When Samsung announced in mid-April that it would build its next generation semiconductor plant in Austin, Texas, it marked one of the largest investments by a foreign company in the U.S. Sure, a $10.8 million grant from the Texas Enterprise Fund probably played a role in Samsung’s decision but, let’s face it, for a company making a multibillion dollar capital investment, $10 million is just a little kiss on the cheek.
Site location decisions are made based largely upon data (demographic, economic and financial, taxes, cultural, etc.) gathered in an effort to measure the likelihood of a company’s success in any given metro area. Businesses choose places like Austin, or Seattle, or Raleigh or Dallas because they are the “total package.”
| Top 10 Metros Overall
1. Austin-Round Rock, Texas MSA
2. Minneapolis-St. Paul-Bloomington, Minn.-Wis. MSA
3. Raleigh-Cary, N.C. MSA
4. Dallas-Fort Worth-Arlington, Texas MSA
5. Houston-Baytown-Sugar Land, Texas MSA
6. Washington-Arlington-Alexandria, D.C.-Md.-Va.-W.Va. MSA
7. Madison, Wis. MSA
8. Seattle-Tacoma-Bellevue, Wash. MSA
9. Pittsburgh, Pa. MSA
10. Phoenix-Mesa-Scottsdale, Ariz. MSA
SOURCE: 2006 Mayor’s Challenge, Expansion Management
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For our nation’s mayors, attracting new business — and supporting existing business — is their No. 1 priority. Why? Because successful economic development programs result in increased job opportunities for their constituents, as well as additional tax dollars to pay for basic government infrastructure and services.
"Creating jobs and economic opportunity is one of the core priorities of my administration,” said Greg Nickels, mayor of Seattle, Wash. “We've simplified the land use code, created a Business Advocate position to be a point person with businesses, and worked with individual industry sectors to tackle work force and other issues they are facing. We're proud to be a partner for business, and not a problem."
Working hand in glove with the business community is the hallmark of a successful metro area.
“Dallas' historic commitment to a strategic partnership with the business community has resulted in a healthy and prosperous community,” said Laura Miller, mayor of Dallas, Texas. “Dallas is the heartbeat of the DFW region, a wonderful place to live, work and have fun.”
Similar sentiments are shared by mayors throughout the country.
“We pride ourselves in creating an environment in which companies can thrive.”
— Charles Meeker, mayor of Raleigh, N.C
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“We pride ourselves in creating an environment in which companies can thrive,” said Charles Meeker, mayor of Raleigh, N.C. “Raleigh is emerging as a world-class marketplace, known for its solid business opportunities and commitment to maintaining an excellent quality of life for its citizens."
But creating an environment that’s attractive to business means paying close attention to the dollars and cents issues.
"We've worked hard in Raleigh to maintain a solid business climate by keeping taxes low and standards high,” said Meeker.
Still, successful companies exist in virtually every community, so what makes some metros more attractive to business than others? (Click here to read commentary on Why Some Communities Lose Businesses, While Others Do Not)
The answer is simple.
These metros have the best overall secondary school districts, the greatest concentration of workers with post-secondary advanced and technical degrees, high quality healthcare at a reasonable cost, a place where employees can enjoy exceptional quality of life at a reasonable salary, the best logistics infrastructure, and the best business climates as established by the state legislature in terms of taxes and spending.
We add all of those attributes together to come up with our list of the 2006 Top Business Opportunity Metros.
How We Came Up With the Best Business Opportunity Metros
This year’s Mayor’s Challenge competition was based upon a metro’s various rankings in seven major studies and rankings conducted by Expansion Management’s award winning research department during the past 12 months.
| Top 10 Metros for Knowledge Workers
1. Ithaca, N.Y. MSA
2. Boulder, Colo. MSA
3. Ann Arbor, Mich. MSA
4. Washington-Arlington-Alexandria, D.C.-Md.-Va.-W.Va. MSA
5. Boston-Cambridge-Quincy, Mass.-N.H. MSA
6. San Jose-Sunnyvale-Santa Clara, Calif. MSA
7. Gainesville, Fla. MSA
8. San Francisco-Oakland-Fremont, Calif. MSA
9. Raleigh-Cary, N.C. MSA
10. Madison, Wis. MSA
SOURCE: 2006 Knowledge Worker Quotient, Expansion Management |
Those rankings compared all 362 MSAs in the areas of public education, health care cost and availability, transportation and logistics infrastructure, quality of life, strength of pool of knowledge workers, government influences on the business climate, and, finally, the metro’s reputation among prominent corporate site location consultants.
