May 12, 2014 - 4:15pm

Which City Has the Best Regulatory Environment for Business?

America faces a dizzying array of regulations imposed by all levels of government. Both Congress and the executive branch generate federal regulations. Indeed, executive branch regulations are the only American regulations that must face any rigorous cost-benefit analysis. States and localities also impose regulations that impact businesses and ordinary households. It has been difficult, so far, to assess the impact of many of these regulations because they are so diverse and difficult to measure.

Until now.

The U.S. Chamber of Commerce Foundation has released a new study, “Enterprising Cities: Regulatory Climate Index 2014,” which serves as a barometer of the costs of doing business across the country and a guide to areas where reform is needed. The index assesses five areas of local regulation that a typical small business encounters in opening and operating in 10 major American cities.

“The ‘Regulatory Climate Index’ is an important step forward in understanding what makes America’s cities competitive for small businesses,” said Gov. John R. McKernan, president of the U.S. Chamber of Commerce Foundation.

The Index compiles actual data of three factors— number of procedures, time, and costs—in each area of business regulation to evaluate regulatory efficiencies across cities. Data for the report were obtained through a review of city laws, official publications and websites, and commercial service providers.

To complete its assessment, the Foundation examined areas of local regulation—including starting a business, dealing with construction permits, registering property, paying taxes, and enforcing contracts—that reflect the business cycle of a company.

The report shows that in many cities a combination of factors are coming together to help small businesses thrive. The final study also reveals the poorly written rules, costly procedures, and burdensome processes that may hinder the growth of small- and medium-sized enterprises.

Among the 10 cities in the "Regulatory Climate Index," the most efficient cities across all 5 areas of business regulation are Dallas and St. Louis. The cities of Raleigh, Boston, Atlanta, and Detroit have moderate levels of regulatory efficiency. Chicago, Los Angeles, San Francisco, and New York City have the least efficient regulatory environments.

Every city measured has its own clear strengths and weaknesses. For example, Los Angeles and San Francisco have the best practices for opening a business, yet both cities have the highest requirements and costs to obtain construction permits. St. Louis has the best practice for the registration of properties but scores below average in Enforcing Contracts. Chicago ranks highly for Enforcing Contracts while ranking lower for Starting a Business.

All cities provide small businesses with information and materials to comply with their regulations. Yet the websites and publications are often disorganized, missing information, or unclear to third parties. Few cities provide detailed information on the procedures, expected waiting time, and administrative costs for construction permits. Overall, no city provided comprehensive information for each of the business regulation areas.

The full study is available here

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About the Author

About the Author

Sheryll Poe is a former senior writer at the U.S. Chamber, who covered public policies affecting businesses including the three "T's" - transportation, trade and taxes.