An Alternative Method Proposal for the Urban Development Economics: Tax Increment Financing

Abstract

In today's world, transformation processes created by industrialization stages affect various building blocks of societies. One of the most important phenomena exposed to these effects is undoubtedly urbanization. With increasing urbanization, local authorities and governments face a comprehensive and competitive urban development setup. Due to financial constraints and fiscal inadequacies, the desired levels of urban development cannot be achieved. Local administrations, which are the main actors of urban development, search for different approaches in terms of public finance in order to overcome financial difficulties. Aiming to provide a solution to these searches, this study firstly introduces the Tax Increment Financing (TIF) method used in urban renovation and improvement projects in various countries of the world. In this study, some of the methods in which TIF can be modeled under the umbrella of participation finance are also examined. Tax farming, which has been used for a long time in different histories and geographies, is also one of the topics analyzed in this paper. As a result of all these examinations and analyzes, an alternative hybrid financing model that can be used in the field of urban development economics is proposed and the conceptual framework of the method of this model is drawn. This article, which focuses on various fields of implication and application of this model proposal, also raises some challenges of the model. Finally, the contribution of the proposed model to different segments of society is presented.