Category Archives: Georgia

The best (and worst) states for business

Last month CEO Magazine produced its annual ranking of the best states in which to do business, and, as with previous surveys, our region does very well.

The best place to do business in the United States is Texas, followed by No. 2 Florida and, in a tie, No. 3 North Carolina and South Carolina, according to Chief Executive’s 2018 “Best and Worst States for Business.” CEOs ranked Indiana No. 5, rounding out the top five states.

The worst place is No. 50 California, bested only slightly by No. 49 New York, No. 48 Illinois, No. 47 New Jersey, No. 46 Connecticut and No. 45 Massachusetts.

Seem familiar? That’s because those are the exact same positions each of these states has occupied in each of the last four years in our annual poll of CEOs about business climates.

The entire ranking includes TN & GA in the Top 10, at #6 & #7 respectively.  Those at the top tend not to change much because they have a consistent philosophy about how to approach the business climate, and they don’t see significant leadership changes.  There’s a similar dynamic at the bottom of the list as well:

Meanwhile, the high-tax, high-cost environments created by the bottom states also tend to be self-reinforcing. Mostly, those places are kept afloat economically by legacy advantages such as strong education and healthcare systems, as well as by the fact that in-demand, digitally skilled millennials enjoy living in their cities.

But states like Massachusetts risk eroding even those advantages as the cost of living skyrockets in big cities and traffic and other annoyances mount. … The situations of bottom feeders could get worse before they get better, in part because of a particular effect of federal tax reform on high-tax states—like the basement dwellers. “The exit numbers of companies and owners are going to be higher,” McGuire says, “because people won’t be able to deduct as much in property and income taxes. They’re being taxed into oblivion.” Also, the coasts are losing some of their perceived edge in talent and lifestyle amid sharply higher costs of living—and facing steadily increasing digital capabilities in the heartland.

“It’s getting to the point now where if you’re a digital marketing specialist, you can move to Nashville or Omaha and have three or four opportunities,” says David Hall, vice president for investments at Revolution LLC, a Washington, D.C.-based seed fund. “Before it was so scattered. You’re seeing the density of the tech and startup ecosystem build on itself and create great network effects within a region.”

This is the most recent item in a long run of stories describing a geographic analog to the process of creative destruction.  Those states who spray “startupicide” on the economy –  suffocating regulations, inflated business taxes and fees, lawsuit-friendly legal environments, and political classes uninterested in business concerns, if not downright hostile to them – lose economic clout as people and capital migrate to other states with more favorable environments in which to work and live.

This migration of economic clout within the US has been more subtle than the California Gold Rush or Irish Potato Famine but is just as significant.  Some states are chasing away their earners, workers, and entrepreneurs; this is their tax base.

The growth corridors of the high-tech South would have a mercantile-like advantage but for the fact that employers can (and do!) simply move in order to thrive under our growth-oriented tax policies, lower public sector debt burdens, stronger job creation, excellent climate for entrepreneurs, and a superior overall business climate.  (The actual climate happens to be conducive to a great quality of life as well.)

Related stories:

• The best climate for entrepreneurs, Part III
• No late hits on entrepreneurs
• The Southeastern growth corridors
• California suggests suicide, Texas offers the (Bowie) knife

BPV completes successful exit from Tower Cloud

BPV portfolio company Tower Cloud has been acquired by Communications Sales & Leasing, Inc (NASDAQ: CSAL) in a stock and cash deal valued at $230 million plus milestone payments.  

Here is today’s write up from the Tampa Bay Business Journal:

St. Pete fiber optics firm acquired in $230 million deal

by Frances McMorris 

St. Petersburg-based Tower Cloud is being acquired by Communications Sales & Leasing Inc. (NASDAQ: CSAL) in a stock and cash deal valued at $230 million.

Tower Cloud, founded in 2006 and backed by private equity investors, operates a fiber optic network in 15 markets in the Southeast United States, with nearly 6,000 route miles connecting large markets and Internet hubs with smaller markets and rural areas.

