PILOT Financing - "Payment In Lieu Of Taxes"...

PILOT is a tool that has created an emerging trend in the commercial real estate development and finance industries that can make a powerful difference in your project's bottom line.  PILOT (Payment In Lieu Of Taxes) programs are based upon the state's interest in attracting capital investment - principally in the form of attracting commercial real estate development programs and developers to given areas of the state where development might not otherwise be undertaken if there are a lack of incentives.  This program is definitely a an incentive that you need to consider.

Property taxes are what are in play here.  You have property taxes that need to be paid.  Initially, the thinking with this program was that the state (acting through the local county industrial development authority) would offer a rebate of a portion of the first 10 years of property tax receipts to the developer by using the Payment In Lieu Of Taxes approach to reduce the property tax bite, with the resulting development being the outcome everyone wants to promote.

Well, that's nice (in as far as it goes) but the commercial real estate development finance needs cannot be set aside because it doesn't matter what the future property tax liability is going to be if in fact the proposed project cannot attract sufficient capital investment to undertake the development, construction and stabilization of the emerging asset.  Rainmaker Marketing Corporation sees an opportunity for the developer to attract additional funding using the future payment differential as the basis for funding some present funding source (grant, loan, etc.) that is needed to help with the capital funding plan, and needed right now.

Let's use a working example to illustrate the potential opportunity...

You are developing a 48-unit assisted living dementia care unit.  The project will cost approximately $6,000,000 to develop, construct and operate to the point of economic stabilization.