What is a PILOT?

A traditional PILOT is set up such that the company pays a reduced percentage of full taxation and scales up to full taxation over a period of years.  Each IDA across the state can determine their standard for where that percentage starts and how many years they use to scale up to full taxation.  The payments are made to the IDA, who then distributes them to the affected taxing jurisdictions (typically the County, Town, Village and School).  You can find the Lewis County model here: Lewis County IDA Uniform Tax Exemption Policy 

Historically PILOTs were used to “lure” big enterprises from outside of the area to set up shop locally.  An IDA could offer a PILOT, along with other incentives, in an effort to make their area more attractive to develop in.  The PILOT would ease the tax burden on the company in the start-up phase until they were operating at full profitability. 

PILOTs can also be used to encourage existing local businesses to grow and expand.  This is really the area of focus for the Lewis County IDA.  We want to help our small businesses “level up” so that they can hire more local people and get more great Lewis County products out on the market. 

The driving premise behind offering a PILOT is that the economic impact (jobs, local spending, food security, energy security, etc) generated by the start-up or expansion outweigh the reduction in property taxes that it offers.  This is determined by a comprehensive review process as well as a Cost-Benefit Analysis.  The Cost-Benefit Analysis attempts to quantify and weigh the dollars not earned in taxes against the dollars generated in permanent local jobs, construction jobs and spending, domino-effect spending and anything else related to that specific project.  If the benefits outweigh the “cost” of reduced taxation, then the PILOT may be considered. 

In recent years wind and solar projects have gotten a lot of press in the PILOT arena.  The assessment structure in New York State doesn’t handle taxation of energy projects in such a way as to make building them financially feasible. This issue dates back to the hydroelectric facilities built along the Beaver River in the 1980s.  Thus, each IDA across NYS has had to determine their own PILOT rate for renewable energy projects, usually based on production capacity and not tied to assessment at all.  At the Lewis County IDA this is an ever-evolving process, as we work to be more thoughtful and comprehensive in our determination of a responsible PILOT policy for renewables.  In my next article, I’ll explain how these projects help you, the local resident. 

Naturally Lewis – Moving Lewis County Forward is a monthly column published in the Lowville Journal & Republican centering on providing education and updates on economic development initiatives in Lewis County.  This month’s column was provided by Cheyenne Steria, Director of Finance and Incentives at Lewis County Economic Development.