TIF study doesn't tell the whole story

Opinion

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To bolster their opposition to extending the downtown TIF, Nile Wendorf and the New Leadership Party slate have been referring to a 1999 academic article by Richard Dye and David Merriman published by the U of I's Institute of Government & Public Affairs. It's easy to see why Wendorf et al. like to cite this study of Chicago-area TIFs, because the authors concluded that cities with TIFs had slower economic growth than cities without them.

But after a close reading of the full academic article, which relies on data that is between 10 and 25 years old, I'd argue that it hardly provides the "irrefutable support" to those like Wendorf and the NLP slate who want to trash the downtown TIF and, in the process, eviscerate the Crandall-Arambula plan for downtown redevelopment.

First of all, the article's main finding, after controlling for intervening variables, was that non-TIF cities grew more than TIF cities by a scant 0.8 percent per year, a statistically significant finding only at a very liberal .13 confidence level.

Moreover, the authors hardly gave TIFs a chance to impact economic growth. They studied economic growth over a four-year period (1992-95) that was only one to eight years after the cities in the study had adopted their TIF, so they assumed an almost immediate impact of TIF on economic growth. In fact, the initial impact of downtown TIFs is often simply to "stop the bleeding" by halting further decline; growth comes later. (Only a third of the TIFs in the study were central business district TIFs.)

Many of the cities that did not adopt TIFs during the 1984-1991 study period were experiencing growth from new housing development and annexation, and did not yet see the need for TIF. Yet I think you would find that most have subsequently established TIF districts, particularly for downtown redevelopment. Indeed, I doubt that TIF opponents can find a single example of a successful downtown redevelopment over the past two decades that was accomplished without the help of TIF.

Looking beyond this article, I found an interesting survey of the academic evidence on TIFs and economic growth by Professor Joyce Man in a book she co-edited with Craig Johnson, Tax Increment Financing and Economic Development: Uses, Structures, and Impact. Her conclusion was that the evidence, when properly interpreted, supports the hypothesis that TIF stimulates economic development.

Jon Hale
Oak Park

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