EDITOR’S NOTE: This is the first in a six-part series examining various aspects of the “New Hampshire Advantage” and whether the Granite State has been able to maintain its competitiveness in these areas.
When Phil Macy was considering moving his company and employees to New Hampshire, he was looking for a building that would make a statement.
“It’s quite a bit different from what we had in Lawrence,” Macy said, standing in the lobby of Nora Systems’ new home in an office park in Salem. “We didn’t have a reception area. This is a much more formal presence.”
This was in August, just a few weeks after Nora Systems, a rubber floor covering manufacturer, had packed up and moved from its Lawrence, Mass., home of 25 years and settled into its new home.
Macy, the company’s vice president, had just finished a meeting with members of the New Hampshire Division of Economic Development, who were working to ensure the company felt at home and was able to reap all of the benefits of the programs available for new businesses.
Representatives from the company were educated about the New Hampshire Procurement Technical Assistance Center, which offers assistance on recruiting and obtaining federal contracts for companies in the state.
John Provost, an employers services representative for the New Hampshire Department of Employment Security, also talked about how the state can help in filling any vacant positions with qualified new employees with a six-week training program.
The company was going to have an opening for a receptionist, and Provost said the state could help fill that role.
“We want to welcome you to New Hampshire, and we’re happy you’ve chosen Salem,” said Michael Bergeron, the man behind the scenes who helped convince the company to hop the border.
Bergeron is the business development manager for the state’s Division of Economic Development. His job, essentially, is to sell the “New Hampshire Advantage” to companies, primarily across the border in Massachusetts, that are looking for a new place to do business. Nora Systems was Bergeron’s latest catch.
Drawing business in
Bergeron, a Litchfield resident, said that despite the woes of the recent recession, the “New Hampshire Advantage” for doing business in the Granite State remains strong.
His PowerPoint presentation highlights all the ways New Hampshire can be a more attractive place for businesses: low tax burden, skilled workforce, excellent quality of life.
It also notes the state’s high ranking in terms of business friendliness: The 2011 U.S. Business Tax Climate report placed New Hampshire seventh. It is released annually by the Tax Foundation, a Washington, D.C.-based think tank.
The lack of income tax or sales tax were factors in New Hampshire’s high ranking. New Hampshire levies an 8.5 percent corporate income tax on corporations with gross receipts over $50,000. Among states levying corporate income taxes, New Hampshire’s ranks 11th-highest.
By comparison, Massachusetts was ranked 32nd in the Tax Foundation’s report.
“The lesson is simple,” the report reads. “A state that raises sufficient revenue without one of the major taxes will, all things being equal, outcompete those states that levy every tax in the state tax collector’s arsenal.”
While Massachusetts is home to the largest portion of businesses Bergeron tries to woo, he has been able to convince businesses from New York, New Jersey and California to move to the Granite State.
Bergeron said a well-represented government is also attractive to prospective business owners, ensuring a certain level of stability in the philosophy the state takes toward taxing businesses.
While some states tax businesses more heavily and then offer financial incentives, New Hampshire takes the opposite approach, he said.
“We allow companies to keep more of what they earn,” Bergeron said. “But in return, they don’t have a laundry list of giveaways. We have some minor tax credits and a great job training program, but very different philosophies on creating jobs and stimulating the economy.”
While Bergeron is confident the state is still in prime position to poach businesses from across state lines, there are others who believe more needs to be done to make sure the so-called advantage is maintained.
Commissions in Concord are studying the relationship between government and business and what can be done to enhance the state’s advantage.
Fred Kocher, president of the New Hampshire High Technology Council, said aspects of the advantage remain strong, but there is work to be done in other areas.
“What hasn’t changed is the quality of life,” he said. “I believe that still attracts businesses to New Hampshire and also keeps businesses here. Given the times in which we live, for many, quality of life has become more important, especially if you have children.”
Another advantage, Kocher said, is that the state offers a highly trained and available workforce and assistance in getting settled from the state’s economic development office.
He used as an example Albany International Corp., which, after 115 years in New York, moved its headquarters to Rochester last year. The company has plans to expand in the area, specifically in its aerospace engineered composites operation, with a new plant by 2014 and jobs for 300 people.
The tax and regulatory atmosphere was only part of the draw.
“They moved here lock, stock and barrel,” Kocher said. “They see the quality of life here, and this is where they want to expand.”
“New Hampshire is in a good place,” Kocher added. “We have our problems like every other state. A lot of people have been unemployed for a long time. We’ve got to deal with that. We’re not immune. But another competitive advantage is we’re small. We can get our arms around the issues we have to solve a lot faster and more effectively than the larger states.”
