For the third year in a row, the Alabama Policy Institute (API) has collected data on Alabama's 50 most populous municipalities and ranked them based on criteria that both promote business success and encourage the entrepreneurial spirit.

The four categories graded are:

• Economic Vitality
• Business Tax Burden
• Community Allure
• Transportation Infrastructure

This report looks at a number of factors:

• What cities have the best tax policy?
• Which have low costs of living and crime rates?
• What cities have experienced the most year-over-year population and job growth?
• What type of economic vitality do cities have?

The Economic Vitality of a city is important to businesses because factors such as job growth, population growth, and median per capita income reflect its ability to survive during an economic downturn. Job Creation or lack thereof has a clear impact on a city's business climate, and income levels reveal a city's ability to invest in its own business marketplace.

The Business Tax Burden category employs two key tax components for each city: property tax rates and general sales tax.

The Community Allure rating counts for a smaller percentage of the rankings than Economic Vitality and Business Tax Burden. Nevertheless, indicators such as the cost of living index, education performance, and crime rates all play a key role in any city's business climate.

The components of the Transportation Infrastructure category comprise the smallest percent of the ranking system, but they are important because businesses of all sizes need quick, convenient access for their customers, employees and suppliers.

Alabama's most business-friendly cities possess responsible limited governance, reasonable tax rates, quality school systems, low crime, access to transportation infrastructure, and a thriving economy despite significant economic challenges over the last several years.

The Business-Friendly Formula

Economic Vitality (35% of overall score):

• Recent job growth, 2010-2011 to 2011-2012 (50% of Economic Vitality category)
• Residential population growth, 2011 to 2012 (12.5%)
• Long-term population growth, 2002 to 2012 (12.5%)
• Median per capita income in past 12 months (2012 dollars), 2008-2012 average (25%)

Business Tax Burden (30% of overall score):

• Business property taxes (70% of Business Tax Burden category)
• Local sales tax (30%)

Community Allure (20% of overall score):

• Cost of living index, 2012 (35% of Community Allure Category)
• Per capita violent crime rate, 2012 (35%)
• Percent of adults age 25 or older with at least a high school diploma, 2008-2012 (15%)
• Averaged 8th grade Alabama Reading and Math Tex (ARMT) scores, 2012-2013 (15%)

Transportation Infrastructure (15% of overall score):

• Distance to primary commercial service airport that enplanes at least 10,000 paying passengers per year, 2012 (25% of Transportation Infrastructure category)
• Distance to commercial rail service (25%)
• Distance to port capable of handling container shipping (25%)
• Distance to Interstate Highway System (25%)

For the complete study from the Alabama Policy Institute, click here: Building Business in Alabama