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Sometimes it pays to be among the most distressed.

Three Western North Carolina counties, could be gaining advantages in recruiting new employers thanks to N.C. Department of Commerce’s placement of them in higher tiers of economic distress for 2016.

The 40 “most distressed” counties fall into Tier 1, with moderately distressed counties in Tier 2 and least distressed counties in Tier 3.

Tier 1 counties have several advantages through various state programs, including the administration of some economic development grants, according to David Rhoades, deputy communications director for the Commerce Department, who talked with Carolina Public Press about the tier system on Friday. Tier 2 counties have less advantage, but still enjoy an edge over Tier 3 counties.

McDowell and Yancey counties are moving from Tier 2 to Tier 1. Haywood County had been Tier 3 but will be Tier 2 in 2016. All three counties are adjacent to the prosperous metro area that includes Asheville and Hendersonville. Both Buncombe and Henderson counties are Tier 3.

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Also of regional interest, Caldwell County is also moving from Tier 2 to Tier 1. While just outside of the 18-county WNC region, Caldwell County is of economic importance to adjacent Avery and Watauga counties, due to commercial ties and workers who commute between counties.

Because each tier has a set number of counties, any time a county moves between tiers, another county must switch places. The counties moving into less distressed tiers included Wilson moving from Tier 1 to Tier 2 and three Piedmont Triad counties — Guilford, which moved from Tier 2 to Tier 3, and Rockingham and Surry counties, which moved from Tier 1 to Tier 2.

Statistical designations

Despite the potential advantages of being designated in a more distressed tier, actually experiencing economic distress is never a good thing. But the state’s methods of defining these categories are based on statistics that don’t necessarily comport with residents’ sense of being distressed.

For instance, any county with less than 12,000 people automatically qualifies for Tier 1, no matter how good the economy is, and any county with less than 50,000 people automatically qualifies for at least Tier 2. Counties with less than 50,000 population also have a lower poverty level requirement to automatically qualify for Tier 1.

Since most of WNC’s 18 counties have relatively small populations, only the top 5 counties in population in WNC can avoid automatically being placed in Tiers 1 or 2 based on the number of people in those counties and regardless of their actual prosperity or employment levels.

A glance at a map shows resulting clusters of Tier 1 counties in most of the state’s extreme southwest and northeast, where many of the counties have a very low population.

Economic development

Under a system that existed a few years ago, Tier 1 and Tier 2 counties enjoyed a strong advantage in getting tax credits. But that program is no longer in place, Rhoades said. Even so, advantages remain but are less direct.

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Among the most important advantages for Tier 1 and Tier 2 counties are two ways in which they benefit from economic incentive grants.

First, some of the economic incentive grant funding for employers who decide to go to Tier 3 counties is diverted into a fund that often benefits Tier 1 and 2 counties, Rhoades said. The effect of that is to reduce the amount of the grant that is actually going onto the bottom line of the employer, providing a small incentive for that company to go with a Tier 1 or 2 county.

Second, a relatively new economic development grant program requires a local match. For Tier 1 counties, it must be a 1 to 1 match. But the match is a higher ratio for Tier 2 counties and the highest for Tier 3 counties, Rhoades said. This helps level the playing field for smaller or poorer counties whose taxpayers may have less deep pockets than those elsewhere.

Frank Taylor

Frank Taylor is the managing editor of Carolina Public Press. Contact him at ftaylor@carolinapublicpress.org.

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