Editing Tax increment financing (section)

== Unintended consequences ==
Like any economic tool, TIF comes with drawbacks.  Organizations such as Municipal Officials for Redevelopment Reform (MORR) use to hold regular conferences on redevelopment abuse, as well as local organizations like Chicago's 33 Ward Working Families.<ref>{{Cite web |last=Burt |first=Nicholas |date=Nov 18, 2019 |title=The Case for Abolishing the Tax Increment Financing (TIF) Program |url=https://www.workingfamilies33.org/wf33_policy_paper_abolish_tif |url-status=live |archive-url=https://web.archive.org/web/20240303230146/https://www.workingfamilies33.org/wf33_policy_paper_abolish_tif |archive-date=Mar 3, 2024 |access-date=Mar 3, 2024 |website=www.workingfamilies33.org}}</ref><ref>{{cite web|url=http://www.redevelopment.com/|title=Redevelopment.com website|access-date=2009-12-04|archive-url=https://web.archive.org/web/20100502023337/http://redevelopment.com/|archive-date=2010-05-02}}</ref>

*As efficient market theory predicts, and now empirical evidence from economic studies suggests cities that adopt TIF grow more slowly than those that do not.<ref>{{Cite journal |last=Dye |first=Richard |last2=Merriman |first2=David |date=March 2000 |title=The Effects of Tax Increment Financing on Economic Development |url=https://www.sciencedirect.com/science/article/abs/pii/S0094119099921496 |journal=[[Journal of Urban Economics]] |volume=47 |issue=2 |pages=306–328 |via=Elsevier Science Direct}}</ref>  A literature review by David Merriman, a professor at the University of Illinois at Chicago found TIF "may be moving development from one part of the city to another, and changing the timing of the development, but there's not more development than would have otherwise been made."<ref>{{Cite book |last=Merriman |first=David |url=https://www.lincolninst.edu/publications/policy-focus-reports/improving-tax-increment-financing-tif-economic-development |title=Improving Tax Increment Financing (TIF) for Economic Development |publisher=[[Columbia University Press]] |year=2018 |isbn=978-1-55844-378-5 |location=113 Brattle Street, Cambridge, MA 02138-3400 USA |language=English}}</ref>  
*TIF increases the property taxes of the areas next to a TIF district by reducing the [Total Taxable Property Value].<ref name=":3">{{Cite web |last=Quigley |first=Mike |date=April 2, 2007 |title=A Tale of Two Cities: Reinventing Tax Increment Financing |url=https://quigley.house.gov/sites/quigley.house.gov/files/migrated/images/user_images/gt/stories/reinventingTaxIncrementFinancing.pdf |url-status=dead |archive-url=https://web.archive.org/web/20141229061321/https://quigley.house.gov/sites/quigley.house.gov/files/migrated/images/user_images/gt/stories/reinventingTaxIncrementFinancing.pdf |archive-date=Dec 29, 2014 |access-date=Mar 15, 2024 |website=house.gov}}</ref> [[Congressman]] [[Mike Quigley]] simplified the math and showed if a [Tax Rate] = [Revenue to be Raised] / [Total Taxable Property Value], then reducing the denominator, [Total Taxable Property Value], increases the [Tax Rate].<ref name=":3" /><ref name=":4">{{Cite web |last=Nordtvedt |first=Kenneth |date=Nov 1, 2015 |title=The Dark Side of Tax Increment Financing |url=https://leg.mt.gov/content/Committees/Interim/2015-2016/Revenue-and-Transportation/Meetings/Nov-2015/nordtvedt-tif-dark-side.pdf |url-status=live |archive-url=https://web.archive.org/web/20151213071500/https://leg.mt.gov/content/Committees/Interim/2015-2016/Revenue-and-Transportation/Meetings/Nov-2015/nordtvedt-tif-dark-side.pdf |archive-date=Dec 13, 2015 |access-date=Mar 15, 2024 |website=leg.mt.gov}}</ref><ref name=":5">{{Cite news |last=Joravsky |first=Ben |date=Nov 1, 2007 |title=TIFs for Dummies |url=https://chicagoreader.com/news-politics/tifs-for-dummies/ |url-status=live |archive-url=https://web.archive.org/web/20211018201232/https://chicagoreader.com/news-politics/tifs-for-dummies/ |archive-date=Oct 18, 2021 |access-date=Mar 15, 2024 |work=[[Chicago Reader]] |volume=37 |issue=6}}</ref>  A property owner's [Tax Bill] is typically [Tax Rate] x [Assessed Property Value], thus as a new TIF district reduces the [Total Taxable Property], the [Tax Rate] and [Tax Bill] increases for property owners near the TIF district.<ref name=":3" /><ref name=":4" /><ref name=":5" /> State [[Kenneth Nordtvedt|Representative Keneth Nordtvedt]] of Montana paraphrased the scheme this way, "''All property taxes --- city, county, school, state --- are exempted on TIF districts’ incremental properties, and then districts put a monetarily equal fee on those properties.  Though collected by county treasurer as a tax, that fee is given to TIF district development boards to spend. The adversely affected taxing jurisdictions like school districts, county government, even city government's general fund, are then quietly directed by law to make themselves whole by raising their levies on properties outside of the TIF districts so as to compensate for revenues lost from the TIF district incremental properties."''<ref name=":4" />
*As investment in an area increases, it is not uncommon for real estate values to rise and for [[gentrification]] to occur.  
