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BUSINESS REPORT: California – Finding The Lowest Denominator Of Business Cost

By Michelle Adams
From the March/April 2012 issue

In today’s challenging economic development environment, relocation, expansion or new facility decisions often hinge on the cost of doing business in a particular location—or, to be more specific, the lowest cost of doing business.

According to KPMG’s new Competitive Alternatives study, four metro areas in California (chart, below) rank in the top 25 for lowest cost of doing business. While these cities can rightly bask in that designation, a close look at some smaller locations reveals that cost-effectiveness is the watchword on the county and municipal level as well. A good example can be found in Santa Clarita Valley, which boasts affordability, comfort and amenities.

California Fast Facts

  • Population (2010): 37,253,956
  • Largest Cities (2010): Los Angeles, 3,792,621; San Diego, 1,307,402; San Jose, 945,942; San Francisco, 805,235; Fresno, 494,665
  • Targeted Industries: Alternative Energy, Clean Technology, Tourism, Healthcare, Agriculture, TV & Film
  • Key Incentives: New Markets Tax Credit Program, R&D Tax Credit, Enterprise/LAMBRA/Empowerment Zones, Film & TV Production Tax Credit, Industrial Development Bonds
  • GDP (All Industry 2010): $1.9 trillion*

*Bureau of Economic Analysis, U.S. Department of Commerce

At first glance, the Santa Clarita Valley may not appear to be a “low-cost” operating environment. And, when compared to other regions across the country solely on the basis of price per square foot, it often isn’t. However, when it comes to locating in prime marketplaces such as Southern California, the Santa Clarita Valley continues to be a smart choice among site selectors and real estate professionals. In contrast to many of its peers in the Los Angeles region, the Santa Clarita Valley is able to offer firms significant cost savings through a positive business environment, an educated local labor force and a wide range of benefit programs.

Santa Clarita Valley’s updated General Plan, known as “One Valley, One Vision,” is centered on a growth strategy that balances the jobs to housing ratio creating a minimum of two jobs for every new residence. This approach to building a balanced economy reaffirms economists’ findings that Santa Clarita Valley is positioned to outperform almost all of Southern California over the next decade.

Through the new Santa Clarita Valley Enterprise Zone (SCVEZ) employers can receive up to $37,440 in state tax credits for each qualified employee over a five-year period. Also, as a part of the Enterprise Zone program, businesses can receive tax credits on up to $20 million worth of qualified equipment purchases, utilize net operating loss carryover, net interest deductions and preference points when bidding state contracts.

Additional specialized incentives are also available to Santa Clarita Valley businesses, including: U.S. Foreign Trade Zone (FTZ) benefits, research and development tax credits, utility consulting services and rebates, Use Tax rebates, Recycling Market Development Zone (RMDZ) incentives and no or low cost business consulting services.

Industry Rides The Rails In Hesperia, CA

The railroad has been a part of Hesperia, CA’s history since the late 1800s, when travelers rested at the Hesperia Hotel and bakers in Los Angeles anxiously awaited their daily fuel supply from the desert. As much as rail is deeply rooted in the City’s past, it is forging ahead as a critical component of its future. Soon Hesperia will become a critical location for industrial transportation—it is being transformed into an international transportation hub by reconnecting with the nations rail system.

“The City of Hesperia is investing in the future of the “I” Avenue Industrial Area to attract the broad range of businesses that utilize rail transport,” said City Manager Mike Podegracz. “With the combination of a much appreciated $2 million grant from the EDA and our valuable redevelopment funds, we are moving forward with this vital project to help stimulate our local economy.”

This project has the potential to attract new businesses, and in turn hundreds of new jobs to this region. Once completed, there will be 200 acres of property with direct rail access in Hesperia and a team transload facility. Because not all companies can be located along the tracks or have the large scale transporting needs to have their own rail spur, a transload facility allows multiple companies to partner together, accommodating the movement of multiple smaller shipments at one locations without individual large scale agreements with the railroad.

The most heavily traveled rail line in the United States with the most international traffic is located right in the heart of Hesperia and connects to Burlington Northern Santa Fe’s system of 32,000 route miles throughout the United States. Today, the city is laying the tracks needed to open Hesperia up to the world, and the city looks forward to celebrating the trains once again coming home to Hesperia.

CA Breaks Top 25 in Lowest-Cost

Four metros in California ranked in the 25 cities with the lowest cost of doing business in KPMG’s Competitive Alternatives study.

Rank/City/Cost Index
1. Cincinnati, OH    95.9
2. Atlanta, GA    96.2
3. Orlando, FL    96.3
4. Tampa, FL    96.4
5. Dallas-Fort Worth, TX    96.5
6. Baltimore, MD    97.0
7. St. Louis, MO    97.1
8. Cleveland, OH    97.1
9. Pittsburgh, PA    97.2
10. Phoenix, AZ    97.6
11. Miami, FL    97.8
12. Houston, TX    97.8
13. Minneapolis, MN    98.3
14. Denver, CO    98.4
15. Riverside-San Bernardino, CA    98.6
16. Portland, OR    99.3    19
17. Sacramento, CA    100.0
18. San Diego, CA    100.6
19. Los Angeles, CA    100.9
27. San Francisco, CA    104.5

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