Featured Locations

Choose a location... Syracuse, NY Nebraska Public Power District, NE Defiance, OH Strongsville, OH Newport News, VA Hoffman Estates, IL San Antonio, TX North Carolina's Electric Cooperatives Tennessee Valley Authority Wayne County, OH

Jump to Location

Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Mass. Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hamp. New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington Wash., D.C. West Virginia Wisconsin Wyoming ************** International Puerto Rico Canada U.K. Mexico Germany Hong Kong Ireland Italy Luxembourg Netherlands Singapore Spain

Home > Articles By Month > July 2007

THE 2007 BUSINESS FACILITIES RANKINGS REPORT

By Michelle Janowitz

The Top Locations for: Business Climate, Quality of Life, Biotechnology strength, Automotive, Manufacturing Growth, Manufacturing Momentum, Green Cities, Cost of Labor, Educated Workforce, Education climate, Global Business Environments, and Business Tax Climate.

 

Last month in our “Choice Locations” cover story we presented you with a list of business destinations worthy of your consideration, based on our personal experience and instinct. This month, we use hard data to serve up more top-notch business locations.

Every July for the past three years, Business Facilities has published rankings of locations across the U.S. and abroad in categories that best reflect your needs as a corporate site selector in one convenient report. This year you’ll recognize some old favorites among the 11 categories chosen in this Rankings Report, as well as some exciting new additions that we hope to keep around for years to come.

Two rankings that we are especially proud of this year are Business Facilities’ very own Quality of Life (page 16) and Business Climate (page 14) rankings. These two rankings are especially tough to assemble, but we’ve finally found the right combination of relevant data sources. Some of the results will surprise you.

Probably the most challenging aspect of doing these rankings each year is determining how to compose each one—what data to use and how to weight it—in a way that best defines the particular category. Even the most well thought out and carefully researched rankings are still subject to the value judgments of those who choose and weigh the input factors—in this case, the Business Facilities editorial team. The rankings are also limited by the freshness of the data—sometimes the latest available figures are still a few years old.

This year a large portion of the data we used for the rankings was collected by Morgan Quitno Press, which publishes a multitude of statistics on states and cities annually. The Business Tax Climate, Global Business Environments, and Green Cities rankings are all constructed from material previously published elsewhere. The remainder of the rankings are wholly original products of Business Facilities. The end result is a wealth of locations that rise to the top in categories that are relevant to just about any company’s site search.

If you have any suggestions for categories for next year’s ranking feature or general feedback, e-mail us at feedback@groupc.com.

BUSINESS CLIMATE

You’d be hard pressed to find a location that doesn’t use an adjective like “great” or “top-notch” to modify the words “business climate” when describing itself to potential companies. So what makes a

business climate great? Compared to the factors that contribute to quality of life, the variables that define a business climate are substantially less ambiguous. Our business climate ranking gets at the heart of what makes a location good for business: business costs, economic climate, and labor force. We also feel that quality of life—difficult as it is to measure—has a role in defining business climate. That’s why we incorporated the results from our Quality of Life ranking into this ranking.

The following is how the Business Climate ranking was composed: In order to measure economic climate we looked at per capita GDP in 2005; change in per capita GDP, 2001-2005; state business tax climate index, 2007; number of Fortune 500 firms in 2006; rate of new employer firms in 2005; job growth, 2005-2006; and percent of roadways in mediocre or poor condition in 2004.

One component that is used in other business climate rankings, but is intentionally absent from our Business Climate ranking, is financial incentives. We wanted to create a business climate ranking that reveals a state’s “core” business climate and utilizes variables that (for the most part) pertain to all companies. Because incentives are only granted on a case-by-case basis, we feel it is more accurate to disregard them here.

Interestingly, four out of the five Rocky Mountain States landed in the top 10, headed up by Montana,

our top business climate for 2007. Second place South Dakota wasn’t far behind though, trailing by fewer than 10 points (not much considering that the scores from which the ranks were calculated varied by the hundreds). Low labor costs, a significant increase in per capita GDP, a favorable state business tax climate, and prodigious job growth were among some of the things that helped Montana take the number one spot this year.

QUALITY OF LIFE

You don’t have to look at too many economic development Web sites to see that locations compete pretty hard to convince you of their high quality of life. Most site selectors believe, to varying

degrees, that where there is a good quality of life you’ll find happy people, and happy people means a company will have a pool of potential workers who are loyal and productive. On top of that, when you need to draw talent to your company’s new location, people will be more willing to relocate to an area that offers a good quality of life. For many companies in which the owner will be relocating along with the business, quality of life takes on even more importance.

