What Is a PILOT?
PILOT stands for Payment In Lieu Of Taxes. It's a negotiated agreement where a solar project makes fixed annual payments to local governments instead of traditional property taxes.
Why PILOT Instead of Regular Taxes?
- Predictability — Fixed amounts for 20-40 years
- Simplicity — Avoids complex equipment depreciation calculations
- Guaranteed revenue — Not affected by assessment appeals
- Often higher — PILOT can exceed what property taxes would have been
How It Works
Step 1: IDA Negotiation
The county Industrial Development Agency (IDA) negotiates terms with the solar developer. Public hearings are held.
Step 2: Agreement Terms
A PILOT schedule is set—typically a fixed amount per MW of capacity, often with annual increases.
Step 3: Annual Payments
The solar project makes payments each year for the life of the agreement (often 25-40 years).
Step 4: Distribution
Payments are split among local taxing jurisdictions—typically the town, county, and school district.
Who Gets the Money?
| Recipient | Typical Share | Uses |
|---|---|---|
| School District | 50-65% | Education funding |
| Town | 15-25% | Local services, roads |
| County | 15-25% | County services |
| Special Districts | Variable | Fire, library, etc. |
Example: What a 42 MW Project Pays
A project like Shepherd's Run might pay approximately:
Actual amounts depend on negotiated terms. These are illustrative estimates based on similar projects.
Compare to Current Land Use
What does farmland typically pay in taxes?
- Agricultural land under ag exemption: minimal taxes
- Same land with solar PILOT: significant annual payments
Solar projects often generate 10-50x more tax revenue than agricultural use of the same land.
No Burden on Services
Unlike residential or commercial development, solar farms:
- Add no students to school district
- Require minimal road use after construction
- Need no water/sewer services
- Generate few emergency calls
PILOT payments are nearly pure revenue—they don't come with corresponding service costs.
Host Community Agreements
Beyond PILOT, many projects offer additional benefits:
- Community benefit funds — Direct payments to the town
- Electric bill credits — For nearby residents
- Road improvements — Upgraded access roads
- Community solar allocation — Reserved subscriptions for locals
Common Questions
Does PILOT mean they pay less than normal taxes?
Not necessarily. PILOT is often equal to or greater than what traditional property taxes would be, with the advantage of predictable, guaranteed payments.
What happens if the project fails?
Decommissioning bonds ensure the site is restored. PILOT agreements typically include provisions for project changes.
Can the community negotiate better terms?
Yes. PILOT agreements are negotiated, and community input can influence terms. Attend IDA hearings to have your voice heard.
The Bottom Line
Solar projects provide significant, reliable tax revenue to local communities for decades. This money supports schools, roads, and services without adding population or service demands.