* Although generally sold to legislatures as a tool to redevelop [[Blight (urban)|blighted]] areas, some districts are drawn up where development would happen anyway, such as ideal development areas at the edges of cities. [[California]] has passed legislation designed to curb this abuse.<ref>{{cite web|url=http://www.coalitionforredevelopmentreform.org/references/morrreport.php|title=Redevelopment: The unknown government|publisher=Coalition for Redevelopment Reform|access-date=2009-12-04|archive-date=2008-07-25|archive-url=https://web.archive.org/web/20080725190116/http://www.coalitionforredevelopmentreform.org/references/morrreport.php|url-status=dead}}</ref><ref>{{cite web|url=http://www.ppic.org/content/pubs/report/R_298MDR.pdf|title=Subsidizing Redevelopment in California| publisher=Public Policy Institute of California|access-date=2009-12-04}}</ref>
* The designation of urban areas as "blighted,"<ref name="Community Revitalization Levy">{{cite web | url=http://www.ffwdweekly.com/news--views/news/blighted-streets-no-more-10253/ | title=Blighted streets, no more | publisher=Fast Forward Weekly | date=10 January 2013 | access-date=26 August 2015 | author=James Wilt }}{{dead link|date=December 2017 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> essential to most TIF implementation, can allow governmental condemnation of property through eminent domain laws. The famous [[Kelo v. City of New London]] United States Supreme Court case, where homes were condemned for a private development, arose over actions within a TIF district.
*The TIF process arguably leads to favoritism for politically connected developers, implementing attorneys, economic development officials, and others involved in the processes. However, most Urban Renewal Authorities require public notice and have competitive bidding requirements.
* In some cases, school districts within communities using TIF are experiencing larger increases in state aid than districts not in such communities. This may be creating an incentive for governments to "over-TIF," consequently taking on riskier development projects. Local governments are under no obligation to recognize when TIF designation would adversely affect a school district's financial condition, and consequently the quality of some schools can be compromised.
* Normal inflationary increases in property values can be captured with districts in poorly written TIFs, representing money that would have gone into the public coffers even without the financed improvements.
* Districts can be drawn excessively large thus capturing revenue from areas that would have appreciated in value regardless of TIF designation.
* Approval of districts can sometimes capture one entity's future taxes without its ''official'' input, i.e. a school districts taxes will be frozen on action of a city.
* Capturing the full tax increment and directing it to repay the development bonds ignores the fact that the incremental increase in property value likely requires an increase in the provision of public services, which will now have to be funded from elsewhere, often from subsidies from less economically thriving areas.  The use of tax increment financing to create a large residential development means that public services from schools to public safety will need to be expanded, yet if the full tax increment is captured to repay the development bonds, other money will have to be used.<ref name="TIF 1">{{cite web | url=http://americandreamcoalition-org.adcblog.org/landuse/TIFsinIllinois.pdf | title=The Effects of Tax-Increment Financing on Economic Development | publisher=American Dream Coalition | date=September 1999 | access-date=28 August 2015 | author1=Richard Dye | author2=David Merriman | page=47 | editor=James H. Kuklinski | archive-date=4 March 2016 | archive-url=https://web.archive.org/web/20160304064036/http://americandreamcoalition-org.adcblog.org/landuse/TIFsinIllinois.pdf | url-status=dead }}</ref><ref name="Journal of Urban Economics">{{cite journal | title=The Effects of Tax-Increment Financing on Economic Development |author1=Richard Dye |author2=David Merriman | journal=Journal of Urban Economics | year=2000 | volume=47 | issue=2 | pages=306–328|doi=10.1006/juec.1999.2149 |s2cid=54771066 }}</ref> For example, a study in Saint Louis Missouri found low-income students lost 91 times more than wealthier students in the suburbs due to TIF,  and students with disabilities as the second hardest hit group.<ref>{{Cite news |last=Wimbley |first=Lacretia |date=Jan 25, 2024 |title=St. Louis-area TIF districts cost public schools' minority students over $260 million, report finds |url=https://www.stlpr.org/education/2024-01-25/st-louis-area-tif-districts-cost-public-schools-minority-students-over-260-million-report-finds |url-status=live |archive-url=https://web.archive.org/web/20240126030353/https://www.stlpr.org/education/2024-01-25/st-louis-area-tif-districts-cost-public-schools-minority-students-over-260-million-report-finds |archive-date=Jan 26, 2024 |access-date=Mar 17, 2024 |work=[[STLPR]]}}</ref>