How North Carolina rates the economic status of its 100 counties

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At the end of November every year you start seeing stories about the economic rankings of North Carolina’s counties. That’s because the N.C. Department of Commerce releases its tiers.  All 100 counties are grouped into three categories.  Tier 3, for the 20 counties in the best shape.  Tier 2 for the next 40, in less great shape. And Tier 1, for the 40 worst off. The polite Commerce term is “most distressed.”

People pay attention to the ranking for several reasons.  If your county scores better,  politicians like taking credit. If your county does worse, well, there are excuses, explanations, sometimes finger-pointing. You will sometimes see challengers in county elections making a big deal of why the incumbent commissioners are to blame for us being stuck in Tier 1, or the local chamber isn’t doing its job, etc. But sometimes counties don’t mind if they are moved from a 2 to a 1 because a significant amount of state money for economic development and infrastructure assistance flows to lower-ranked counties.

The tier system has roots that go back to the late 1980s, when the legislature created a tax credit for companies that created jobs in the 20 most economically distressed counties, as determined by a Commerce Department formula.

In 1996,  the William S. Lee Act tax incentive program classified all 100 counties into five tiers, then it was compressed to three in 2006. Now, when the governor announces a new company is coming here, one of the main programs you will read about is JDIG, the Job Development Investment Grant.

Basically, it takes tax withholdings from new jobs after they are created, and gives some of it back to the companies for a fixed amount of time, up to a dozen years.  But if the company locates in a wealthy Tier 3 county like Wake or Mecklenburg, some of the money goes into a utility fund for counties in poorer tiers. The theory here is that rural counties will benefit from big job announcements in urban areas.

A number of other programs are influenced in some way by the tiers. For example, if a county is ranked low enough, it might not have to match state grant funds in certain programs, or the match is less than required of Tier 3 counties. Or it might be more competitive for some grants, say, for money to renovate an abandoned factory for new employers. Or state aid to run a sewer line to an industrial park. There are nuances in the tier business. For example, you might be a wealthy Tier 3 county, but you have some low-income census tracts that could qualify for Commerce grants.

(Commerce isn’t the only agency that uses tiers. Other departments  also use them with tier references scattered throughout state law.  If the legislature ever decides to replace tiers, someone’s going to have a job combing through the statutes and figure out where all these Easter eggs are. If you are a new state legislator and want to impress veteran members, volunteer to help with these kinds of code cleanups. They will love you for it.)

Number-crunchers in the Commerce Department’s Labor & Economic Analysis Division have a legislature-imposed deadline of Nov. 30 to compile the rankings for the coming year.  They wait until the latest possible county unemployment numbers come out before they can finish their calculations, according to Commerce spokesman David Rhoades. When counties change from one tier to another, Commerce tries to give local officials a head’s up.

Basically, there are four measurements:  Median household income,  property tax base per capita, population growth and unemployment rate.

Each county gets ranked 1 (worst) to 100 (best) on each measure. Then they are all combined, and the counties are ranked 1 to 100. So the most distressed county, according to the latest rankings, is Edgecombe, in Eastern North Carolina.  Its property tax base per capita was $60,475, which was ranked second-lowest; its population dropped 1.98% over the past three years, which ranked it eighth-lowest; its median household income was $38,818, which made it 14th from the bottom; and its 12-month average jobless rate was 8.92%, fourth lowest. Its score of 28 was 5 points worse than Robeson County, the second most-distressed county.

Meanwhile, Chatham County had an aggregate score of 380 and is officially the least-distressed county in the state.

This is why the rankings are a little problematic. Chatham has sections that are not very prosperous. The median household income on the western side of the county, the  Siler City side, is substantially less than the overall county number. That’s because the other side of the county is basically an extension of Chapel Hill and Cary, some of the most affluent towns in the state. This will only get more pronounced as the upscale Chatham Park builds out from the Haw River and Jordan Lake to Pittsboro.

The same is true of my exurbanish county, Johnston, which comes out in the rankings as a prosperous Tier 3 county. While that’s true of the western side, the Wake County side, the county east of I-95 is  more like the neighboring Tier 1 counties of Sampson and Wayne.

Another idiosyncrasy is what happens with beach counties and second-home mountain counties. Dare, on the Outer Banks, has a lot of expensive beach homes but a relatively small resident population, so the per capita real estate comes out to more than $395,000. That is the highest number in that category, by a mile. The state average is $114,000.  Because Dare’s economy is tourism-based, it also has wide swings in employment, even during normal years, which makes for a higher average annual rate. So while Dare is in some ways a Tier 3 county, it has been in Tier 2 since the three-tier system started in 2007.  But it’s a Tier 2 county with some of the state’s most expensive real estate.

It isn’t easy to influence the metrics in the short run.  If you’re a poor county, it is pretty daunting to come up with a way to boost family incomes, which is the solution for poverty.

One of the most effective economic development strategies is a steady upgrading of the workforce. When corporate executives are asked what’s most important in deciding where to locate a new plant or office, having a skilled workforce ranks very high.

That’s something counties can influence. In North Carolina, there are hundreds of thousands of folks who started college but didn’t get a degree. In Edgecombe County, around 24% of adults 25-44 fall in that category.  That’s around 3,000 people.

I would give Edgecombe the money it would take to help find those folks and get them back into a program that would earn them a degree, a credential . . . skills.  This wouldn’t be easy.  It takes a lot of outreach and counselors and financial aid. I know. I dropped out of college twice before I finished on the third try when I was 33. The community colleges, private colleges and state four-year institutions are trying to do this, but to really do it, more people need to be working on the problem.

That includes county officials, the business community, churches and civic organizations. So make a deal with places like Edgecombe that if they will tackle this, the state will underwrite the costs. It will be expensive, but boosting the education of the workforce will attract higher-paying companies. And, as they say about economic incentives for companies, it will eventually pay for itself with increased taxes.

And you’d have a shot at moving a county out of Tier 1.

 

 

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