Changes in Public Policy and the Cost of Debt: Tax Increment Financing and the State of California’s Elimination of Redevelopment Agencies

Craig L. Johnson and Ruth Winecoff

Municipal Finance Journal, 2022, vol. 43, issue 1, 25 - 45

Abstract: In 2011, the state of California eliminated redevelopment agencies (RDAs), placing in jeopardy tax increment financing (TIF) debt and the future of own-source local government tax-based debt financing. This paper provides an analysis of the elimination and restructuring of TIF debt in California. It finds evidence of a positive market reaction to California’s RDA policy reforms and restructuring of the TIF sector. After a period of uncertainty, reform led to lower debt costs and lower capital project costs. The successful restructuring in California provides lessons for governments considering reforms to TIF programs and local own-source tax-based debt financing in general.

Date: 2022
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