Municipal Investment and Property Value Appreciation in Chicago’s Tax Increment Financing Districts

Abstract

To determine whether Tax Increment Financing (TIF) triggers or captures growth, we examine the relationship between expenditures and property value change in Chicago’s TIF districts. A regression model relates spending type, which varies from infrastructure to developer subsidies, to a district’s property value growth between 2002 and 2012. Results show variation in the impact of spending, with subsidies for commercial development having the clearest positive relationship while infrastructure spending has a negative effect. Although trends are less clear over the long run, these differences underscore how the effectiveness of TIF cannot be surmised without accounting for variations in spending.

Did incentives help municipalities recover from the Great Recession? Evidence from Midwestern cities

“…This is consistent with previous research on Chicago (Kane & Weber, 2016) as well as anecdotes about the implementation of TIF within the regions examined in which municipalities use TIF in support of real estate development, including incubators and flexible space, and business attraction and retention, rather than job generation per se. This is consistent with previous research on Chicago (Kane & Weber, 2016) as well as anecdotes about the implementation of TIF within the regions examined in which municipalities use TIF in support of real estate development, including incubators and flexible space, and business attraction and retention, rather than job generation per se.…”

“…The finding that TIF is more positively related to establishment creation than to employment expansion holds for municipalities in all three states. This is consistent with previous research on Chicago (Kane & Weber, 2016) as well as anecdotes about the implementation of TIF within the regions examined in which municipalities use TIF in support of real estate development, including incubators and flexible space, and business attraction and retention, rather than job generation per se. Even though TIF allocations are justified on the basis of the number of jobs they will create (Lester, 2014), the funds typically subsidize developers' land acquisition and hard construction costs and therefore affect the behavior of the business tenants of new space only incidentally.…”

Is Tax Increment Financing a Fiscal Bane or Boon?

“…No study has ever estimated the fiscal impacts all these TIF regulations have on affected jurisdictions in Iowa. Previous studies focus on factors influencing municipal TIF adoption (Anderson 1990;Byrne 2005;Dye and Sundberg 1998;Man 1999;Man and Rosentraub 1998), distribution of TIF costs (Huddleston 1986), TIF effects on property value growth (Byrne 2006;Merriman 2000, 2003;Kane and Weber 2016;Smith 2006;Merriman 2003, 2007), and TIF effects on school district finance (Nguyen-Hoang 2014;Weber 2003;Weber, Hendrick, and Thompson 2008). A few studies on TIF in Iowa focus on its legal aspects (Nydle 2009;Perri 2001), its politics (Lawrence and Stephenson 1995;Pacewicz 2013), and its impact on economic development Eathington 2002, 2006).…”

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

“…Data quality has improved since the recession. For example, in Chicago, prior research on TIF expenditures used a composite dataset constructed by scraping City Council meeting documents, redevelopment agreements, and Freedom of Information Act requests, which made verification problematic and completeness difficult to ascertain (Kane and Weber 2016). In recent years, however, local and state government agencies have begun to disseminate digital reports and datasets through government websites or data portals.…”