Tax Increment Financing Research Articles

Postindustrial Futures and the Edge of the Frontier

Port Covington is a 260-acre development underway in South Baltimore City, featuring a multibillion-dollar campus for the popular sportswear brand Under Armour. It promises to transform a "vacant" and degraded former railyard into a "city within a city" and to catalyze Baltimore's comeback. It also promises to cost a lot. In 2016, after tense public debate, developers secured a $660 million tax increment financing (TIF) deal to begin work, committing taxpayers to decades of debt on the company's behalf. Eligibility for that deal hinged on making the site's industrial history visible as an obstacle to profit. The dominant spatial tropes that scholars use to understand dispossession make it hard to appreciate this instrumentalization of the past, as well as developers' savvy appeals to industrial nostalgia. In this article, I pay particular attention to the blind spots of the frontier concept. Arguments that foreground frontier motifs emphasize erasure as a primary technique of dispossession: by covering up past and present lifeways, "urban pioneers" legitimate land seizure as benign discovery. But in Port Covington's case, developers dramatized a history of municipal neglect. Far from concealed, this history became a key ingredient in developers' claims to the land and a mechanism structuring their access to financial options. In the process of exploring these dynamics, I query whether frontier concepts may reach the limits of their usefulness in the postindustrial city. Here, land's not-so-distant past provides both the template for development dreams and the justification for dispossession by private actors who (the story goes) are best equipped to manage reconstruction. Besides TIF, the range of development incentives available for improving "blighted" spaces—and activists' studied responses to those incentives—suggest that postindustrial futures are rarely conceived on a blank slate. Instead, historicity drives debates about who the city is for and what it can become.

Policy options to mitigate the impacts of green gentrification when constructing new bike paths in the Madison area

To address changing climate patterns, cities in the US are expanding sustainable transportation options and implementing green infrastructure. Sustainable infrastructure projects help communities adapt, decrease CO2 emissions, promote community health, and provide economic benefits. These projects can also have unintended consequences, increasing gentrification and displacement of vulnerable communities through increased property values (i.e., green gentrification). The City of Madison maintains an extensive system of bike trails and continues to expand community access, with three projects recently completed or in development. We recommend that the City of Madison alter policy to use tax-increment financing or community land trusts as a preventative measure to mitigate green gentrification of nearby areas for all current and future bike path construction projects.

“Building Together” in Baltimore? Corporate Megadevelopment and Coalitions for Community Power

We consider how various coalitions influence redevelopment projects in cities, especially as communities demand more inclusion in the development process. Based on qualitative research, we investigate the approval process for the 235-acre megadevelopment project at Port Covington in Baltimore, Maryland, and how stakeholders, including developers, community-based organizations, politicians, and impacted community members view the project, the tax increment financing (TIF) granted by the city, and community benefits agreements (CBAs). Community leaders leaned hard on the development corporation, demanding community and city-wide benefits before a TIF could be approved. We analyze the processes of the Port Covington CBA within the context of the political and economic dynamics of Baltimore. This case study adds to our understanding of how communities respond to corporate-led developments through coalition building, effectively gaining power in how elite governing regimes dictate development in cities.

Taxes and Economic Development: An Update on the State of the Economics Literature

There is a large literature examining the effect of taxes and tax concessions on local economic development. The last comprehensive review of taxes and economic development, however, was Wasylenko’s review in 1997, which mostly examined the location response of firms. Subsequent to the last major review of the literature, empirical work in this area sought to address endogeneity concerns that plagued previous studies, resulting in a series of compelling new studies. This article reviews the empirical literature on tax-based economic development incentives produced since Wasylenko’s 1997 review and covers property tax (including tax increment financing and business improvement districts); spatially targeted and zone-based tax concessions; firm-specific incentives; and corporate income taxes. The review focuses on academic studies that employ modern program evaluation or quasi-experimental techniques and U.S.-based policies.

