Coase-Sandor Working Paper Series in Law and Economics

Publication Date


Publication Title

Law & Economics Working Papers


This article examines the level of appropriate level of constitutional protection against outside governments that condemn property located within a given local municipality that use tax increment financing to fund local improvements The standard TIF arrangement does not provide the TIF lenders with liens against any particular asset, because to do so would be to abandon the tax exempt status of the municipal bonds that are issued. Yet these agreements guarantee that the local government that issued the bonds will take no steps to compromise their repayment from (incremental) tax dollars. These protections allow TIF bonds to trade in ordinary financial markets. The bonds may, however, prove vulnerable to loss when the private and public property within the local municipal district are condemned by an outside governments, as happened in Chicago v. Prologis, now before the Illinois Supreme Court. I believe that these TIF bonds should in general be counted as property under the takings clause and not be treated as a mere "expectation" devoid of constitutional protection. This topic opens the way for a larger consideration of how to value divided interests in real property under the takings clause as a matter of modern finance theory in light of the powerful public choice issues at stake.



Additional Information

Chicago Unbound includes both works in progress and final versions of articles. Please be aware that a more recent version of this article may be available on Chicago Unbound, SSRN or elsewhere.

Included in

Law Commons