The Excesses of Tax-Increment Financing & Urban Renewal

By Rob Taylor

Sex scandals aside, taxes are the biggest issue on the table right now, which is understandable when most families are spending more on taxes than they do on housing, food, and clothing combined.  Most people think they are paying too much due to the overspending of government, so it makes sense to shrink the budget.

There never seems to be enough revenue for education, infrastructure, and public safety, so eliminating the process of tax-increment financing would stop Urban Renewal Agencies from siphoning money from those and other overlapping taxing districts that provide those services.

According to data collected from the “OR Property Tax Annual Statistics FY 2016-2017” found on the Oregon Department of Revenue’s website, there are 110 Urban Renewal Agencies in the state.  Those UR agencies received $223.3-million from the “Revenue from Excess,” while others received an additional $21.1-million from special levies totaling $244.4-million that was diverted from other various taxing districts or directly from the taxpayers.  The revenue from property taxes going to Urban Renewal through the TIF process in FY 2009-2010 was $182-million.

“Revenue from Excess,” is the property tax revenue generated by increased property values inside the UR area over the frozen increment when the authorities enacted the plan for the district.  Without the TIF process, the other districts that overlap the UR area would retain that money.

Statewide in FY 2016-2017, Public education lost $87.2-million in potential revenue because of urban renewal activity. Cities lost $73.3-million in that same fiscal year, and counties lost $41.5-million, which includes the $28.2-million taken from Multnomah County alone.  Other districts, including Fire Districts, lost $21.3-million.

Those totals do not include the maintenance of the unfunded projects built with the redirected money.

Politicians use urban renewal funding as seed money to create new taxing districts, or they use tax dollars from existing districts to maintain unnecessary projects at the expense of necessary amenities. Those projects include auditoriums, carousels, conservation easements, convention centers, decorations, estuaries, murals, racetracks, swimming pools, sports stadiums, sculptures, street art, and theaters, which take money directly from colleges, roads, schools, police and fire departments.

The idea of redevelopment is to increase the assessed values of property surrounding and within the urban renewal area by artificially inflating the local tax base using public money—all to generate new economic activity that most likely would have taken place with or without public incentives.  It just may not have happened in the area desired by the urban renewal planner but in a place chosen by the private business owner, which alleviates the taxpayers of the financial risk.

Some independent studies have found little evidence that municipalities with Urban Renewal Agencies developed any faster than cities without these programs did.  In fact, one study titled “The Effects of Tax Increment Financing on Economic Development” written in March of 1999 by two professors of economics, Richard F. Dye, and David E. Merriman, it found TIF areas grew slower than areas without it did:

If the use of tax increment financing spurs economic development that would not have happened but for the public expenditures, we would expect (after controlling for other growth determinants and for self-selection) a positive relationship between TIF adoption and growth. If the use of tax increment financing merely moves capital around within a municipality, relocating improvements from non-TIF areas of the town to within TIF district borders without changing the productivity of that capital, we would expect (after appropriate controls) to find a zero relationship between TIF adoption and growth. What we find, however, is a negative relationship between TIF adoption and growth. This is consistent with the hypothesis that government subsidies reallocate property improvements in such a way that capital is less productive in its new location.

A Senior Fellow at the CATO Institute made the case against urban renewal and tax-increment financing in a policy analysis titled, “The Case against Tax-Increment Financing” by Randal O’Toole.  In the paper, he states:

There are two problems with any attempts to reform TIF. First, no matter how much legislatures may try to focus TIF on genuine examples of blighted neighborhoods, cities will find ways to get around such safeguards. Second, there is little evidence that city gov­ernments are better than private developers at determining the type and location of new development that cities need, and plenty of evidence that they are not as good. Instead of reforming TIF, state legislatures should sim­ply repeal the laws that give cities and coun­ties the authority to use it and similar tools to subsidize economic development.

The politicians intentionally design these types of development schemes to centralize power and money for the utilization of government planners.  Oregon legislators both Democrat and Republican ignore the annual loss of revenue, especially to education, so they can continue the excessiveness of constructing nonessential boondoggles of the future because it benefits the special interest of both parties today.

Rob Taylor is the tentative Chief Petitioner for the “Committee to Shut Down the Coos County URA.”  Go to for more information.