While our Quality of Life ranking is probably the most subjective ranking of the bunch, we still found plenty of quantitative data to effectively measure this enigmatic concept. The data fall into eight primary categories covering the quality of life gamut: crime, material well-being, job security,

recreation/arts availability, health, climate, education, and cost of living. For instance, we measured the material well being category through per capita personal income in 2005, per capita disposable personal income in 2005, median household income in 2005, personal bankruptcy rate in 2006, and total tax burden as a percentage of income in 2006. Education was measured using the results of our Best Education Climates ranking.

South Dakota was this year’s winner thanks to its low crime rate, low personal tax burden as a percentage of income, high job security, low pollution rates, good education climate, and the lowest cost of living of all the states.

BIOTECHNOLOGY STRENGTH

Biotechnology is a hot industry that keeps getting hotter. No wonder so many states are clamoring for biotech projects. To be able to compete, areas are working hard to make their existing biotech assets more attractive, while generating new assets to help create a business climate that’s conducive to growing this much sought after industry. With that in mind, we created a ranking that reveals which states in the U.S. are true biotech hot spots.

The rankings for 2007 were performed using an all-new methodology, and can’t be directly compared to prior Business Facilities biotechnology rankings. According to BIO—the Biotechnology Industry Organization trade group—the biotechnology industry can be divided into four distinct categories: Agricultural Feedstock and Chemicals; Drugs and Pharmaceuticals; Medical Devices and Equipment; and Research, Testing, and Medical Laboratories. Because most states tend to be strong in at most one or two of these categories, we have included separate rankings by biotechnology category (see charts below). We also included an Overall Depth and Overall Breadth ranking. Overall Depth ranks states by depth-of-proficiency; where a state is rewarded for opening a big lead on the competition in one biotech category, even if it’s not the leader in others. Overall Breadth recognizes states for their overall breadth of expertise in biotechnology across all four categories.

To rank each state, the following formula was used: Location Quotient x Share of Number of Business Establishments Nationwide ÷ Share of National Population. The resulting number represents a balance between the number of people in each state working in biotechnology and the number of biotechnology companies doing business in the state. The Location Quotient for each state is a look at the percentage of a state’s population working in biotechnology compared to the percentage of people who work in biotechnology nationally.

All data in the BIO report is circa 2004, the latest currently available. Census data used are the latest (revised 2006) estimates of what the population was in each state and nationwide in 2004. Puerto Rico was included in the ranking, while the District of Columbia was not.

The biotechnology rankings for this year reveal that the overall winner for depth of biotechnology leadership is Iowa, which far and away dominates the competition in the field of Agricultural Feedstock and Chemicals. Iowa’s lead over other states in this particular sector far exceeds any lead held by other states in the three other major bioscience fields. Iowa ranked 13th, 35th, and 42nd in the pharmaceuticals, medical devices, and research/testing categories, respectively, but the competition between states was more closely packed in those cases.

Of equal status is the 2007 overall winner for breadth of biotechnology leadership: New Jersey. The Garden State is more competitive in each of the four categories of the biosciences than any other state, showing no weakness in any area of biotechnology. It ranks 24th, 1st, 11th, and 5th in agriculture, pharmaceuticals, medical devices, and research/testing, respectively. There’s no biotechnology field in which this state cannot compete for business.

States making the top 10 of both the Overall Depth and Overall Breadth rankings are New Jersey, Nebraska, Utah, Massachusetts, Missouri, and Connecticut.

AUTOMOTIVE

There is no denying that several major automotive companies in the U.S. have had to cut jobs and close plants in recent years. However, expansions in the U.S. by Kia and Toyota this year and last signify that the automotive sector in the U.S. is still alive and kicking. The question is then: which states are rising to the top in this industry?

In order to answer this, we looked at several factors for each state: the increase in cars and light trucks produced, 1995-2005; the number of car/truck assembly plants, 2005, plus half the number of light vehicle engine plants, 2005; the change in the number of employees in vehicle and vehicle equipment manufacturing industries, 1993-2003; and the change in the ratio of total vehicle manufacturing payroll to vehicles produced, 1994/1995-2004/2005.

Indiana had the second largest gain in number of vehicles produced, adding 361,865 cars and trucks to its annual production totals. It was second in the number of manufacturing/engine plants built, and first in the number of employees added in the sector (51,436) by about a factor of two over the next state, Kentucky. It added $3,146 to each automotive employee’s earnings per vehicle produced—the third highest total in the U.S., which is impressive considering how many vehicles Indiana added to its production rolls. That result helps Indiana earn first place by a small but secure margin.