Does the arena matter? Comparing redevelopment outcomes in central Dallas tax increment financing districts

This article evaluates central Dallas tax increment financing (TIF) districts to compare development outcomes in an area with a major professional sports arena to others without a similar anchor. Using a comparative case study approach to assess quantitative and urbanism performance, the project is primarily concerned with whether the arena makes a substantial difference in property assessment values and urbanist revitalization. This study finds that the most successful TIF subsidized redevelopment in the Dallas core has been seen where private parties with a winning vision have assembled sufficient land to attain a critical mass from which further construction can gain momentum. In the absence of this combination or initial developer interest, outcomes have been disappointing despite similar City efforts and core proximity. While the arena-anchored district has been eventually successful in generating construction value, gains have come at a far higher relative public cost than other effective districts.

Measuring the effect of performance management in local economic development policy: the case of tax increment finance districts in the Dallas-Ft. Worth metroplex

ABSTRACT Does performance management use in local governments actually bring about performance improvement? If so, can performance be attributed to the use of particular tools or approaches? This study examines the particular performance measurement tools and approaches being utilised within Tax Increment Finance (TIF) districts in one metropolitan area – the Dallas-Ft. Worth Metroplex – to ascertain whether they are positively associated with district tax revenues and property valuations. We utilise archival analysis of TIF district records to identify the presence and characteristics of four conceptual types of activities: strategic planning, performance measurement, performance reporting, and performance management. We then develop predictive models to obtain quantitative evidence of the effectiveness of particular observed approaches. Our findings offer a comparative assessment of the value of various tools and approaches in the highly competitive policy field of economic development, with broader implications for performance management and public management in local governments.

The Fiscal Effects of Tax Increment Financing on Rural School Districts: The Case of Iowa

Tax increment financing (TIF)—an economic (re)development tool originally designed for urban cities—has been available to rural communities for decades. This is the first study to focus solely on TIF in rural school districts, to examine TIF effects on school districts’ property tax base and rates, and to conduct event-study estimations of TIF effects. The study finds that TIF has mostly positive effects on rural school districts’ property tax base and mixed effects on property tax rates, and that TIF-induced increases in tax base come primarily from residential property and slightly from commercial property. The study’s findings assert the importance of returned excess increment if rural school districts in Iowa and many other states are to benefit from TIF.

10 Questions to Ask About Planning, Financing and Implementing Transit Oriented Development Strategies

Transit-Oriented Development (TOD) strategies can improve connectivity between housing and employment centers, green spaces, and community facilities by supporting both local environmental sustainability objectives, through more efficient use of land, and “complete” streets, by creating safer infrastructure for pedestrians and bicyclists, leading to potential modal shifts. Enabling conditions for TOD may include changes in land-use regulation and other statutory provisions to create an integrated regulatory framework. TOD requires robust stakeholder engagement and institutional coordination during planning and implementation. Financing mechanisms cities have used to fund TOD include Land Value Capture, a strategy based on expected increases in land values due to infrastructure investments. These mechanisms have been used to generate revenues such as Tax Increment Financing (TIF) and a wide range of taxes and fees. Cities should be aware of the potential negative impacts of TOD, such as displacement and gentrification. Effective and inclusive TOD strategies should be accompanied by land management strategies that mitigate these impacts, including having policies in place to ensure the preservation and expansion of affordable housing. There is typically a lag of at least 5 to 10 years before the economic and financial impacts of TOD investments are fully realized, thus requiring the need for patient capital, well-structured deals and financial instruments, and proper governance.

Is Tax Competition Strategic? Spatial Distributions of Business Property Tax Abatements in the Chicago Suburbs

The authors analyze the locations of property tax abatements awarded to businesses in Cook County, Illinois from 2012 to 2014 to explore their spatial distribution and to examine local government motivations for awarding incentives. The authors’ analysis, which controls for the spatial distribution of businesses, reveals a clustering of abatements at intramunicipal geographic scales. They also find amplified probabilities that abatements are awarded to businesses located near tax increment financing districts or enterprise zones. These patterns suggest that local governments use abatements in a strategic fashion to advance policy goals. The authors use the same data to develop three indices of the degree of abatement clustering at the municipal scale for each of the 64 municipalities in Cook County that awarded five or more abatements. Most of the Chicago suburbs exhibit a pattern consistent with the strategic award of business tax incentives.

