they can rely on Texas."

Phrased another way, Executive Director of the Economic Development & Tourism Division Aaron Demerson says Texas allows companies to "thrive" by passing sweeping tort reforms, holding the line on taxes, and limiting burdensome regulations. "Texas has partnered with employers in job creation and, in the process, helped investors improve their bottom line," he notes.

Demerson is proud of the state's two competitive incentive programs, which have been instrumental in attracting jobs and businesses, as well as top researchers and research dollars to higher education institutions. He points out that the Texas Enterprise Fund - the largest "deal-closing fund" of its kind in the U.S. - has allocated over $439 million to employers, generated more than $14.7 billion in total capital investment, and been behind the "announcement" of nearly 59,000 new jobs. The Texas Emerging Technology Fund has awarded more than $197 million to 133 early-stage companies, and given $173 million in grant matching and research superiority funds to Texas universities.

"In recent years, Texas has remained consistent in the type of industries it promotes," adds Demerson. "Through the Governor's Industry Cluster Initiative, the state identified and focused on building a competitive advantage within six industry clusters: aerospace and defense, advanced technologies and manufacturing, biotechnology and life sciences, energy, information and computer technology, and petroleum refining and chemical products."

Companies in those key industries operating in Texas include Samsung, Caterpillar, HostGator, GE Transportation, Electronic Arts, Gore Design, Hanger Orthopedics, Facebook, M&G Group, and Zarges.

2. Georgia
Georgia was ranked first for labor availability and work force development programs. And since a trained and available work force is often the deciding factor for businesses, Georgia Department of Economic Development's Commissioner Chris Cummiskey points out that the QuickStart work force development program has played a major role in the state's success.

"We make sure that companies have a fully trained work force at the state's expense ready to go the first day they start operation," he says, citing the $1 billion Kia project in West Point, which now employs 3,000 people, as "a perfect example." Cummiskey explains, "Our people went over to Korea, to see how they run a manufacturing plant. Then, we replicated that, set up an on-site training center, sorted through 30,000 applications, found the best, and trained more than 1,000 people. On the first day, the company opened at 100 percent efficiency."

Technical colleges, located within 30 miles of every Georgian, design curriculums to meet the community's work force needs. In the four-year systems, Georgia Tech and University of Georgia are described by Cummiskey as "top universities in the country that basically people in Georgia can go to free-of-charge. This has helped to keep intellectual capital here for another level of employees as well."

In the tax arena, Cummiskey notes that Georgia was the first Southeast state to implement single-factor apportionment for state income taxes, taxing corporations only on a percentage of sales in the state, while other states also tax on land and employees. "This makes our effective corporate tax rate in the 1 and 2 percent range, even less for some companies," says Cummiskey. "In the last couple of years, when other states have raised corporate taxes, we have managed to cut taxes and still managed to balance our budget."

  • Top States for Doing Business 2011
  • 1. TEXAS
  • 2. GEORGIA
  • 3. ALABAMA
  • 5. INDIANA
Cummiskey says that while certain financial incentives can be emulated by other states, it has taken decades to nurture Georgia's higher education and logistics paradigms. He boasts that the ports at Savannah and Brunswick, two class-A railroads housed on-site at the ports, and the Hartsfield-Jackson Atlanta International Airport comprise an unrivaled logistics infrastructure. This is perhaps why Georgia ranked second for its overall infrastructure and global access.

Governor Nathan Deal addressed Georgia's high-ranked categories. "I'm not surprised Georgia is ranked highly for its infrastructure and global access. Assets such as the fastest-growing seaport and busiest airport in the country give us a built-in advantage over our competition," he says. "But we're also very aware that we need to keep our competitive edge, so I've launched a Georgia Competitiveness Initiative to ensure our state stays as business-friendly as possible. We've asked business leaders from around the state to help us find ways to stay strong, not just in work force and infrastructure, but also in key areas like innovation, global commerce, cost of doing business, and government efficiency. Our goal is to be the best of the best."

3. Alabama
Placing among the top states for incentive programs (tied for first), labor costs (second), and work force development programs (second) on Area Development's recent survey of location consultants, Alabama's development leaders focus incentives and a keen eye and ear toward the needs of both domestic and foreign companies. Governor Robert Bentley notes that the quality, skill, and work ethic of the work force, plus its right-to-work state status, have caught the attention of foreign firms. Governor Bentley notes: "I asked a German-based company how many people at our plant here miss work every day. The answer was less than one-tenth of 1 percent. He continues, "In Germany, that figure was 7 to 8 percent a day."

On-site training is yet another economic-development magnet. AIDT (Alabama Industrial Development Training), an institution of the Alabama Community College System, provides job-specific training programs. Governor Bentley points out paradigms of on-site work force training at Toyota, Hyundai, and Mercedes plants, plus a maritime training facility in Mobile for the shipbuilding industry. In addition to collaborating with the two-year colleges, the four-year colleges around Huntsville are expected to implement training programs for aerospace industry engineers.

