These are the Easiest and Hardest Places to Do Business in North America, Study Finds

Oklahoma City sits at the top of North America's cities and major counties as the easiest place to do business for small- and medium-sized firms, according to Arizona State University’s Center for the Study of Economic Liberty.

Oklahoma’s state capital earned the top spot through an accumulated score from categories such as ease of starting a business, paying taxes, employing people, registering property and obtaining electricity. The study looked at regulations in 115 cities and counties across 92 states, provinces and districts in the United States, Canada and Mexico. The categories for starting a business, employing workers and paying taxes made up 80% of the score for each area.

In the category for starting a business, three Canadian cities topped the list ahead of those in the United States. Winnipeg in Manitoba, Halifax in Nova Scotia and Moncton in New Brunswick finished in the top three for the easiest cities in which to start a business. Steve Slivinsksi, senior research fellow at the center and the study’s project director, said the Canadian cities reaching the top in that category came as a bit of a surprise given Canada's regulatory environment.

The process can take as little as two days in those three Canadian cities, according to the study, compared to an average of less than a week in most U.S. cities and an average of 16 days in Canada overall.

Jackson, Mississippi, was the first U.S. city, followed closely by Honolulu, Hawaii, for easiest place to start a business. Little Rock, Arkansas, ranked the lowest among U.S., Canadian and most Mexican cities with a process that "could take over two months to navigate the bureaucracy and complete the procedures necessary to start a business," the study noted.

For Oklahoma City, the study’s finding puts a feather in the city’s economic development cap to use when trying to boost its fortunes against competing cities. The city hasn’t had the explosive growth experienced by other Sun Belt cities such as Dallas, about 200 miles to its south.

The perception may be that oil and gas drives the economy but it’s a small percentage of Oklahoma City's overall marketplace. Aerospace is the biggest economic driver with Tinker Air Force Base in the area, according to the Greater Oklahoma City Chamber.

“Anytime we can rank above our peers … that’s a real positive,” said Jeff Seymour, executive vice president for economic development for the chamber. Seymour said his city competes with a lot of the cities in the study’s overall top 25.

Seymour said the city has sought to keep the burden on business low to show that it is “still very hungry for investment.”

When creating the study, the ASU center borrowed from the World Bank’s annual “Doing Business” survey, which has similar categories. But the World Bank’s study looks at countries and focuses on a limited number of cities within those countries: Los Angeles and New York City in the United States and Toronto in Canada, for example.

The center, which started five years ago with funding from the W.P. Carey Foundation and Charles Koch Foundation, saw an opportunity to fill a niche by breaking down data to the city level.

Researchers combed through local laws in each of the cities to come up with the scores. The study focused solely on cities and counties instead of metropolitan areas.

Arlington County, Virginia, in the Washington, D.C., area, took the No. 2 spot overall behind Oklahoma City. Sioux Falls, South Dakota; Boise, Idaho; Atlanta; Charlotte, North Carolina; Houston; Cheyenne, Wyoming; Virginia Beach, Virginia; and Charleston, South Carolina round out the top 10 spots. San Francisco had the lowest overall score out of the U.S. cities and ranked No. 77.

Many of the hottest U.S. cities for economic growth such as Austin, Texas; Nashville, Tennessee; and Orlando, Florida, didn’t rank well for overall scores.

But the study’s findings shouldn’t imply cities with strong economies are difficult to do business in, Slivinsksi said. He said all of them may in fact be easy for doing business.

“We are strictly looking at the regulatory environment,” he said.

Slivinski said the study itself isn’t intended to stand alone but be used as a companion that matches up with other studies as communities look at how they may want to make changes to their policies.

For example, while Oklahoma City rose to the top on the center’s study, it was No. 54 on the Urban Land Institute’s “Emerging Trends” survey for overall real estate prospects next year. Austin, however, ranked No. 1 on the ULI list but No. 41 on the ASU study for overall ease of doing business.

Seymour said for Oklahoma City economic development efforts, marrying this study with others “reinforces that you have to do all things well.”

Out of all of the subcategories, Oklahoma City scored the highest for "employing workers," with a No. 12 ranking. Arlington County took the top spot for employing workers, while San Francisco again ranked the lowest among U.S. communities. Ottawa was the lowest for Canadian localities and came in right below San Francisco. The Canadian areas all fell toward the bottom of the rankings but above Mexican places for employing workers.

The study looked at minimum wage rates at the federal level combined with state and municipality levels. It factored in cost-of-living differences between cities by measuring wages as a percentage of per capita personal income. San Francisco and the Canadian cities have been increasing their minimum wage rates.

But Vancouver topped the subcategory of paying taxes followed by Cheyenne. Pittsburgh ranked the lowest among U.S. cities, while Quebec City was at the bottom for Canada. The study looked at personal, corporate and property taxes as well as any other tax on business income at the municipal level.

According to the study, Vancouver did well because of relatively low personal and corporate income taxes. Pittsburgh, however, has a heavy tax burden at the local level, the study notes.

One of the challenges with the study is how it deals with the property aspect of doing business. A lot of small- and medium-sized businesses lease space, so registering property isn't a factor. But as a tenant, property taxes still could directly affect the business depending on the lease. Businesses sign net leases in which the landlord passes the responsibility of paying property taxes onto the tenant.

Slivinski said such nuances in the data may show up in later studies as the center broadens the study’s scope, including expanding beyond cities to metropolitan areas.

“There’s a lot more stuff we can do with it,” he said.