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Area Development - Site Selection, Facility Planning and Workforce Development

2018 Top States for Doing Business: Georgia Ranks #1 Fifth Year in a Row

Competitive labor environments and leading workforce development programs, low taxes and utility costs, favorable regulatory environments, and cooperative state governments are among the top-ranked states’ pro-business attributes.

Q3 2018
There’ a lot of prestige that comes from landing big-headline development projects, so it’s no wonder that states put powerful effort into making themselves great places to do business. Business success is a key component in a state’s economic health and, ultimately, individual prosperity and quality of life.

Creating an environment as a top state for doing business is no easy task, though. It requires attention to a lot of detail, from tax policies to economic development programs to regulatory matters to support for a well-qualified workforce. Our survey identifies 11 separate components that each play a key role in just how ideal a state is as a place for doing business. Needless to say, the ones that do well in a lot of these areas tend to fare well overall.

As competitive as the environment is, with ever-shifting policies and programs, it’s clear that some states have really figured out how to hit the sweet spot. Georgia tops the list this year, as it has since 2014. Second-place Texas was third last year and the year before, and third-place Alabama was in the sixth spot in 2017 and 2016. Regular appearances at or near the top are a reflection of success, and the ongoing success that builds upon past wins and positive reputations.

TOP STATES FOR DOING BUSINESS 2018

  1. 1.Georgia
  2. 2.Texas
  3. 3.Alabama
  4. 4.Tennessee
  5. 5.South Carolina
  6. 6.North Carolina
  7. 7.Louisiana
  8. 8.Mississippi
  9. 9.Indiana
  10. 10.Florida
  11. 11.Ohio
  12. 12.Arizona
  13. 13.tKentucky
  14. 13.tVirginia
  15. 15.Arkansas
  16. 16.Oklahoma
  17. 17.Utah
  18. 18.tMichigan
  19. 18.tNew York
  20. 20.Nevada

Individual Categories

Overall Cost of Doing Business

  1. 1.Texas
  2. 2.Tennessee
  3. 3.tGeorgia
  4. 3.tAlabama
  5. 5.tSouth Carolina
  6. 5.tMississippi
  7. 5.tIndiana
  8. 8.North Carolina
  9. 9.tLouisiana
  10. 9.tFlorida
  11. Other: KY

Corporate Tax Environment

  1. 1.Texas
  2. 2.tTennessee
  3. 2.tFlorida
  4. 4.Georgia
  5. 5.tNorth Carolina
  6. 5.tNevada
  7. 5.tSouth Dakota
  8. 8.South Carolina
  9. 9.tVirginia
  10. 9.tUtah
  11. Others: AL, IN, AZ, LA

Business Incentives Programs

  1. 1.South Carolina
  2. 2.tGeorgia
  3. 2.tAlabama
  4. 4.Mississippi
  5. 5.Texas
  6. 6.tTennessee
  7. 6.tLouisiana
  8. 8.Oklahoma
  9. 9.tIndiana
  10. 9.tOhio
  11. 9.tNew York
  12. 9.tNew Jersey
  13. Others: VA, KY

Access to Capital & Project Funding

  1. 1.California
  2. 2.tTexas
  3. 2.tNew York
  4. 4.North Carolina
  5. 5.tGeorgia
  6. 5.tMassachusetts
  7. 7.Florida
  8. 8.tTennessee
  9. 8.tIllinois
  10. 10.Louisiana
  11. Others: CO, NJ, MI, PA, CT, MD

Competitive Labor Environment

  1. 1.Texas
  2. 2.tGeorgia
  3. 2.tNorth Carolina
  4. 4.Florida
  5. 5.Tennessee
  6. 6.tAlabama
  7. 6.tIndiana
  8. 6.tArizona
  9. 9.tUtah
  10. 9.tOhio
  11. Others: SC, MS

Leading Workforce Development Programs

  1. 1.Georgia
  2. 2.Alabama
  3. 3.Louisiana
  4. 4.tSouth Carolina
  5. 4.tTennessee
  6. 6.North Carolina
  7. 7.tVirginia
  8. 7.tOhio
  9. 9.Florida
  10. 10.tMississippi
  11. 10.tIowa
  12. 10.tCalifornia

Shovel-Ready Sites Program

  1. 1.Tennessee
  2. 2.Georgia
  3. 3.Alabama
  4. 4.South Carolina
  5. 5.North Carolina
  6. 6.Ohio
  7. 7.Texas
  8. 8.tIndiana
  9. 8.tMississippi
  10. 10.tKentucky
  11. 10.tLouisiana
  12. Others: AR, VA, IA, WI

Cooperative & Responsive State Government

  1. 1.Georgia
  2. 2.South Carolina
  3. 3.North Carolina
  4. 4.Alabama
  5. 5.Tennessee
  6. 6.tMississippi
  7. 6.tLouisiana
  8. 8.Arizona
  9. 9.tIndiana
  10. 9.tVirginia
  11. Others: OH, TX, AR

Favorable General Regulatory Environment

  1. 1.tAlabama
  2. 1.tGeorgia
  3. 3.Texas
  4. 4.South Carolina
  5. 5.Tennessee
  6. 6.Louisiana
  7. 7.Mississippi
  8. 8.Florida
  9. Others: NC, IN, AR, KY, UT, KS, NV

Favorable Utility Rates

  1. 1.Alabama
  2. 2.Georgia
  3. 3.tIndiana
  4. 3.tOhio
  5. 3.tMichigan
  6. 6.tKentucky
  7. 6.tNorth Carolina
  8. 8.Tennessee
  9. 9.tSouth Carolina
  10. 9.tArizona
  11. 9.tVirginia
  12. Others: AK, ID, CO

Most Improved Economic Development Policies

  1. 1.Alabama
  2. 2.Georgia
  3. 3.Texas
  4. 4.tSouth Carolina
  5. 4.tMississippi
  6. 6.Tennessee
  7. 7.tLouisiana
  8. 7.tIndiana
  9. 9.Arizona
  10. 10.Kentucky
  11. Others: FL, OH, AR
Overall Cost of Doing Business
Of the 11 other categories listed in our Top States for Doing Business report, nearly all have some impact on the cost of doing business. Achieving an exceptional cost picture isn’t just a matter of having low taxes or utility rates or a lower average wage —It’s the sum total of many accomplishments.

Texas leads the way in this category again, which isn’t a big surprise due to the fact that it is a recognized leader in many of the things that go into the overall cost of doing business. It tops the list in corporate tax environment and competitive labor environment, two of the biggest cost factors, and it’s in the top five in incentive programs, access to capital, and a favorable regulatory environment. Texas also is in the top five states whose economic development policies are seen as the most improved.

Much of the same can be said about Tennessee, which ranks second for its overall cost of doing business, and is rated highly for its competitive labor environment, generous business incentives, positive tax picture, favorable regulatory environment, reasonable utility rates, easily accessed project funding, exceptional workforce development concepts, and outstanding shovel-ready sites — ranking first in this last category. Hit on all of the cylinders in this manner, and you’re bound to reduce the cost of doing business.

Indeed, most of the states rated highly for their overall cost of doing business are also well-regarded across the entire survey. Georgia and Alabama tie for third and can be found at or near the top of numerous other categories. It’s worth noting that all of the states honored in this category — except for Indiana — are in the South. There are plenty of excellent reasons to do business in other areas of the country, but it often will cost you more.

Methodology for 2018 Top States for Doing Business

Our 2018 Top States for Doing Business rankings reflect the results of our recent survey asking the consultants to give us their top state picks in 11 categories that impact companies’ location and facility plans. The states in each category were ranked based on their number of mentions in the particular category and total mentions in all 11 categories were calculated to rank the top 20 states overall.

Corporate Tax Environment
According to the Tax Foundation, most states have corporate income taxes, but there are significant differences from state to state. Rates range from 3 to 12 percent, though half a dozen states don’t have a corporate income tax at all. Of course, corporate income taxation is just one piece of the overall tax environment. Property taxes, franchise or receipts taxes, inventory taxes, sales taxes, and various other elements add into the picture — not to mention the highly important credits and exemptions that subtract from the total tax bill.

At the top of the list for corporate tax environment is Texas, which levies no corporate or personal income tax. Policymakers, who reduced the franchise tax a few years ago, have signaled that they aren’t yet done cutting, and the Tax Foundation suggests there is room to improve. That organization, in fact, has said the state’s remaining franchise tax is the main thing standing in the way of a top three ranking in its own state tax climate evaluations.

