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Pitting School Districts Against IDAs

August 23, 2011

As school districts and other government entities deal with fiscal austerity, including the new 2% property tax cap, competition for and desire to conserve municipal money is likely to increase. The Rome City School District and Oneida County Industrial Agency recently traded words over a 25 year zero sum payment in lieu of taxes which would reduce money available to the school district. What was previously a little-noticed activity involving IDAs using municipal tax revenue with relatively little input from other municipal entities and extending PILOT agreements beyond original expiration dates may become a flashpoint.

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2 Comments leave one →
  1. Justin Miller permalink
    August 23, 2011 12:26 pm

    Scott:

    I agree that the fiscal crisis felt by affected taxing jurisdictions (ATJs) throughout the state has placed heightened scrutiny on IDA PILOT agreements.

    However, we have noticed that IDA’s actually can play a strong collaborative role by structuring PILOT revenues with fixed escalators that exceed the 2% property tax cap. For instance, many IDA projects that utilize fixed payment PILOT structures (commercial housing, utilities, wind farms, etc) often include either a fixed or CPI-based escalator. To the extent that a fixed escalator or CPI floor exceed 2%, IDA PILOTs can actually serve as a budgetary tool for IDAs and ATJs to generate revenues in excess of the tax cap restriction. This strategy, coupled with strong PILOT enforcement mechanisms (through PILOT mortgages or otherwise), makes for sound fiscal planning through IDA-led economic development efforts.

    Justin

  2. August 23, 2011 8:20 pm

    Justin, thanks for your response. It is a complex area and the impending cap will have implications that are not yet obvious. I believe that PILOT payments are included under the tax cap limitation so that any increase in PILOT revenues above 2% may necessitate a corresponding tax levy decrease elsewhere.

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