Essays on Tax Increment Financing

86 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 2003.This dissertation consists of three essays on Tax Increment Financing (TIF), focusing on TIF use in Illinois. TIF is a popular economic development tool that allows for the funding of municipal improvements from increases in property tax revenue brought about by the municipal improvements. The first essay examines the characteristics of the areas in which TIF districts are located, as well as, the factors influencing property value growth within TIF districts. The findings show that TIF districts, on average, are located in areas that are more economically disadvantaged than the municipality as a whole. In addition, the results suggest a positive relationship between blight and subsequent property value growth. The results also show that the size of a TIF district has a positive influence on property value growth, and that industrial TIF districts, TIF districts located in low-density areas, in areas with a high proportion of white residents, and close to the city center have higher growth. The second essay examines municipalities' TIF adoption decision and sheds light on two alternative motives for TIF adoption. First, that neighboring municipalities engage in strategic interaction when considering TIF adoption and second, that municipalities adopt TIF to capture property tax revenue from overlapping jurisdictions. The findings indicate that municipalities do engage in strategic interaction, which suggests that municipalities use TIF as a way to compete for businesses looking to relocate or expand, but do not adopt TIF to capture tax revenue. The municipal tax rate, an influx of new residents and the share of non-residential property and owner occupied housing also influence adoption. The third essay examines the impact of TIF adoption on the employment growth rates of Illinois municipalities. Results indicate a lack of an overall TIF adoption effect. However, findings suggest that TIF districts supporting industrial development may increase employment growth rates of adopting municipalities, while TIF districts supporting retail development decrease employment growth rates. These results are consistent with businesses within industrial TIF districts capturing spending that would have occurred outside of the adopting municipality, whereas TIF districts supporting retail establishments shift spending within the municipality to more labor-efficient retailers.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD