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Business Benefits
Idaho Fosters Entrepreneurism, Expansion and Success

By Martin Johncox, Horizon Air Magazine

Thanks to information technology, many companies can do business from almost any location in the country, or even the world. They are increasingly choosing to go where business costs are low and the quality of life is high, even if it's far from the traditional centers of commerce. 

Idaho has become one of the most popular choices for companies wanting to combine stellar recreational opportunities with a favorable business climate and attractive commercial and residential real estate prices. Companies are filing paper work to register their new business in Idaho at the rate of 100 every business day. In 2001, some 17,400 corporations, partnerships, LLCs and other entities registered with the Idaho Secretary of State's office. That number has been growing about 13 percent a year, with 28,505 companies filing in 2005. Year-to-date figures show Idaho is on track to break the 30,000 mark in 2006. The figures include businesses based in other states that are expanding by setting up divisions, plants or call centers in Idaho, although business longevity isn't racket.  

Idaho is attracting companies in record numbers party because of its "progressive business climate," explains Roger B. Madsen, director if the Idaho Commerce & Labor department. "Our legislature invests in what a company looks for when relocating or expanding its operation: access to an educated, trained and highly skilled work force; solid highways and transportation systems, and broadband connectivity.

The numbers bear out a finding by the Kauffman Foundation, a business think tank in Kansas City, Missouri. Based on business data from 1996-2005, the Kauffman Index of Entrepreneurial Activity, released in May, shows that Idaho is one of the country's top five places for business startups.

In addition, experts say a combination of new and established businesses, heavy increases in housing construction and an increase in population helped propel Idaho to its status as the third-fastest-growing state between 2004 and 2005, according to data from the U.S. Census Bureau. Idaho added 33,956 residents, a 2.4 percent increase. Only Nevada and Arizona grew at faster rates.  

State lawmakers continue to take steps to make Idaho a great place to work and live. "In 2005 the Idaho Legislature passed a whole host of business incentives and endorsed $1.6 billion plan to use GARVEE bonds for needed highway improvements," says Madsen. (A GARVEE is a Federal Highway Grant Anticipation Revenue Vehicle Bond, which allows the state to receive federal transportation funds sooner than officially allocated and then pay back the funds via bond sales. GARVEEs often are used to accelerate construction of vital projects.)

Madsen also notes that this year the Legislature appropriated $5 million to extend broadband access to rural communities, granted tax credits for film and commercial production and provided more money for science and technology, and work force training.

"These investments send a message that Idaho places a priority on delivering what businesses need to expand," he says.

A positive business climate that attracts new companies and supports the expansion of existing ones has also led to a healthier job market. Idaho's seasonal adjusted unemployment rate has been below 4 percent since May 2005, according to Idaho Commerce & Labor.

"The economy has never, at any time in Idaho history, been this robust," Madsen says.

In addition, in August, as part of a special session, the Legislature passed the Property Tax Relief Act of 2006, which eliminated and education maintenance-an-operation levy on real property that had meant taxes of $3 for $1,000 of assessed value. The removal of the levy- a levy that was not capped like other local-government levies found on property-tax bills- reduces property taxes by $260 million statewide, according to Governor James E. Risch's office. In November, voters will indicate via an advisory vote whether they want to keep the property-tax relief the Legislature adopted and also keep an accompanying 1 percent increase in sales tax to protect education.  

Idaho's overall tax burden per capita is the second-lowest in the West, according to the Census Bureau. Idaho has a balanced, interlocking structure of personal income, sales, property and corporate taxes.

Yet another asset is the state's famous "natural infrastructure." Mountains, rivers, laces and high deserts combine to make the state desirable to workers and indispensable to certain businesses.   Quality of life, relatively low costs of doing business and a hop-to-it work force have made Idaho an appealing place for homegrown entrepreneurial endeavors and for companies relocating or expanding from other states.  

Idaho Advantages

It's no surprise that Idaho is attracting companies, according to experts. Companies are more willing to move all or part of their operations to have lower business cots, a factor behind the "off shoring" phenomenon, in which companies send their manufacturing, research and design jobs to well-trained workers in China, Singapore or India.

But Idaho is one of the select states benefiting from "onshoring," according to urban-trends expert Joel Katkin, who authored a 2005 Inc. magazine article ranking the Boise area second nationally (after Reno) for jobs and careers. Kotkin says onshoring favors smaller U.S. cities with low business costs, existing tech industries, trained workers and affordable housing.

The cost of doing business in these regions compares more favorable with that in Asian countries, while the lower housing costs make these areas attractive to well-trained employees.   Kotkin noted that traditional business powerhouses such as the Silicon Valley have been losing jobs over the past five years, while places such as Boise are gaining them.

"It used to be, if you had a concentration of industries, you had an advantage. But today, information is portable, and the higher the [population] densities, the lower the job creation," Kotkin told a recent Boise Metro Chamber of Commerce conference.

Higher densities drive up property prices which discourages companies from starting and expanding in an area. Lower-density areas have more attractive commercial-space and home prices, giving mountain states such as Idaho and advantage for businesses and their workers.

"Here you can enjoy a quality of life that a person in San Jose doesn't have a chance of getting," he says.

Idaho's economy is maturing, and businesses and other are realizing it is much more than an agricultural state, says John Thompson, a patent attorney with Stoel Rives LLP, a business law firm that has offices in Idaho, Utah, Washington, Oregon and California.

Thompson authors the Idaho Patent Report, which analyzes trends in patents awarded in the state.   Idaho companies were granted 1,645 patents in 2005, down from an all-time high of 2,009 in 2002, but still maintaining Idaho's position as the state with the highest number of patents awarded per capita.

When Thompson prepares these reports for other states, he can usually lump high-tech patents into the group of "electrical and computer hardware." But for Idaho, he had to break that category into computer hardware/electrical devices, semiconductors and imaging/optical technology because the state's technology companies are so diverse.

"It's clear Idaho has the professional and intellectual talent to develop new inventions; it has a sophisticated business community," says Thompson, who has shepherded more than 100 high-tech innovations through the patent process for Western-states companies.

"A lot of professionals have relocated to Idaho to support some of the large companies, and then they seed startups of their own," he says, "and all that contributes to increasing the number of businesses in the state."

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