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

Abstract

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.