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PILOT compliance to get closer look

Wednesday, June 11, 2008

Development Board officials are inviting two businesses to their July meeting to talk about compliance with a contract that lowered business costs by modifying their tax liabilities.

IDB Attorney Bob Binkley didn't name the two businesses when the Board met Friday because he'd not mailed the invitations yet. But he described the situation that may include other employers who allegedly aren't employing as many people as required by the contract they signed.

State law lets cities cut a business' property tax liabilities to create more jobs. It's done through a PILOT Program, but it's got nothing to do with airplanes, or a new program that might be flying into new territory.

It's called a Payment In Lieu Of Taxes, or PILOT, and the taxes that are deferred are paid on real estate, buildings and machinery. Payments are reduced, but the money still goes to city and county property tax collectors.

Here's how it works: A contract is signed so 10 years' taxes are waived, but payments in lieu of taxes are made based on a schedule starting with what the business would otherwise have to pay in property taxes. Typically, there's a zero payment the first year and 10 percent the second year. Payments grow by that amount annually through the 10th year when 90 percent of the normal property tax bill is paid. Then, the business with a PILOT contract is paying property tax bills instead of payments in lieu of property taxes.

Failure to comply with the contract would result in a property tax bill being sent to the businesses that are in default, Binkley said.

However, the bill that's sent would be for what would have been paid without the PILOT contract.

There are about a dozen jobs at the two businesses in Lewisburg where it would appear that the PILOT Program contracts have been violated.

"We have identified two businesses in default," Binkley told the board led by Chairman Eddie Wiles.

Crediting city employee Lisa Jackson for helping him gather information, Binkley emphasized his caution in identifying the employers. He "put a question mark" next to the name of three employers on a list he's developed as he and Jackson have pored over documents related to these and other businesses with PILOT contracts.

The reason for the question mark is "because we just don't know" enough about the contracts, Binkley continued.

"Some of the programs in the past speak of employees, but they may not be tied to the PILOT Program," the . . .Pick up a copy of today's edition, Wednesday, June 11, 2008, for entire story.