Reverse That TIF: An Analysis of Alternative Tax Incremental Finance Measures in Wisconsin

Rachel Lea Ramthun

Abstract


Tax increment financing, or TIF, has become a hot topic in the world of public economic development for professionals, politicians, and academics. TIF occurs when a municipality offers what is essentially a loan to a private developer to increase the property value on a blighted property, thus creating economic development. When the property value increases, the property tax revenue increases.  This future tax revenue will then repay the loan. Since TIF is considered a subsidy, researchers and policymakers disagree over the methods that should be used, and, sometimes, whether TIF should be used at all. An alternative method, reverse TIF, has been studied little (if at all) but could save a municipality from financial destitution in the event of a failed TIF district since the developer takes out a private loan that is repaid through the future increased tax revenue. This study will analyze the success and failure rates of Wisconsin municipalities utilizing reverse TIF and compare them to those using “regular” TIF. Data will be collected through use of an email survey to each of the 431 municipalities in Wisconsin that currently utilize any type of TIF (since the State of Wisconsin Department of Revenue does not differentiate between “regular” and reverse TIF). A Chi-Squared test will be used to analyze the data.  The hypothesis for this study is that there is a lower failure rate when reverse TIF methods are used because developers have more at risk and a higher incentive for a successful tax incremental district. No matter the results of this study, Wisconsin municipalities—and possible those from other states, too—can use the findings as a tool to more successfully implement TIF in the future.


Keywords


TIF; TID; Tax Increment Finance; Tax Incremental Finance; Tax Increment Financing; Tax Incremental Financing; Local Government; Economic Development; Government; Political Science; Public Administration; Wisconsin

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