US interstate rivalry hits new lows

By Claire Prentice
New York

It is supposed to be the United States, but the recession has turned America into 50 competing parts.

As the economy bites, states across America are resorting to dirty tactics to steal business from their neighbours.

At stake are business start-ups and well established firms.

US states have always had the power to vary sales and business taxes, but the stalled economy has injected an aggressive new tone as they compete to persuade businesses to relocate and invest with them.

'Nasty tone'

Nevada was accused of stooping to a new low this week with a $1m year-long advertising campaign which mocks California's $26bn budget deficit and uses the slogan, "Keep your business in California and Kiss Your Assets Goodbye".

The Nevada ads compare California legislators to monkeys and the state budget to flying pigs.

"Our campaign has been a big success, we've had a huge response," says Somer Hollingsworth, the president and chief executive of the Nevada Development Authority.

The campaign has sparked a furious row between Nevada and California, which has retaliated with its own multimedia blitz of pro-California ads proclaiming that "What happens in Vegas stays in Vegas, but what happens in California makes the world go 'round".

The advert features world famous California brands like Gap, Apple, Disney, Levi's and Mattel and points out that California boasts 51 Fortune 500 companies, as compared to 2 in Nevada.

California assemblyman Jose Solorio is offended at "the nastiness of the tone" of the adverts promoting Nevada, known as "the Silver State".

"They go too far," he says.

"Why would anyone want to go there anyway? They have very high unemployment, construction has gone bust and there aren't the opportunities there that there are in California."

Mr Solorio's pro-California ads will run on the web and on cable TV in Nevada and California for the next six months.

The assemblyman has also set up a 'California is Golden' website and Facebook group.

Mr Hollingsworth is unapologetic.

"We are very pro-business and California isn't," he says. "That is why people are rushing to leave."

'I win, you lose'

Observers say the move represents a definite change of tack as states use aggressive advertising campaigns to attract new business rather than sitting back and waiting for companies in other states to notice their lower taxes, cheaper office space and less stringent regulations.

"It's a very simple strategy of 'I win, you lose'," says Philip Kotler, professor of marketing at Northwestern University's Kellogg School of Management in Illinois.

The fight is not limited to the Golden and the Silver States.

In New Hampshire, economic development officials drive into Massachusetts to pick up business owners at the border under an initiative dubbed "New Hampshire Open Invitation".

Development officials then give potential investors the full VIP treatment - free luxury hotel accommodation and slap up meals - and drive them around in a limousine while pitching to them about why they should switch state.

"We get a lot of business from Massachusetts," says Michael Bergeron, business development manager for the state of New Hampshire.

"Our neighbours, Vermont, Maine, Massachusetts and Rhode Island are all very high tax states and we have a very low tax burden and a business-friendly environment," he says.

"That's what distinguishes us as a brand."

Dirty play

Development officials in Indiana make similar "sales trips" into Illinois, Ohio and Michigan, and recently placed billboards at the borders of these states, inviting businesses to "Come on IN [the acronym for Indiana] for lower taxes, business and housing costs".

"One third of our new jobs in recent months have come from businesses consolidating and concentrating their business from other states into Indiana," says Indiana secretary of commerce Mitch Roob.

Indiana officials also travel further afield to poach business, to Dallas, New York and Atlanta.

"I don't think it's dirty tactics," says Mr Roob. "It's business. It's the tyranny of the marketplace.

"No state, whether it is California or Indiana, has a God-given right to get business and keep it. We all need to continually update and refine our sales pitch to make our state appealing to great businesses."

There is a danger that the aggressive new marketing tactics could backfire, according to Drew Coburn, director of strategy at New York branding firm Cubism.

"It's stupid from a communications strategy point of view," says Mr Coburn.

"You're wasting your energy on negatives when you should be concentrating on selling the positives of your own brand. You're alerting people across the whole country to the fact you are willing to play dirty and a lot of people will be put off by that."

Positive player

One state that is not willing to do that is New Jersey.

Often the butt of jokes as New York's poorer neighbour, New Jersey officials have turned that perceived cheapness into an asset, stressing the cost-savings of relocating from New York, with its high taxes and rents.

"We aren't criticising anybody," says Jerold Zaro, chief of the New Jersey Office of Economic Growth.

"We are simply telling out story and it is the people on our borders, in New York and Philadelphia, who are listening."

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/8273664.stm

Published: 2009/10/04 16:47:23 GMT

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