Tax Increment Research Articles

Does Tax Increment Financing Raise Urban Industrial Property Values?

The paper examines the impact of tax increment financing (TIF) on the value of industrial properties in Chicago. Because TIF designation may be self-selected, a two stage procedure is used to estimate the influence of TIF. The authors find that the value of industrial parcels located in mixed-use TIF districts (i.e. those that also contain commercial or residential properties) is higher than that of similar parcels that are not located in a TIF district. However, the value of industrial parcels that are located in homogeneous industrial use TIF districts is no higher and in some specifications is lower than that of similar parcels not located in a TIF district. These divergent results may be best explained by industrial parcel owners' desire to convert their properties to non industrial uses.

Neighborhood characteristics and the targeting of tax increment financing in Chicago

Tax increment financing (TIF) is a local economic development tool that funds improvements in an area designated as a TIF district with property tax revenues generated from the growth in property values in the district. This paper tests a number of explanations for the location of TIF districts within a city by estimating Weibull duration models of the time to inclusion in a TIF district for neighborhoods in Chicago. The results suggest that a neighborhood's hazard of inclusion in a TIF district is positively related to neighborhood distress, the presence of Empowerment Zones, and the passage of time and negatively related to a neighborhood's political influence.

Equity and Entrepreneurialism

How do the socially reproductive functions of local government fare within municipalities that adopt “entrepreneurial” economic development practices? This article examines the case of tax increment financing (TIF), a quintessentially entrepreneurial strategy whose use has significant fiscal implications for the overlapping taxing jurisdictions that provide these functions. Statistical analysis of TIF's impact on the finances of school districts in Cook County, Illinois, reveals that municipal use of TIF depletes the property tax revenues of schools during the lifespan of the TIF district but that a portion of the budget shortfalls are relieved by increases in state school aid. Entrepreneurial policies can create conflict between taxing bodies unless higher levels of government take on some of the fiscal burden of these more redistributive functions.

都心更新プロジェクト推進にむけた民間開発者からの開発手法の検討

This study aimes to establish the ways and coordination to proceed "URBAN RENEWAL PROJECTS". The results of the questioners to some key players of private developers, operators and investors showed the unwillingness to join the project. We made analysis from following aspects; Risk and Return, Phase of the project, Use and development style, and the change of private developers. And we found; 1) Private sectors are divided into "Developers", "Operators", and "Investors". 2) Developers have to take development risks and relatively low return. The ways and coordination to proceed are; 1) The risks adjustment of development phase should be taken. Such as, joint developments with the operators and investors and making options with landowners. 2) Multi- tower style and using air lights are effective planning for flexible development. 3)Public subsidiary and Tax Increment Financing are needed to achieve the required rate of return.

Tax Increment Financing and Economic Development: Uses, Structures, and Impact. By CRAIG L. JOHNSON and JOYCE Y. MAN.

<i>Tax Increment Financing and Economic Development: Uses, Structures, and Impact</i>. By CRAIG L. JOHNSON and JOYCE Y. MAN.

Book Reviews

Books reviewed:Craig L. Johnson and Joyce Y. Man, Albany, Tax Increment Financing and Economic Development: Uses, Structures and Impact

Tax increment financing and economic development: uses, structures, and impacts

Tax increment financing and economic development: uses, structures, and impacts

Tax increment financing: a theoretical inquiry

This paper offers an analysis of tax increment financing (TIF), adding to a small theoretical literature on this important fiscal instrument. The analysis exploits the theoretical connection between property values and public-good levels, which is the subject of a large literature in local public finance. Using this approach, the paper shows that localized public improvements are likely to be opposed by property owners outside the affected area, who pay higher property taxes with no offsetting benefits. By using tax revenue captured from overlapping jurisdictions, TIF may circumvent this opposition, allowing the city to implement the public improvement without an increase in its tax rate. TIF is not always viable as a financing method, however, because it may not generate enough additional revenue. The analysis shows that TIF’s viability is ensured only when the public good is at least moderately underprovided relative to the socially optimal level. In the case where the public good is slightly underprovided, a public improvement is desirable, but TIF is not viable. Finally, the analysis shows that the public-good level ultimately chosen under TIF need not be efficient, with both under- and overprovision being possible outcomes. Thus, while TIF may allow a city to carry out needed public improvements, the stimulus it provides may be excessive.

