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John H. Boyd makes his living by telling companies how much it will cost to do business in different parts of the country.

When Boyd looks at Buffalo as a factory town, he sees an expensive place, but one that also is whipping itself into better shape and has some pretty powerful intangibles going for it.

"The cost challenges are still here in Western New York for manufacturing," says Boyd, the president of The Boyd Co., a Princeton, N.J., consulting firm that regularly prepares studies comparing the costs of doing business throughout the United States and Canada.

"But there are some changes in the business climate that bode well for this area," he says.

That's good, because on a dollar-for-dollar basis, the Buffalo area still has a lot of catching up to do. Boyd's survey ranks Buffalo as the third most-expensive place out of 25 U.S. cities and New Brunswick to run a 100,000-square-foot durable goods factory that employs 275 people in the metalworking industry.

Boyd's research found that Buffalo's appeal to manufacturers is clouded by the same factors that local business and economic development officials have been complaining about for years. Comparatively high labor costs, expensive electricity and stiff property taxes all combine to make Buffalo a more costly place for manufacturers to set up shop, Boyd says.

In all, Boyd's research found that it would cost $14.62 million a year to run his hypothetical factory in Buffalo. That's less than the $15.16 million a company would pay in Detroit and the $14.68 million it would cost in St. Louis, but the good news stops there.

A company could run that same factory for $5.5 million less in New Brunswick and $3.5 million less in Greenville-Spartanburg, S.C., which is the least expensive U.S. city in Boyd's survey.

Yet Boyd isn't as down on Buffalo as the numbers alone might suggest. Money talks, but sometimes it's the little things that can make a difference.

And those little things -- like the availability of skilled labor, adequate and reliable supplies of electricity and the region's location as a gateway to the Northeast, Canada and the Midwest -- are taking on greater significance as labor markets elsewhere remain tight.

"The white-hot issue now is labor availability," Boyd says. Manufacturers looking to build a factory today are more willing to absorb higher labor costs if they can be sure they'll be able to build a qualified work force pretty quickly.

"That is something that Buffalo brings to the table," he says. "There are tradeoffs. There is no perfect location."

That's why groups like the Buffalo Niagara Enterprise, which has a five-year goal of bringing 50,000 new jobs to the region, is touting the productivity of the local work force and quality of life issues in its marketing pitches, appealing to companies that need good, reliable workers more than simply the cheapest costs.

"While we're better than we were, we started so far out that we still have a ways to go," says Andrew J. Rudnick, the president of the Buffalo Niagara Partnership.

While the state's corporate income tax rate has been chopped to 7.5 percent from 9 percent, Boyd says a proposal to base corporate income taxes solely on a company's sales within the state's borders, as six other states currently do, would be a big boost to New York's business climate.

In addition, the expansion of the state's Empire Development Zones, combined with efforts to prepare targeted sites so they're shovel-ready and can be developed quickly, is helping to clear some of the traditional roadblocks that manufacturers face in New York.

Despite growing concerns over the need to build new power plants in New York to meet the growing demand for electricity over the next few years, especially downstate, Boyd says the Buffalo region's adequate -- and reliable -- supply of electricity is an asset at a time when rolling blackouts are a daily occurance in California.

"That's one of the fundamental strengths of upstate New York," even though power prices here still are on the high side, Boyd says. "The trump card here is the hydroelectric capabilities."

Location also is on Buffalo's side, especially with warehouse projects expected to be a big growth industry over the next five years, Boyd says.

"One thing Buffalo brings to the table that some of these other cities don't is access to some of the richest markets," like New York City, Boston and Canada, Boyd says. But it also shows how all the dawdling and squabbling over expanding the Peace Bridge or building a twin span is hurting Buffalo's competitive position.

And with low-cost airlines like Southwest Airlines and others moving into the Buffalo market in the last few years, high air fares aren't the big negative that they used to be.

"I think you're more competitive," Boyd says. "The cost structure hasn't changed dramatically over the last three years, yet the business landscape has changed for the better."

But that doesn't mean Buffalo is home free. Its manufacturing costs are high enough that they still could obscure its recent improvement in other areas.

"Costs are a hinderance," Boyd says. "When it gets to be a $1 million difference, there had better be some mitigating benefits."

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