FORBES: Will More Corporations Follow Hertz To Florida’s Low Taxes And Sunshine?
Earlier this year, the Hertz Corporation – a Fortune 300 company and the world’s largest airport rental car business – announced that it would move its corporate headquarters from its 25-year home in Bergen County, New Jersey to the Southwest Florida city of Estero. On the Tuesday before Thanksgiving, Florida Governor Rick Scott, Hertz CEO Mark Frissora, and other government officials officially broke ground at the site; providing residents of Lee and Collier counties with even more reasons to be thankful given the projected economic impact of this important occasion. While critics will say this is just another run of the mill business migration, it actually holds greater significance than reported.
How so? Glad you asked.
To begin, Hertz spurned New Jersey’s repeated efforts – including $40 to $70 million in incentives – to keep the company headquartered in the Garden State. Additionally, Hertz’s 2012 acquisition of Tulsa-based Dollar Thrifty saw Oklahoma come into the mix as a potential landing spot. However, Hertz quickly discovered that getting more than a hundred employees and their families to relocate from New Jersey to the Sooner State (and vice versa) proved a non-starter. Even Texas, which has seen a dramatic increase in Fortune 500 relocations under the tenure of Governor Rick Perry, was unable to lure the rental car giant to its business-friendly state.
With that in mind, we come back to the decision to set up shop in Florida — specifically the Southwest part of the state.
Prior to Hertz’s May 7th announcement, relocating a Fortune 300 company to Southwest Florida had never been done. Companies similar in size and scope to Hertz seeking to relocate to the Sunshine State had traditionally favored the bigger cities and markets of Miami, Fort Lauderdale, Orlando, and Tampa.
While these metropolitan areas have an advantage in population size, Lee and Collier counties remain economically competitive, having received roughly 22 percent of the total $95.61 billion in annual adjusted gross income (AGI) Florida gained between 1992 and 2010. Tourism in the region and entire state has also increased as the annual number of passengers coming and going from Southwest Florida International Airport has risen by more than 2 million in the last decade, and Florida, as a whole, had double the amount of tourists this past year than New York and the Big Apple AAPL +0.54%. This is all good news for a corporation built around the travel industry.
In addition to pristine beaches, warm year-round climate, and Disney World, Florida is also known for not having a state income tax. What the general public might not be readily aware of is the fact that businesses located within the Sunshine State also enjoy the 12th-lowest corporate income tax rate in the nation: a flat rate of 5.5 percent. Conversely, Oklahoma and New Jersey have their corporate income tax rates set at a flat 6 and 9 percent respectively. The 0.5 and 3.5 percent difference in relation to Florida’s makes for a greater overall earning potential given that the federal corporate income tax rate of 35 percent is the highest in the world.
Of even greater importance is the fact that Hertz isn’t the only entity which stands to benefit from its relocation.
According to an economic impact study conducted by Florida Gulf Coast University, Lee County can expect the creation of 700 new jobs by Hertz alone over a five-year period. During this time, another 1,000 new jobs will be created and an annual economic impact, upon project completion, is forecasted to be $190.2 million as a result. Even though the study only covers 2013 to 2017, the economic benefits are projected to continue well past 2017. Quite the economic boost for a county where the average annual wage in 2011 was $38,193 and unemployment was 6.8 percent as of March 2013.
Fortune 200, 300, and 500 corporations are now taking note of the economic and quality of life benefits Southwest Florida offers to those who call the region home. Hertz’s successful move will only serve as a catalyst for these companies seeking relocation from states with unfavorable business climates and high taxes.