Sep 13, 2022

by: Steve Kaelble, Staff Editor, Area Development

Business has certainly been booming this past year, certainly more than many people expected on the heels of a major pandemic. As the economy has rebounded dramatically, countless fast-growing companies have been seeking locations where they can grow.

Area Development’s latest “Top States for Doing Business” feature looks at some of the places you’re most likely to find those locations ripe for growing and doing business successfully, as per the surveyed panel of experts — consultants who have spent many years collectively in the work of economic development and location selection. They’ve learned through experience which states are the standouts in various important factors for doing business, from costs to taxes and incentives to training to a welcoming and hassle-free government.

Once again, Georgia is atop the overall list, a spot it has held for nine years in a row. As you read on to find out more about how states rank in various attributes of doing business, you’ll find Georgia atop many of those lists, too.

TOP STATES FOR DOING BUSINESS 2022

1. GEORGIA
2. TENNESSEE
3. SOUTH CAROLINA
4. TEXAS
5. NORTH CAROLINA
6. ALABAMA
7. VIRGINIA
8. OHIO
9. INDIANA
10. MISSISSIPPI
11. FLORIDA
12. LOUISIANA
13. ARIZONA
14. MICHIGAN
15. NEW YORK
16T. CALIFORNIA
16T. ILLINOIS
18. KENTUCKY
19T. OKLAHOMA
19T. UTAH

INDIVIDUAL CATEGORIES
Overall Cost of Doing Business

1. GEORGIA
2. TENNESSEE
3. SOUTH CAROLINA
4. ALABAMA
5. NORTH CAROLINA
6. TEXAS
7T.  INDIANA
7T.  MISSISSIPPI
9T. ARIZONA
9T. FLORIDA
9T. OHIO

 

Overall Cost of Doing Business
Some say that money isn’t everything, and they are right, of course. If overall cost of doing business was the only consideration in choosing a location, we wouldn’t have a dozen other categories to examine. But it’s worth noting that of the 10 states that lead our overall list of “Top States for Doing Business,” all but two are also atop the rankings for their overall cost of doing business.

Georgia, in fact, is the cost leader yet again, the third year in a row. Tennessee moves up to the second slot, and South Carolina rises to third. It’s probably not surprising that the list of business cost winners is made up of largely the same players from one year to the next, albeit with some shuffling of the order.

There are many factors that create a low overall cost of doing business, and some of our other “Top States” categories reflect those factors. Low taxes enter into the big picture, as do generous incentives. Energy is a big cost factor for many projects, along with availability of real estate.

Business Incentive Programs
Our panel of experts swapped the top two places on the comparison of business incentive programs. Last year the top two were South Carolina and Georgia, while this year it’s Georgia and then South Carolina. Suffice it to say that both are winners.

And it’s also worth noting this is a list that’s dominated by Southern States. The only states on this list that are north of the Mason-Dixon Line are Ohio (ranked fourth in this category) — with wide-ranging incentives that include microloans and enterprise zone credits along with boosts for job creation and meat processing — and sixth-place Indiana, with a dozen categories of incentives that range from R&D and payroll tax benefits to incentives for moving headquarters and operating data centers.

Take #1 Georgia as an example. The state lowered its corporate tax rate a few years ago, and even before that, the rate had not gone up for at least half a century. Georgia also is generous with tax credits and exemptions, plus a talent pool that’s supported by highly regarded training and development programs.

Tennessee, meanwhile, boasts the lowest state and local taxes paid per capita, and there is no personal income tax. Business costs are helped by its right-to-work status, too. South Carolina also touts being a right-to-work state, industrial power rates that are significantly below the national average, and a workforce and education system that helps companies connect with well-qualified but affordable people.

Alabama (ranked fourth in this category) boasts a competitive cost structure, generous tax incentives, and low power costs. And, North Carolina (ranked fifth for its overall cost of doing business) is proud of taxes that are among the lowest in the nation, along with low utility rates and other cost benefits.

