The Tiff Over Tif: A Review of the Literature Examining the Effectiveness of the Tax Increment Financing

Abstract

California's recent decision to discontinue tax increment fnancing (TIF) after six decades of use has triggered a re-examination of its broader use. TIF typically allows the borrowing of funds for local economic development in a specifed district, to be paid for by taxes collected in the future that are generated by the development. To put the fndings of the previous literature into context and to make them more broadly informative, this paper reviews the empirical research, provides some descriptive national analysis of TIF adoption, and provides policy recommendations informed by the empirical fndings and literature.

The City as a Fiscal Derivative: Financialization, Urban Development, and the Politics of Earmarking

“…Finally, and along these lines, the politics of earmarking perspective provides a new framework for communicating research about nontraditional finance to politicians, journalists, and regulators, who are more interested in this topic than in many other subjects of social scientific inquiry. Many empirical papers about TIF are written with such policy audiences in mind and downplay the practice's complexity so as to purportedly make findings “useful to policy‐makers”—namely, by devising better estimation techniques to definitively determine if TIF is “effective in promoting growth” (e.g., Greenbaum and Landers :656). This is the most common question that scholars ask about TIF, but is misleading for reasons that should now be evident: TIF is not a passive tool, but rather an agent of spatial transformation that incentivizes municipal leaders to “grow” TIF districts 22.…”

“…), infrastructure lease‐back agreements (Kirkpatrick and Smith ), disaster and other targeted special‐purpose bonds (Gotham and Greenberg ), securitized tax liens (Botein and Heidkamp ), zero‐coupon bonds (Hildreth and Zorn ), interest rate swaps (Lucchetti ), social obligation bonds, and tax increment. Of these, tax increment financing (TIF) is most widely used in the United States, with municipal leaders in most American cities using some form of it (Greenbaum and Landers , 657). The theoretical literature on TIF is therefore well developed and follows established lines of debate within urban studies.…”

Tax increment financing: Capturing or creating growth?

“…Several studies over the past decade have outlined widespread problems with TIF across many locations in the U.S. Youngman (2011) criticized the invisibility of TIF processes and described the larger problem of municipal finance that is masked by TIF use in much of the U.S. Other studies broadly criticize the transparency and efficacy of TIF and outline the challenges to oversight and reporting of TIF (Kenyon, Langley, & Paquin, 2012;Mitmore, 2008). Greenbaum and Landers (2014) provide a recent review of this literature. Merriman (2018) provides a recent review of the issues surrounding TIF, how TIF works in a comparison of states and provides recommendations to improve outcomes, equity and efficiency of TIF.…”

Understanding the impact of Bus Rapid Transit (BRT) on property values - a case study of Brisbane, Australia

“…Empirical evidence from the literature is less than helpful for practical LVC implementation since there is a knowledge gap in how to estimate the LVU prior to the transport project, without the help with empirical data from land/property market. This prediction is important because, as a pre-investment funding scheme, some LVC mechanisms (such as, tax increment financing) need to be established in the vicinity of proposed infrastructure, where property values are expected to rise, (Greenbaum & Landers, 2014). Therefore, a pre-investment analysis of the LVU forms the basis on which to formulate LVC strategies.…”

“…Despite substantial LVU studies having been conducted (and a few of them have been specifically driven for LVC purposes) they generally stay in the theoretical stage of examining the relationship between transport accessibility and land values and justifying recapturing of this value through LVC tools. Estimation of LVU for future transport infrastructure is a critical factor for the development and implementation of LVC financing mechanisms (for example, tax increment financing, see Greenbaum & Landers, 2014).…”