Dissolving Districts: Did Property Values Fall When California Terminated Its Redevelopment Agencies?

Abstract

California pioneered the use of tax increment finance (TIF) to promote redevelopment, but in 2012 all redevelopment agencies in the state were simultaneously (and unexpectedly) dissolved, essentially eliminating TIF-supported redevelopment in California. This paper uses hedonic methods to analyze changes in residential property values associated with the dissolution of TIF districts in five cities in northern Orange County. If TIF is necessary for (re)development in the TIF districts, then the unexpected elimination of TIF-funded redevelopment should have reduced property values. The authors find that, within the study area, the elimination of TIF was not associated with decreases in residential values within TIF districts, and quality-adjusted home prices in and near former TIF districts continued to grow at a rate at least comparable to citywide rates in the aftermath of the dissolution. These findings raise the concern that TIF may function as a tool for revenue capture before the TIF districts reach the anticipated expiration dates. In the absence of significant regulatory safeguards, TIF may be used to capture revenue from overlapping governments, instead of serving as an engine of economic development.