Editor’s note: In this first of a two-part report, the News + Record looks at the North Carolina Department of Commerce’s “Tier” program, which is used to help steer tax credits and grants to the state’s most economically distressed areas. Chatham County’s economic status places it among the state’s 20 Tier 3 counties — meaning it ranks among the least distressed, or most economically advantaged — in N.C. when, in reality, Siler City and other pockets of the county chronically lag behind in development and economic opportunity. In part one, we examine what the Tier system is and how it impacts Chatham. In part two, next week, we look at possible solutions and alternatives to the Tier program that would benefit the county.
Additionally, a sidebar story accompanying this piece in the print edition covers how the tier system affects nearby Moore County. You can find that story here.
SILER CITY — Chatham County’s official status as one of North Carolina’s “least distressed” counties — in other words, ranking among the top 20 of the state’s 100 counties based on a set of economic criteria — is, according to local officials and observers, extraordinarily misleading.
And it’s likely costing Chatham a shot at millions of dollars in grants assistance and other types of financial benefits.
Chatham County, according to the N.C. Dept. of Commerce, is simply too rich. The concentration of high wealth in northeast Chatham — measured in median household income and assessed property value, two of the state’s four Tier measurement criteria — ignores pockets of poverty in the rest of the county and, ultimately, helps disqualify all of Chatham from receiving much-needed financial help for projects that would improve infrastructure and make it more attractive to developers.
The most significant result: Tier 1 and Tier 2 counties in North Carolina — 80 counties considered more economically disadvantaged, many of which have higher wages and higher employment rates than Chatham — receive higher priority than Chatham does for grants and tax credits. And on a municipal scale, Siler City, Chatham’s largest municipality — which, if it was a county in and of itself, would rank 98th out of 100 N.C. counties in median household income — is paying a huge price by being a town with “hidden distress” located in a Tier 3 county.
Businesses and industries interested in locating in the job-distressed Siler City area, for example, would only qualify for the relatively few Tier 3 state incentives available — even though Siler City decidedly looks like a Tier 1 community, badly in need of business revitalization. And projects already in development, such as the town’s CAM (Chatham Advanced Manufacturing) megasite, receive significantly reduced funding (from sources like N.C.’s Rural Infrastructure Authority) to extend utilities to the site. Funds from the authority would make the megasite more “shovel-ready” for tenants.
Tim Booras, the owner of Siler City’s CAM site, said he didn’t know of any other single statewide economic development issue over which there was “so much collective frustration.”
“Nobody is willing to do anything about it,” he said. “They (state officials) know it’s broken and they just can’t fix it.”
Bryan Thompson, Siler City’s former town manager, who now works in Pittsboro as assistant Chatham County manager, says the Tier system may not be widely recognized or understood in Chatham.
“But the impact of it is certainly felt,” he said. “The things that, whether it’s infrastructure, water, sewer, or if it’s other kinds of financial assistance for meaningful public projects that would improve the life quality of those living in these areas…the effect is there.”
Thompson, who witnessed firsthand how Siler City was impacted by the state’s Tier system during his six years as manager there, echoes what other officials in the county manager’s office and across Chatham believe: that Chatham’s “Tier 3” ranking is, in his words, “not a very authentic representation of the entire community.”
Understanding Tiers
Some history: since 1996, the N.C. Dept. of Commerce has been tasked by the legislature with ranking the state’s 100 counties from “most economically distressed” (the bottom 40 counties are designated as Tier 1) to “least economically distressed” (20 counties designated as Tier 3). The rankings are based on an assessment of four elements — trends in each county’s:
• Unemployment rate
• Median household income
• Population growth
• Assessed property value per capita
The original intent of the Tier system, according to Jonathan Morgan, an Associate Professor of Public Administration and Government at UNC’s School of Government, “was to use the Tiers to steer higher tax credits and grants to counties (and businesses) which chronically lagged behind the rest of the state. The problem: it never seems to have worked as well in practice as intended.”
