Santa Monica Most Expensive City for Business

September 17, 2024 -- A July survey of more than two hundred cities that is garnering new-found interest ranked Santa Monica as the most expensive city to conduct business in the region and in seven competing states.

The 2024 Kosmont-Rose Institute Cost of Doing Business Survey ranked cities based on seven variables -- sales tax, utility tax, minimum wage, business license fee, average office rent, crime and housing affordability.

Santa Monica was the only city that had the lowest possible score in every one of the categories, according to the survey of 216 cities in California, Nevada, Washington, Idaho, Arizona, New Mexico, Minnesota and Texas.

Of the 26 "most costly cities" to do business, 22 are in Los Angeles County, which claimed nine of the top 10 cities, with San Francisco claiming the eighth spot.

Two Washington cities -- Bellevue and Seattle -- rounded out the list dominated by California cities, according to the survey.

“LA County is a significant center of commerce, yet doing business in the County comes at a high cost,” said Larry Kosmont, Chairman and CEO of the Kosmont Companies, which co-sponsored the Survey.

“While many LA County cities are strategically located and have strong family income and consumer demographics, rent levels and local taxes tend to fall into the Survey’s highest-cost categories.

"These are key decision factors for businesses looking to set up shop or relocate,” Kosmont said

For the first time in three decades, the Survey presented data for all 174 incorporated cities in Los Angeles, Orange, Riverside and San Bernardino Counties.

"This comprehensive approach allows for direct comparisons between these cities and shows that the cost of doing business is markedly higher in Los Angeles County than in other parts of the region," said a press release announcing the findings.

"This difference can be attributed in part to market forces, such as office rents, as well as local policies, such as sales taxes and minimum wage requirements."

The survey found that California's $16 per hour minimum wage, and the recently mandated $20 per hour wage for fast food workers, are far higher than the $7.25 per hour minimum wage in Texas, Idaho and Utah.

Several high cost cities, including five of the top ten, require minimum wages higher than the state, including Santa Monica, where a $17.27 per hour minimum wage kicked in on July 1.

California also had a higher base sales tax than several other states in the survey, with most of the highest cost cities, including Santa Monica, charging 10.25 percent.

Meanwhile the survey's crime index was based on serious crimes reported in 2022 and released this January -- burglary, larceny-theft, vehicle theft, homicide, rape, armed robbery and aggravated assault.

The survey, which was released on July 23, has gained attention after it was the subject of a report in the Los Angeles Business Journal on Monday.

Ken Miller, director of the Rose Institute and a co-author of the survey, told the Journal that Santa Monica had topped the list in previous surveys but was not included in the last survey released in December 2022, which was scaled back due to lack of resources.

“Leaving a city like Santa Monica off the list that we knew to be expensive was the main reason why we decided to be more thorough in Southern California this time around and capture every city,” Miller told the Journal.

The survey also focused on 40 non-California cities "where a lot of California businesses have fled to in recent years, to get a sense of just how much cheaper they are,” Miller said.

The best cities to do business were Boise, Idaho and Carson City, Nevada. Dallas and Houston, Texas were the only two "powerhouse cities" that made the top ten list of least costly cities.

For a copy of the survey click here