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Tennessee Center for Policy Research President Justin Owen recaps this year’s Business-Friendly Cities Report in his monthly Nashville City Paper column. Read the Business-Friendly Cities Report here. by Justin Owen Each year, the Tennessee Center for Policy Research ranks the state’s 50 most populous cities according to their business climate. The categories we choose reflect cities’ commitment to creating a business-friendly atmosphere free of stifling taxes and restrictive regulatory burdens. Cities with low tax burdens, less regulation, quality education systems and low crime rates fare better at attracting and retaining business than those with high taxes, burdensome red tape, poor schools and high crime. This year, three categories accounted for each city’s overall score: Economic Vitality, Business Tax Burden and Community Allure. These categories included factors such as job and population growth, tax burdens, household income, cost of living, crime rates and education. Considering these statistics, Mt. Juliet takes the top spot as this year’s Most Business-Friendly City. The Wilson County city has consistently scored high in the rankings. Due to its low tax burden (it lacks a city property tax), its low cost of living, better-than-average job performance and a recent spike in population, it finished first in business in 2010. Overall, nine of the Top 10 cities are in Middle Tennessee. Lower taxes, low crime, decent education performance and modest job loss boosted these Middle Tennessee cities into the upper echelon. This bodes well for the region and shows that competition has a positive impact on business growth. Just as it works in business, competition boosts a community’s performance, benefiting local residents, who are the city’s “consumers.” As cities relatively close in proximity compete for residents and business, they will inevitably move toward a more business-friendly atmosphere. This is the case with Mt. Juliet, Brentwood, Spring Hill, Franklin, La Vergne, Hendersonville, Goodlettsville, Lebanon and Columbia, which all finished in the Top 10. Further, Nashville’s suburbs took advantage of its relative friendliness to business. Of the “big four” cities — Nashville, Memphis, Knoxville and Chattanooga — only Nashville finished higher than 41. This is a testament to a property tax lower than the other three, a low cost of living and average job performance numbers. As Nashville goes, so do its suburban counterparts. On the flipside, Memphis finished dead last. The Bluff City has consistently failed to address its education woes and has an abhorrently high crime rate. It also imposes a property tax that is nearly 16 percent higher than that of any other city in the state. Overall, West Tennessee finished poorly compared with the two other Grand Divisions. Part of the problem is that the region lags behind East and Middle Tennessee in its economic base. Agriculture and manufacturing make up a significant portion of its production, and the manufacturing sector in particular has lagged over the past few years. As a result, many West Tennessee cities have faced higher-than-normal job loss during the economic downturn. East Tennessee fared somewhat poorly as well. The only exception is Farragut, a small suburb of Knoxville and the 2006 Most Business-Friendly City, which finished second this year. No other East Tennessee city managed to make the Top 10, while nine of the 15 least business-friendly cities are situated in the eastern third of the state. Poor job numbers and stagnant population growth were the main culprits for most East Tennessee cities. Cities that want to attract new business development while also nourishing existing enterprise should follow the lead of Mt. Juliet by limiting their tax burdens, addressing crime and maintaining a quality education system. This will attract new residents and thereby business growth regardless of the overall economic outlook. As Mt. Juliet has proven, a city can be business-friendly even during periods of economic calamity. Justin Owen is president of the Tennessee Center for Policy Research, the state’s free market think tank.