October 3, 2017: PILOT stands for “Payment in Lieu of Taxes.” Typically PILOT agreements appear to be haphazard, secretive, and calculated in an ad-hoc manner. What’s more, payments in lieu of taxes typically generate relatively little revenue, as a share of overall municipal budgets, and often are not a reliable long-term source of funds. Local governments justify tax abatements by arguing that abated taxes are not lost revenue, since the money would not have been in the city coffers had the development not occurred. While this may be true in some cases, it is all too common for property tax abatements to be given to companies that do not really need them, depriving the city of income it would have had without the subsidy. This is money that would otherwise have gone to fund city services. It is risky granting lengthy abatements, since the city is gambling away up to 30 years of tax revenue on the assumption that without the subsidy, no company would have located there.  (See the Incentives Trap for more info).

2017-10-03- PILOTAgreement