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City official: PILOTs and rising health-benefit costs are pushing property tax bills higher
Summary
At a budget preview, a city official told council members that about 20 properties shifting off the tax rolls under PILOT arrangements have lowered assessed values and, coupled with higher municipal health-benefit costs, are contributing to higher property tax bills for other taxpayers. The administration said it will present corrective steps at a future meeting.
A city official said at a budget preview that payments in lieu of taxes, known as PILOTs, together with rising municipal health‑benefit costs are combining to drive up property tax bills for homeowners.
The official told council members that roughly 20 previously taxable parcels have shifted off the tax rolls under PILOT arrangements, and that the effect of those parcels leaving the assessment base has helped raise tax rates for remaining taxpayers even though PILOT revenue is collected. "When it comes off the tax rolls ... it's not much. It's very little," the official said, distinguishing revenues derived from PILOTs from conventional property taxes.
The official highlighted that the concern is not only empty lots. "They're not empty lots, you know? It's the YMCA building. It's Bruce the Bed King. ... the credit union building. These are large structures that are paying sizable taxes and they're being demolished and they're coming off the tax rolls," the official said, noting that large parcels with large tax bills replacing taxable assessments with PILOT arrangements have a disproportionate effect on overall valuations.
Council members pressed for an answer homeowners might hear in public: why a typical homeowner's bill could rise by double‑digit percentages. The official agreed health benefits are a major driver of the current increase, saying, "health benefits are the main driver of this tax increase," but added that how PILOTs are billed "certainly aren't helping the problem." The official said the administration is taking steps to correct billing practices for PILOTs and to address health‑benefit cost drivers ahead of the next budget cycle.
The official also revisited last year’s public debate over whether PILOTs are taxes, noting the phrase stands for "payments in lieu of taxes" and emphasizing the difference between PILOT revenue and conventional taxable revenue: "they are definitionally not taxes," the official said. The official warned the public conversation that conflated the two set up misleading expectations about where revenue comes from and how assessments respond when parcels leave the rolls.
On the mechanics of valuation change, the official said two forces have driven down assessments: a wave of tax appeals and PILOT arrangements that convert commercial assessments into tax‑exempt assessments, removing those properties from the assessment base.
The administration said it will present more detailed proposals and the technical fixes it has begun implementing at a forthcoming meeting; staff did not present those technical details during the preview.
The remarks were part of a budget preview and the official invited further questions and a detailed discussion at the next scheduled budget meeting.
