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County Tier Downgrade Could Help More Money Flow Into The Region

By Christina Haley O'Neal, posted Dec 1, 2020
The recent New Hanover and Brunswick county designations as Tier 2 counties, while a downgrade from their previous rankings, could be good news for the Cape Fear region, local economic leaders said.

That's because the ranking could help bring more money into the Wilmington area in the form of grant opportunities and incentives from the state, said Adam Jones, regional economist and associate professor at the University of North Carolina Wilmington.

The new tiers, which were released Monday, included 22 counties that will change tiers in 2021. Some of those counties were deemed more distressed counties, including New Hanover and Brunswick counties, which dropped from Tier 3 designations (the highest) in 2020 to Tier 2 designations in 2021.

Others that changed were for less distressed counties, including Onslow, which moved from a Tier 1 to Tier 2 designation and Carteret County, which moved from a Tier 2 to Tier 3 designation.

Pender County remained at a Tier 3 designation for 2021. 

New Hanover County's economic distress rank is No. 79 for 2021, a change from No. 96 in 2020, according to a memo from the N.C. Department of Commerce, which conducts the rankings every year. 

The state's economic distress ranking goes from No. 1 being the most distressed to No. 100 being the least distressed, according to the state commerce department.

"This shift was largely driven by a change in the county’s unemployment rate rank, which moved from #83 last year to #49 this year," stated the memo.

What's driving the counties' drop in the rankings is that they fell in their unemployment ranking, Jones said. 

"That's largely driven over this last year by the [COVID-related] shutdowns, and the fact that we're strong in leisure and hospitality, which were disproportionately affected by the shutdown," Jones said.

"So why this is potentially good for us is that means, as the economy's recovering in 2021, we're now eligible for more incentive dollars from the state or lower [local] matches for those incentive dollars," Jones added. "And our unemployment rate will likely recover as the economy reopens. I don't think this is like a long trend. It's a blip, as opposed to a deterioration."

The ranking has "no impact on the financial health of the county or the county’s Triple-A bond rating," according to a news release from New Hanover County on Monday.

New Hanover County’s unemployment rate, which was in the 3% range for the first part of 2020, rose to 15.1% in April because of the impacts of COVID-19. In May the rate fell to 13.8% and in September fell to 6.5%, according to the county.

The tier rankings use four factors for the designations: average unemployment rate, median household income, percentage growth by population and adjusted property tax base per capita, according to the state. 

Local economic development leaders also agreed that the new rankings could be used as a way to help secure funding opportunities in the future.

The ranking will most likely be a short-term designation, said Scott Satterfield, CEO of Wilmington Business Development, which oversees business and industry recruitment and retention efforts in New Hanover and Pender counties. 

"This is obviously a designation we have not dealt with in our service area historically, and we will work to take advantage of any opportunity it affords us," Satterfield said. "The way the tier system is structured in our state, the lower your tier, the more potential incentives you can qualify for. With that, we hope there will be an opportunity for us to take advantage of this shift in our recruitment efforts. This can come in many forms."

Bill Early, executive director of Brunswick Business and Industry Development (Brunswick BID) said, "it does make us eligible for the additional grants through the state."

One of them is the state's Utility Account, which provides infrastructure grants to local governments in Tier 1 and Tier 2 counties, Early said, adding that it could help with public infrastructure for economic development projects. It would also help secure more grants under the state's Rural Development Division. 

"If you're trying to build a case for need, for different funding sources, the more distressed you are, the greater the likelihood of receiving something," Early said. "But I have not found that to be a problem for Brunswick County accessing funds to some of these larger programs because a lot of these projects we work on are pretty large ... so they are eligible for certain programs regardless of our tier."

Brunswick County’s economic distress rank is No. 80, a change from No. 81 in 2020. The shift for the county was also largely driven by its unemployment rank, which moved from No. 18 last year to No. 11 this year, according to state commerce.

Jones also noted that the One North Carolina Fund, a discretionary cash-grant program, is another one of those programs in which funding can be impacted by a county's tier.

"So like the One North Carolina discretionary grant funding, if you're in a Tier 3 county, for every dollar the state funds in the local governments have to put in $1. But as a Tier 2 county, for every dollar that we put in locally, the state can put in $2. So our match goes down," Jones said.

If the county would have maintained its unemployment ranks from last year, New Hanover County would have remained at the same standing as it was last year, he said. 

Tyler Newman, president and CEO for Business Alliance for a Sound Economy (BASE) said there are some nuances to the criteria used. 

"While they have to focus on four specific criteria as set forth by the legislature, the time periods captured aren't necessarily the same. For example, this uses the population growth from July 2016-July 2019 and unemployment from October 2019-September 2020. So, for New Hanover County, we get COVID19-related unemployment but miss out on the huge number of folks that can work remotely and have chosen to move their job/business/family to Wilmington over the past year," Newman said.

Overall, Newman said some advantages are that the rankings both give the county access to more job creation grants and resources and "reiterate how deliberate we need to be about supporting investment, businesses, job growth and job creators."

This year has been filled with unprecedented challenges due to the COVID-19 pandemic, and there's continued uncertainty on what lies ahead, said Natalie English, president and CEO of the Wilmington Chamber of Commerce. 

English also noted the change in tier to help the area's economic organizations "to offer larger incentives and grants to help recruit companies to our area in the next year."

"This could be a great opportunity to attract new investment and reduce those unemployment numbers," English said. "The chamber has been focused on talent and workforce development initiatives to help position our region for an accelerated recovery. Having a skilled workforce in place is a key component of our overall recovery strategy."
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