That Utah ranks as one of the most business-friendly states in the nation is significant, especially at a time when business relocations and expansion have dropped off dramatically since the recession began in 2007, according to a Chicago-based consultant.

Low corporate taxes, a well-educated and productive work force, government spending on education and infrastructure and quality of life were some factors cited for Utah's improved standing in the Pollina Corporate Real Estate Inc.'s 2009 list of top pro-business states. The list is used by thousands of site selectors globally to determine whether companies should locate in Utah. After Virginia, Utah took second place this year, up from ninth place last year.

"Business expansions and relocations in the U.S. have dropped about 40 percent over the past 12-18 months. We're now seeing more consolidations because the efforts today are on cost-savings rather than expansions. That means the states will have a more difficult time attracting companies. More than ever, political leaders need to know how to prepare themselves to compete in a global economy," said Ron Pollina, president and geoeconomist for Pollina Corporate.

"World economies today aren't as favorably tilted towards the U.S. as in the last century, therefore federal and state governments are going to have to be more aggressive in attracting companies to their states," he said. "The U.S. was a growth market in the 20th century. America must be an integral part of global business if it is to remain a superpower, but thus far we have done a terrible job of integrating ourselves in the 21st century marketplace."

Why Utah improved

But the report cites Utah as a model for other states because of the significant improvement it has made in boosting its competitiveness globally and in the nation.

"In 2004, the first year we did the study, Utah ranked 21st. Now it's in second place. Utah rose faster than any other state because of the changes it made to its taxation policies and spending to improve transportation infrastructure. That's reflective of good political leadership," Pollina said.

"Many other states still think they're competing with states next door. But things have changed; we're now competing with China, India, Mexico, Brazil, Eastern Europe. In addition to low taxes, good labor and state and federal incentive packages, businesses also want to know if the state is going to provide an environment that will help them expand."

The expansion of Microsoft, Goldman Sachs and eBay in Utah is indicative of its strong pro-business climate, said Jason Perry, executive director of the Governor's Office of Economic Development and the newly-named transition director for incoming Gov. Gary Herbert.

"A good environment helps existing companies hire more people. In spite of the recession, we're still seen as one of the premier economies because of our very low costs of doing business, a well-educated and ready work force, and we're also seen as a safe place to invest," he said.

"We've just added two non-stop flights from Salt Lake to Tokyo and Paris, and we're increasingly seen as an international destination. We've had trade missions to China, India and Mexico to make sure our local companies can grow their business overseas. We want to make sure our businesses are plugged in to the new world economy," Perry said.

Pollina's report, "Top 10 Pro-Business States for 2009: Rebuilding American's Economic Power" ranked each state based on 33 factors including taxes, human resources, right-to-work legislation, energy costs, infrastructure spending, workers compensation laws, economic incentive programs and state economic development efforts. North Carolina, Wyoming, South Carolina, South Dakota, Kansas, Georgia, Florida and Nebraska were other states that made the Top 10 list.

Room for improvement

Because Utah is now perceived as a good alternative to California by companies looking to service the West Coast market, the Beehive state could become more competitive in attracting business relocations if it improved its offering of financial assistance and other corporate tax incentives, Pollina said.

"Utah lacks availability in terms of real estate tax abatement and corporate tax abatement programs and job training programs. Some states would hire employees for the companies they're trying to attract, and also pay their wages during their training period, and the company gets to decide whether to keep those workers or not after their training is over," he said.

"State governments tend to move slowly, but companies move fast. If they need a new operation somewhere, that's going to happen quickly. Many states don't understand that," he said. "But now, many states are talking about pushing through legislation to create more incentive programs to stimulate job growth because their political leaders are taking the heat for jobs lost and reduced income taxes."

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