The Impact of Tax Increment Financing (TIF) on Local, Municipal Fiscal Health, A Preliminary Assessment and Case Study

EWG commissioned the Applied Research Collaborative, an organization of local researchers from area universities, to analyze four aspects of the broader research questions posed by the Board. Mark Tranel and Will Winter, University of Missouri – St. Louis, examine municipal finances across a 15 year period, from 1993 to 2007, using a multivariate model to analyze the impact of TIF usage, and a variety of other municipal characteristics, on municipal financial health. Although a comprehensive study of the St. Louis region is desirable, due to data limitations, the study focuses on 28 municipalities in St. Louis County only. The researchers examined the trends of four measures of financial condition, concluding that all 28 municipalities in the study saw a decline in their fiscal health over the study period. The researchers warn that this finding, coupled with the fact that many of these municipalities are heavily reliant on sales tax as a revenue source, suggest potential future problems should the sales tax fall. The multivariate model found that two measures of municipal use of TIF are correlated with modest increased financial distress.