Medford, Ore.: Head North, Young Biz

Medford, Ore.

2000 Census Population: 63,000

Pros: Low cost of doing business, numerous business tax incentives, rich in natural beauty and recreation, located in the Interstate 5 corridor

Cons: Rising housing costs, minimal cultural activities

It's no secret that businesses have been fleeing highly regulated and costly California for years. But while such companies have traditionally sought refuge in lower cost locales like Phoenix and Tucson, today more are looking to locate a bit farther off the beaten path.

Why? Because many typical alternative cities no longer offer the magnitude of savings they once did, says John Boyd, president of the Boyd Co., a Princeton (N.J.)-based consulting company that helps businesses with site selection. "To some degree, they've become a victim of their own success," he says.


  Enter Medford, Ore. Since launching an economic development program in 2000, the city has set out to lure California businesses 27 miles north of the border, using the promise of substantial savings as bait. According to West Chester (Pa.)-based economic research consultant, Jackson County, where Medford is located, scored 13% below the national average on its business costs index, while places like Northern California's Sonoma County were a full 18% above average.

Oregon also has no sales tax, its power bills and workman's compensation costs tend to run about a third to half of what they would in California, and it has recently enacted several business incentives, including up to $2 million in tax credits to qualified e-commerce companies located in certain parts of the state.

"It doesn't take long for that to make sense," says Bill Hoke, Medford's deputy city manager in charge of economic development. In the last two years alone, Medford has reeled in medical- and botanical-testing labs, a custom sticker company, and manufacturers of sinks, tiles, portable storage units, espresso carts, and particle-testing equipment.


  Most recently, the city won a highly publicized contest for Amy's Kitchen, the Santa Rosa (Calif.)-based natural foods giant who, Hoke says, will save as much as $1 million a year by building its newest facility in Medford rather than in Sonoma County.

But like any city with potential as a new breeding ground for entrepreneurship, Medford makes more than just good business sense. From the heart of the city, it's a mere 17-minute drive to salmon fishing in the Rogue River, 15 minutes to tee off at any of eight local golf courses, and 30 minutes to hit the slopes at one of the area's two ski resorts.

"You put all that together, and it's pretty hard to beat if your business doesn't have to be in a large metro area," Hoke says.

One of Medford's biggest drawbacks now is that housing prices are already rising rapidly as word gets out. But with putting the city's housing affordability at 20% better than the national average, Medford should still have quite a few years left before it's crimped by its own success.

Coming Thursday: A conversation with Jack Schultz, author of Boomtown USA

Friday: A look at one thriving company and where it's choosing to expand. Plus, a slide show spotlighting some of the nation's most innovative small-business cities.

Before it's here, it's on the Bloomberg Terminal.