Morgan wrote those words in a blog post in 2016. In that same post, he cited analyses done by the Program Evaluation Division of the state’s General Assembly. In a 2015 report, the division posited that the Tier system hasn’t helped North Carolina’s most distressed counties, and that the existing Tier formula (which has changed multiple times since 1996, although none of the changes have taken into consideration the intra-county disparities like those in Chatham) “may distort our interpretation of economic distress.”
Further analysis suggested the state’s approach to measuring economic distress was “outdated,” Morgan wrote.
The General Assembly’s own evaluation division, in fact, recommended ending the use of the Tier system for all economic development programs by 2018, and to establish a commission “to reexamine North Carolina’s strategy for identifying and assisting chronically distressed communities.”
That hasn’t happened.
Rep. Robert Reives II, who represents Chatham County in the General Assembly, describes Chatham as “a tale of two counties,” a disparity the faulty Tier system can’t help address.
“You’ve got the northeastern portion of the county that has really experienced a major boom and a lot of economic growth and development, and then you’ve got the western side, which has not benefited from that,” he said. “It’s just a huge issue and something that everyone wants to see addressed, but the problem is — just like with everything else in government — once it’s in place it’s kind of hard to get it out of place. Now that the Tier system is in place, it’s just hard to get it tweaked or changed.”
Patrick Corso of Moore County Partners in Progress, that county’s economic development arm, said the legislature “just absolutely refuses to deal with this.”
“No matter whether it’s a study committee telling them what they ought to do, whether it’s the Triangle J [Council of Governments] telling them what it is they ought to change…” he said. “Every time you talk to a legislator, their response is, ‘We can’t touch this because it will open Pandora’s box.’”
In fact, a total of 35 bills related to the Tier system were introduced in the General Assembly in 2019. In prior years, as many as 54 bills have been introduced, each attempting to address the system.
None passed.
‘No money there’
Chatham County officials and those in the development world continue to be troubled by that fact. It keeps Siler City and the pockets of Chatham County in the most dire need of grants for infrastructure projects, most agree, from getting them.
“The crux of the issue,” says Alyssa Byrd, the president of Chatham County’s Economic Development Corporation, “is that we are ranked as one of the least distressed counties in all of North Carolina, which disproportionately impacts areas that are in need, that are the most distressed.”
Byrd said since many state programs dole out funds based on a county’s Tier status, Chatham County is in the unfortunate position of not being able to take advantage of that funding. In Siler City, she says, there’s a lot of opportunity for redevelopment and expansion. But it can’t happen with the existing infrastructure — or lack of it — and one of the best ways to address infrastructure needs is through grants and state-based economic programs.
Tier 3 counties, though, get little of that.
And what about other Commerce Department programs which provide funds for things like utility improvement and rural infrastructure fixes?
“Lately,” according to Byrd, “there’s just no money there. If we were able to take advantage, we would…but there’s no funding in some of those pots.”
The state of North Carolina’s ready-made solution is discretionary funding by the Commerce Department for certain projects in needy areas. But because it’s largely Tier-dependent, and because Siler City lies within Tier 3 Chatham, Siler City has to ask for favors, jump through additional hoops and take extras steps to get considered.
And even then, Byrd says, “our request may not qualify based on specific standards.”
Booras said ultimately it’s about jobs for Siler City and the distressed parts of Chatham.
“And we can’t have jobs unless some company comes in here to build a facility, and we can’t do that until we have water and sewer,” he says.
And in the western part of Chatham, that means state help. Because of Chatham’s Tier 3 status, the opportunities to get that help are extremely limited.
Nancy Hannah, the town of Siler City’s grants administrator, sees that week in and week out.
“Well, we are trying to source funds for these projects, and we’re running into a problem accessing state funds because of our Tier 3 designation,” she says. “There are funds that we are not able to even apply for because we’re not a Tier 1 or Tier 2 county. So that does hamper the availability of funds that we can source.
“I’ve been living in the county for 11 years,” Hannah said. “And I haven’t seen much change on this side of the county in that whole time.”
A legislative goal
Chatham isn’t alone in its distress. More than 40 percent of North Carolina’s municipalities, in fact, have a different Tier designation than the counties in which they’re located. And like Siler City and Goldston, nearly 20 percent of the state’s municipalities have more economic distress than their county.
