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.)[Not a valid template]
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?
Reading the Indiana Code on PILOT, the amount of PILOT cannot exceed what the property tax would have been according to the assessed value of the entity. Would the Wastewater Utility have an assessed value large enough to warrant a $5 million property tax levy?
I have heard the administration advance the theory that the Sanitary District is a utility, I suppose like lights and gas and water. That is a false analogy, of course, for a number of reasons, including that the Sanitary District is also a taxing entity, receiving part of property taxes from property in the district. They also blithely ignore the fact that many of the people paying that tax who are situated outside the city have no access to sewage services. They patiently explain the justice of that by saying that “they might someday.”
Central to the administration’s credibility problems is its fanciful use of language, as well as other forms of mental gymnastics seemingly intended to make their view of reality conform to the view that the rest of us have. Some people insist that this is lying. You can be your own judge of that.
We can mitigate this apparent fast and loose use of the truth by remembering that Indiana municipal governments are largely captives of state government. For example, there are few revenue options available, and of those they only exist at the discretion of the state. Likewise, the entire budgeting process is subject to state review and modification so that, as one governor candidate says, local government is handcuffed by this hovering helicopter fiscal paternalism.
None of this excuses the ineptitude of the administration, which attempts to placate us all by explaining that “this is all very complicated,” suggesting they think it involves facts and concepts beyond the understanding of the rest of us. And that, of course, is not only nonsense, but insulting. The fact is, as this thread points out, the administration has its own problems coping with the hard facts of the real world. It just wraps things up in a package of disguises, and expect us not to notice.