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PILOT (Payment-in-lieu-of-taxes)

PILOT – partial freeze of property taxes for projects involving construction or significant renovation of an underutilized or vacant parcel.

The Downtown Property PILOT (Payment-in-lieu-of-tax) is a financial incentive used to encourage commercial property owners to develop their properties to higher and better use in situations where without the incentive, such development would not be financially viable. The Downtown Property PILOT is different from The EDGE’s PILOT program which is used to attract large industries and job creation.

Downtown Property PILOTs hold property taxes at a pre-development level for a set amount of time as determined by a grading system.

A property owner never pays less taxes than before the pre-development assessment/PILOT – they always pay more. During the PILOT they pay the pre-development rate PLUS 25% of the incremental increase at the time of closing. Then after the PILOT term, they would pay the full tax rate.

The program dramatically increases the taxes collected once the PILOT expires. Plus, values of surrounding properties often go up as a result of development, thereby further increasing total taxes collected

The Downtown Property PILOT is administered by the Center City Revenue Finance Corporation.

PILOT Eligibility

To be eligible for a Downtown Property PILOT, the property must be located within the CBID boundaries. In rare cases, CCRFC may grant a PILOT to multi-family projects outside of the CBID but within the Parkways.

Downtown Property PILOTs must pass a “but for” test: but for this incentive, would this property be able to be developed to the higher and better use while making the project financially viable. To determine this, DMC staff carefully scrutinizes financial documents that would be required by a bank or investor in order to evaluate the project.

In addition, the value of the building renovations, site improvements, or new construction must be equal to or greater than 60% of the total project cost, including acquisition cost or pre-developed property value. In other words, CCRFC is only looking to award Downtown Property PILOTs to major, catalytic projects

Downtown Property PILOTs are not awarded until the property is developed and compliant with CCRFC guidelines.

PILOT Program Details

Offered To: Developers and Property Owners

Uses: To secure adequate financing for project

Terms, Rates & Leverage Requirements:

  • Maximum PILOT term is 15 years
  • Must meet “but for” test, ie project would not occur but for the PILOT'

Eligible Boundaries: CBID and Core City area.

Downtown Property PILOT Application

PILOT Review Report

The PILOT review report includes review and analysis of the Downtown Memphis Commission’s (DMC) Payment in Lieu of Taxes (PILOT) Program. This review seeks to answer four questions:

  1. Is the PILOT program delivering the desired results of growing the tax base and helping projects happen that couldn’t otherwise occur?
  2. Is the PILOT program helping to build the right development in the right place?
  3. Can the but-for test be formalized to provide clearer guidelines for financial analysis to aid staff review and create a more predictable process for developers?
  4. Are there any other policy changes that should be considered to maximize the public benefit of this vital economic development tool?

Please use this link to review our PILOT review report