January 12, 2016

MEMO TO:           Mayor Barber and Board of Commissioners

FROM:                  Frank A. Rush, Jr., Town Manager

SUBJECT:           Resolution of Support to End Economic Development Tier System

in North Carolina

The Board of Commissioners is asked to approve the attached resolution formally expressing the Town’s support for a recent recommendation to end the current economic development “tier system” used in North Carolina.  I have attached a copy of the recent report generated by the NC General Assembly’s Program Evaluation Division for your information.

North Carolina includes 100 counties, and the current “tier system” ranks each county according to an index of economic measures and low-population / high poverty adjustments.  This index is updated each year, and the counties that rank 1-40 are considered to be most economically distressed (Tier 1), counties ranked 41-80 are also considered somewhat economically distressed (Tier 2), while the counties ranked 81-100 are the least economically distressed (Tier 3).  The formula used to determine the rankings relies on the average unemployment rate, median household income, percentage population growth, and assessed property value per capita for each county.  There are two automatic qualifiers for Tier 1 status based on county population and poverty rate.

The current 3-tier system has been in place since 2000 (previous iterations included 5 tiers).  The tier system is used by various State assistance programs to distribute State funding, with Tier 1 counties and Tier 2 counties having greater eligibility for various State assistance programs.  Carteret County is categorized as a Tier 3 county, and that has limited Carteret County and Emerald Isle’s eligibility and competitiveness for some State funding programs in the past.  Because of its status as a tourism community, Carteret County has a high assessed property value per capita (valuable waterfront property, low permanent population) and a high median household income (many retirees), and these factors have likely resulted in Carteret County’s historical Tier 3 designation.  While Emerald Isle and other Bogue Banks communities are relatively wealthy, there are areas of Carteret County that more closely resemble many of the Tier 1 counties, and the current tier system has harmed Carteret County.

Some of the key findings of the report are as follows:

  • the 40 Tier 2 counties received much more State funding than the 40 Tier 1 counties in FY 14-15,
  • the automatic population qualifier does not necessarily reflect economic distress, and
  • identifying economic distress at the county level masks economically distressed areas within Tier 3 counties (i.e., Carteret County).

The specific recommendations in the recent report are as follows:

  • the General Assembly should eliminate the use of the tier system for all non-economic development programs administered by the State by July 1, 2017,
  • the General Assembly should eliminate the use of the tier system for all economic development programs administered by the State by July 1, 2018, and
  • a new commission should examine the State’s strategy for identifying and assisting chronically distressed communities in the State.

The recent report confirms the concerns expressed by Carteret County and others over the years, and is a positive development for our county.  I am hopeful that the General Assembly will implement the recommendations, and that the State will eventually develop a more targeted approach to assist economically distressed areas in North Carolina.

I recommend approval of the attached resolution.