Posts Tagged ‘California’

26th July
2009
written by JHiggins

Couldn’t resist – Inside Tucson Business ran a story on another list that we really don’t want to end up on. We are in the top 10 most expensive cities to do business in ….NATIONWIDE. Apparently there is a recalculation on how cities are measured and we as a region didn’t fair too well.

We are going to find out how if there is a typo in this statement…. “small businesses saw their annual taxes jump from $744 to $200,000, Jensen said in an e-mail.” Seems a little to big to make sense. Maybe $744 to $2000?

We made a similar list a year ago when ASBA ranked Tucson as the most unfriendly city in the state to do business in.  ASBA has over 3000 members statewide that apparently aren’t afraid to point out that Tucson needs to clean up it’s act.

Tucson among 10 most expensive to do business

Published on Saturday, July 25, 2009

A new study ranks Tucson among the 10 most expensive cities in the United States in which to do business.

The 15th annual Kosmont-Rose Institute Cost of Doing Business Survey released July 20 puts Tucson and Phoenix in an alphabetical list that also includes Akron, Ohio; Chicago; Jersey City, N.J.; Los Angeles; New York; Newark; Philadelphia; and San Francisco.

The survey, done by Claremont McKenna College, Claremont, Calif., ranked 411 cities in terms of their relative cost to do business. Categories include taxes, fees, economic incentives, transportation amenities, the existence of special enterprise zones, and public-private partnerships. Survey officials said two of the biggest determinants of a city’s cost of doing business tended to be business license fees and property taxes.

Research associate Brad Jensen said what caused Tucson to jump so much was a 2007 change in the way taxes are calculated setting an annual tax of $200,000 for the first $10 million in receipts of the first 100 employees and doing away the old system that was graduated based on the number of employees. Under the change, small businesses saw their annual taxes jump from $744 to $200,000, Jensen said in an e-mail.

The survey was originally developed to compare costs among 250 cities in California but has been expanded to include 161 cities outside the state.

The 10 least expensive cities in the survey were Austin, Texas; Cheyenne, Wyo.; Dallas; Eugene, Ore.; Everett, Ore.; Fort Worth, Texas; Gresham, Ore.; Houston; Portland, Ore.; and Reno, Nev.

Laura Shaw, senior vice president of marketing and communications for the economic development agency Tucson Regional Economic Opportunities Inc., said she couldn’t comment specifically on the new study because she hadn’t seen it but said a Forbes study released in March this year ranked Tucson No. 105 out of 200 cities.

Once again, Texas cities came out looking pretty good. Four out of 10 cities are in Texas and four out of 10 are in Oregon of all places.

The press release from the Kosmont-Rose Institute took some pot shots at California.

California cities such as Los Angeles, Oakland, San Francisco, and Santa Monica received “Very High Cost” ratings, and as in past years, Los Angeles County continues to be the location of the Survey’s most expensive jurisdictions with 11 of the 50 most expensive cities being in the County. Communities in western states such as Washington, Colorado, and Nevada consistently provide low cost areas in which to do business.

“California and many of its cities are now grappling with the triple witching hour of property tax losses, sales tax recession, and income tax losses,”said Larry Kosmont, president and CEO of Kosmont Companies and founder of the Survey. “Even well-run cities are having a hard time fending off tax increases, particularly since the financially faltering State wants to take back local redevelopment money and gas tax from their local cities and counties. However California should not raise anymore taxes at a time when businesses are already suffering, unless we want to see the exodus continue of companies leaving the State to other more business friendly locations.”

Since the Survey’s inception, California has consistently been one of the most expensive states in which to operate a business and as a result the state has earned a mixed reputation for its treatment of businesses. Recent trends support these conclusions. State workers’ compensation costs are once again on the rise after some years of stability, and a new one percent increase in the sales tax went into effect for the state of California on April 1, 2009. Further, several California counties and cities have recently increased their local sales tax rates. As a result, the California sales tax ranges from 8.25 percent in counties without add-on sales tax to a hefty 10.75 percent in some cities in Los Angeles County.

Even more challenging to a healthy economy are finances at the State level. With the State bleeding red ink due to a 26.3 billion dollar shortfall, and the overall economy in a downturn, the California legislature will need to carve out a budget deal premised primarily on drastic service cuts. However, many worry that the budget will continue to ignore the unfunded programs that are not sustainable due to ongoing revenue deficits that make voter approved commitments such as Proposition 98 education mandates unachievable. This makes the State’s future appear dim to many business leaders.

“California faces tough choices and spending reforms that are needed to resolve budget deficiencies, sufficient for California to become financially solvent, will not be easy ones to accept,” said Kosmont. “Pension and In Home Supportive Service reforms could save the State billions of dollars, however these and other reforms can be perceived as harsh. Ultimately, the California legislature needs to decide if they want to bring credit stability to a system that the business and financial community views as unmanageable and less creditworthy as each day passes.”

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