2011 Kosmont-Rose Institute Cost of Doing Business Survey Report

Released by the Rose Institute of State & Local Government at Claremont McKenna College

CLAREMONT, Calif.--()--Claremont McKenna College’s Rose Institute of State & Local Government today released the 17th annual Kosmont-Rose Institute Cost of Doing Business Survey. The Rose Institute, and in partnership with Los Angeles-based Kosmont Companies, gathers business fees and a variety of tax rates from 421 selected cities across the United States. Rankings for each city are divided into one of five “Cost Ratings” groups: Very Low Cost ($), Low Cost ($$), Average Cost ($$$), High Cost ($$$$), and Very High Cost ($$$$$).

The Twenty Most Expensive Cities in 2011

City Name     Sales Tax     Retail Business License Fee     Property Tax
AKRON, OH     6.50%     $ 112,500     2.63%
BEVERLY HILLS, CA     9.75%     $ 12,700     1.09%
BIRMINGHAM, AL     8.00%     $ 20,000     1.39%
CHICAGO, IL     9.75%     $ 125,000     4.63%

CINCINNATI, OH

    6.99%     $ 21,000     2.35%
CLARKSBURG, WV     8.25%     $ 515     1.81%
COLUMBUS, GA     6.78%     $ 60,050     1.66%
CULVER CITY, CA     9.75%     $ 10,060     1.06%
LOS ANGELES, CA     9.25%     $ 12,700     1.19%
MOBILE, AL     9.00%     $ 29,660     1.27%
NAPERVILLE, IL     6.75%     $ 100,000     2.54%
NEW YORK, NY     8.87%     $ 88,500     4.64%
NEWARK, NJ     7.00%     $ 40,000     3.18%
PHILADELPHIA, PA     8.00%     $ 106,272     2.64%
PORTLAND, OR     0.00%     $ 36,500     2.29%
RICHMOND, VA     5.00%     $ 20,000     1.20%
SAINT LOUIS, MO     9.24%     $ 11,250     2.33%
SAN FRANCISCO, CA     9.50%     $ 60,500     1.16%
SANTA MONICA, CA     9.75%     $ 12,500     1.11%
TOLEDO, OH     7.24%     $ 22,500     0.94%
           

The Twenty Least Expensive Cities in 2011

City Name

    Sales Tax     Retail Business License Fee     Property Tax
AUSTIN, TX     8.25%     $ 0     0.46%
ABILENE, TX     8.25%     $ 0     0.69%
FORT WORTH, TX     8.25%     $ 0     0.86%
CHEYENNE, WY     6.00%     $ 0     0.67%
EUGENE, OR     0.00%     $ 0     0.72%
YAKIMA, WA     8.20%     $ 1,285     1.15%
KENT, WA     9.50%     $ 100     1.08%
EVERETT, WA     8.60%     $ 1,000     1.33%
VANCOUVER, WA     8.10%     $ 125     1.39%
FEDERAL WAY, WA     9.00%     $ 50     1.16%
OLYMPIA, WA     8.70%     $ 30     1.23%
CORPUS CHRISTI, TX     8.25%     $ 0     2.03%
RENO, NV     7.72%     $ 7,545     1.28%
SPOKANE, WA     8.49%     $ 2,060     1.37%
CENTENNIAL, CO     2.50%     $ 0     1.46%
OVERLAND PARK, KS     8.65%     $ 0     0.15%
HOUSTON, TX     8.25%     $ 0     2.44%
SIOUX FALLS, SD     6.00%     $ 0     2.09%
BELLEVUE, WA     9.00%     $ 14,960     0.00%
GRESHAM, OR     0.00%     $ 469     1.75%

Highlights from the 2011 Survey

  • All of the least expensive cities are located west of the Mississippi River, with five cities in Texas and eight in Washington.
  • Seventeen of the twenty least expensive cities are located in states that do not impose income tax, and two are located in states that do not impose sales tax.
  • High business license fees are the primary reason that cities end up on the most expensive list.

