The Impact of Tax Increment Financing on Downtown Development: Assessing the Effects of TIF on Property Values in the city of Kalamazoo

Abstract

Tax increment financing (TIF) is a popular local economic development tool used by U.S. municipalities. By improving public infrastructure in a disadvantaged area of a city, TIF attempts to stimulate new development, while using the subsequent increases in property values and the associated gains in taxes to pay-off the costs of the improvements. This paper presents an investigation into the impact of Kalamazoo, Michigan's Downtown Development Authority's TIF District on property values, to discern whether or not the District successfully encouraged higher rates of economic growth. Through basic empirical analysis, it is shown that the TIF District did have a significantly positive effect on property value growth.