“Tower Cloud significantly expands our backhaul network and greatly accelerates our entry into the high growth small cell and dark fiber businesses,”Kenny Gunderman, president and CEO of Little Rock, Arkansas-based CS&L, said in a statement. “We continue to grow our wireless carrier relationships across all asset classes and are seeing an increasing number of opportunities arise as carriers densify their networks and look toward the deployment of 5G and related technologies.”

In an investor conference call about the deal Monday morning, Gunderman said, “Tower Cloud is very complementary to our strategy of acquiring and building mission critical communications infrastructure and becoming more and more relevant to the national wireless carriers in particular. The deal makes CS&L one of the largest owners of fiber in the country,” Gunderman said.

“We think that fiber is and will be the most critical component of the communications network going forward and Tower Cloud is an established provider of two of the biggest growth areas within fiber including dark fiber deployments and small cells,” Gunderman said in the call.

The acquisition expands CS&L’s national wireless carrier relationships because more than 90 percent of Tower Cloud’s revenues are from national wireless carriers. The deal also advances CS&L’s diversification strategy by increasing its exposure to the national wireless carriers with long-term contractual revenues.

Tower Cloud’s recent dark fiber and small cell awards with national wireless carriers will accelerate the company’s initiatives, the company said in a statement. Tower Cloud is currently constructing dark fiber routes in Florida and Georgia with total contractual revenues of $175 million.

Last November, Tower Cloud signed a contract with one of the “big 4” mobile carriers to expand its fiber network infrastructure and bring high-speed connectivity and capacity to Augusta, Georgia. It also announced last September that it would expand its fiber network into Jacksonville.

Tower Cloud named to Inc. 500 List of Fastest-Growing Private Companies

With 3-Year Sales Growth of 964%, the BPV portfolio company ranked #478 on the 2013 Inc. 500 List of America’s Fastest-Growing Private Companies.

The 2013 Inc. 500, unveiled in the September issue of Inc., is the most competitive crop in the list’s history.  To make the cut, companies had to have achieved a staggering minimum of 918.59% in sales growth.

“We are honored to be recognized by the 2013 Inc. 500 for the tremendous growth Tower Cloud has achieved over the last three years,” said Ronald Mudry, Tower Cloud’s founder and CEO. “Our placement as the 7th fastest growing telecommunication company in the nation, and the fastest growing wireless backhaul provider is a testament to all the hard work, dedication and customer focus of the Tower Cloud team.”

The love of taxes is the root of unhappiness, Part II

New evidence from the dismal science confirms what social science has already shown: the love of taxes is the root of unhappiness.

The original social science, from the December 2009 issue of Science, indicated that states with the highest taxes also have the least happy residents.  Residents of high tax states not only have less money to spend on other things that make them happy, they don’t enjoy many benefits in exchange for all their hard-earned tax dollars.  Roads, schools, and crime are no better (and in many cases worse) while their state governments borrow even more and spend disproportionately on public employee pensions and entitlement programs.  Their needs ignored at the expense of entrenched special interests, taxpayers get unhappy.  And then they get out.

From this one might argue causation; high taxes = unhappiness.  While we are certainly sympathetic to that point of view, we also have to wonder if it runs vice-versa, or at least cuts both ways: unhappy people like to raise taxes.

We are… happy.  And happy to report that’s true for our region as well.  NVSE readers already know that the Southeast’s advantages extend well beyond the matter of taxes and include lower public sector debt burdens, stronger job creation, the best climate for entrepreneurs, and a superior overall business climate.  (The actual climate happens to be conducive to a great quality of life as well.)

