Minnesota Tax Increment Financing

The Center for Urban and Regional Affairs at the University of Minnnesota conducted a recent study on the effects of TIFs on local government finances in Minnesota.

First, how does a TIF work? Usually, a local government floats a general bond issue for public improvements and pays the bond off through additional tax revenues generated by the improvement.

What is the overall conclusion of the Center's analysis? In general, the financial benefits of TIF deals analyzed in the state do not exceed the costs created for local governments. Data for the 1974-2002 period were analyzed. The study is fairly technical in nature, but worth a review. We are likely to see more research challenging the costs and benefits of economic development financing tools in the future as state and local government contain to struggle financially.

Download the report here.