Regional employment and housing impacts of tax increment financing districts

ABSTRACT

This paper estimates the impacts of tax increment financing (TIF) districts on employment and residential development in Polk County, Iowa, using quasi-experimental methods. A spatially lagged-adjustment model is adapted for use at the parcel level. Results indicate that TIF districts contributed gross declines in private sector, non-governmental employment. Job losses attributable to TIF totalled 110 jobs per square mile, and the negative employment effects were sustained over the long term between 2001 and 2011. In contrast, there is some evidence that TIF districts have contributed positively to residential development, although the increase in housing near the districts was not found to be statistically significant in the quasi-experimental integrated lagged adjustment model.

KEYWORDS:

• tax increment financing
• economic development
• quasi-experimental research design

JEL:

• R11
• R38
• R51

ACKNOWLEDGEMENTS

Previous versions of this paper were presented at the Association of Collegiate Schools of Planning Annual Meeting in 2014 and the Annual Meeting of the Association for Budgeting and Financial Management in 2015. The author thanks the editor, Tomasz Mickiewicz, and anonymous referees for helpful comments that improved the paper and led to its publication. The author also thanks Katie Gieszler and Hai ‘Bobby’ Hoang Mai for their helpful research assistance.

DISCLOSURE STATEMENT

No potential conflict of interest was reported by the author.

Notes

1. Wassmer (1994) estimated negative employment effects statistically significant for regressions on property tax abatements, downtown development authorities and industrial development bonds.

2. While modern theories of endogenous growth suggest smaller returns from local incentives (tax) policy, a lagged process of economic adjustment is still a mainstay characteristic of these models (e.g., Barro & Sala-i-Martin, 1992). For a review of theories of local endogenous growth, see Moulaert and Sekia (2003).

Additional information

Funding

This research was funded by a grant from the University of Iowa Social Science Research Funding Program, Office of the Vice President for Research and Economic Development.