Older and Western Cities Most Expensive, Texas and Washington Cities Least Expensive

In the 2011 edition of the Kosmont-Rose Institute Cost of Doing Business Survey, the 20 most expensive cities are distributed across every region of the country. Of the 20 most expensive, six are in the Midwest, five in California, four in the Northeast, 4 in the Southeast and 1 in the Pacific Northwest.

All of the 20 least expensive cities are in the western and central states. Texas and Washington dominate the least expensive list with five and eight cities, respectively.

Survey a “Tie-Breaker” for Businesses Deciding Where to Locate

The Survey uses a proprietary approach to compare the 421 cities nationwide based on the raw data on fees, taxes, and economic incentives and programs that businesses may encounter in each city.

“The Survey is known as a ‘tie-breaker’ for companies contemplating a move or an expansion,” says Larry Kosmont, President & CEO of Kosmont Companies. “It serves the firm that has already determined the best combination of factors important to it, such as the quality of the labor force, the cost of housing, and the proximity to their suppliers and customers. There is often a handful of side-by-side cities in a market area that meets these criteria for a given company. That’s when city-imposed fees really make a difference and information in the Survey can be a cost and time saver.”

Nationwide - Business License Fees and Property Taxes are Culprits

High business license fees are the primary reason that cities end up on the list of most expensive. Fifteen of the twenty most expensive cities assess business taxes based on either gross receipts or general profit.

With such formulas, the taxes a business pays to a city have the potential to increase rapidly. Nineteen of the twenty cities impose a business license fee of more than $10,000 a year on medium-size retail businesses. Of these nineteen cities, seven have fees between $100,000 and $175,000.

There is a similar pattern for the property tax rates of the twenty most expensive cities. All of the rates are higher than 1%, with twelve of the cities having rates over 2%. In comparison, the majority of the cities included in the survey have property tax rates hovering just above 1%. New York and Chicago are the ignoble leaders with rates of 4.64% and 4.63% respectively, with Newark third at 3.18%.

Spotlight on California - Redevelopment Agencies Face Extinction, Cities Forced to Innovate

While the Great Recession may have officially ended two years ago, the national economy remains stalled and California’s crushing financial problems have only gotten worse. With the state strapped for cash, desperate measures are being taken.

In recent decades, redevelopment agencies provided one of the most effective forms of economic development for California’s local governments. Then, two laws enacted as part of the state budget this past summer effectively eliminate redevelopment authorities unless their cities turn over large sums tax revenue for the privilege of continued existence.

“California’s 425 redevelopment agencies are now fighting for their lives”, said Kosmont. A lawsuit brought forth by The League of California Cities, California Redevelopment Association and the cities of San Jose and Union City, challenges the state’s action on the grounds that it violates Prop 22, a ballot measure passed by voters in 2010 designed to protect local revenues from the State.

Last month the California Supreme Court halted – for the moment – the plan to dismantle redevelopment agencies. The court will decide by January 15, 2012 whether the state’s plan is legal.

Despite the dire situation of local government, there are several potentially positive opportunities to be had in the midst of this crisis. The down economy and resultant economic pressures on city governments can help business owners to find advantageous deals at city hall. “If you’re in business right now,” Kosmont observed, “there are good deals to be struck with cities.”

Contacts

Kosmont Companies
Larry Kosmont, President & CEO, 213-507-9000
or
Rose Institute of State and Local Government
David Huntoon, Fellow, 909-621-8159
For Additional Charts Contact: Matt Goulet, 818-274-2206

Release Summary

Kosmont-Rose Institute Cost of Doing Business Survey. Gathers business fees and a variety of tax rates from 421 selected cities across the U.S. Rankings for each city are divided into categories.

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Contacts

Kosmont Companies
Larry Kosmont, President & CEO, 213-507-9000
or
Rose Institute of State and Local Government
David Huntoon, Fellow, 909-621-8159
For Additional Charts Contact: Matt Goulet, 818-274-2206