Book Review: Tax Increment Financing and Economic Development: Uses, Structures, and Impact

Book Review: Tax Increment Financing and Economic Development: Uses, Structures, and Impact

Financing urban infrastructure in India through tax increment financing instruments: A case for smart cities mission

This article is targeted at exploring the Tax Increment Financing (TIF) model for financing planned urban development programs and projects in Indian cities—smart cities, in particular. This is founded on the premise that the TIF approach offers an excellent opportunity to Urban Local Bodies (ULBs) for the creation, capture and recycling of values in cities to support funding of core urban infrastructure in a sustained manner. This article identifies the key components of the TIF model and explains why it is a theoretically elegant and practically desirable strategy for potential acceptance by Indian cities at the present level of urban evolution when municipal finances are unstable and the municipalities are also not in a position to generate current tax income surplus. This article is grounded on the precept of “theory follows practice and vice versa”, case studies on TIF as implemented internationally. In the end, this article suggests directions as to how the TIF principles could be integrated into the theoretical account of financing innovative projects under the Smart Cities Mission, including accessing capital market funds through municipal bonds. The key findings of this article suggest that the efficacy of tax increment financing tools in Indian cities will depend on several factors: the versatility of city development strategy and plan; reforms in municipal finance system; reforms in spatial planning; effective design of TIF projects and financing strategies, including mechanisms for value capture and recycling to catalyze economic growth‐enhancing enterprises that create further values to land‐owners and the city; and human resource capacity to plan, design, finance, implement and monitor projects. If planned well, TIF instruments can act as potent tools to augment external economies of agglomeration and networking and give a momentum to the economic growth, bringing forth a self‐financing or even surplus‐generating process of planned urban expansion, growth and reclamation.

When Rent Seeking Smacks You in the Face: TIF and Motivated Reasoning

This article is a substitute for the Fellows Address that I did not get to present at the 2020 Southern Regional Science Association (SRSA) Conference due to the COVID-19 pandemic. Regional science research typically addresses real world problems in hopes of guiding better policy decisions. Why is it, then, that economic development plans often fail to reflect best practices? What do you do when you find that your own community is about to buy into a terrible plan? In this address, I share my observations and experience with a Tax Increment Financing (TIF) development plan implemented in Norman, OK. I point out how motivated reasoning leads policy makers to seek reasons to approve a plan rather than to evaluate if a plan is good. To make a meaningful impact on public policy decisions, scholars will need to step out of their comfort zones and engage in - sometimes contentious - community outreach education.

Compensatory financing of energy saving projects in the development of «Smart City»

The article studies the financial compensation technology Tax Increment Financing (TIF) and offers suggestions on the prospects for attracting investment in energy conservation projects. Compensatory financing for energy conservation projects will enable them to make effective management decisions related to finding sources of funding, building their rational structure, and to share risks among project stakeholders; to protect other assets from default and increase the level of financial and credit obligations of project owners; to promote the increase of the financial leverage ratio, which will lead to an increase in the profitability of joint-stock capital and a decrease in its value as a part of total capital.
 The essence of TIF is to ensure that investor expenses are reimbursed through special funds, which are filled by tax revenues from the revenues of infrastructure facilities created and put into operation. The basis of this mechanism is a redevelopment, which is used to finance the investor, who invests in construction and reimburses his expenses from the special fund, where the taxes paid by the owners of new consolidated objects are accumulated. Such a scheme for financing investment projects uses the effect of increasing taxes as a result of the implementation of projects aimed at increasing the value of real estate.
 Based on the conducted research, the main features of the Smart City concept were singled out, as well as their characteristics, the feature of this compensatory technology, which is the locality of the financing object, was identified. Therefore, it is proposed to implement this approach within the framework of the Smart City concept, since it promotes not only the use of modern information platforms of the city's development, but also the principles of sustainable development, including the implementation of energy-saving measures.