The more recent dismal science is courtesy of The Red-State Path to Prosperity, from Arthur B. Laffer and Stephen Moore in last week’s Wall Street Journal:

Consider the South. We predict that within a decade five or six states in Dixie could entirely eliminate their income taxes. This would mean that the region stretching from Florida through Texas and Louisiana could become a vast state income-tax free zone.  Three of these states—Florida, Texas and Tennessee—already impose no income tax. Louisiana and North Carolina… are moving quickly ahead with plans to eliminate theirs. Just to the west, Kansas and Oklahoma are also devising plans to replace their income taxes with more growth-friendly expanded sales taxes and energy extraction taxes…

All the empirical evidence shows that raising a state’s tax burden weakens its tax base. Still, too many blue-state lawmakers believe that a primary purpose of government is to redistribute income from rich to poor, even if those policies make everyone, including the poor, less well off. The obsession with “fairness” puts growth secondary.  Meanwhile, in the South, watch for a zero-income-tax domino effect.

Here Mr. Laffer further discusses how blue states are struggling to compete for businesses and workers with the Journal‘s Mary Kissel:

Southeast dominates CEOs Top 10

For the eighth consecutive year, Texas has been voted the best state for business by Chief Executive magazine. 

The Top 10 looks familiar to us, as it constitutes most of the geography in which we have focused our investment efforts for over twenty years now, and adds to the growing list of evidence that some states understand job creation better than others.  The 2012 edition of their annual survey of CEOs includes a feature on What Keeps Texas on Top:

The state is growing its own companies but also is displaying remarkable success in luring investments from other states, particularly California, which once again ranks last in our survey. A raft of small, technology companies have either relocated to Texas or moved key operations there.  Bigger California companies, such as Facebook, eBay and PetCo also have recently opened operations in Texas, and major manufacturers from different states, such as General Electric’s transportation unit and Caterpillar have located big new plants in Fort Worth and Victoria, respectively.  “Employers from around the nation and all over the world continue to look to Texas as the premier location for business expansion, relocation and job growth thanks to our low taxes, reasonable and predictable regulations, fair legal system and skilled workforce,” Gov. Rick Perry told Chief Executive.

Texas has powerful momentum and it’s difficult to see what could halt it…  The sheer diversification in its economy—all the way from wheat farming to semiconductors—suggests that the state could absorb many punches and keep on rolling.

The love of taxes is the root of unhappiness: update

The Tax Foundation has issued its 2012 State Business Tax Climate Index, which once again confirms that the love of taxes is the root of unhappiness.

We remain… happy.  And happy to report that’s true for our region as well.

When confronted with the argument that higher taxes = unhappiness, we wonder, even while remaining sympathetic to the point of view, whether or not it runs vice-versa, or at least cuts both ways:  unhappy people like to raise taxes.

This is just the most recent study – see also here, here, here, here, here, here, and here – to confirm the country is experiencing the rise of the high-tech South.

Another factor in the Southeast’s attractive growth potential – and one clearly related to taxes – is lower state debt burdens.  Some state governments, when faced with crushing budget deficits, respond with growth-stalling tax increases on the businesses that operate in their states.  (The problem worsens dramatically when one considers many states’ unfunded pension liabilities.)

Two states whose budget woes have garnered recent headlines include Illinois, which pushed through a 45% increase in corporate taxes – apparently triggering an exodus; and California, which is on the verge of running out of money – again.

Some states, like the aforementioned California, respond in other “desperate ways” which further undermine investor confidence and entrepreneurial spirits:  accounting gimmicks, delayed payments, issuing IOUs, or even more borrowing.  As we’ve written before, only one non-Southeastern state – Nebraska – has a lower debt-to-GDP ratio than FL (5th), GA (4th), TN (2nd), NC (3rd), TX and VA (tied for 6th).

State debt-to-GDP ratio (Source: AEI)

Wireless backhaul works in less populated areas as well as major cities

Ron Mudry, CEO of Tower Cloud, recently offered practial reasons why less populated areas are also excellent opportunities for delivering wireless backhaul services:

• 85% of mobile backhaul bandwidth is in non-NFL cities or rural areas
• Individual sites in those areas have lower cell-site density and require more bandwidth
• Existing dark fiber is available to lease from other carriers, utility companies, and municipalities – even if slightly harder to find than in large cities
• The same networks that deliver fiber to cell towers can also reach other business locations, helping to amortize the cost of fiber

Tower Cloud operates backhaul networks throughout Georgia, Florida, Alabama and South Carolina and is building additional networks to support national and regional wireless carriers.  Speaking about his company’s expanded capacity in Atlanta, Mudry explained, “With the explosive growth of iPhones, Blackberries and Android Smart phones, wireless carriers are rushing to upgrade and enhance their networks to meet today’s demand.  Atlanta is a prime example of our ability to quickly and efficiently turn up a network to help bring real-time 4G to consumers.”

