Understanding PILOTs
The Livingston County Industrial Development Agency uses a tool called a “PILOT” to structure tax payments from eligible companies and organizations to the local taxing jurisdictions, such as the village, town, county, and school district. PILOT is an acronym that means payment-in-lieu-of-taxes and can range in duration or amount. When it is used to attract new businesses or new construction, it is often misinterpreted as a “tax break” or an expense for taxpayers, which can be confusing. While it is a benefit and does assist with mitigating the immediate effects of increased assessed valuations, it is important to know that a PILOT can never result in a loss of existing tax dollars.
Companies or organizations seeking a PILOT must first qualify for the benefit by adding both employment and assessed value to a property. The benefit provides a phased-in approach on the difference between the existing assessment and the future assessment after construction. The difference in values is broken down incrementally over the term allowing the benefactor to stabilize and solidify their new operation(s) before implementing full taxes.
More recently and somewhat differently, solar companies have sought PILOTs to structure a payment schedule for property taxes to local jurisdictions. Under NYS real property tax law, solar developments can claim a 15-year exemption from property taxes unless required by taxing jurisdictions to enter into a PILOT. In this case, a PILOT is a necessary tool to obtain payment from the developer.
PILOTs have become a competitive tool among different economic development agencies around the State. Some agencies offer longer, more robust terms in an effort to gain an advantage over others as a way to entice prospective out-of-state companies. Most, if not all developers know this and will leverage a local agency to negotiate the longest and best offer. The Livingston County Industrial Development Agency maintains a conservative, standardized approach to evaluate each prospective company seeking a PILOT. If needed, certain projects that offer an increased economic impact can require a deviation that constitutes fiscally responsible decisions, public hearings, and a consistent evaluation of the factors involved.
If you take anything away from this, understand that any PILOT structure will begin by bringing a taxing jurisdiction equal, if not more, tax dollars than what is currently assessed. The benefit to a company or organization (not including solar development) is savings on the future increased tax dollars during the term of the PILOT. For solar companies, a PILOT is an assurance that the jurisdictions will realize additional tax dollars from the development. Lastly, and most importantly, the ultimate goal and result is a growth in the overall tax base for your communities.