A benchmark modelling for participation-based tax increment financing

PurposeThis paper aims to present the theoretical and conceptual framework of a new method in public finance called “participation based tax increment financing (P-TIF)” by combining conventional tax increment financing (TIF) within the Sharīʿah-compliance structure.Design/methodology/approachThis study develops a benchmark model for P-TIF, which offers a participative contract between both lender and borrower. With the help of this model, a financing schema in P-TIF is established by incorporating stochastic modelling. Possible implications and alternative options of application are also explored with a discussion of challenges.FindingsThe results mainly indicate that P-TIF promises lenders to be a part of increment from tax earnings, in return for a reduced interest rate. They show how a rise in participation of the lender in a given contract lowers the interest rate. Under the base case scenario, the interest rate is reduced to zero when the participation of the lender in tax increment is set at 50%.Practical implicationsWith the feature of being interest-free, P-TIF can be implied also within the Sharīʿah-compliance framework, thanks to the model it is based on. Additionally, as the model in this paper is parametric, it can be applicable to various cases in Islamic finance.Originality/valueTo the best of our knowledge, this is the first paper in the literature in the sense that it provides a conceptual idea and respective model for TIF method within a Sharīʿah-compliance framework.

Embedding futurity in urban governance: Redevelopment schemes and the time value of money

Whether appraising development projects or underwriting bonds to finance infrastructure, municipal governments rely on “time value of money” (TVM) techniques to discount and convert hypothetical future cash flows into objects of knowledge in the present. I analyze these calculative techniques through participant observation and interviews with professionals involved in redevelopment projects funded by Tax Increment Financing (TIF) in the Midwestern United States. I find that the TVM assumptions used in models to estimate future values help embed financialized modes of futurity into governance, leveraging the tax base for entrepreneurial urbanism. I describe the contexts in which these techniques are used and, drawing on the literature on the social construction of value, the future imaginaries they perform. I explain why the local state adopts the private sector’s low discount rates and the material effects of this mimicry: inflated estimates of future property values, which are capitalized into larger amounts of public subsidy and, possibly, higher actual values. Future values are also the basis for co-rent-seeking, whereby the state attempts to repay debt on infrastructure through the production of surplus value in land. With institutional support, the techniques and assumptions underpinning these land value capture strategies intensify development and create a reinforcing spiral of asset appreciation.

Financing the Northern Line Extension: the politics of governing Greater London

ABSTRACT This paper examines the politics of governing Greater London by focusing on the financing of Transport for London’s Northern Line Extension. It argues that metropolitan infrastructure policy is a terrain for power struggles to play out. At the same time that the formation of agglomeration economies drives the fragmentation of political geographies, it also strengthens the authority of metropolitan governments, which remains subject to the jurisdiction of nation-states. Based on expert interviews and documentary analysis, this paper demonstrates that the Mayor of London pursued the Northern Line Extension to extract fiscal and financing capacities from the UK state. The office instrumented England’s first tax-increment financing to overcome the collective action problem hardwired into transport policy in the Greater London Area and harness non-sovereign finance for gaining more autonomy from the Treasury. Instrumentation, the paper concludes, has profound distributional effects within and between agglomerations, and therefore warrants further scholarly attention.