MANUFACTURING MOMENTUM

Although the U.S. on the whole has lost manufacturing plants to overseas competition over the past decade, some states have actually posted a net increase. In order to find out which among these states shows the greatest promise for manufacturing going forward, we looked at the change from 2002-2004 (and for some items, 2003-2004) in factors like the number of manufacturing establishments and manufacturing workers, value of shipments, value added, and payroll. Since we looked at the changes rather than static values, the Manufacturing Momentum ranking is a dynamic tool that shows which states have excelled in growing their manufacturing base. This doesn’t answer “Who is the strongest?” in terms of the most factories or jobs; it answers “Who is making the best progress?” This year, Louisiana takes the number one spot in the ranking.

The data is from the Census Bureau’s 2007 Statistical Abstract of the United States. The latest figures in this report are from 2004. If they were from 2005 or 2006, we’d most likely have a different winner due to Hurricane Katrina.

Louisiana scored really well on the increase in the value added to its manufacturing shipments, but it didn’t add significant numbers of employees or establishments. One explanation may be that a huge project/s came along, possibly oil/gas related. The same phenomenon is largely true of Oregon; Iowa, on the other hand, had a good jump in value of its shipments, but also saw a dramatic increase in number of establishments, employees, and payroll.

There are states with many more manufacturing establishments than these top three, but many of those states seem to be shedding jobs, not adding them. California (ranked 41) has by far the greatest number of manufacturing establishments and jobs, but during the period measured it lost 5.4% of its manufacturing jobs. Arizona (25th) has lots of population growth (it added establishments and payroll) but that may be what’s pushed its value added per worker down—cheap labor means a manufacturer doesn’t have to strive as hard for productivity, and that’s not necessarily a good thing for the long term. The state also lost a large amount of the raw value of its shipments, meaning Arizona added manufacturers that are making lower margin, less valuable goods (as you would expect with cheaper labor).

GREEN CITIES

 

Between higher gas prices and an elevated level of environmental consciousness in the U.S., going “green” is a hot topic these days—and, it’s at the forefront of business, political, and personal agendas. Given increasing concerns by companies regarding this topic, we thought it apropos to report which cities in the U.S. have the greatest number of environmentally sound facilities.

 

 

 

 

We used the LEED standard of environmental certification, established by the U.S. Green Building Council, and ranked cities by the number of facilities built to this set of earth-friendly codes.

 

 

 

 

 

COST OF LABOR

Among those business costs that vary by location, the cost of your workforce often has the most substantial effect on your company’s bottom line. However, the cost of your workforce is predicted by more than just an area’s average annual salary; healthcare, unemployment insurance, and workers’ comp add significantly to the payroll checks you write. This is why we take several variables into account to bring you a comprehensive Cost of Labor ranking.

This year’s ranking uses methodology similar to our previous Cost of Labor rankings in 2005 and 2006, with a few minor changes. For example, we changed the healthcare cost factor from your cost to cover a single employee to “single person + 1.” Also, we added average annual pay to the mix so that we weren’t relying solely on manufacturing wages as an indicator of an area’s wages and salaries.

The new results show a few big changes and also reveal a few states that just rank high no matter how we alter the methodology. Interestingly, South Dakota has taken first place in this ranking each of the past three years. Clearly, no matter how you slice it, South Dakota’s labor force is just one heck of a value. Likewise, Mississippi, Arizona, and New Mexico are top 10 winners that won’t easily be displaced.

EDUCATED WORKFORCE

Let’s face it: having a well-educated workforce at your disposal is an attractive proposition for companies in almost any industry. Although not all jobs require employees to have a bachelor’s or advanced degree, most require employees to at least have a high school diploma. With that in mind, we felt it was important to consider attainment of degrees at all levels (high school, bachelor’s, and advanced degree) in our Most Educated Workforce ranking in order to get a complete picture of what locations with a well-educated workforce look like.

Specifically, we looked at the workforce 25 years and older with a high school diploma, bachelor’s degree, and an advanced degree, all for 2005; and the percentage point increase in attainment of each of those degrees from 2004 to 2005. The degree attainments counted for 55%, 33.3%, and 16.7% of the final tally, respectively.

EDUCATION CLIMATE

Unlike the preceding Most Educated Workforce ranking, which measures the level of education of the current workforce, the Education Climate ranking reveals what you can expect from a state’s future, long-term workforce. It takes into account things like how good a state’s schools are and the depth of the state’s commitment to education through a variety of factors such as pupil-teacher ratio, estimated public high school graduation rate, enrollment rate in institutions of higher education, SAT scores, estimated per pupil public elementary and secondary school current expenditures, federal allocations for the Head Start program, and state and local government expenditures on education.

