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Economic roadblock

November 3, 2011

Catawba County officials say a state ranking system hinders job creation here and throughout North Carolina.

The state’s economic ranking system — the “tier structure” — revolves around tax incentives for expanding businesses. The state gives growing companies larger incentives if they set up shop in a lower-tiered area — or one it considers more economically distressed — and less to counties ranked as more economically successful.   

While the state’s tier structure was formed to create jobs in economically hard-hit areas, the county’s economic officials say the ranking system’s incentive imbalance may be limiting job opportunities throughout the state.

They say more than 90 percent of the state’s income comes from non-territorial, non-tiered areas, and as long as projects land somewhere in North Carolina, the legislature should not care where.

“There are some substantial job-creation counties in there if you just give a little fuel to the engine,” said Scott Millar, president of the Economic Development Corporation (EDC).

Millar said that fuel can be created by simplifying the tiering system by using a county’s unemployment as the single tiering determinant. He said that would give more counties a lower tier, and thus, more tools to attract prospective businesses to their areas.

“Since state income is not affected by whether a project occurs in a tier-1 Camden County or tier-3 Mecklenburg, simplify the county tiering methodology,” Millar wrote in an EDC document.

In the current tiering structure, Catawba County is in tier-2 and can offer prospective businesses incentives like an Article 3J tax credit of $5,000 per new created job after meeting a minimum 10-job threshold.
However, as a tier-1, the county could lure prospective companies with Article 3J tax credits of $12,500 per new created job after meeting a minimum threshold of only five jobs, according to the N.C. Department of Commerce (NCDOC).  

Under a simplified methodology created by the EDC, a county is ranked as a:
* tier-1 if its unemployment rate (by year) exceeds the state’s unemployment rate.
* tier-2 if its unemployment rate falls within 1 percent of the state’s unemployment rate.
* tier-3 if its unemployment rate is less than the state’s rate.

Currently, there are 40 tier-1, 40 tier-2 and 20 tier-3 counties. Using unemployment as the guide under this formula, there would be 56 tier-1, 17 tier-2 and 27 tier-3 counties.

Using unemployment as the sole factor, Catawba County would be a tier-1 county and be eligible for larger incentives as well as tax credits for investment in real property, according to the NCDOC’s website.

Catawba County EDC has a history of bringing incentive-based jobs to Catawba County, including jobs at Apple in Maiden and LEE Industries in Conover. In 2010, EDC helped create 799 jobs and $47.5 million in investments in the county.

On Thursday, Millar presented the simplified tiering system to members of the N.C. Association of County Commissioners (NCACC) at a special meeting inside Catawba Valley Community College’s Sipe Boardroom.

Catawba County Commissioners organized the meeting to discuss the county’s legislative agenda for the coming year. The tiering system was one of many issues discussed with the NCACC, a group that acts as counties’ advocate before the executive, legislative and judicial branches of state government.

“It’s an interesting concept,” said Kevin Leonard, NCACC’s director of government relations, adding that a lower tier could give counties, and the state, more tools for attracting businesses.

Leonard said he plans to set up a meeting with state representatives and Assistant County Manager Dewey Harris to discuss the issue further.

Effects of tiering
The state’s current tiering structure also affects county departments seeking grant funding or reimbursement from the state.

Directors of Catawba County’s public health, emergency services and utilities and engineering departments all said state funding priorities can often be determined by tier.

Doug Urland, the county’s public health director, said certain grants his department applies for are awarded based on tier level. Like economic development, tier-1 counties are given priority in most situations.  

“They will say this is a grant open for everyone, however, those counties with a lower tier are given priority,” Urland said.

Animal services, too, have been affected by tiering. Emergency Services director Bryan Blanton said counties are reimbursed for spay and neuter service based on what tier the county falls into.

Every year, the county provides spay and neuter services to lower income families that can’t afford it, Blanton said. Throughout the year, the county can request reimbursement from the state.

However, if there is not sufficient money in the Spay/Neuter account to pay 100 percent of the amounts requested, a formula was created by the General Assembly to pay requests based upon tier ranking, according to the N.C. Department of Agriculture (NCDOA). "In this event, 50 percent of the available funds in the Spay/Neuter Account shall be reserved for reimbursement for eligible applicants within tier-1 areas, as defined in G.S. 143B‑437.08," according to NCDOA. "The remaining 50 percent of the funds shall be used to fund reimbursement requests from eligible applicants in development tier-2 and tier-3 areas."

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