When I joined AC Power last January, I knew two facts about pilots: They fly planes, and they wear hats. It’s been 11 months, and I still only know two facts about pilots. But I also know several facts about Payment in Lieu of Taxes (PILOT) agreements and how they can be key to unlocking the economic potential of solar on previously disturbed sites.
PILOT agreements are an alternative to traditional taxation and can benefit a project's developer and the entity receiving tax revenues alike.
To set the stage, I’ll briefly remind us of a few facts:
As with any investment, a solar project needs to make financial sense in order to be built;
Lower-risk investors prefer known costs and revenues to unknown costs and revenues;
Thus, investors prefer to invest in projects with fewer variable expenses and revenues;
Many of AC Power’s projects are built on unused land that currently isn’t bringing any tax revenue to the town, county, or school district.
Given this information, a PILOT agreement can alleviate many of the issues that developers and communities face when considering placing a project on unused land.
PILOT agreements provide stable tax obligations for businesses or developers. A PILOT agreement exempts the solar project from fluctuating property tax rates for the term of the agreement. This provides certainty and allows for better financial planning.
PILOT agreements can incentivize businesses to invest in a particular township or region. A reduced, fixed tax payment encourages economic development, job creation, and increased property values.
PILOT agreements provide a consistent revenue stream for the town, county, and school district. This point is especially pertinent for municipalities interested in monetizing brownfield land; developers who cannot finance a project at full projected tax rates are often able to do so given a PILOT agreement.
PILOT agreements are negotiated between the developer and the taxing entities and can include provisions that benefit the local community. For example, the agreement may require the business or developer to contribute to community development funds, infrastructure improvements, affordable housing initiatives, or other public projects.
PILOT agreements provide flexibility for the developer and for the community; rates, duration, and payment structure can all be negotiated to meet all parties’ needs.
Opponents of PILOTs argue that these agreements result in a reduced tax base for the township. Every situation is different, and a PILOT agreement won’t always make sense for a given community. However, when it works, a strong PILOT agreement enhances the community by providing an otherwise inaccessible source of revenue and making use of otherwise idle land.
AC Power is a mission-driven organization, and we are committed to using creative solutions to help communities develop unused land into a revenue- and energy-generating project that enhances communities. Proponents of PILOTs (myself included) appreciate the fact that these agreements help communities make use of disused land by letting solar projects take to the skies.
AC Power is here to support you every step of the way in bringing solar power to a brownfield near you. Contact us at email@example.com for more information on developing solar energy projects on your local brownfield sites.