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The North Carolina Department of Commerce released its 2018 county tier rankings for economic well-being on Friday, which included the good news that no county in Western North Carolina moved into a category of greater economic distress.
However, the bad news is that none of the counties, some of which rate in the most-distressed group, improved into a higher category either.
This is the first time in recent years that the tiers for Western North Carolina counties have been static.
Last year Haywood County recovered to Tier 3 after spending a year at Tier 2. Meanwhile, Mitchell and Cherokee counties declined to Tier 1 when the rankings for 2017 were released a year ago.
Despite these incremental changes, the median tier for the 19-county region has been constant at 1.74 over the last four years. In theory that suggests the region tends toward economic distress and has made little progress, but that doesn’t account or population imbalances between counties. More than half of the region’s population is in the four “least distressed” counties, Buncombe, Henderson, Haywood and Wautaga.
Why tiers matter
The ratings can be important because they are “incorporated into various state programs to encourage economic activity in less prosperous areas of the state.” Even though being Tier 1 suggests a county’s economic situation is bleak, it could improve the county’s chances of getting state support for the recruitment or expansion of industries that could bring new jobs and increase the tax base.
What the tiers actually say about conditions in each county and how meaningful that is may be a subject for debate. Department of Commerce Communications Director David Rhoades, talked with Carolina Public Press by email last week about some of these issues.
“Companies that are considering a North Carolina location focus on the key factors that will help their business be successful in a given location; such as the regional workforce, the number of available buildings, or transportation accessibility,” Rhoades said.
“A location’s tier level is rarely if ever mentioned by companies when they approach (the Department of Commerce), and if those fundamental business factors aren’t present, the tier level won’t come into play. While Tier 1 or 2 locations can qualify for somewhat more generous economic development incentives, depending on the program, Tier 3 status indicates a county has less economic distress, which is obviously a good thing.
How tiers work
One would think that a state goal would be for every county to rank as “least distressed,” which is Tier 3. But because of how the tiers work, that will never happen. Neither would all counties rank as Tier 1, or “most distressed,” even during a major economic crisis.
The key to understanding the state’s tier system is that the Department of Commerce rates the counties relative to each other, not some external standard of well-being. So even if a county experiences a boom or a bust in a given year, if every other county experiences relatively the same economic trend, the tiers may remain the same.
Exactly 40 county will always be ranked as “most distressed” or Tier 1. Exactly 40 will be ranked in the middle category, Tier 2. The remaining 20 of North Carolina’s 100 counties will be ranked as Tier 3, or “least distressed.”
According to the Commerce Department, the facts used to rank the counties and determine which category each falls into include average employment rate, median household income, percentage growth in population and adjusted tax base per capita.
In addition, several factors automatically qualify counties for lower tiers.
Any county with less than 50,000 automatically qualifies for Tiers 1 or 2. Those that have been Tier 1 during the two previous years and either have less than 12,000 people or that have less than 50,000 and a poverty rate of at least 19 percent automatically qualify for Tier 1.
“The sorting process works like this – the four factors that make up the economic indicators are analyzed first, and then the adjustment factors are considered,” Rhoades explained. “Only after those two steps are complete is a tier level assigned. So, in other words, it’s not like one step covers mandatory numbers and the other step isn’t mandatory as well – the economic indicators and the application of adjustment factors are both necessary.”
The automatic qualifiers could, in theory, throw off the 40-40-20 breakdown, but the county populations are such that this can’t happen right now, Rhoades said. “From a practical standpoint, given the populations in all 100 counties, this situation has not arisen and is unlikely to arise,” he said.
The criteria for evaluation counties as well as the automatic qualifying factors probably fit some counties better than others, so that the economic prosperity or despair in a given county could be different from what its tier implies.
For instance, the Department of Commerce treats population growth as a positive indicator, even though taken alone it could represent an increase in the number of poor residents. This is offset somewhat by other criteria that look at household income and per capita measures.
However, the system has no obvious way to compensate for the opposite trend. If a very small county that has previously been Tier 1 for several years experiences an economic boom that does not include an increase in population, it could remain Tier 1 indefinitely through automatic qualification. This could happen especially in counties that experience a boom in tourism and seasonal residents who are not captured in the demographic data used to evaluate the counties.
WNC county tiers