Jeffrey I. Chapman
Local redevelopment activities involve a mixture of politics, demographics, public sector fiscal stress and public financing issues. These activities are often controversial and frequently result in contentious public hearings concerning such problems as the appropriate use of eminent domain, the extensive removal of housing units and subjective definitions of blight. However, methods of redevelopment finance are often overlooked.
This chapter analyses one particular tool of redevelopment finance that has spread throughout the United States — the use of tax increment financing. The first section of the chapter describes the theory and practice of tax increment finance (TIF); the next section raises theoretical and applied policy issues concerning the appropriate use of this technique; the third section examines California as a case study of TIF over a period of nearly 50 years; and the final section draws conclusions based on this analysis.
Public redevelopment projects are designed as public sector interventions to mitigate the characteristics of blight. For most states, the legislation authorizing redevelopment explicitly mentions blight elimination. The goals of redevelopment are typically to attract new business, provide better housing and, in general, to stop the growth of urban decay. TIF is a technique that many redevelopment agencies utilize to generate funds for furthering the goals of redevelopment. The controversy that surrounds it comes from the potential use of the technique in unblighted areas or for purposes only distantly related to easing the problems of blight.
TIF is thus a technique that was originally justified to finance the removal of blight but has also become a deliberate policy attempt to use the market____________________