Where To Warehouse
STATES TO CONSIDER FOR YOUR NEXT DISTRIBUTION CENTER
Direct Relief, a Goleta, Calif.-based nonprofit, was running out of space. Since 2009, the global relief organization has distributed $1.5 billion of humanitarian supplies from its 52,000-square-foot warehouse. And in the wake of the West African Ebola crisis—Direct Relief has sent 19 emergency shipments to Liberia, Guinea and Sierra Leone to date—the organization needed room to grow.
Such demands prompted Direct Relief personnel to search for new warehousing facilities, reveals Bhupi Singh, Direct Relief’s executive vice president, chief operating officer and chief financial officer. Singh admits that California’s high real estate costs made him briefly consider a move, but he says that relocating didn’t make sense logistically.
After all, Singh says, California has a lot of perks. “The current location’s proximity to the largest ports in the U.S.—the Port of Los Angeles and the Port of Long Beach—is a very strong logistics advantage,” he says, since Direct Relief often ships its supplies via ocean containers. This key benefit, as well as employees’ desire to stay put, led Singh to scout another California location for Direct Relief’s new distribution center. He says he has high hopes for the company’s new plot of land, which will soon house a “larger, state-of-the-art warehouse” to meet Direct Relief’s growing needs.
Linda DiMario, senior director of Economic Development at the Irvine Chamber of Commerce, applauds Direct Relief’s decision to stay in California. “We’re an economic powerhouse,” DiMario says, citing California’s strong talent pool—thanks to a myriad of local universities—and its proximity to key Asian markets. Plus, she says, the California Competes Tax Credit divvies out more than $150 million in incentives to local businesses looking to expand, as well as companies wishing to relocate to California. “Like the real estate industry always says, it’s all about ‘location, location, location,’” DiMario says. “California gives [shippers] the strategic location, the economic eco-system and the opportunity to succeed.”
In addition to California, below are five states shippers should consider when building a distribution center.
Logistically speaking, Georgia has several key advantages, asserts Tom Croteau, the Georgia Department of Economic Development’s deputy commissioner of global commerce. Not only does Georgia boast one of the nation’s most extensive rail systems—5,000 miles of track to haul freight—the state’s sea and air infrastructures are also top-notch. “Companies setting up a distribution center want a good market, as well as access to a port,” Croteau says. Georgia offers both, he points out, with the Port of Savannah ranking as the fourth-largest containerport in the United States Shippers also benefit from a range of tax incentives, including Georgia’s low 6 percent corporate income tax rate—a figure that hasn’t budged since 1969.
Sitting squarely in the middle of the U.S., Nebraska is at the center of the North American Free Trade Agreement transportation corridor, notes Kate Ellingson of the Nebraska Department of Economic Development. The Midwestern state is a one-day truck drive away from 26 percent of the U.S. and a two-day drive from 90 percent of the states. Geography aside, Nebraska is also friendly to business and offers a slew of incentives to both logistics companies and state-based shippers, Ellingson says. Some of the most-lauded incentives include a lack of state property and inventory taxes, as well as no personal property tax on intangibles.
Ranking among the five states with the lowest diesel and gasoline taxes, Missouri’s cost-friendly environment helps businesses succeed, says Missouri Partnership CEO Christopher Chung. The centrally located state is also within 600 miles of 52 percent of U.S. manufacturing centers and boasts an extensive rail and highway network, in addition to the cargo-friendly Lambert-St. Louis International Airport. The Show Me State’s new Missouri Works initiative is also attracting business, Chung says, with the program providing qualifying companies with fully refundable tax credits against Missouri’s low corporate tax rates. State officials are also bullish about Missouri’s single-sales-factor apportionment formula, which dramatically lowers shippers’ business tax.
Housing America’s largest highway and longest railway systems, Texas has one of the strongest transportation infrastructures in the U.S. The state is also home to the most foreign trade zones—33. Further propelling success is Texas’ central location, which enables trucks to reach 93 percent of the U.S. from the Dallas/Fort Worth region within 48 hours. Business-wise, Texas benefits from one of the best tax environments in the nation, according to the Tax Foundation. Texas-based companies enjoy no corporate nor individual income taxes, as well as no state property taxes. Real estate rates in Texas are also among the nation’s lowest.
Shippers wanting to serve California without paying California’s hefty real estate costs should consider moving to Utah, says Jeff Edwards, president and CEO of the Utah Governor’s Office of Economic Development. Logistically, it makes sense, Edwards says, since three major freeways converge in Utah—two of which go directly to California. Such an advantage has led numerous companies to the Beehive State, including cosmetic giant Sephora, which had no Utah-based stores when it opened its Salt Lake City distribution center in 2008. Further incentivizing shippers to Utah is the Economic Development Tax Increment Financing (EDTIF) program, which provides businesses relocating or expanding in Utah a tax credit of up to 30 percent over five to 10 years.
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