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 the pre-development level for a set amount of time as determined by a grading system. For example, if a building is assessed at $500,000 prior to development and then reassessed at $2 million after development, the property owner would pay taxes based on the $500,000 level for a specified amount of time, and then start paying at the reassessed value once that time expires. The Downtown Property PILOT does not reduce the taxes collected; in fact, the program dramatically increases the taxes collected once the PILOT expires. Plus, values of surrounding properties generally go up as a result of the development, thereby further increasing total taxes collected
The Downtown Property PILOT is administered by the Center City Revenue Finance Corporation.
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.