College-Educated Work Force. For today's high-tech, high-value companies, the most important site selection criteria of all is an educated work force, specifically in the science and engineering fields that tend to drive our emerging technology industries.
In our annual Knowledge Worker Quotient study, we try to identify the best places to find that kind of work force by comparing the 362 metro areas according to concentration of science and engineering graduates among the overall work force; the number of patents issued per capita; the number of colleges and universities, and the amount of research & development spending.
Public Education. Most of our readers are executives with manufacturing companies and, for them, high school graduates still make up the bulk of their work force. After all, if 28 percent of adult Americans are college graduates, simple math tells us that 72 percent are not.
| Top 10 Metros for Public Schools
1. State College, Pa. MSA
2. Ithaca, N.Y. MSA
3. Lawrence, Kan. MSA
4. Iowa City, Iowa MSA
5. Sheboygan, Wis. MSA
6. Charlottesville, Va. MSA
7. Eau Claire, Wis. MSA
8. Madison, Wis. MSA
9. Columbia, Mo. MSA
10. Harrisonburg, Va. MSA
SOURCE: 2006 Metro Public Schools Quotient, Expansion Management |
For the past 15 years, our annual Education Quotient compares 2,800 secondary school districts nationwide, focusing primarily on results obtained (college board scores and graduation rates) by each school district.
MSA EQ scores were calculated by taking all of the school districts we evaluated in each MSA and assigning them a weight based upon student enrollment as a percentage of the total student enrollment for the MSA and published in our annual Metro Public Schools Quotient rankings.
The results provide our readers with a way of comparing the type of work force they are likely to encounter in various communities across the country. After all, today's high school students represent a community's work force for the next 40 years.
Quality of Life. For most people, quality of life means being able to enjoy the fruits of a middle class lifestyle – the American Dream, so to speak. While access to theater and opera weigh heavily in the typical quality of life ranking, those cultural amenities are irrelevant to most American workers. For them, quality of life centers around more essential things, like home ownership, good schools and safe neighborhoods.
| Top 10 Metros for Quality of Life
1. Missoula, Mont. MSA
2. Fargo, N.D.-Minn. MSA
3. Bismarck, N.D. MSA
4. Grand Forks, N.D.-Minn. MSA
5. Columbia, Mo. MSA
6. Billings, Mont. MSA
7. Iowa City, Iowa MSA
8. Madison, Wis. MSA
9. Sioux Falls, S.D. MSA
10. State College, Pa. MSA
SOURCE: 2006 Quality of Life Quotient, Expansion Management |
Our Quality of Life Quotient compares 362 metro areas based upon cost of living, affordable housing, low crime, transportation access, good public schools, proximity to community colleges and universities, an educated work force, low taxes and other concerns that a potential employer might have.
Since companies have a choice as to where to locate future facilities, the concept here is to find locations where employees can enjoy a high quality middle class lifestyle at the lowest cost to the employer.
Logistics Infrastructure. Clearly, where a business locates its manufacturing and distribution facilities is dependent upon a whole host of factors, most of which are specific to that particular business.
| Top 10 Metros for Logistics Infrastructure
1. New York-Newark-Edison, N.Y.-N.J.-Pa. MSA
2. Houston-Baytown-Sugar Land, Texas MSA
3. Chicago-Naperville-Joliet, Ill.-Ind.-Wis. MSA
4. Cleveland-Elyria-Mentor, Ohio MSA
5. Detroit-Warren-Livonia, Mich. MSA
6. St. Louis, Mo.-Ill. MSA
7. Minneapolis-St. Paul-Bloomington, Minn.-Wis. MSA
8. San Francisco-Oakland-Fremont, Calif. MSA
9. Kansas City, Mo.-Kan. MSA
10. Jacksonville, Fla. MSA
SOURCE: 2005 Logistics Quotient, Expansion Management |
But what makes for a great logistics location? Are some cities better equipped than others to handle a company's distribution needs? If so, why? What is it about those cities that make them better locations for a company's next distribution center than, say, a neighboring city less than 100 miles away?
