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How cities and states can build the foundation for business growth

Published: 01/02/2018
Updated: 02/16/2022

By GPEC President & CEO, Chris Camacho

It’s a classic talking point from politicians to say that government doesn’t create jobs – and it’s spot on. What government can do, however, is create the right operating environment for companies to compete and grow, thus protecting and creating more jobs.

For state leaders, that can mean supporting pro-business policies, eliminating burdensome regulations and creating and modernizing programs that incentivize companies to grow. Some states have attempted to increase their competitiveness through massive tax cuts, resulting in diminished revenues and a weakened environment for business.

Other states, such as Arizona, have been focused on creating policies that support business growth, and avoid the fringe political issues that often muddy the waters, and state reputations, both of which are unappealing to companies looking to expand into other markets. While there is no exact recipe for growing business, states who focus on the following approaches will most certainly be in a position to see economic growth.

1. Pro-business operating environment

At the state level, policymakers are able to set policy that gets out of the way of business, making it easier for companies to add to their bottom line. For example, pro-business states offer protections for both the employee and the employer through right-to-work policies, and set low workers’ compensation costs. Further, states can support existing and expansion projects by offering competitive corporate tax rates and programs that support capital intensive investment, and research and development projects.

2. Low regulations

A common concern from small and mid size companies is burdensome regulations that are both costly and time consuming. According to data from the Census Bureau, firms employing fewer than 20 employees accounts for 89 percent of all businesses in the U.S. Lessening burdens on these smaller companies allows them to spend more time growing their business and expanding their customer base, rather than spending inordinate amounts of time on redundant regulations.

3. Economic development programs 

Economic development programs – or incentives – can be regarded as a four-letter word to some. Often seen as pay outs to larger companies, or corporate welfare, economic development programs can be an effective tool for states to compete. When done right, these programs can be a resource for business retention, as well as when competing for large scale attraction projects. What is important, however, is to make sure the companies meet certain requirements before being awarded these programs to protect taxpayer resources. Companies are seeking certainty when in the due diligence process, and thus “usability” of economic development programs is now a centerpiece of the cost of doing business assessment.

With that framework in place, city and regional leaders are well positioned to enhance the physical environment for companies to grow. Local governments regularly interface with the companies within their city boundaries, and are familiar with the pain points that make it harder to do business, and can work to provide more tailored programs.

Local elected officials are well positioned to provide quicker resolutions to streamline processes and reduce unnecessary costs that businesses face while in expansion or growth mode. Whether it is forward thinking infrastructure investments that allow a company to get up and running more quickly, or reducing red tape during the permitting process, cities can support existing businesses in their communities, and create an attractive market for those looking to expand.

1. Infrastructure

Applying the “if you build it, they will come” philosophy, city leaders can make their communities more attractive to companies through proactive infrastructure projects. Having available power, water and sewer lines in place make a site ready to go for a company looking to start operating as soon as possible. For companies not needing to build from the ground up, having readily available space is also important.

2. Workforce development

For companies today, having a readily available workforce is one of the most sought after assets in a market. A location can have all the infrastructure and programs available, but if there are no employees that can fill vacant jobs, a company will look elsewhere. Cities can enhance their competitiveness by providing the resources to prepare the next generation of talent in up and coming industries, as well as workforce programs for those needing additional training.

3. Diverse communities

Becoming increasingly important is also the livability of a community. Previous generations were drawn to relocation opportunities for the opportunity to work with certain companies. However, now companies are relocating to be closer to the talent, who are looking to be in diverse, vibrant communities offering a plethora of recreational, arts and culture, and entertainment options.

It would be easier for those in economic development if there were a prescriptive model to follow. Each state is unique and offers companies and its employees reasons for being there. As industries continue to evolve, so too will businesses needs for where they operate. State and local leaders who are responsive to this change, and willing to adapt policies that support their growth, will be in a leading position against their competitors, while others wait to catch up.