The clear winner in this ranking is Vermont, which dominates the competition when it comes to student-teacher ratio with 10 students for every one teacher. (Not surprisingly, Vermont placed 6th in the Most Educated Workforce ranking.) Vermont’s next-door neighbor New Hampshire also made third on both lists.

GLOBAL BUSINESS ENVIRONMENTS

Thanks to The Economist Intelligence Unit’s 2007 e-readiness rankings, we were able to compile a global business environments ranking. The Economist Intelligence Unit recently published a free whitepaper (sponsored by IBM and The IBM Institute for Business Value) ranking 69 major countries around the world in terms of their “e-readiness.”

 

 

 

 

 

There were several components to it, one of them being the Business Environment Index (where 10 represents a theoretical perfect score). It is from this subindex that we compiled the top business environments from around the world.

 

 

 

 

 

According to the report, the Business Environment Index is composed of 70 variables, such as political stability, taxation, competition policy, and openness to trade and investment. The index is meant to measure each country’s attractiveness as a destination for business investment in the 2007-2011 timeframe.

 

 

 

 

 

 

 

The Most Dynamic States of Germany

It shouldn’t be surprising that as the most powerful economy in Europe, Germany scrutinizes its own 16 states as thoroughly as the U.S. does its 50.

Naturally, that means that there are rankings produced, and one of the most in-depth rankings of any kind is produced by Initiative Neue Soziale Marktwirtschaft (a think tank advocating free-market reform—its name translates to Initiative New Social Market Economy, abbreviated INSM). Its latest “Bundesländerranking 2006,” presented in concert with WirtschaftsWoche magazine, shows that the states of Saarland and Bavaria top the list in terms of “economic dynamism.”

report with the ranking was released late in 2006; the economic dynamism constitutes the main part of the study and aims to show which states are best positioned for economic growth going forward. The ranking used comparison data from 2003 through 2005 to measure the rate of change. When measuring the change over a longer term—2000 to 2005—the state of Saxony comes up tops, followed closely by Saarland, while Bavaria drops to fifth place. A subordinate ranking within the report shows the current economic strength of each state (not taking into account the direction in which things are headed); Bavaria takes first in this, followed by Baden-Wuerttemberg, while Saarland is sixth.

The lead dynamic ranking in which Saarland placed first examined 33 indicators in the period from 2003 to 2005 (and/or from 2002 to 2004, if no more current numbers were present). Taken into account were the following:

• Job market (weighted 25%)

• Prosperity (weighted 25%)

• Location (development of labor costs, infrastructure, human capital, etc.; weighted 30%)

• Structure (laws, local government practices, etc.; weighted 15%)

• Enterprise performance (development of yields on turnover and capital funds ratios; weighted 5%)

Saarland, the report’s declared “winner,” has watched its economy grow 6.1% since 2003, helping to do away with perceptions of it as only a coal and steel region. Though the steel industry still plays a significant role in Saarland’s economy, the region also is known as a leader in innovation and high-tech growth, with significant resources devoted to the automotive, communications, nanotechnology, and logistics industries. In particular, the automotive industry has become the cornerstone of the region’s economic power, as well as for automobile production throughout Europe. Automotive companies employ about 42,000 of Saarland’s 1.1 million inhabitants.

INSM also produces a similar district-scale ranking for Germany; Munich, Freising, Main-Taunus-Kreis, and Dachau are among the winners. Full details from all INSM studies are available as links (in German only) within the INSM Web site at www.insm.de.

BUSINESS TAX CLIMATE

For the third year in a row, we turn to The Tax Foundation (a nonpartisan, nonprofit organization based in Washington, DC that monitors fiscal policy in the U.S.) to bring you the best tax climates in the nation as a business would see it.

 

 

The 2007 edition, as always, favors tax climates that are not only low-tax, but also simple and without so many loopholes that it becomes burdensome just to figure your taxes; complex tax schemes are a real cost for business.

 

 

 

The overall index of the best climates is made up of five subindices—corporate tax, individual income tax, sales tax, unemployment tax, and property tax. Each of these has its own subfactors. The entire report is available for free at www.taxfoundation.org.

 

 

 

 

 

 

 

 

 

 

Looking for information on locations? click here

 

Notice: You may link to any page on BusinessFacilities.com. However, you are not permitted to copy any article in its entirety and republish it—either in print or online. It is acceptable to use the first paragraph of the piece or create your own summary and link back to the full article posted at Businessfacilities.com.