Op-Ed: Let's Keep the PILOT Light On

1/30/2019

Thomas A. Heywood, Chairman, West Virginia Roundtable

The West Virginia Roundtable is an independent, non-profit, non-partisan organization comprised of chief executive officers of West Virginia’s largest companies and organizations.  Our purpose is to enhance prosperity in the Mountain State.  We do this through advocacy and engagement on issues that are important to West Virginia’s future.

As Chairman of the Roundtable, I write to express the Roundtable’s strong support for payment in lieu of taxes (or “PILOT”) agreements.  PILOT agreements are an important and effective economic development tool that local governments across West Virginia use thoughtfully and effectively to create jobs, expand our tax base, and stimulate economic activity.

PILOT agreements take many forms, but a typical PILOT agreement involves a company investing in a manufacturing or other facility (thereby creating jobs); transferring legal title of the new facilities to a local governing body (which is exempt from property taxes); the issuance of revenue bonds to pay for the purchase or construction of the facilities; leasing those facilities back, which involves the company making a steady stream of lease payments to the local governing body, which, in turn, are used to pay down the bonds; and entering into a PILOT agreement pursuant to which the company makes payments to the governing body.  The lease payments are made “in lieu of taxes,” hence the acronym PILOT.

PILOT agreements run for a term of years, and PILOT payments are in lieu of property taxes only.  During the term of a PILOT agreement, the company must pay other state and local taxes that all businesses pay.  After that term, the company pays regular taxes on the investment, including property taxes, like every other business.  The PILOT payments received by local governments are allocated in precisely the same manner as property tax payments otherwise would be.

This is a win-win scenario.  Investments are attracted and jobs are created; and local governments receive a steady stream of funds for education and other essential governmental services (through PILOT payments for a period of years, and then in the form of regular tax payments from the investment once the PILOT agreement ends).

Part of the beauty of PILOT agreements is their flexibility.  I have had the privilege of working on dozens of economic development projects across West Virginia over the years, during my service in state government and as a business lawyer.  From these experiences, I know that West Virginia faces significant challenges in competing for new investments and new jobs.  A lot of these challenges stem from our topography.  West Virginia’s tax on manufacturing equipment, machinery and inventory represents a competitive challenge for West Virginia (most other states do not have such a tax).  Additionally, bigger states have more money in their economic development programs than West Virginia does.  For these reasons and others, West Virginia needs every tool possible in its economic development tool box.

Every local economic development opportunity is different.  Every business decision to invest and create jobs has its own challenges and considerations.  Sometimes a PILOT agreement makes sense.  Sometimes a PILOT agreement does not make sense.

County Commissioners and economic development officials across West Virginia are immensely capable of identifying those circumstances where a PILOT agreement makes sense, and the right set of incentives and tools to land a job-creating investment.  We should not deprive these talented and hardworking public servants of a tool that might be just what is needed to land an investment that will create dozens if not hundreds of good jobs for West Virginians. 

On behalf the West Virginia Roundtable, I thank all our hardworking county and local officials and economic development professionals for fighting the good fight for West Virginia jobs each and every day, and I encourage all West Virginians to keep the PILOT light on!