Business Incentive Programs
Our panel of experts swapped the top two places on the comparison of business incentive programs. Last year the top two were South Carolina and Georgia, while this year it’s Georgia and then South Carolina. Suffice it to say that both are winners.

And it’s also worth noting this is a list that’s dominated by Southern States. The only states on this list that are north of the Mason-Dixon Line are Ohio (ranked fourth in this category) — with wide-ranging incentives that include microloans and enterprise zone credits along with boosts for job creation and meat processing — and sixth-place Indiana, with a dozen categories of incentives that range from R&D and payroll tax benefits to incentives for moving headquarters and operating data centers.

Georgia’s top-rated list of incentives includes a job tax credit rewarding new job creation to the tune of as much as $4,000 per job per year for five years. The state aimed to fight COVID-19 and ramp up its presence in manufacture of personal protective equipment with a PPE manufacturing tax credit. Meanwhile, there are generous sales and use tax exemptions for manufacturers, distribution centers, and data centers, among other perks.

South Carolina has a big menu of incentives, too. Start with the jobs tax credit — it’s targeted to be especially generous in areas of highest need and, in those areas, can be worth as much as $25,000 per new job created. There are credits for R&D, for corporate headquarters, for investment in economic impact zones, and various ways to lower property taxes.

Third-place in this category, Tennessee also targets extra-generous incentives to areas deemed “at-risk” or “distressed” by the Appalachian Regional Commission. Its long list of other incentives includes an infrastructure program, a job training assistance program, and an economic development fund that can help out with all kinds of costs, such as retrofitting buildings, acquiring real estate, and relocating equipment.

Access to Capital and Funding
Where does a large share of business innovation take place in America? California, the place where venture capital flows like running water. It’s no surprise that California tops our list this year for access to capital and funding, just as it did a year earlier. Indeed, according to research from Statista, there was about $158 billion in venture capital investment in California in 2021, far ahead of any other state. Next was New York at about $50 billion, Massachusetts at $36 billion, and Texas at $9 billion.

Of course, venture capital is just one source of funding for business growth. Many states have been quite creative in launching funding options. For example, small businesses that are having trouble getting financing in California can tap into the California Capital Access Program for Small Business.

Meanwhile, Texas is second on our capital and funding list this year, and that’s where the nation’s largest deal-closing fund helps plug gaps and make big investments happen. The Texas Enterprise Fund can be the final tool for winning projects when there’s just one site in the state competing, and when there’s a viable out-of-state option still on the table.

Third on the list is New York, and there’s a fourth-place tie between Massachusetts and Virginia. As mentioned above, New York and Massachusetts are big winners in the venture capital business, and New York also happens to be one of the world’s most prominent financial capitals. Massachusetts also has such options as the Massachusetts Growth Capital Corp., which connects businesses with alternative funding and other resources. Virginia has its own menu of capital options, and recently added a Small Business Resiliency Fund program aimed at expanding access to capital and technical assistance to small businesses impacted by the pandemic.

Competitive Labor Market
Georgia remains at the top of the list when it comes to competitive labor availability. Texas and Tennessee tie for second place in this category, followed by the Carolinas. These are all states that fall in the lower half nationally in terms of median annual wages, which certainly makes sense for maintaining a competitive labor market. They also are states that do well in terms of attracting highly qualified workers, and they have good programs for filling in gaps when it comes to training and education.

One twist this year, compared to last, is that a couple of states make our top 10 without being right-to-work states (last year, all of the states listed as being tops in competitive labor were right-to-work states). And, a couple of the states on the list have a median income a bit higher up the list. As we stated earlier, money isn’t everything, and for some projects, there clearly are competitive labor attributes more important than dollars.