The Tier system is so detrimental to Chatham County that local officials routinely make eliminating it a legislative goal. At the county’s annual legislative breakfast on Feb. 28, Chatham officials suggested to the county’s legislative contingent, which includes Reives and state Sen. Valerie Foushee, once again, to “(e)liminate the current usage of the state’s economic development Tier system for distribution of non-economic development funds OR replace it with a system that recognizes the vast wealth disparities within counties.”
A report presented at the breakfast cited language from the 2015 Program Evaluation Division of the General Assembly calling for the dissolution of the economic development Tier system. That evaluation “summarized various ways that these Tiers have not been effectively used to get non-economic development funds to the most distressed counties.
“However,” the evaluation read, “the General Assembly has failed to take action on this report and continues to use the current economic Tiers for various grants and programs.”
Chatham County “serves as a key example of why the current tier designations are grossly unfair,” the legislative goals’ language reads. “The western part of the county, including Siler City, remains a very economically distressed area, even though the eastern part of the county is considered to be fairly wealthy. Over the years, the county and the western area, including Siler City, have missed out on funding that would greatly help this area take major steps toward economic recovery.”
One example: Just a few years ago, Siler City received $4 million of the $8.87 million requested of the Golden LEAF Foundation to run water lines to the CAM megasite, but the Tier designation prevented the town from getting additional funds for much-needed wastewater lines.
At the recent legislative breakfast, officials made it a part of their 2020 legislative wish list, saying: “We would ask that counties and municipalities have input and that the formula recognize the far-ranging economic differences that exist within most counties. Creating zones within counties would be a possible solution.”
‘One-sided’
There was a time when Siler City was Chatham’s economic engine. But the loss of textile mills and food processing plants in the last three decades have helped drive its economic decline — making it a perfect candidate for the kinds of benefits the Tier system was supposed to help dole out.
The expansive development and rapid growth at Chatham Park and in and around Pittsboro? It’s helped Chatham some, but Siler City Town Manager Roy Lynch says it’s literally and figuratively one-sided.
“Certainly we are benefiting from some of what we’ve seen here,” Lynch says. “However, you also can see the disparity between the two sides... But as that growth does continue, it’s pushed on the one side of the county.”
Hannah, Siler City’s grants administrator, sees the challenges firsthand as she searches and applies for development grants to help the town. The process of cobbling together state funds, she says, is a little bit like solving a Rubik’s cube. The large state funding she’s looking for is a bit more difficult to find when the county is labeled one of the least economically disadvantaged in the state, and some state-level grants specifically deny Tier 3 counties from applying.
“Unfortunately, the federal funds are more limited in the amount … they’re usually limited to $2 or $3 million,” she said. “For both infrastructure and economic development there are $2 and $3 million limits. And so when we’ve currently got a $21 million project, it makes sourcing funds challenging.”
According to Reives, that wasn’t the intention of the original legislation which created the Tier system.
“It wasn’t a lack of foresight,” he said. “It’s just that I don’t think that anybody saw the stark differences that you’re seeing in North Carolina now in areas that are developing. We’ve got areas of North Carolina that can barely contain themselves; we’ve got areas of North Carolina that are consistently losing population every year. So I think that, again, you’ve got to come up with some way to separate areas.”
Booras says there’s a simple fix: an “easy button” solution that allows for municipalities to seek exemptions to the Tier system for certain projects. Reives describes a similar solution as “micro-targeting,” using technology that didn’t exist when the Tier system was developed to drill down into data that shows just exactly how distressed some communities are.
“The county separation system doesn’t work anymore, period,” Reives said. “We’ve just got to continue to push solutions forward. It’s not a partisan issue.”
“We need to stoke conversation,” Chatham County Commissioner Karen Howard said at the legislative breakfast. “The notion that the Tier system as it stands works for every county — we know that’s not true. We need to bring back the conversation of how to do it better.”
Next week, in part two, we explore options for change and alternatives to the Tier system.