Governor Bentley explains the rationale behind business-attracting strategies during the economic recovery: "Since we don't have as much cash available as in the past, we are working on legislation to allow companies to keep part of the money that they pay their employees to help recoup for their capital investments." Greg Canfield, director of the Alabama Development Office (ADO), points out both statutory and discretionary incentives - a low state corporate income tax rate, a full deduction of federal taxes from Alabama income tax liability, a Business Privilege Tax capped at $15,000 (with exceptions for financial institutions and insurance companies), and no property tax levied on inventory. Canfield adds, "The millage rate at state level for real and personal property taxes is limited to 6 1/2 many cases, that is half or less what it would be in other states." Discretionary cash incentives upon project completion and throughout the first several years after completion with employment-based targets are also attractive incentives. "One particular legislation passed in the last session makes Alabama unique," says Canfield, noting a tariff credit that allows qualifying firms to claim a transferable income tax credit to temporarily offset export tariff costs.

Top leaders in the economic recovery (Alabama ranked among fourth place states in this category) must stay aware of the needs of site consultants and principles. Canfield says, "I don't need to know what works well; I need to know what we can do better, and what we need to do differently. We learn from the answers, and build strategy around that to stay ahead of the curve moving into the future."

4. South Carolina
South Carolina received high marks in several economic recovery categories. It was ranked second for its overall business environment and for each of the factors comprising that category, i.e., corporate tax environment, incentive programs, overall cost of doing business, and business friendliness (tied). The state also placed second for its certified sites and shovel-ready programs, third for labor costs, and fifth for its work force development programs.

South Carolina Secretary of Commerce Bobby Hitt noted, "The Palmetto State has a number of features that make it competitive with other states. We have great infrastructure and a world-class port in Charleston. We also have a large number of buildings and sites that are ready-to-go for businesses. Commerce has worked closely with our local economic development allies to make these sites shovel-ready and help companies cut down their start-up times and costs."

Economic recovery strategies are paying off. South Carolina levies none of the following taxes - state property tax; local income tax; inventory tax; sales tax on manufacturing machinery, industrial power, or materials for finished products; wholesale tax or unitary tax on worldwide profits. Tax credits are offered for job creation, new production equipment, corporate headquarters facilities, and research and development, and discretionary incentives are doled out depending on an individual project's needs.

In the June 2011 edition of South Carolina Digest, Dr. Bruce Yandle, Dean Emeritus, College of Business & Behavioral Science at Clemson University, reports that the state's GDP growth turned positive in the most recent year available, 2009-2010, after negative growth for the five preceding years. He lauds expanding employment in higher-growth sectors, such as professional business services and healthcare, as well as positive employment feedback regarding the state's transition from old-line textile and apparel manufacturing to higher-tech textiles and durable goods production. He points out that the state has experienced more rapid employment growth in manufacturing and professional business services sectors than the nation. "South Carolina continues to be a wonderful surprise for business prospects seeking to set up new operations," said Secretary Hitt. "Not only do we have a positive business environment, but we also have talented people with the skill sets businesses are seeking."

The readySC program works with 16 technical colleges to prepare a skilled work force. Apprenticeship Carolina guides companies through the process for creating demand-driven registered apprenticeship programs in sectors ranging from manufacturing to information technologies and healthcare. Secretary Hitt explains: "Teamwork with statewide partners, like the S.C. Technical College System, on programs that focus on work force development, continues to pay off and is causing companies to take notice."

5. Indiana
Indiana was ranked fifth overall among the top states for doing business, first for its rail and highway accessibility, and second as a leader in economic recovery.

A "push for speed and certainty" in all aspects of state government is what helps job growth here, according to Mitch Roob, Indiana Secretary of Commerce and CEO of the Indiana Economic Development Corporation.

"When people invest in Indiana, they know their taxes are unlikely to rise due to the certainty fostered by maintaining a balanced budget and a low tax burden," he says. "Individuals and businesses also receive speedy service on everything from vehicle environmental licensing.In Indiana, we realize we exist in a world marketplace where prospective [ROI] on personal financial capital must be at world levels. We recognize that we have to become a world-class location where world-class companies will create world-class opportunities for world-class Hoosiers."

Indiana already is known as the "Crossroads of America" due to its ideal geographic location (within a half-day's drive of over 20 major metros) and notable transportation assets (eight interstate highways; more than 11,000 highway miles; 4,165 miles of active railway tracks; the world's second-largest FedEx hub, and more).

Not to rest on its laurels, in 2005 the state launched an aggressive 10-year, $10 billion transportation plan ("Major Moves") to significantly improve and expand Indiana's highway infrastructure. The long-term lease of the Indiana Toll Road provided $2.6 billion of funding for over 200 new construction and 200 major preservation projects. Amazingly, no tax increases are called for to fund the program, already well under way.

Indiana wants to attract more companies in the biotech, automotive, new energy, and defense sectors. State programs recently implemented to foster a pro-business climate include new legislation decreasing corporate income tax from 8.5 to 6.5 percent; a property tax relief program that cut property taxes by one third (and established a constitutional cap on tax rates for all property classes); and an R&D tax credit equal to 15 percent of a company's first $1 million of qualifying R&D expenditures.

Not surprisingly, Indiana's GDP grew 4.6 percent in 2010; well above the national rate of 2.6 percent and at a clip placing it as the state with the third-highest growth rate in the nation (U.S. Bureau of Economic Analysis).

Governor Mitch Daniels is clear about what it takes to steer Indiana through these hard economic times, and the message is quite different than what is coming from Washington, D.C. "Government does not create jobs," he has said, "it only create[s] the conditions that make jobs more or less likely."

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