Effect of local government taxes and spending on the redevelopment of commercial property

We provide the first causal evidence of the effect of taxation and spending on the redevelopment of commercial property. We analyze a unique dataset of local government property tax levies to renew current expense funding for general operating purposes. Our regression discontinuity approach finds cities that vote to renew taxes and spending have more redevelopment of commercial property than cities that cut balanced-budget funding by an average of 21%. Demolition doubles, and new construction increases an average of 48%. The results hold for cities in urban areas, service sector-oriented cities, and cities with above-median population growth. We even find that renewing funding for local government services spurs more commercial redevelopment in cities with declining populations, but only in a sample that allows outliers. Firms seem to value local government spending more than cutting taxes. • Studies the demolition and redevelopment of commercial property at local level • Regression discontinuity on 4,651 votes to renew or cut current expense funding • Renewing current expense taxes doubles demolition and increases new construction 50% • Results hold for urban areas, service-oriented cities, and growing cities • Weak evidence for declining cities spurring redevelopment by renewing public services