Terre Haute PILOT Shrouded in Fog

Pilots always seem both spiffy and reliable, so maybe that’s why when Mayor Duke Bennett throws out the acronym, it casts a spell of complacency on those who should be helping the average citizen understand what’s going on with local finance. When it’s spelled out, PILOT equals “payment in lieu of taxes.”

Of course, we understand what the phrase means. What ‘s puzzling is how it’s connected to the sewage disposal system. The mayor assures us that PILOT fees are common, and that’s the truth. However, in other municipalities, PILOT is associated with either federal property or property owned by non-profits. This makes sense: because these kinds of property aren’t subject to local property taxes, they can be asked, or even volunteer, to make payments instead of taxes in order to cover the costs of services they get from the city. As Wikipedia explains it, “these entities enjoy the same level of service the rest of the residents of the given city or county enjoy. These services include fire, police, sewer, trash collection, etc. It is argued that asking some, or all, nonprofits to pay taxes, either voluntarily, or via statutory measures, would help offset some of these costs and ease the strain on local budgets.”

If you look at the third item on this list of services, you’ll see why we’re puzzled by the Terre Haute use of the PILOT concept. Instead of imposing fees on non-tax paying entities for sewer services, the city is moving funds from the sewage disposal budget into the general fund and calling them PILOT fees.

Something seems wrong here. Terre Haute residents pay a fee for sewage disposal. What justifies reallocating this money as a PILOT fee? This sewage fee is not optional and might accurately be called a tax since tax is defined as “a compulsory contribution to state revenue, levied by the government.” So a tax is being turned into a payment in lieu of taxes. It’s just as magical as turning waste into diesel fuel.

It’s even worse that the city comptroller, Leslie Ellis, acts as if it’s no problem that these so-called PILOT funds are not “assessed” through any standard formula. Miraculously, each year they become the amount needed to balance the city budget! (On paper, anyway.)

Ellis told Tribune Star reporter Sue Loughlin that $5 million dollars from sewer user fees was budgeted to balance the general fund. However, the $5 million won’t be allowed to turn into PILOT fees if revenue requirements for the sanitary district aren’t met. The Indiana Finance Authority overseeing the State Revolving Fund from which Terre Haute has received loans to finance the sewage treatment plant sets these requirements. So now a storm water fee must be implemented to cover the revenue requirements.

Councilman Neil Garrison has helpfully supplied a map showing how the storm water fee affects people who aren’t in the city. Actually, it sounds as if their payment would be more like a PILOT. They don’t pay city taxes, so covering the cost of storm drainage would be a payment in lieu of the portion of those taxes that provide sewage disposal. Of course, then the problem is that PILOT is supposed to be a mutually agreed upon contribution, not an imposed fee – that’s a tax!

Instead of bandying around the term PILOT and insisting that it is a legal way to move taxpayer money around, why doesn’t the city try to get a PILOT program such as other towns have? It would be more fiscally useful if Terre Haute acquired funds through payment in lieu of taxes from Indiana State University and Union Hospital. These two entities remove a lot of property from the tax rolls. What are they paying for the use of the municipal sewer system?


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