What attracts new business to a town?

IMAGINE you are the mayor of a city. Your political career hinges on your ability to market the city to the business community in order to bring in more jobs and tax dollars. What should you do? Improve the mass transit system? Cut corporate taxes? Keep cost-of-living expenses down?

The first thing most city officials do to attract businesses is cut corporate taxes, says Ira Smolowitz, dean of the Bureau of Business Research and Program Development at American International College in Springfield, Mass.

But executives say a skilled labor force is the most important factor they consider when relocating a business, according to a recent study by the Bureau of Business Research and Program Development. The study surveyed 127 companies with combined annual sales of more than $880 billion, who employ more than 4.2 million workers. They were asked to rate 12 factors that influence their decision to relocate to a city. ``[Taxes are] important, but [they are] not the most important factor,'' says Mr. Smolowitz, who co-authored the report with Clayton Hillyer, assistant professor of marketing at American International College. ``Tax breaks are a poor long-term strategy because some other locale will always be able to offer a lower tax rate,'' the study states.

``This study has to frustrate a mayor,'' Smolowitz says. Developing a skilled labor force requires long-term investment, and those officials who initiate such projects may be long out of office by the time their efforts begin to pay off, he says.

Other factors executives rated as highly important include the city's pro-business stance, its corporate income tax rates, and a modern highway and mass transit system, the study shows.