These 14 NC counties are considered ‘more distressed’ than they were a year ago

When the clock strikes midnight this New Year’s Eve, Cumberland County will join the ranks of some of the most economically distressed counties in North Carolina.

That’s when the county — home to North Carolina’s sixth-largest city in Fayetteville — becomes a Tier 1 county in the eyes of the state.

Cumberland will be one of more than a dozen counties to be downgraded this year — a higher than usual amount due to changes that the N.C. General Assembly made earlier this year to the state’s tier system. In total, 28 counties will move up or down the tier rankings next year.

Last year, the number was six, said David Rhoades, a spokesman for the N.C. Commerce Department.

And while it would seem bad to be labeled one of the worst of something, this time it means that Cumberland County has more tools with which to conduct economic development than it did in 2018.

“In reality, the revised metrics more accurately reflects the economic standings of the community,” Robert Van Geons, president of the Fayetteville Cumberland Economic Development Corp., said in an interview. “The information that goes into those calculations doesn’t change. The advantages of our community are the same as yesterday and the issues remain the same” as well.

The tier system, which is mandated by state law, determines how the state runs several programs that assist in economic development. Those include the One North Carolina Fund and the Job Development Investment Grant, which uses incentives to lure new companies to the state or get existing companies to expand or keep jobs. It also influences the state’s Utility Account, which helps pay for infrastructure upgrades, and the downtown revitalization Main Street program. More distressed counties are treated more favorably by the programs.

Van Geons said he had been monitoring legislative changes throughout the year, so he knew the downgrade was likely coming. In response, he said, Cumberland County will quickly begin to see how it can take advantage of its new Tier 1 status to attract more business, including tapping into the Utility Account.

Cumberland County made news this year for attracting defense contractor Booz Allen Hamilton to hire more than 200 jobs in Fayetteville, with the state chipping in around $2 million in incentives to make it happen. Van Geons said he doesn’t think the new tier designation would have had any effect on a deal like that — but it could help the county land other employers like manufacturers.

“There are a number of site selection companies and brokers that look for opportunities in tier 1 communities, in part because of that status,” Van Geons said. “We will be looking to create more available site-ready projects, and the ability to access those tools will be something we are investigating and going after aggressively.”

Why all the change?

The tier system is broken down into three levels — with Tier 1 counties generally being the most economically distressed and Tier 3 counties generally being the least economically distressed. The Triangle, where growth has outpaced much of the rest of the state, is made up almost entirely of Tier 3 counties. Franklin County, north of Wake County, is a Tier 2 county.

Companies that locate in Tier 1 counties receive 100 percent of any incentive grants they receive from the state, while companies that take grants in Tier 2 or Tier 3 counties get less.

For projects in a Tier 2 county, 90 percent of the annual grant is paid to the company, while 10 percent is transferred to the state’s Utility Account, which helps fund infrastructure projects in Tier 1 and Tier 2 counties.

For projects in Tier 3 counties, 75 percent of the grant is paid to the company and 25 percent goes to the Utility Account.

For example, the state recently awarded a $12.5 million incentive grant to Advance Auto Parts to get the retailer to switch its corporate headquarters from Roanoke, Virginia, to Raleigh, which is in a Tier 3 county. Advance Auto Parts will receive $9.4 million of the JDIG grant, while $3.1 million will be transferred to the Utility Account.

County tiers are calculated using four factors:

Average unemployment rate

Median household income

Percentage growth in population

Adjusted property tax base per capita

In previous years, the Commerce Department also took into consideration several “adjustment factors” when making its tier system, including a county’s total population. For example, previously, any county with fewer than 50,000 people automatically qualified as either Tier 1 or 2. Those with fewer than 12,000 people — or those with fewer than 50,000 people and a poverty rate of at least 15 percent — were considered Tier 1.

But those adjustment factors were ended this year by the N.C. General Assembly. Some lawmakers had expressed displeasure earlier this year that despite the tier system being in place, most economic developments still flow to counties that are already doing well, such as those in the Triangle and the Charlotte area. Employers have flocked to those regions in recent years because of their high number of young, college-educated workers.

The changes have resulted in many Eastern North Carolina counties getting downgraded, while many of the state’s counties in the mountains and foothills were pushed up.

The counties that have been downgraded this year from Tier 2 to Tier 1 include: Beaufort, Cleveland, Cumberland, Duplin, Hoke, Nash, Rockingham, Rutherford, Sampson, Surry, Wayne and Wilson.

Counties moving from Tier 3 to Tier 2 include Carteret and Granville.

The law calls for 40 counties to be designated as Tier 1, 40 counties to be designated as Tier 2, and 20 counties to be designated Tier 3. The counties are re-evaluated every year and ranked according to how they stack up against each other.

The counties moving from Tier 1 to Tier 2 include: Alleghany, Ashe, Camden, Cherokee, Clay, Jackson, Macon, McDowell, Montgomery, Person, Yadkin and Yancey.

The two counties moved into the highest tier were Currituck and Davie counties. Currituck, on the Virginia border, benefits from the growth of the Norfolk area in Virginia, while Davie County has enjoyed spillover from Winston-Salem.

A surprising upgrade

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Zachery Eanes is the Innovate Raleigh reporter for The News & Observer and The Herald-Sun. He covers technology, startups and main street businesses, biotechnology, and education issues related to those areas.