Our annual Logistics Quotient, conducted in partnership with Logistics Today magazine, compares metro areas according to about 60 factors grouped into 10 major logistics categories: the overall transportation & distribution industry climate, work force/labor costs/availability/shill levels; road/highway basic infrastructure and spending; road density/congestion/truck safety; road conditions; taxes & fees; railroad access; water ports (both river/lake and ocean); air service; and interstate highway access (both main and auxiliary routes.
Healthcare Cost and Availability. As we are all painfully aware, healthcare costs are not only a major expense for working families, they are also a major cost for employers, who generally pick up 75 to 80 percent of healthcare cost for their employees. As the cost of healthcare has risen steadily over the years, so too has its impact on a company's bottom line.
| Top 10 States for Healthcare Costs
1. Louisiana
2. Nebraska
3. Pennsylvania
4. Wisconsin
5. South Dakota
6. Alabama
7. North Dakota
8. Minnesota
9. Iowa
10. Ohio
SOURCE: 2006 Healthcare Cost Quotient, Expansion Management |
As a result, healthcare costs are becoming an important site selection factor when companies compare cities across the country, or even within a particular region. Those cities that are able to offer high quality healthcare are a relatively reasonable cost can offer this as a competitive advantage — that is, as just one more reason why a company should locate its next facility in that particular metro area.
Among the areas we compared in our annual Healthcare Cost Quotient are healthcare costs, employer insurance costs, hospital beds per 1,000 population, number of community health centers, number of nurses per population, number of teaching hospitals, etc.
Taxes and Government Spending. Politicians always claim credit when the economy is good, and swear they had nothing to do with it when the economy is bad.
| Top 10 States Taxes & Government Spending
1. Texas
2. Nevada
3. Wyoming
4. Arkansas
5. Iowa
6. Arizona
7. Florida
8. Washington
9. Tennessee
10. Georgia
SOURCE: 2005 Legislative Quotient, Expansion Management |
Our annual Legislative Quotient measures a state's business climate in those areas that governments are responsible for — taxes, spending on education and basic infrastructure, and managing the state's finances. Not only do we look at the most current data on revenue and spending, we also look at 5-year trends to see if things are getting better or worse. (NOTE: each MSA receives its state's ranking.)
Reputation Among Professional Site Consultants. Each year, the editors of Expansion Management poll roughly 80 prominent site location consultants in its annual America’s 50 Hottest Cities
rankings to determine which cities their clients find most attractive when it comes to actually selecting an expansion or relocation site, and why these cities are more appealing than the others.
What’s the Bottom Line?
| Top 10 Metros (Reputation Among Site Consultants)
1. Nashville-Davidson-Murfreesboro, Tenn. MSA
2. Phoenix-Mesa-Scottsdale, Ariz. MSA
3. Atlanta-Sandy Springs-Marietta, Ga. MSA
4. Dallas-Fort Worth-Arlington, Texas MSA
5. San Antonio, Texas MSA
6. Charlotte-Gastonia-Concord, N.C.-S.C.
7. Memphis, Tenn.-Miss.-Ark. MSA
8. Jacksonville, Fla. MSA
9. Knoxville, Tenn. MSA
10. Birmingham-Hoover, Ala. MSA
SOURCE: 2006 America’s 50 Hottest Cities Consultant Poll , Expansion Management |
One of the standard features of Expansion Management’s various annual metro “Quotient” studies is the awarding of the "5-Star Metros " designation to the top 20 percent of the 362 MSAs . Metros that earn this distinction can rightfully consider themselves to be among the elite cities when it comes to that particular category (i.e., publics schools, health care costs, logistics infrastructure, etc.).
Metros that rank in the 21 to 40 percentile are designated as “4-Star Metros ,” while those that rank in the middle (41 to 60 percentile) are awarded 3-Stars. You can do the math for the 2-Star and 1-Star metros.
Why do we arrange metros into group rankings? Because it provides you healthcare business executives as well as corporate site location specialists healthcare with a quick and easy means to compare the relative strengths and weaknesses of a particular metro you may be considering for a future facility location, as well as to compare it with any other communities you might be considering using the same criteria for each location.
More importantly, making this list also reflects the comparative strength of that particular city in a number of major categories. Site selection is all about compromises — it's impossible to be No. 1 in every area, but it is important to score reasonably well in most areas.
The various Mayors in the metro areas on this list all have a strong asset to sell to prospective businesses looking for the best place to relocate or expand their operations. Whether or not they are successful in attracting new business depends upon how aggressively they take advantage of, and market, those advantages.
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