Tied for second are two states that also are without a personal income tax, Tennessee and Florida. Tennessee, too, has some room to improve, according to the Tax Foundation, especially when it comes to the sales tax. Of course, there are significant sales tax exemptions that help facilitate business activities there. The Tax Foundation lists Florida among the top five states with the best business tax climates, and lawmakers there have continued to pursue positive changes. Multiple reductions and exemptions are coming online, and even some creative ways to redirect taxes, including the option to reduce certain tax liabilities by contributing to scholarship programs.

Georgia is high on this list again, thanks to its numerous programs aimed at lowering business taxes. There are exemptions covering many business activities, and companies can earn credits for creating jobs, particularly in strategic industries, and also for hiring disadvantaged workers, retraining workers, increasing exports, conducting R&D, and a host of other situations. Tying and rounding out the top five are more repeat honorees in this category: Nevada, North Carolina, and South Dakota.

Business Incentive Programs
Launching or expanding an operation can be incredibly expensive, but generous incentive programs ease the way virtually everywhere. Some, of course, are more generous than others, and South Carolina tops this category once again. Its menu of incentives is long and diverse — many focus on lowering corporate income, sales or local property taxes. But many of its economic development successes are also driven by job development credits, workforce development incentives, and grants from such discretionary funds as the Set-Aside Program, the Rural Infrastructure Fund, and the Governor’s Closing Fund, all of which can be tailored to an individual company’s needs.

Georgia and Alabama are tied for second in the realm of business incentives. Given that business incentives often are targeted at reducing taxes and that Georgia is one of the leading corporate tax environments, its high ranking here is not surprising. But there are also incentives that directly or indirectly help small businesses get revved up, including tax credits for angel investors who put their faith in fledgling companies. Alabama, meanwhile, has a wide range of incentives rewarding those that launch or expand an operation, or refurbish facilities. There are credits encouraging capital investment, and jobs credits that can result in a refund of 3 percent of the payroll, or even more, for up to a decade.

Similarly, diverse incentive programs lure companies to Mississippi — through business loans, tax incentives, economic development grants, assistance for small or minority-owned companies, and funds aimed at employers already up and running and eager to thrive. And Texas is well-known for its generous business incentives, including the deal-closing Texas Enterprise Fund that has helped create more than 80,000 jobs since its launch 14 years ago.

Access to Capital and Project Funding
The time-worn adage “it takes money to make money” is most definitely true in the world of business expansion and location. Incentives may help pay back some of the investment cost that goes with opening or expanding a new business location, but those doors could never open without capital and project funding, usually in the millions or even billions of dollars.

California, New York and Texas once again comprise the top three states in access to capital and project funding, albeit in a slightly different order from last year. All three are solid centers of traditional financial services activity, and magnets for venture capital. In fact, one recent report from PricewaterhouseCoopers and CB Insights found that these three states plus Massachusetts (also on this list) together snare four-fifths of the nation’s venture capital funds.

Many states find that specialized funding programs make a real difference in helping harder-to-finance companies get their projects going. Such Texas initiatives as LiftFund and PeopleFund, for example, aim to elevate businesses that have trouble accessing more traditional financing. Innovate NY and the Linked Deposit Program similarly strive to help those less able to land bank financing. California companies benefit from a long list of targeted funding programs.

Competitive Labor Environment
Productivity is ever-increasing, but for many companies, labor remains one of the biggest costs of doing business. Indeed, access to qualified and affordable labor is the top concern of most companies making a location decision. A competitive labor environment is the byproduct of a strong pool of available labor supported by a solid network of educational institutions and programs that help companies arrange the tailored training that their workers need to succeed.

Texas once again tops this list for a number of reasons. The Lone Star State has a vast array of colleges and universities that turn out well-qualified employees. Helping companies tap into just the right educational expertise are such initiatives as the Skills Development Fund, which provides money for community or technical colleges to partner with businesses on training programs.