The Effects of Tax Increment Financing on Economic Development

Local governments attempt to influence business location decisions and economic development through use of the property tax. Tax increment financing (TIF) earmarks property tax revenues that result from growth in assessed valuation. The TIF revenues are to be used for economic development projects but may also be diverted for other purposes. Using data for the Chicago metropolitan area that includes information on property value growth before and after TIF adoption, we find evidence that cities that adopt TIF grow more slowly than those that do not. We test for and reject sample selection bias as an explanation of this finding.

Are Local Economic Development Incentives Effective in an Urban Area?

Economic development incentives are offered by local governments in the United States to retain or attract manufacturing and/or commercial enterprises. We are concerned with first wave incentives that began in the United States in the 1970s and continue until today. These include: manufacturing or commercial property tax abatements, tax increment finance authorities, downtown development authorities, and industrial development bonds. The reason that local governments offer these incentives is the perceived benefits that non-residential enterprises bring to a jurisdiction. State governments have an appropriate interest in the creation of local incentive programs if such incentives are effective at retaining and redirecting economic activity to places where there is a public benefit to the state arising from the creation of jobs there, as compared to elsewhere. So the natural question to ask is, given the way that they are currently structured, what are the effects of local incentive use in a metropolitan area? Do they have an impact on local property values, employment, and poverty rates that offer a public benefit to the entire metropolitan area, or are they simply giveaways to business that could be better accomplished through direct cuts in business taxation? The purpose of this paper is to answer these questions by summarizing some of the findings from our forthcoming book, Bidding for Business: The Efficacy of Local Incentives in a Metropolitan Area (Upjohn Institute, 2000). In this paper we offer tabular and regression-based simulation evidence that leads to public policy suggestions regarding the future use of local incentives in U.S. metropolitan areas.

Optimal investment in a tax increment financing district

In this paper we introduce a general model of property tax increment financed redevelopment. The model illustrates how expenditures on public infrastructure and housing induce private capital investment and growth in property values. It can be used to frame the problem of how best to manage a tax increment financing (or TIF) fund to realize redevelopment objectives. The solution to this problem suggests when the use of TIF is appropriate. We present estimates of the model‘s parameters for a TIF district in Urbana, Illinois, a solution to the fund management problem, and an evaluation of TIF‘s suitability in this case.

Fiscal Pressure, Tax Competition and the Adoption of Tax Increment Financing

Tax increment financing (TIF) has been widely adopted as an economic development tool by municipalities. This study estimates a structural probit model of municipal TIF adoption decisions using data drawn from cities in Indiana. It provides empirical evidence that factors such as fiscal pressures, tax competition, economic distress, industrial composition, availability of alternative programmes and the expected gains in property values from the use of TIF exert significant influence in a city's decision to adopt a TIF programme. After using an accurate measure of prior growth, this analysis finds no empirical evidence to support the contention that growing cities are more likely to adopt TIF.

Tax Increment Debt Finance: An Analysis of the Mainstreaming of a Fringe Sector

Despite the persistent efforts of federal tax policymakers to place binding constraints on the economic development bond market in the United States, it has grown since the Tax Reform Act of 1986 and is a well established segment of the municipal securities market. This article provides an analysis of the development bond market by describing tax increment debt finance (TIF) in the United States and conducting an empirical analysis of California TIF debt. Our analysis indicates that tax increment debt finance (TIF) is no longer an obscure infrequently used financing tool, but for local governments in many states is a commonly used means of raising capital for multiple purposes. Our empirical analysis highlights the unique project‐specific features of tax increment finance that bond issuers must understand and manage to enhance the credit quality and minimize the financing costs of tax increment debt.

