Property tax breaks have gotten a bad rap as lost revenue for municipalities, but those who design payments-in-lieu-of-taxes defend them, saying they only bring revenue and value for local municipalities.
Some people talk about a tax giveaway, but nothing is given away, said David J. Zembiec, deputy CEO of the Jefferson County Industrial Development Agency. PILOTs ramp up payments slowly over time, which gives them a chance to succeed long-term.
JCIDA has tried to negotiate several tense PILOTs in recent years, including Galloo Island Wind Farm and now two housing PILOTs. With new or expanding businesses, such as Roth Industries, Great Lakes Cheese or Galloo Island Wind Farm, JCIDA uses job creation as a reason for offering PILOTs. Aside from short-term construction jobs, the housing projects will not have nearly the same employment benefits.
But youre still getting the capital investment and adding to the tax base, Mr. Zembiec said. By adding assessed value to a taxing jurisdiction, youre reducing the tax burden on the residents who are already there.
If a jurisdiction maintains its tax levy while it adds value in new developments, the tax rate will decrease. The same would apply to the amount in debt service paid by each user in a water or sewer district.
Mr. Zembiec and Comptroller Lyle V. Eaton picked out a few current PILOTs to show typical and atypical versions. The taxing jurisdictions involved in the PILOT for COR Development Co., Fayetteville, will receive fairly standard PILOT payments, although housing is not a typical project for PILOT agreements. But like other projects, CORs Beaver Meadow Apartments, south of Target off Route 3, will take a vacant piece of property and add value to it, increasing the potential taxes for Jefferson County, Watertown City School District and the town of Watertown.
The town has no property taxes. The county Board of Legislators approved the PILOT on Tuesday, which the Town Council followed on Thursday. The district plans a meeting for the Board of Education at 5 p.m. today on the PILOT. JCIDA will hold a public hearing on the PILOT and other mortgage recording and sales tax breaks at 10 a.m. Jan. 4, with a vote possible on Jan. 5.
Were in a unique situation where housing could be the factor in whether or not Fort Drum expands or shrinks, Mr. Zembiec said. If it shrinks somewhat, the schools lose students, businesses lose customers, so it will hurt the local economy.
Fort Drum has direct spending in the local economy of $1.5 billion, its 2010 economic impact study said. Indirect spending is even higher, and more soldiers and family members mean more sales tax revenue for municipalities.
Were filling a unique need to sustain the regions economic engine, Mr. Zembiec said. It is a challenge because there are legitimate questions about schools, transportation costs and demands for other services, so the question is: How much of a tax break can you provide while maintaining services?
The PILOT approved for Roth Industries in the City Center Industrial Park was a standard 15-year PILOT, which gave taxing jurisdictions half the payment they would normally collect over the term. Roth took a piece of land owned by the Watertown Local Development Corp., and therefore tax-exempt, and put a $6 million investment into its new building. The businesses created 16 jobs.
Great Lakes Cheese, a much larger project at $86.6 million, has a specialized 20-year PILOT, which gave the Adams manufacturer a fixed amount to pay jurisdictions. The plant modernized, doubled capacity and promised to add at least four employees. In reality it has added closer to 40 positions.
The difference in those projects and the housing projects is the difficulty in financing.
With Great Lakes Cheese and Roth, there was not a great deal of difficulty in financing the projects, Mr. Eaton said.
Such is not the case with apartment projects.
For these housing projects, the PILOT proposals are not a product of the developer being greedy. Its about getting financing at all, Mr. Zembiec said.
Manufacturing and commercial projects are having difficulty with financing, too. Florelle Tissue Corp. talked to numerous banks before securing commercial lending to start a specialty paper manufacturing plant in Brownville. Housing in the Watertown area makes lenders even more nervous because it is viewed as a homogenous military market with a population that comes and goes because of deployments.
Theyre not willing to take that much of a risk now, Mr. Zembiec said. We want them to come here and make money here so they can improve the local economy. A PILOT is mitigating risk in this case.