BATH | Economic development officials are looking at a different way to handle the special tax payments, called PILOTs, made by some businesses.
A PILOT, or payment in lieu of taxes, is a deal made in advance for a developer to pay a set amount over a set period of time rather than standard taxes based on property value.
Jamie Johnson, of the Steuben County Industrial Development Agency, told the county Legislature’s Finance Committee last week that PILOTs can cause unique problems for the towns and villages where the development takes place.
He’s trying to move in a different direction.
“There are several renewable energy projects that are coming our way in the next 12-24 months, with three wind projects in particular that will result in about $1 billion of investment over the course of that period of time,” Johnson told committee chair Scott Van Etten of Caton. “They’re all talking with us about PILOT incentives.”
But Johnson said the distribution of funds from PILOTs can vary based on tax rates.
“Many (municipalities) are going to be receiving substantial payments from these PILOTs, and the initial thought is to reduce taxes,” he told the committee. “By reducing taxes, they effectively reduce the total amount of revenue they are going to receive from the PILOT. It actually hurts them.”
He said something similar can happen in school districts, where the combination of the state tax cap and the large PILOT payments can force a reduction in taxes -- which in turn reduces the payment they receive the next year.
“What we have proposed is actually fixing the distribution based on the current tax rate” when the PILOT is established, Johnson said.
The first candidate for the new plan is Baron Winds, a project planned to install 69 turbines in the western part of the county.
“Not only does it protect municipalities and taxing entities from any deviation in the payments, but it also establishes a fixed rate for each year of the PILOT,” Johnson said. Towns and villages would know exactly what their share of payments would be in each year of the 20-year agreement.
“(Municipalities) want to have revenue they can budget for,” noted county Finance Commissioner Pat Donnelly.
Johnson said under state law, the variable rate is the default, so switching to what he believes is a better arrangement has to be approved by all affected governments and taxing entities for each project.
Legislator John Malter noted the plan does have downsides based on your perspective.
“There are winners and losers in this,” he said, adding that school districts probably get the greatest benefits from the proposed structure.
“(Steuben County government) is probably one of the biggest losers,” added County Manager Jack Wheeler.
The Finance Committee voted unanimously to advance the proposal to the full Legislature for consideration.