The impact of tax increment financing programs on local economic development

The Tax Increment Financing (TIF) method has achieved widespread popularity as a funding source to finance local infrastructure investments and improvements. However, little research has been conducted to evaluate the effectiveness of such programs. This study undertakes a regression analysis to examine the effects of the municipal adoption of TIF programs on local economic development. The empirical results suggest that the adoption of TIF programs has a significant positive effect on local employment.

Local economic development financing: issues and findings

This symposium examines issues related to local economic development financing. The symposium introduction paper consists of two sections: (1) a review of the literature related to local economic development in general and to the financing economic development in particular; and (2) a summary of major findings from the four symposium papers addressing such issues as rural bank loans, the tax increment financing program, professionalism in economic development, and regional development through tax sharing.

Local economic development financing: issues and findings

This symposium examines issues related to local economic development financing. The symposium introduction paper consists of two sections: (1) a review of the literature related to local economic development in general and to the financing economic development in particular; and (2) a summary of major findings from the four symposium papers addressing such issues as rural bank loans, the tax increment financing program, professionalism in economic development, and regional development through tax sharing.

Tax increment financing as a municipal revenue: helping the legislature get it right

Tax increment financing raises revenue for public infrastructure in a redevelopment district by capturing increased property tax revenue stimulated by the redevelopment. TIF has left a long trail of intergovernmental controversy. Cities in Washington State, which approved TIF in 1982, have yet to complete a project. After two failed constitutional amendment campaigns, a test case was initiated to validate TIF before the state supreme court. The cities lost. This article examines the technique, this case, and lessons for making tax increment financing available as a revenue source in Washington.

Tax Increment Financing: Municipal Adoption and Effects On Property Value Growth

Tax increment financing (TIF) has been adopted widely by municipalities in the United States as an economic development tool. Despite the large number of state initiatives and TIF's increasing popularity, few statistical studies have been con ducted to examine the direct effect of the TIF program from an economic perspective. This article analyzes the effect of TIF plans on property value growth by comparing pre-TIF to post-TIF property value changes in a first-difference model. The empiri cal results from a panel of Indiana cities indicate that the TIF program has increased median owner-occupied housing values in a TIF-adopting city by 11% relative to what it would have been without TIF. This finding suggests that the TIF program effectively stimulates property value growth in an entire community.

A Model of Tax Increment Financing Adoption Incentives

With tax increment financing (TIF) a municipality pays for economic development expenditures out of future increases in tax collections. If the development expenditures are the sole cause of the increased tax collections, TIF is a fair and reasonable policy. If not, TIF can distort choices and redistribute resources. This paper develops an economic model of TIF as a choice by the sponsoring municipality with an impact on an overlying government. The analytic framework isolates the impact of key variables, permits analysis of the payoff from TIF to each government, and helps inform discussions about equity. The model clearly shows that while the special nature of TIF causes it to favor projects that generate significant tax revenue, that revenue need not be truly incremental with respect to the project alone, and projects therefore need not be efficient to be financially viable to municipalities. In fact, the projects that best fit the goals of TIF legislation may be impossible to finance through TIF. Alternative government programs may be required to help towns develop areas most in need.

The Economics and Politics of Tax Increment Financing

ABSTRACT Tax Increment Financing (TIF) is a popular yet controversial tool that allows local governments to use property tax revenue to fund the public costs of economic development. Since TIF gives one local government the power to affect the tax bases of the overlapping jurisdictions, there is uncertainty and argument on the part of government officials and taxpayers as to who really finances the program. To evaluate the alternative contentions, this paper presents a general methodology that identifies which taxpayers in which locations fund the TIF's expenditures, and sets forward the conditions under which such a local economic development policy can be beneficial to taxpayers. The paper applies the model to study the TIF program currently active in downtown Des Moines, Iowa. The evidence indicates that the taxpayers in the entire metropolitan area subsidized the downtown activities in the early years, but now pay lower property tax rates due to the city's TIF‐financed urban revitalization program.