Cost of Doing Business Survey Rates 421 Cities

The Claremont McKenna College’s Rose Institute of State & Local Government ranked the most expensive and least expensive cities in the U.S. for its 17th annual Kosmont-Rose Institute Cost of Doing Business Survey. Analysts gathered business fees and tax rates from 421 selected cities across the U.S. and ranked them into one of five “Cost Ratings” groups: Very low cost, low cost, average cost, high cost and very high cost.

''The survey is known as a ‘tie-breaker’ for companies contemplating a move or an expansion,'' said Larry Kosmont, the president of Kosmont Companies. ''It serves the firm that has already determined the best combination of factors important to it, such as the quality of the labor force, the cost of housing, and the proximity to their suppliers and customers. There is often a handful of side-by-side cities in a market area that meets these criteria for a given company. That’s when city-imposed fees really make a difference and information in the survey can be a cost and time saver.''

The top 20 "most expensive" cities, in alphabetical order, included:

Akron, Ohio
Beverly Hills, California
Birmingham, Alabama
Chicago, Illinois
Cincinnati, Ohio
Clarksburg, West Virginia
Columbus, Georgia
Culver City, California
Los Angeles, California
Mobile, Alabama
Naperville, Illinois
New York, New York
Newark, New Jersey
Philadelphia, Pennsylvania
Portland, Oregon
Richmond, Virginia
Saint Louis, Missouri
San Francisco, California
Santa Monica, California
Toledo, Ohio

The 20 least expensive cities were:

Austin, Texas
Abilene, Texas
Fort Worth, Texas
Cheyenne, Wyoming
Eugene, Oregon
Yakima, Washington
Kent, Washington
Everett, Washington
Vancouver, Washington
Federal Way, Washington
Olympia, Washington
Corpus Christi, Texas
Reno, Nevada
Spokane, Washington
Centennial, Colorado
Overland Park, Kansas
Houston, Texas
Sioux Falls, South Dakota
Bellevue, Washington
Gresham, Oregon

Kosmont-Rose found that all of the least expensive cities were located west of the Mississippi River, with five cities in Texas and eight in the state of Washington and also that 17 of the top 20 were in states without income tax.

The Cost of Doing Business Survey determined of the 20 most expensive cities, six were in the Midwest, five were in California, four in the Northeast, four in the Southeast and one in the Pacific Northwest.

High business license fees were the primary reason that cities ended up on the list of most expensive. Fifteen of the 20 most expensive cities assess business taxes based on either gross receipts or general profit. With that formula, those taxes a business pays to a city have the potential to increase rapidly. Nineteen of the 20 cities impose a business license fee of more than $10,000 a year on medium-size retail businesses. Of these 19 cities, seven have fees between $100,000 and $175,000, Kosmont-Rose found.

There was a similar pattern for the property tax rates of the 20 most expensive cities too. All of the rates were higher than 1 percent, with 12 of the cities having rates higher than 2 percent. In comparison, the majority of the cities included in the survey have property tax rates hovering just above 1 percent. New York and Chicago were the ignoble leaders with rates of 4.64 percent and 4.63 percent respectively, with Newark third at 3.18 percent.

-Rapaport