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Legislative Post Audit presents findings on TIF districts and industrial revenue bond tax exemptions
Summary
Legislative Post Audit staff told the Senate committee that selected TIF districts produced development and higher assessed values but that several did not generate enough property-tax increment to cover city financing costs; auditors also reported IRB property-tax exemptions generally produced private-sector returns but did not pay for themselves in new public revenues.
Legislative Post Audit staff presented two recent reviews to the Senate Assessment and Taxation Committee: an October 2024 audit of tax increment financing (TIF) districts and a March 2022 evaluation of industrial revenue bond property-tax exemptions (IRBX).
Kristen Roddinghouse, deputy director of Legislative Post Audit, told the committee auditors examined a selection of longstanding TIF districts across several cities and asked whether those districts recovered their costs and generated measurable benefits. For six districts reviewed, auditors found the outcomes varied: three districts did not generate enough property-tax increment to cover the city’s financing costs, while others did. Using the Melrose district as an example, auditors estimated it generated about $5 million in property-tax increment and that some districts required additional city funds to cover financing costs.
The auditors quantified direct city costs for the six districts they reviewed as ranging from about $1.6 million to $7 million. They also reported that, for most of the reviewed districts, the average annual number of reported crimes increased after development—an observation the audit noted may be related to greater activity and traffic rather than a direct causal effect of TIF projects.
On benefits, auditors compared actual assessed-value growth and tax revenue with modeled estimates of what would have occurred without TIF development. In most reviewed districts, auditors found assessed values and tax revenue rose above those modeled estimates; they also observed increased property-value growth and major construction activity within a quarter-mile of many TIF boundaries. Auditors concluded TIF districts produced development-related benefits but, in several cases, did not pay off financing costs through property-tax increments alone.
On school districts, the auditors reported small fiscal effects: annual foregone property-tax revenue tied to the six TIF districts equaled less than one-tenth of 1 percent of each affected school district’s annual expenditures.
Andy (Legislative Post Audit), who presented the IRBX evaluation, summarized that between 2005 and 2020 roughly 640 IRBX projects were granted and that Legislative Post Audit estimated those exemptions reduced statewide property-tax revenues by about $100 million per year in the observed period. Using simulation models for eight selected IRBX projects, auditors reported the private-sector economic returns (jobs and business activity) were generally positive and that when private-sector activity and public tax impacts are combined, projects produced more than a dollar in total return per dollar of exempted property tax in most modeled cases. However, none of the selected IRBXs were projected to recoup their cost through increased public-sector tax revenues alone.
The presentations included policy notes and data gaps for legislative consideration, including the absence of a central TIF database and limits on available local data for some analyses. Committee members thanked auditors and asked follow-up questions on crime data, local effects and the age of reviewed projects.