Tied for second are Georgia and North Carolina. They can point to multiple factors that make their labor environment competitive. For one thing, both states have right-to-work laws (as do nine of the top 10 states in this category). Georgia boasts an educational environment that turns out a steady stream of skilled employees, starting with publicly funded pre-K education, ongoing programs targeted at improving elementary and secondary teaching quality, and generous scholarships for higher education. North Carolina is well-known for its Tier 1 research universities, but also has some of the nation’s most comprehensive technical and advanced vocational programs.

Leading Workforce Development Programs
As stated, workforce development is a critical part of the labor environment. In the best of circumstances, a state’s workforce development programs have created a pool of properly skilled labor that’s ready to be hired as the need arises. There are often gaps, though, but a solid workforce development program can fill in the gaps in a way that is tailored to an employer’s needs.

Georgia is the leader in this category, thanks to a variety of factors. The Workforce Division of the Georgia Department of Economic Development has the responsibility of ensuring that education and training programs are aligned with what industry is demanding. The Technical College System of Georgia is heavily involved in the effort, and even has tuition-free programs in a dozen and a half high-demand careers. And the Georgia QuickStart program, which provides free customized services for companies, has helped a million people raise their skill levels.

Louisiana, ranked third this year, is highly regarded as well for a number of reasons. Beyond standard workforce programs, the state benefits from such ideas as a state-funded initiative to triple the undergraduate degrees awarded by the University of Louisiana at Lafayette School of Computing & Informatics. That kind of support helped information technology and consulting firm CGI decide to expand its IT center of excellence.

Tennessee (which tied for fourth in this category with South Carolina), has gotten a lot of attention with its ambitious “Drive to 55” program with a target of equipping 55 percent of Tennesseans with a college degree or certificate by 2025. The Tennessee Promise and Tennessee Reconnect programs provide the backbone of this initiative, by ensuring that all Tennessee high school graduates can have two years of tuition-free education at any of the state’s community colleges or colleges of applied technology. That promise recently was extended to cover all Tennessee adults wishing to attend college for the first time or return to wrap up a degree.

And Florida, in ninth place, has a strong network of educational institutions along with an array of customized training programs and incentives such as CareerSource Florida. Its FloridaFlex program, in fact, handles not just training but recruiting and hiring.

Shovel-Ready Sites Program
Real estate transactions and site development are incredibly complicated matters. Even a simple sale of a home generates a stack of paperwork following weeks of due diligence on the part of title professionals and other experts. That’s nothing compared with what it takes to transform an undeveloped site of hundreds of acres into a new factory or distribution center or other kind of facility. There are ownership matters to resolve, utilities to arrange, infrastructure to develop, technical studies to conduct, zoning matters to consider, and other headaches to deal with.

No wonder shovel-ready sites are considered a deal-maker in many instances. What they’re called and what the designation means varies from state to state, but in general it’s a confirmation that the key details have already been checked out and resolved. Tennessee is top-ranked here again this year, with its Select Tennessee Certified Sites Program with a few dozen sites that are ready to roll.

No. 2 Georgia, meanwhile, has the GRAD program, short for Georgia Ready for Accelerated Development. More than 60 sites are ready to go, having already had an environmental assessment, geotechnical investigation, zoning designation, and utility service assessment, to name a few details. Alabama, ranking third, calls the concept AdvantageSite, and there are some five dozen sites that fit the bill. It’s a public-private partnership that ensures a site is ready for prospective industry to get going on a project, with preliminary work completed and all the paperwork in hand. In Kentucky, the concept goes by the name Build-Ready Sites, and there are prime possibilities waiting for shovels in more than a dozen Kentucky counties.

Cooperative and Responsive State Government
At his inauguration in 1981, President Ronald Reagan famously declared that “government is the problem.” The leaders in this category might beg to differ, as they’re being recognized for being part of the solution to the challenge of running a successful business. Many states claim that they roll out the red carpet and put out the welcome mat for business prospects, but being business-friendly is more than just words. It’s an active effort to break down barriers that stand in the way of business success, facilitate deals, and swiftly move what can be complicated processes down the road to completion. States that excel in this area want business dealings to feel less like the picture Reagan painted and more like “phone a friend” or a transaction at the coffee shop on the corner.

Topping this category once again is Georgia, which provides a wealth of support for businesses considering locations there as well as those already planted there and working to expand. Its staff includes industry-specific experts and people with contact lists packed with supporters willing to help. The aim is to simplify the process of locating the ideal spot, then easing the path of obtaining approvals and creating project-specific incentive packages.

