TAX INCREMENT DEBT FINANCE AND THE GREAT RECESSION

This paper explores U.S. local government debt finance activities related to Tax Increment Financing (TIF) between 2000 and 2013. We gather comprehensive data about debt that is serviced through TIF, document changes in several variables related to the amount, use, and structural features of such debt, and evaluate the impact of the Great Recession on these variables. Our results indicate that the Great Recession limited how local governments could sell and structure TIF debt. We suggest that these limitations were the result of the limited capital available during and immediately after the financial crisis, structural changes in the financial industry caused by the financial crisis, and increased risk aversion by investors.