A nationwide ranking puts Arkansas at the bottom of the rankings for the best places to do business, but there are some bright spots, including the cost of living and doing business.
In the CNBC annual ranking of states in which to do business, Arkansas ranks 43rd overall. Arkansas business owners see broadband internet access and access to capital for people of color as challenges for the state to overcome.
Arkansas Secretary of Commerce Mike Preston doesn’t think CNBC’s overall ranking for Arkansas is an accurate description of what it’s like to do business in the state and points to the “A” rating “for the cost of doing business and an” A + “for the cost of living.
“If you look at where Arkansas comes in at the cost of doing business, we’re number four in the country,” Preston said. “For most companies, when looking to make a financial decision about where to locate jobs, the cost of doing business is going to be at the top of that list. I think the weighting and some of the rating structures and metrics they used to calculate their overall rank unfairly put Arkansas below what it really should be.
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Preston does not anticipate that the CNBC report will deter companies from wanting to come to Arkansas.
For their ranking, CNBC consulted with business and political experts to determine the score they assigned to each state.
Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, explained that the CNBC study assesses states based on how they market to businesses.
“The cost of living is largely determined by house prices,” Jebaraj said. “Even though house prices are rising rapidly in Northwest Arkansas, statewide, they’re not rising as quickly. We’ve had various tax cuts, regulatory changes and things like that. reduce the cost of doing business here in Arkansas. “
Andy Deal of Fort Smith, owner of three Plato’s Closets in Arkansas, said the cost of rent is low compared to other states and it’s a “huge plus” for his businesses.
The two business owners the Times Record spoke to both cited the workforce as a challenge to doing business in the state.
Deal believes the state’s minimum wage makes it difficult for his company to find workers, as Plato’s closet mostly employs young people who are taking their first jobs.
“We hire a lot of young children. This is becoming more and more difficult, especially as a state is raising the minimum wage to $ 11 an hour. It definitely makes doing business in this state more difficult and makes us look to other states, ”Deal said.
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Rod Lovan, co-owner of Stirling Roastery and Stirling Soap Company in Booneville, said it can be difficult to keep workers in rural areas.
“The guys we’ve hired in the past are mobile upwards, so we understand we’re only going to have them for two or three years while they’re in college or taking a break in between. ‘college and graduate school and then they move on to something bigger and better,’ Lovan said.
Lovan says most of their business is done online.
Alan Morse, CEO of Ritter Communications, headquartered in Jonesboro, says the lack of internet in rural areas presents challenges for businesses.
“Our Internet infrastructure has become just as vital to our economic survival and general well-being as water and electricity. For Arkansas businesses and homes, increased access to high-quality, high-speed Internet supports e-commerce, remote working, video conferencing, productivity and efficiency, ”Morse said in a statement. communicated to the Times Record.
Access to capital
In their ranking, CNBC ranked Arkansas D- in access to capital.
Reverend Cory Anderson, director of innovation for the Winthrop Rockefeller Foundation, said his group had researched this problem and found access to capital to be a problem for people of color and women in the world. ‘State. In the study, the foundation found that 3% of the federal government’s Small Business Association loans went to people of color in the state, even though 16 to 17% of businesses in the state are owned by individuals. colored.
For small business owners, it can be difficult to get loans from private banks.
“If you’re a private bank, lending $ 5,000 will cost you the same time and effort as $ 50 million. You have to go through all the same processes. When you talk about loans to small businesses and people of color, part of the challenge for private banks is that it’s hard to make money out of them, ”Anderson said.
After finding this disparity in their study, the Winthrop Rockefeller Foundation began to discuss with private banks a closer partnership with CDFI (Community Development Financial Institutions).
“CDFIs are set up to say you know what, we’re going to do banking functions, but the money that we make, we’re going to put back into the community,” Anderson said. “We will reinvest there by having lower interest rates for our products. We will reinvest in it by charging these people who do business with us less fees. We’re going to reinvest there by having bank branches and availability where traditional private banks just can’t make money.
Currently, the state has a budget surplus and there are plans to hold a special legislative session to determine how the state will use it. Gov. Asa Hutchinson has indicated his support for using the surplus to reduce personal income tax to make Arkansas a better state for business.
Jebaraj doesn’t think the tax cuts will attract more businesses to Arkansas.
“In any given year, very few people move. Most of them move for economic reasons related to where they find a job or the location of their business. Very few people move because personal income is lower or higher in another state. Regardless of the income tax, businesses take it into account, so there isn’t a lot of movement related to just income taxes.
In 2009, when Plato’s Closet was deciding whether or not to open operations in Arkansas, Deal said the personal tax rate was a factor that made them consider avoiding Arkansas.
Scott Hardin, director of communications for the Arkansas Department of Finance and Administration, explained that tax cuts over the past seven years have put $ 250 million “in the pockets of the Arkansans.” The top tax rate is currently 5.9%, down from 7% in 2009. The top tax rate only applies to income over $ 32,600.