South Carolina regularly ranks near the top in this category, as well. Its services are similarly geared toward easing the location/expansion process, but the state also recognizes that all partners need to be at the top of their game in providing a cooperative and responsive effort. That’s why the state offers consultation assistance to its local governments to help them improve their own economic development responsiveness and professionalism.

The aversion to red tape can be found up and down this category of business-friendly states. Eighth-place Arizona describes its regulatory environment as “minimalist,” and has undertaken focused efforts to remove burdensome regulations and create resources for business-targeted assistance.

Favorable General Regulatory Environment
When it comes to business regulations, the climate can make or break the viability of a location or expansion project, as well as the ongoing health of the operation. Environmental laws and how they are enforced can determine whether a particular site will work or not, and there are numerous other legal considerations that also impact the big picture and bottom line. Workers’ compensation laws and other labor factors can be a big deal, as can various other administrative hurdles — or lack thereof.

Georgia moves up to the top in this category this year, in a tie with Alabama. Just one example of this is the streamlined process for environmental permitting in Alabama. Its Department of Environmental Management includes a Permit Coordination and Development Center that aligns administrative functions and communications with an aim of creating hassle-free interactions with businesses.

Texas also regularly rates highly in this regard. Though some analyses suggest there’s still room for improvement, Texas has recognized that this kind of burden comes not just in the form of business regulations, but also the impact of legal rulings. That explains its longstanding crusade for tort reform, aimed at reducing business liabilities and minimizing business risks. Mississippi, ranking seventh, has made a similar commitment.

Favorable Utility Rates
Big users of energy pay close attention to utility rates, as the cost of energy, in particular, can be a major part of operational expenses. That’s especially the case for such users as manufacturing operations and data centers. But as with everything else, determining the place with the most favorable rates is a lot more complicated than looking up prices on a table, because big users can often land special incentives, discounted rates, and improvements to the infrastructure.

That said, the top states on this list do fare pretty well on the rate tables. The U.S. Energy Information Administration keeps tabs on such things as electric rates, and the four states topping this category all fall around or below the middle of the price list. Again, that’s a base residential rate and not what a big industrial user would expect to pay, but it certainly doesn’t hurt to start in a good spot. Tied-for-third-place Indiana, for example, is near the bottom in average electric costs, and below the national average in natural gas.

For businesses, utilities such as Alabama Power offer dozens of pricing options that consider the type of business and the specific energy requirements. Demand pricing might be the best bet, or time-of-use pricing, or real-time pricing, or some variation. Picking the right option can make all the difference in solving the utility cost equation.

The right spot on the map can play a role in the availability of competitive utility services. Kentucky, for example, sits right on the interstate natural gas pipeline corridor, which means supply is not an issue, and it has exceptional access to naturally flowing water supplies, too. Its electric rates are made more competitive by Kentucky’s extensive coal reserves.

Most Improved Economic Development Policies
The business of economic development is highly competitive, and the landscape changes all the time. Factors that added up to a good deal five years ago might be just average today, as states continually revise and improve their policies and programs. As good as the states profiled here are as locations for business success, there is always room for improvement in incentives, tax rates, workforce development programs, and all of the other factors that make a state attractive to businesses.

Category-topping Alabama, for example, has continued to pursue legislation aimed at boosting business-friendliness and encouraging regional cooperation for the benefit of all. The same can be said in states up and down the list, such as in Texas, which made it to the top of the CNBC “Top States for Business” list by continuing to promote the gospel of low taxes, restrained spending, and smart regulation. Indiana, tied for seventh on the list, included workforce training initiatives among its new laws for 2018. A new secretary and cabinet for workforce training will oversee programs that in the past have been spread across multiple agencies.

Kentucky, meanwhile, is boosting its competitiveness with a number of new ideas. The KY Innovation initiative is putting in place a regional approach for developing high-tech businesses that have a big potential to grow. Kentucky is also building upon its highly regarded apprenticeship program. And the state has partnered with neighboring Indiana on an exchange program that allows disadvantaged business enterprises to work on federally funded transportation projects across both states with a single certification.
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