Payment In Lieu
Of Taxes - Continued...
Continued
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For a working example, assume that the
property taxes for the project are scheduled to be an average of
$100,000 per year, for the first 10 years. Normally, the PILOT
program approach would seek to reduce these taxes by an average of 26%
(as is the norm in most cases). This means that approximately
$260,000 (or $26,000 per year on average) would be abated. The
resulting PILOT would be an average of $74,000 per annum, resulting in
an increase in the project's operating income of approximately $26,000.
In
the alternative, the developer could enter into a PILOT agreement with
the county industrial development authority. Instead of lowering
the overall payment, the payment would remain at $100,000 per year, but
the county industrial development authority could use the $260,000 to
repay a grant or loan that was part of the capital funding plan.
Finally,
if your real estate development project has come to the point where you
need to use this program, perhaps another alternative would be better; a
fractional real estate ownership interest syndication using the
tenants-in-common approach. If you have the due diligence up to
date and ready to go, you can go right into the syndication platform as
early as the pre-construction phase and for projects having budgets of
greater than $2.5 million. This real estate syndication program is
designed to increase the developer's financial investment leverage and
increasing the project's at-risk equity contributions. It's made
for making these types of transactions work faster and more
cost-efficiently.
A
"Payment In Lieu
Of Taxes" (commonly called a "PILOT") capital funding
approach provides the commercial real estate development project with a
funding program alternative that can be made to work for the benefit of
the developer, project and regulators. Check with the lead state
economic development agency (or public law) to determine what the PILOT program
in your state may provide to help you create a capital funding plan that has the
funding energy to power your proposed commercial real estate development project
into a profitable reality.
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