Workforce Development Programs
Just to reiterate, wages are only one consideration when you’re trying to fill out an employee roster with highly qualified individuals who are ready to do the job. That is especially true in this age of labor shortages — companies in many industries are having trouble hiring all the talent they need. That just makes workforce development programs all the more vital as a location factor.

This is such an important topic right now that we’ll go into a bit more detail in an accompanying sidebar article. But if you’ve been actively involved in picking locations and hiring workers in recent years, you won’t be surprised by the states on our list for the best workforce development programs. These states are highly regarded as superstars in helping companies get up and running with the right people on the job.

Topping the list yet again is Georgia. That owes a lot to the existence of the Georgia Quick Start program, part of the Technical College System of Georgia. It’s an amazing resource for customized, free training services for qualified companies that are growing or adding technology. Virginia (ranked second in this category) also has highly regarded programs, including FastForward, the Virginia Economic Development Partnership’s Virginia Talent Accelerator Program, and Virginia Career Works.

South Carolina fares well on this list, too, with a variety of skills training initiatives placing it third in this category. There are programs specifically for people who have certain challenges to gainful employment, as well as customized training programs for businesses, registered apprenticeships, incumbent worker training, and an on-the-job training program that offers wage and salary reimbursement to help cover training costs.

Energy Availability and Costs
As is the case year after year, our experts rate Georgia and Tennessee as best for energy availability and costs — this year they’re tied for first place. The rest of the top five is different, though. Alabama and North Carolina are tied in third place, and Mississippi moves up to fifth place in this category.

One big factor behind the Tennessee advantage is the Tennessee Valley Authority, which got its start in the 1930s as a federally owned utility and is now a public power wholesaler. Customers of the 153 local power providers that TVA serves enjoy rates that are lower than 70 percent of the nation.

Georgia Power, with flexible rate and usage programs that help with affordability, has a forward-thinking approach to ensuring energy needs continue to be met in the long haul. Its latest Integrated Resource Plan has earned official state approval, setting forth a strategy to transform energy sources, make the grid more resilient, double renewable and solar capacity, focus on energy storage, and create energy efficiency programs.

Logistics and Infrastructure
There’s yet another list with Georgia at the top this year. It’s an easy bet, given the state’s prime location for serving the booming Southeast, its deepwater ports for reaching the world by sea, and the super-busy but ultra-efficient airport in Atlanta. An infrastructure study by a Harvard researcher says Georgia’s logistics hub is the nation’s fourth-largest.

Virginia also has an appealing location on the central East Coast, and significant infrastructure advantages — enough to land it in second place in this category this year. It’s on the way to having the deepest and widest port on the East Coast, has more than 32,000 miles of railway, lots of destinations available by air, and the region’s second-densest interstate system.

Ohio comes in third, tied with last year’s top-rated Texas. Ohio has the nation’s fourth-largest system of interstate highways, nine commercial ports on Lake Erie, plus terminals along the Ohio River. It has more railyards and intermodal terminals than almost any other state. Texas, meanwhile, boasts more public roads and freight railway miles than any other state, busy airports, and nearly a dozen deepwater ports.

Indiana, ranked fifth for logistics and infrastructure this year, recently took CNBC’s top honors for infrastructure. That study looked at volume of goods transported, freight capacity, road conditions, broadband, and a host of other factors.

Available Real Estate
This has been a tricky time in the world of real estate — ask anyone who has tried to buy a home lately, and industrial real estate can be a conundrum, too. It basically goes without saying that regardless of all the other important factors, your location selection amounts to nothing until you locate real estate.

Georgia tops the list for available real estate again this year. In a second-place tie are South Carolina and Texas (the Lone Star State was in a tie with Georgia for first last year). Tennessee and Ohio are ranked next in this category.

What’s even better than a great piece of real estate? One that doesn’t need tons of attention to get it ready for development or occupation. Check the site-readiness section and you’ll see that some of the same states known for available real estate are also talented at delivering sites that can be developed and occupied quickly.

