More Information on the PILOT Situation

TL;DR – The PILOT situation isn’t as simple as I made it out to be.  Before we can hold people accountable for it, there are details of state law that need to be understood.

First off, I need to thank some people who have been helping me get information, and who have been giving me their time when they clearly have a lot of other important things going on:

Councilman Neil Foley has been eager to help me get this figured out.  He has run my questions past people in the IDA office and the assessor’s office, scheduled phone calls, sent e-mails on my behalf, and pretty much done everything he can do to help get to the bottom of this issue.  Thank you, Councilman Foley.

Associate Superintendent for Business Bruce Singer has sent me explanations of workflow, financial analyses, and answers to questions.  He has also confirmed my assumptions and my understanding of a few concepts to make sure I understand what he and the BOE have to contend with during the budget process.  Thank you, Mr. Singer.

IDA Deputy Director Jim Tullo was kind enough to sit on a conference call with Councilman Foley and me, discussing the role of the IDA, the specific situation surrounding this PILOT, and has helped me with several questions.  Thank you, Mr. Tullo.

Just last week, I thought this was a simple case of a PILOT sunsetting and moving to the tax rolls, and didn’t see how that act could affect the school district’s budgeting process.  After all, if the PILOT line item came down on the revenue side, Sachem would end up getting that money because the corresponding tax levy line would come back up to compensate.  Mr. Singer gave me a statement that appeared to shut the door on any other interpretation:

We would like to clarify some misunderstanding  of statements regarding the Brookhaven IDA.  Please be aware that The Brookhaven IDA has the authority to issue tax-exempt and taxable bonds and notes. It can also grant property tax abatements, mortgage recording tax exemption, and full sales tax exemption for qualified applicants.
The Town of Brookhaven Industrial Development Agency has issued millions of dollars in tax-exempt or taxable bonds on behalf of more than 50 companies encouraging them to either locate or expand in the Town of Brookhaven. This assistance has been extended to companies both large and small, and has resulted in the direct creation of thousands of jobs for Brookhaven residents.
As the Sachem Central School District2013-14  and 2014-15 revenue budget was revised due to the Motorola property going to FULL ASSESSMENT.  That means that the Town of Brookhaven taxpayers have been the beneficiary from the higher assessed value of that property.  While Motorola previously paid a PILOT through the IDA, they currently pay their full assessed value taxes through the Town Tax Receiver's office.
In addition to the Full Assessment of the Motorola property, they continue to maintain their presence on Long Island which generates employment.

That’s an official statement from the school district and the IDA.  If it’s not already up on the website, it will be shortly.

After he provided this statement, Mr. Singer provided some additional information that shows the situation is actually a lot more complex than I originally thought.  According to Mr. Singer, a changing PILOT situation affects how we calculate the school district’s maximum levy under the tax cap law.  Once this calculation is made and submitted to the state, Mr. Singer says it cannot be retroactively changed.

In October, the school district needs to submit its levy figures to the state for the coming year. They’re using actual numbers from the prior year and projections for the next to come up with the Maximum Allowable Levy, which is the maximum amount of money they’ll be able to raise through taxes for the next year.  When combined with state aid, this maximum levy makes up the revenue side of the budget and tells us how much we’ll have to spend.

Here’s where it gets hairy.  According to Mr. Singer, if you learn something is moving from PILOT to the tax rolls in, say, May, it’s too late and the district can’t go back and change the PILOT and tax levy line items and still be in compliance with state law.  I’ve seen the calculation.  It adds in PILOT payments we’ve received, multiplies that number by the growth factors provided by the state, then subtracts out any anticipated PILOT payments for the coming year to come up with the number for the maximum for the tax money that can come from the community.

So, what happens when you don’t receive an anticipated PILOT?  According to Mr. Singer, you lose the revenue because you never receive it, but your maximum levy is already calculated, so you never receive it on the tax side.  Even if you’ve been given advance warning of several months.

Two things:

  1.  I’m taking Mr. Singer at his word with regard to the number not being able to change, per state law.
  2. This now begs the question: If the school district doesn’t get the money, where does it go?

I will work to confirm #1.  With regard to #2, I have a conference call tentatively scheduled with the town assessor and someone from the IDA on Tuesday morning.  So stay tuned.

In a discussion with Councilman Foley yesterday and IDA Deputy Director Tullo yesterday, one of the things that became clear is that the IDA’s responsibility ends with ensuring the tax rolls come up to compensate for any projects coming off PILOT programs.  They do inform school districts of critical dates for these projects – I have asked for a copy of whatever was provided to Sachem for the Motorola project, and I may have to file a FOIL request to get it.  (Not due to any resistance from Mr. Tullo, but merely as a formality.)

After Mr. Tullo left yesterday’s call, Councilman Foley stayed on, and I intimated that it was possible we stumbled across an unintended consequence of the state tax cap law – something state lawmakers might not have spotted until the law was actually implemented.  If so, maybe we’ll need to figure out how to raise the issue with our representatives in Albany and get the law fixed.

To close this post up, please know that there is a lot that still needs to be confirmed and a lot more information that is still needed.  In fairness to Mr. Singer and the BOE, though, I thought it was best to issue an update.  The possibility exists that Sachem was the first school district to be negatively affected by an unintended consequence of the tax cap law, so I wanted to let people know what I was doing and where my thoughts were on this.  It’s not likely I’ll get all the information I need until next week, and that’s a long time to wait, particularly if you’re Bruce Singer and the community is confused about this PILOT situation.

Of course, the bigger issue is the tax cap law and how it affects districts statewide.  I’ll post something about that later.