Site Selection magazine has published its 2016 Top State Business Climate rankings. The rankings are based on a combination of perceptions and selected metrics and won’t surprise anyone who has followed business climate analyses over time.
Fifty percent of the ranking is based on a survey of site selectors – corporate facility investors and site consultants — who indicate simply which states they deem to be the most business friendly…The other 50 percent — the objective side — is a combination of factors primarily based on announced project data resident in the Conway Projects Database (see the methodology on page 96), which credits areas with corporate facility projects of at least $1 million in capital investment, 20 or more new jobs or new construction of at least 20,000 sq. ft.
The top five states are Georgia, North Carolina, Ohio, Tennessee and Texas. As Site Selection editor-in-chief Mark Arend writes,
This year’s ranking, like those of previous years, illustrates the enduring strength of the US South as a destination for corporate expansion. Ohio (third) and Indiana (10th) made the top 10, but all others in that group can be found south of the Mason-Dixon Line.
Washington does not appear among the top 25 and the states falling outside the top half are not listed.
Last September we reported on Area Development magazine’s rankings, which were entirely based on perceptions of site selection consultants and which also had a decidedly Southern tilt, with Washington falling outside the top 20. We said then:
Rankings like these are, perhaps, useful as a guide to how people see the various states. But they are subjective. As others have written, there’s no such thing as a “best business climate.” But there are factors most people and most analysts consider influential in making location and investment decisions. Many of those factors are on the Area Development list.
They’re also on the Site Selection list, including taxes. And on that score, the Tax Foundation has some interesting things to say about top-ranked Georgia:
Some of the Site Selection variables are laudable goals that Georgia should be proud to score highly in, such as workforce skills, transportation infrastructure, workforce development, and quality of life. Tax Foundation’s own Location Matters is also weighted in the ranking.
Not included in the methodology of the ranking but mentioned at length in the article is our State Business Tax Climate Index, where unfortunately Georgia ranks in the bottom third of the country in 36th place.
The TF article includes Georgia Gov. Nathan Deal’s response to the state’s business tax climate ranking, and the foundation’s response to his response. It’s a nice way to illustrate that values and subjectivity are an inevitable element in such rankings.
Again, we present this because it’s often useful to see ourselves as others see us. But that’s doesn’t require us to buy into their perception.