Tax increment financing and major league venues

PurposeThis article intends to shine a light on venue-related tax increment financing (TIF) through the first comprehensive inventory of its use at the major league level.Design/methodology/approachFor each 2018 venue in the five North American major leagues, data was collected on TIF contributions to direct venue capital costs as well as to projects using TIF to enable real estate development ancillary to a venue. Neighborhoods surrounding a venue were also assessed for the presence of a TIF district. With both the direct and ancillary elements, data was collected from government, industry, academic, mapping and media sources. A review of this data set and findings are followed by a discussion of implications and directions for future work.FindingsOver one-third of the TIF eligible permanent stadiums and arenas studied in the five major leagues have a direct or strong TIF connection. Direct TIF contributions to sports venues, as well as TIF use intended to generate real estate development around these venues, are most frequent and financially significant in arenas and soccer-specific stadiums. Additionally, arena and stadium projects using TIF often accompany ancillary real estate development.Originality/valueA primary purpose of this article is to provide a previously missing general reference resource to governments and citizens of jurisdictions considering facility TIF use on the scope, nature, extent and identity of TIF projects related to major league sports venues. More generally, the inventory and assessment of TIF use in professional sports venues offered by this article sets the stage for future research on associative relationships between TIF contributions and facility finance outcomes as well as the normative value of venue-related TIF.

Variation in the Heartland: Explaining the Use of Economic Development Incentives in Three Great Lakes States

We identify the factors correlated with the use of economic development incentives after the Great Recession of 2007–2009 to determine the presence of entrepreneurial development regimes. We utilize a unique dataset that combines information on incentives (tax increment financing districts and selected tax abatements and business assistance) with economic, fiscal, and political characteristics for all municipalities in the largest Metropolitan Statistical Areas of Illinois, Wisconsin, and Michigan. These three states bordering Lake Michigan share similar histories and settings, thus targeting the research focus on the key attributes of interest. Our empirical results demonstrate substantial dissimilarity between incentive types and across states, most likely due to policy structures and reforms at the state level that encourage different municipal development regimes. Whereas municipalities, particularly larger ones, continue to use tax abatements, exemptions, and credits to pursue employment growth, the municipalities gravitating toward tax increment financing tend to be suburbs with low unemployment rates and relatively highly educated residents, and not places with greater employment density or manufacturing employment.

Policy mobility, advocacy and problem–potential bridging practices: A review of Scottish city council tax incremental financing business cases

Globalisation has enormously expanded the availability of urban policy information and prompted the need for policy mobility studies. In contrast to objective evidence and rational forms of place-based adoption, policy mobility studies direct attention to the plethora of actors involved in policy mobility and the contested pathways through which policy is adopted, adapted and mutated. Supportive scholars call for consideration of relational and territorial influences, supply- and demand-side dimensions and the interaction between actor and structural interpretations. Given distended forms of adoption, supply-side perspectives acknowledge how influential intermediary actors may exaggerate evidence and codify best practice to effect desired outcomes. Here recognition is given to the limits of ‘city’ or ‘local’-based autonomy and the importance of considering inter-government relations as part of demand-side perspectives. In particular, significance is attributed to local government advocacy and problem–potential bridging practices. Grounded evidence is presented via the analysis of two Scottish city council tax increment financing business cases constructed to gain Scottish Government approval.

Equity in financing public transport infrastructure: Evaluating funding options

Funding of new public transport infrastructure is challenging because of the typically large up front costs. Funding bodies are keen to find new ways of delivering new infrastructure and several funding schemes have been implemented which are based on the way in which better public transport from new infrastructure improves accessibility and raises land values have been implemented. Value capture, the term for a funding mechanism whereby the increase in land value following new infrastructure, has been widely viewed as an alternative funding tool for future public transport infrastructure and has been practiced in a number of forms (e.g., Tax increment financing (TIF)). However, few studies have addressed the equity implications in relation to value capture funding schemes. This study investigates the equity implications using Gold Coast Light Rail Transit (GCLRT) stage one in Gold Coast, Australia as the case study. This case study is used to evaluate four different funding schemes based on previous and existing value capture strategies, such as land value tax, value capture strategies (e.g., TIF and special assessments), and a public transport levy. The paper considers vertical and horizontal equity. There is some evidence of high levy for low income households in the GCLRT catchment areas for value uplift based schemes. The conclusions of the paper contribute to implementation of value capture scheme for many cities in Australia and elsewhere wanting to implement similar funding schemes to fund transport infrastructure.