Do Tax Increment Finance Districts Stimulate Growth in Real Estate Values?

Abstract

We use data on all Wisconsin municipalities during the period [1990][1991][1992][1993][1994][1995][1996][1997][1998][1999][2000][2001][2002][2003] to study the effect of tax increment finance (TIF) on economic development. We use appropriate statistical techniques to measure the impact of TIF and control variables on aggregate property values. We also examine the possibility communities that use TIF are self-selected. We find little evidence that TIF has led to significant increases in aggregate property values or that TIF increases the total value of residential and manufacturing property within a community. Surprisingly, we find positive impacts for commercial TIF districts."Economic development," however defined, is one of the central tasks of local government in the United States. With a mobile citizenry, government may most effectively promote growth by efficiently providing the desired level and mix of public services and by enacting policies to enhance real estate within its borders. Local governments around the country have used an indirect tool called "tax increment finance" (TIF) as a major mechanism to promote real estate development.While the details differ over time and across states, the establishment of a TIF district always begins with the specification of a set of geographical boundaries that delineate the TIF area. TIF districts vary in size but are generally only a small fraction of any particular municipality. The cumulative impact of TIF on real estate markets, particularly non-residential real estate markets can be very important, because a large fraction of new development is sometimes located in TIF districts. Once TIF district boundaries are established, aggregate property tax assessments in the area determine the "base" value of the TIF district. The TIF increment at any particular time is the total value of property tax assessments within the borders of the TIF district minus the base value. Real estate parcels within the TIF district continue to pay property taxes on

Tax increment financing: Capturing or creating growth?

“…He did not conduct analysis in a benefit cost framework, but reported parcel level growth of TIF properties at much higher rates than similar properties outside the TIF area. This study echoes the later work by Merriman, Skidmore, and Kashian (2011) finding adjacent tax rate impacts of TIF. In a study of Milwaukee TIF districts, Carroll (2008) found that the growth of business property value within the TIF district is attributable to the capitalization of higher quality public services offered in these districts.…”

Predicting TIF Distress: A Statistical Analysis of Tax Incremental Finance Districts in Wisconsin

“…Despite the increasing use of TIF by local governments across the country, an interesting debate has emerged about TIF effects and whether it generates real benefits (Merriman 2018). Some scholars argue that TIF actually hurts property values in a variety of ways, such as sapping value from non-TIF areas or hurting regional centers when suburban TIF use is high (Dye and Merriman 2000;Hicks, Faulk, and Quirin 2015;Kovari 2009;Lester 2014;Merriman, Skidmore, and Kashian 2008;Swenson and Eathington 2002;Weber, Bhatta, and Merriman 2003;Yadavalli and Landers 2017). 1 TIF also has the potential to drain needed revenue from other taxing jurisdictions, especially school districts (Weber, Bhatta, and Merriman 2003).…”

“…1 TIF also has the potential to drain needed revenue from other taxing jurisdictions, especially school districts (Weber, Bhatta, and Merriman 2003). However, others argue that TIF can indeed help property value growth, in terms of aggregate residential and commercial property values (Carroll 2008;Man 2001;Merriman, Skidmore, and Kashian 2008;Smith 2006), and has been used successfully to offset deleterious property value effects from crime and brownfields (Carroll and Eger 2006).…”

Simulating the Effects of Michigan's MEGA Tax Credit Program on Job Creation and Fiscal Benefits

“…Another group of studies considers the impact of tax-increment financing districts (Byrne, 2010;Dye & Merriman, 1999;Mason & Thomas, 2010;Merriman, Skidmore, & Kashian, 2007Weber, Bhatta, & Merriman, 2003). Under this incentive policy, local governments divert increments to normal property-tax revenue (or other tax revenue), within a designated district, to support services, infrastructure improvements, or tax breaks to businesses in the designated district.…”