Tower Cloud’s recently completed $49 million round of financing is mentioned here in the WSJ’s Venture Capital Dispatch.

Below you can see Mudry discuss wireless backhaul at COMPTEL Plus in Orlando:

Southeast dominates CEOs Top 10

For the seventh straight year, Texas has been voted the best state for business by Chief Exectuive magazine.

2011’s edition of their annual survey of CEOs includes an excellent interactive map.

The Top 10 looks familiar to us, as it constitutes most of the geography in which we have focused our investment efforts for over twenty years now, and adds to the growing list of evidence that some states understand job creation better than others.

Southeast advantage in 25 high growth industries

Wells Fargo has released a study entitled “Employment Dynamics and State Competitiveness” which predicts 25 industries will drive employment growth in the next few years, and ranks states according to their likely ability to capitalize on those trends.  As with previous related studies – see here, here, here, here, here, here, here, and here – our region performs very well.

The team of economists in their Securities Economics Group credit (among other things) the availability of skilled workers in our region – both homegrown and those drawn to the quality of life.

States with a large number of high-growth industries that also have a large skilled workforce will be at a greater competitive advantage. This would tend to favor states, such as Georgia, North Carolina, Arizona, Virginia and Texas, which not only have a large supply of skilled workers but have also been successful at attracting such workers from other parts of the nation. Florida, which has more high-growth industries than any other state, would be in a stronger position if not for the weakened housing market, which has cut into worker mobility. The Sunshine State is making important enhancements to its university system to bring in more cutting-edge research, and this should pay off with an even better mix of high-growth industries in future years.

Ranking the Southeast business climate

The Chicago Tribune urges Illinois not to become a “New Michigan” or “New California” but instead mimic states such as FL, GA, VA, TN, TX, and NC.  In an April 11 op-ed entitled The Illinois Spiral they reference the third edition of Rich States, Poor States (from the American Legislative Exchange Council) in which our region scores very well:

ALEC ranked states’ economic outlook vs. their 10 year (1998-2008) economic performance based on 15 policy variables which influence the overall business climate.  The results look vaguely familiar to us, and are another vote of confidence in the Southeast as a preferred region in which to work, live, and invest:

5. Florida
8. Virginia
9. Georgia
10. Tennessee
19. Texas
21. North Carolina
32. Massachusetts
46. California
50. New York

As the Tribune puts it:

Employers tend to be harder-headed in deciding where to invest their money than our lawmakers are in spending other people’s money. The employers see Illinois pols dithering through a crisis, inviting an even more bleak future with their refusal to reform government spending and reduce what it costs to have a payroll in Illinois:

• Nor have you heard Illinois leaders, in their to and fro over an income tax hike, confront a 2009 report by the American Legislative Exchange Council: A decade’s worth of hard data suggests that states with no individual income tax created 89 percent more jobs, and had 32 percent faster personal income growth, than did states with the highest income tax rates. The report also analyzed 15 policy factors that influence a state’s growth prospects — tax burdens, debt service, tort climate, mandated minimum wage, spending limits if any — and ranked Illinois’ economic outlook as an alarming 44th in the U.S.

• Nor have you heard Illinois leaders confront this state’s devastating rank in job creation, 48th, and ask how they can be friendlier to present and potential employers. Illinois — with its overspending, its borrowing and its worst-in-America pension crisis — faces massive obligations that give potential employers pause. Add to this toxic mix Illinois’ high cost of workers compensation and its 49th-in-the-U.S. bond ratings. How surprised, then, are we that since 1990 Illinois has underperformed the U.S. in job growth?