Keeping business here
Cliff Gabay sees so many advantages in doing business in New Hampshire that he left money on the table to stay in the Granite State.
Two years ago, as Resonetics, a Nashua-based engineering firm, was expanding and looking for a larger building, Gabay began the process of searching for a new home.
“We did have opportunities to move to Massachusetts or to stay in New Hampshire,” said Gabay, CEO of Resonetics. “Massachusetts made a very strong bid. Likewise, the governor in New Hampshire and DRED made a pitch for us to stay in New Hampshire.”
In the end, while Massachusetts made an offer that was more economically attractive, Gabay chose to stay in Nashua. Resonetics, with its 130 employees, opened at its new Simon Street location in June.
Why? The personal touch.
“Seeing the ground-up support for keeping me here was very meaningful and valuable,” he said. “I was very impressed with the amount of energy that New Hampshire put into that effort.”
In addition, Gabay said New Hampshire was able to put together “a combination of tax incentives and some financial incentives” to stay put. Gabay didn’t want to go into the specifics about how much money those incentives were able to save the company.
Staying in New Hampshire also benefits his employees, Gabay said. The vast majority of them live in the state, and moving to Massachusetts may have cost him staff, particularly those not thrilled about a higher cost of living and paying state income tax, he said.
Staying in New Hampshire is also beneficial from an international recruiting standpoint.
“We’re within an hour of metro Boston, but they get the benefits of not having a long commute and not having to pay state income tax,” he said.
In terms of what could be done better to improve the advantage, Gabay said he wants to see more communication between businesses and the community college system.
“The link could be better,” he said. “I would love to work with the community colleges on the type of skill sets I need for operators and technicians.”
Gabay said he has tried to reach out, but found it difficult to make progress.
In courting Nora Systems, Bergeron touted how people living in New Hampshire and commuting to Massachusetts would be more likely to consider working in their home state when given the opportunity.
“Once you’re in Salem, you’re probably going to be able to grab some of those people,” Bergeron said. “If you are offering a job with a comparable salary, they’re not sitting on 128 in traffic when it’s raining because they like it.”
Maintaining advantage
New Hampshire ranks in the middle of the pack for small businesses. The Small Business and Entrepreneurship Council ranked the state 23rd in its 2011 report in terms of tax systems. Kocher said times are tough for start-ups, as well, but said that isn’t a problem isolated to New Hampshire.
“Investors and venture capitalists in the state are all just sitting on the sideline with their money,” Kocher said. “They’re not certain what the market is going to be like for a company starting up in terms of their ability to succeed in this economy.”
Chris Williams, president of the Greater Nashua Chamber of Commerce, said that over his five-year tenure, Republican leadership of late has been more responsive to addressing the issue of making the state more business-friendly. Not so much when he started.
“If you had asked me that same question back then, I would have said I don’t feel confident about New Hampshire continuing to attract businesses in the long-term future,” Williams said. “Now, here today, having seen what happened with the repeal of the LLC tax and reforms to net operating loss and reasonable compensation, that optimism has returned.”
Changes in law have been made to help promote business growth.
“Over the last two years, I think the balance has returned more to the center,” Williams said. “They’re coming to us now. They realize the state economy is built upon the shoulders of business owners. They’re asking ‘How can we collaborate with you?’ rather than raising more taxes and increasing regulations.”
Bette Lasky, who was a Democratic state senator until losing her bid for re-election in 2010, questioned whether the Republican leadership in Concord has actually resulted in the most important change: more jobs. She defended her party’s work to support businesses in the state, but said ultimately, her responsibility was to make decisions that would put people to work.
“Frankly, I’d love to see the Republican mantra of ‘If we leave businesses alone, it will produce more jobs’ work, but that’s just not happening,” she said.
After peaking during the recession at 6.7 percent in December 2009, the state’s unemployment rate dipped to 4.8 percent in May but has been increasing since, with a 5.4 percent rate reported for September.
Lasky also noted other moves enacted by the Republican Legislature that have resulted in job losses in the Nashua area, most notably the decision to cut funding to the Disproportionate Share Hospital program in half. That has led to massive layoffs and program cuts at hospitals across the state, she said.
“That certainly affected jobs in Nashua, but in a negative way,” she said.
State Sen. Andy Sanborn, R-Lebanon, is chairing a commission to look at what the state can do to improve its competitive edge. He said one of those ways will be to centralize every form potential business owners need to get started in a one-stop-shopping Web portal.
“I don’t care if you’re sitting in New Hampshire or California, I want people to see us as the easiest and best place to do business,” he said. “Other states are leaping ahead of us there.”
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