PILT: Another truckload of money for our Schools.

 

The Challenge: Local Needs & Untaxed Land

• Local governments rely on property taxes to fund essential services like fire departments, schools, and road maintenance.

• However, some properties are exempt from property taxes, such as those owned by:
  • Federal government (e.g., National Parks)
  • Non-profit organizations (e.g., charities, religious institutions)

This creates a situation where the local government still provides services to these lands but doesn't receive any property tax revenue in return.

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 There are two main reasons for payments in lieu of taxes ( PILOTs):

1. To compensate local governments for lost property tax revenue: This applies when property is owned by non-taxpaying entities, such as the federal government or non-profit organizations. The government or organization agrees to make a PILOT payment to the local government in recognition of the fact that the property would otherwise generate property tax revenue that the local government depends on to fund essential services like fire protection, schools, and roads.

2. To incentivize development: In some cases, PILOTs are used to encourage development projects that would benefit the community. For example, a local government might offer a PILOT to a developer who is building a new hospital or manufacturing facility. The PILOT would reduce the developer's property tax burden, making the project more financially attractive. In exchange, the community benefits from the new jobs and economic activity that the development will generate.

To incentivize development: In some cases, PILOTs are used to encourage development projects that would benefit the community. For example, a local government might offer a PILOT to a developer who is building a new hospital or manufacturing facility. The PILOT would reduce the developer's property tax burden, making the project more financially attractive. In exchange, the community benefits from the new jobs and economic activity that the development will generate.

Here are some additional points you might find interesting:

• Negotiating PILOTs: The terms of a PILOT agreement are typically negotiated between the developer and the local government. This negotiation considers factors like the size and scope of the development project, the potential economic benefits to the community, and the length of the PILOT period.
• Types of PILOTs: There are different ways to structure a PILOT agreement. In some cases, the developer might pay a fixed annual amount. In other cases, the payment might be based on a percentage of the property's assessed value or the revenue that the development generates.
• Community benefits: In addition to creating jobs and economic activity, PILOT agreements can also be used to secure other benefits for the community. For example, a developer might agree to build affordable housing units or contribute to infrastructure improvements as part of a PILOT agreement.

Overall, PILOTs can be a valuable tool for local governments to encourage development projects that benefit the community. However, it's important to weigh the potential benefits against the potential costs of forgone tax revenue.

To compensate local governments for lost property tax revenue: This applies when property is owned by non-taxpaying entities, such as the federal government or non-profit organizations. The government or organization agrees to make a PILOT payment to the local government in recognition of the fact that the property would otherwise generate property tax revenue that the local government depends on to fund essential services like fire protection, schools, and roads.

The Solution: PILOT Payments

• PILOT (Payment in Lieu of Taxes) is a way to address this gap.
• Government entities or non-profit organizations voluntarily agree to make payments to the local government.
• These payments are typically less than the full amount of property taxes that would be owed on the land, but they still provide some financial compensation to the local government.

The Benefit: Fairness and Continued Services

• PILOT payments help ensure a fairer distribution of the tax burden.
• Even though the land itself isn't taxed, the entity using it contributes to the community's well-being.
• These payments allow local governments to continue providing essential services to all areas, even those with tax-exempt properties.