The Great Recession’s Impact on Credible Commitment

Abstract

This study explores the Great Recession’s effect on the commitment by the city of Dallas, Texas, to its private partners in seventeen tax increment financing (TIF) districts. What effect did the recession have on private investment in public–private partnerships? Did the recession cause a loss of credibility in the city’s commitment, resulting in lower levels of private investment? Was there a lasting structural change in the determinants of private participation stemming from the recession? Results from a random effects Tobit model show that the city’s proposed budget for each TIF district was a significant determinant of the level of private investment. However, during the recession, the actual amount of investment by the city was essential to reassuring private investors of the city’s commitment.