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Pilot’s Generate Revenue for Local Taxing Jurisdictions

Pilot’s Generate Revenue for Local Taxing Jurisdictions

The Fulton County Industrial Development Agency (IDA) uses Payment in Lieu of Tax Agreements (PILOT) as an incentive to attract companies into Fulton County.

These companies create assessed valuation which generates revenues for local taxing jurisdictions.  Since the IDA began building industrial parks in the 1980’s, it has attracted 20 companies into these parks that have total generated over $126,000,000 in assessed valuation.  This assessed valuation now generates over $5,000,000 annually in revenue for local taxing jurisdictions.  These 20 companies currently employ over 1,500 people.

The IDA can provide qualified projects with certain incentives that help make projects financially viable.  One of these incentives is real property tax exemptions.

When a company desires to purchase a shovel-ready site from the IDA, it files a Project Application with the IDA Board requesting real property tax exemptions.  The IDA Board reviews the Application, determines the number of new jobs proposed to be created, the number of existing jobs that may be retained, the total private sector investment to be made, as well as other factors.  The IDA Board then decides whether to approve the real property tax exemptions.  If approved, the company executes a PILOT with the IDA.  That PILOT identifies the real property tax exemptions the company shall receive.

Property assessments consist of two (2) components:

The standard PILOT issued by the IDA provides a 50% exemption on real property taxes in year 1 and that exemption declines 5% a year for 10 years.  At the end of year 10, the PILOT terminates.

Property assessments consist of two (2) components:

  1. An assessment on the land.

  2. An assessment on the improvements on that land.

The PILOT only applies to the increase in assessed valuation of the improvements on a property.  A PILOT does not apply to the assessment on the land.

The IDA owns properties in the four (4) industrial parks in Fulton County.

Under New York State Law, the IDA is tax exempt.  As such, it pays no property taxes.  Local taxing jurisdictions generate no property taxes from properties owned by the IDA.  So, when the IDA sells a parcel of land to a company and that company constructs a facility, that is when local taxing jurisdictions start generating property tax revenues.  For example, the IDA sells a 10-acre parcel of land to a company that constructs a 200,000 sf manufacturing facility on it.  The assessor in the local taxing jurisdiction the property is located in assesses both the land and the improvements made on that land.  For discussion sake, let’s say the 10 acres is assessed for $250,000, the building is assessed for $10,000,000 and the tax rates for the local taxing jurisdictions are:

Town                       :               $4.00/$1,000 assessed valuation

County                    :               $10.00/$1,000 assessed valuation

School                     :               $25.00/$1,000 assessed valuation

Prior to the sale of the 10-acre parcel, said parcel was generating $0 in real property taxes because it was owned by the IDA.  The IDA sells the parcel to a company and executes a PILOT.  The assessed value of the land is not part of the PILOT.  As such, the assessed value of the land would generate the following real property tax benefits in year 1 to local taxing jurisdictions:

Assessed Valuation Tax Rate Total Tax
Town .24 .26 .46
County .28 .37 .51
School .28 .28 .63
Total .32 .28 .51

With respect to the $10,000,000 of assessed valuation on the improvements made to the land, the PILOT would generate the following payments to local taxing jurisdictions:

Year % Exemption Assessed Valuation PILOT Payment
Town County School Total
1 50% $10,000,000 $20,000 $50,000 $125,000 $195,000
2 45% $10,000,000 $22,000 $55,000 $137,500 $214,500
3 40% $10,000,000 $24,000 $60,000 $150,000 $234,000
4 35% $10,000,000 $26,000 $65,000 $162,500 $253,500
5 30% $10,000,000 $28,000 $70,000 $175,000 $273,000
6 25% $10,000,000 $30,000 $75,000 $187,500 $292,500
7 20% $10,000,000 $32,000 $80,000 $200,000 $312,000
8 15% $10,000,000 $34,000 $85,000 $212,500 $331,500
9 10% $10,000,000 $36,000 $90,000 $225,000 $350,000
10 5% $10,000,000 $38,000 $95,000 $237,500 $370,500
Total 1-10 $2,826,500
11+ 0% $10,000,000 $40,000 $100,000 $250,000 $390,000

As shown above, in year 1, the PILOT would generate $195,000 in PILOT payments for local taxing jurisdictions from the new assessment on the improvements to the 10-acre parcel.

This combined with the $9,750 in PILOT payments made based on the new assessed valuation on the land would bring the total PILOT payments made to local taxing jurisdictions from this hypothetical project in year 1 to be $204,750.  In year 10, the total payments would project to be $379,500.  Over the 10 year life of the PILOT, the total payments would project to be $2,924,000.