Guilford County is trying to move up in the world, but it just moved down in one economic metric used by the state.

Each year, North Carolina ranks its 100 counties on a “Tier” system that goes from 1 to 3 – with Tier 1 being the most financially distressed counties and Tier 3 counties the ones that are on very solid economic footing.

In a newly released ranking, the North Carolina Department of Commerce downgraded Guilford County from a Tier 3 county to a Tier 2 county. Since the lower the tier the greater the financial trouble, no one wants to be shouting “We’re number 1” on this scale.

The tier ranking is an indicator of how Guilford County is doing economically, and in some cases it’s used to determine which counties receive grant money from the state and how much funding they qualify for. The system was created in 1996 to help state legislators direct funds for certain programs to the most distressed counties in North Carolina. Since Guilford County has now moved into a more distressed category, that will mean more grant availability from the state.

The Department of Commerce’s new rankings categorize 40 counties as Tier 1 counties and 40 as Tier 2. It ranks 20 as Tier 3 counties – those considered to be doing well according to the formula used by the state to determine tier status. That calculation factors in the latest available statistics regarding average unemployment rate, median household income, percentage growth in population and adjusted property tax base.

Guilford County Manager Marty Lawing said that, while no county wants to be seen as moving down the ladder of economic prosperity, the benefit is that the new status will make Guilford County eligible for more state grant money.

“It’s not totally bad,” Lawing said of the county’s demotion. “Of course, you want to have a strong economy. Every county wants to be strong in these four categories. It’s a sign you are doing well.”

He said he doesn’t think Guilford County will ever end up classified as one of the state’s most distressed counties.

“I don’t ever see us going to a Tier 1,” Lawing said.

There are a wide range of state grants and programs that are either entirely or partially based on the tier rankings: the Building Reuse and Economic Infrastructure Program, Community Development Block Grants, Industrial Development Fund Utility Accounts, the Job Maintenance and Capital Development Investment Fund, the Main Street Solutions Fund, the NC Green Business Fund, the Agriculture Development and Farmland Preservation Trust Fund, Agriculture & Consumer Services’ Spay & Neuter Grants; Environmental Quality Abandoned Manufactured Home Cleanup Grants, Health & Human Services’ Medication Assistance, the NC 911 Board Public Safety Answering Point Grants, NC Housing Finance Agency’s Low-Income Housing Tax Credit Awards, and the Strategic Prioritization Funding Plan for Regional Impact Transportation Investment Projects.

Lawing said Guilford County’s demotion came about largely because of one component in the formula.

“The main thing that hurt us was medium household income,” the county manager said. “We dropped about $1,000; that was the key factor.”

According to the state Department of Commerce, in Guilford County, household medium income went from $46,093 in 2013 to $44,828 in 2014, which were the years with the latest reliable statistics for the state’s purposes.

Lawing said another thing that hurt Guilford County is that the county is currently at the very end of its tax revaluation cycle. The Guilford County Tax Department is finishing up a countywide revaluation of every piece of property in the county and, once the new values are on the books early next year, the property tax base should be higher.

“If the tax base increases, that’s always a bump,” Lawing said.

In adjusted property tax base per capita, Guilford County “fell” from number 53 to 52 among the state’s 100 counties.   As for population growth, Guilford County moved from 83 to 80.

And even though the county’s jobless rate dropped from 5.8 percent to 5.3 percent, that success didn’t keep pace with other counties that had larger decreases in their unemployment numbers.

Greensboro Chamber of Commerce President and CEO Brent Christensen said that, from a purely pragmatic point of view, the shift toward being a more distressed county could help the county more than hurt it.

“The inside baseball is that we’ll be eligible for more programs from the state, at least for the next year,” he said. “A Tier 2 county is eligible for a higher amount than a Tier 3.”

Christensen’s main job is to recruit new business to Guilford County and help existing businesses expand, and he said the tier system isn’t something that prospective economic development clients are likely to consider when making their decisions. They don’t, for instance, look at Guilford County’s tier demotion and get a poor impression of the county.

“I don’t think there is an external component to it,” Christensen said of the rankings, adding that, when he talks to businesses about relocating here, Guilford County’s tier ranking simply doesn’t come up.

The system isn’t commonly used in other states and isn’t widely known even in the State of North Carolina.

A county with less than 12,000 residents automatically qualifies for a Tier 1 ranking and, a county with a population of less than 50,000 that has a poverty rate of greater than 19 percent also automatically qualifies for the most distressed category.

Tier 3 counties in the state – those doing the best according to the formula – are Brunswick, Buncombe, Cabarrus, Carteret, Chatham, Durham, Forsyth, Haywood, Henderson, Iredell, Johnston, Lincoln, Mecklenburg, Moore, New Hanover, Orange, Pender, Union, Wake and Watauga counties.

Some Tier 1 counties, classified as the most distressed, are Anson, Ashe, Caldwell, Chowan, Hyde, Macon, Montgomery, Yadkin and Yancey counties.

In an email Lawing sent out to area officials regarding Guilford County’s drop, he wrote, “Looking ahead, I think the 2017 revaluation should improve the adjusted property tax base per capita factor. Our position will continue to be impacted by the economic strength of the counties with less than 50,000 until our economic factors improve to the point that we are solidly in the top 20.”

In 2006, a decade after the classification system began, the state changed the tier designation system by reducing the number of tier designations from five to three and refining the formula used to calculate the distress levels.

A December 2015 study by researchers working on behalf of the state legislature found major concerns with the current formula for calculating economic distress and it recommended wholesale changes in the system that included ending its use for all “non-economic” development programs by July 1, 2017, and forming a legislative commission “to reexamine the State’s strategy for identifying and assisting economically distressed communities” by July 1, 2018.