Cooperative and Responsive State Government
The various arms of state government can either make or break a location decision. This measure is a bit of an amalgam of various characteristics, some fairly easy to quantify, some that boil down to a more subjectively experienced, welcoming vibe. Other lists here get more specific about such things as the tax and regulatory environment, incentives and training assistance — this one rates the overall feel of the state government reception, and how responsive and cooperative state representatives tend to be.

At the top of this list is Georgia once again. It was at the top last time around, too. Observers chalk it up to multiple strengths, starting with fiscal health. The state budget is always balanced, and the debt-per-capita measure is among the nation’s lowest. Among other things, the Georgia Department of Economic Development is helpful in researching locations and connecting with resources.

Second last year was Tennessee, and it’s there again, tied this year with North Carolina in this category. Tennessee likes to tout its fiscal responsibility, too, with a disciplined budget that has room for positive investments in such things as workforce and education. North Carolina is proud of its legal and regulatory environment that’s committed to not getting in the way, along with low taxes and business costs, plus an embrace of diversity and inclusion. South Carolina makes the top five, too, along with Ohio.

Corporate Tax Structure
The Lone Star State takes pride in its low business operating costs, and one of the elements of that involves its corporate tax structure. There’s no corporate income tax in Texas, no personal income tax, and an overall tax burden that’s among the nation’s lowest. Our panel of experts says it’s the best, ranking Texas in first place in this category as they did last year.

Tennessee also gets high marks for low taxes — said to be the lowest state and local taxes paid per capita. As in Texas, there’s no personal income tax on wages and salaries. The state is second on our corporate tax structure list this year. And the story in third-ranked Florida is also about the taxes that don’t exist, such as a state-level property tax, as well as corporate income taxes on certain kinds of corporations. Florida is another high-ranking state on the Tax Foundation’s measure of state business tax climate.

Site-Readiness Programs
It’s a fast-moving world, and the winners are often the ones that are able to move the fastest. Locating available real estate is step #1 but finding a site for a warehouse or manufacturing plant that is ready to roll — with infrastructure well on the way and approvals just about worked out already — can make all the difference between winning and coming up short.

Tennessee is really good at site-readiness, so good that it lands atop this list year in and out, it seems. The state lists Certified Sites in every direction, from 1,855 acres along Interstate 24 in middle Tennessee to 840 acres near Clarksville to some smaller sites near Oak Ridge.

Georgia is quite good at this business, too, landing once again in second place. It has a program called GRAD — Georgia Ready for Accelerated Development — featuring sites that have graduated through all of the zoning, environmental assessment, utility work, and other steps needed to get them ready. A third party evaluates site readiness and they go through a board approval process to be accepted into the program.

The rest of the top five is pretty much the same as last year, just a bit shuffled. South Carolina’s site-readiness efforts land the state third on the list, and North Carolina and Ohio tie for fourth this year.

Favorable Regulatory Environment
Regulation of some kind is inevitable in a structured and ordered society, but from a business perspective, the regulatory environment needs to be as hassle-free as possible. The South as a whole does pretty well in this regard, and South Carolina leads the way again this year.

Georgia moves up to second place in this category this year, and tied for third are Alabama and Tennessee. Among the states on this list, just two don’t fall in the traditional South: sixth-place Indiana and ninth-place Arizona (tied with Virginia).

Speed of Project Permitting
This is an important subset of the overall regulatory environment, and it also ties into the site readiness that’s explored elsewhere in these rankings. Simply put, permitting is often not simple. In some jurisdictions and situations, it can be a slow and painful process (and in some places pandemic staffing issues have made it even worse).

Seeing as how this is a part of the regulatory environment, it’s not surprising that most of the same states listed in the previous section are also on this list of speediest places for project permitting. They’re all Southern States with the exception of Arizona and Indiana. And just like last year, the top three are Alabama, and Georgia and South Carolina (tied this year).

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