Association for Public Policy Analysis & Management

At present, tax increment financing (TIF) is the most widely used tool for financing economic development and leveraging public investment. This mechanism allows a municipality to issue bonds and a private developer to use the proceeds for financing public infrastructure, capital improvements, and site preparation in the redevelopment of a designated TIF area. The assessed value of properties in the area remains the same through the life of the TIF and the incremental (or increased) property tax revenue resulting from expected property value and economic growth is used to repay the bondholders over time.

Municipalities and local economic developers support TIFs with the primary rationale that this kind of public-private partnership facilitates redevelopment that will create new employment opportunities for residents, attract new businesses, increase employment in existing businesses, and drive investment in and surrounding the redevelopment area.

However, the sparse evidence about the impact of TIF districts and other locational incentives on employment and private investment outcomes is inconclusive due to methodological and data limitations. The purpose of this paper is to address the gap in the literature by further identifying and isolating the employment and private investment outcomes of TIF designation.  To measure job growth, this analysis will use Longitudinal Employer-Household Dynamics Origin Destination Employment Statistics (LODES) job count data at levels of geography as small as the census block and disaggregated by job type and location of worker residence. To measure private investment, the paper will use building permit activity data available from Open Baltimore and the Baltimore City Planning Department.

Several quasi-experimental approaches will be used to estimate effects, including difference-in-difference, propensity score matching, and spatial regression discontinuity (SRD). SRD uses geographic boundaries/borders of TIF districts to exploit the discontinuity in the otherwise continuous relationship between the outcomes of interest and the distance from a TIF boundary.

This study focuses on completed development projects financed with TIF in Baltimore City. Measuring the employment and private investment impact of TIF designation is necessary to weigh the potential for future TIFs and other spatially targeted economic development incentives to create jobs, employ local workers, and drive local investment as city officials, residents and developers attempt to understand and articulate the benefit of TIFs and their contribution to the overall prosperity of surrounding neighborhoods and the residents within them.