What is a PILOT in Albany?

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Looking at the City of Albany’s budget the word "PILOT" can be found in several places.  PILOTs - Payments in Lieu of Taxes - are the vehicle for receiving extra funding from New York State.  There also is a line in each yearly budget “Other PILOTs and Taxes” representing over $7 million in 2025 revenue.  We wanted to understand how PILOTs contribute to this multimillion dollar number.

What is a PILOT?  A Payments in Lieu of Taxes is a financial arrangement where a property owner agrees to make payments to a local government instead of paying property taxes in a typical fashion.  There are generally three types of PILOT arrangements:

1. A government entity that owns tax-exempt property in a community (a city or county) makes payments to the community.  Typically this is the Federal Government or a State making a payment to a city or county.

2. A nonprofit that owns tax-exempt property in a community makes voluntary payments to a community.  As examples, these payments could come from a private university or a large hospital in the community that makes extensive use of the community’s services.

3. A property developer makes an arrangement with a community whereby the community makes the property improvements tax exempt for a period of time in return for negotiated, discounted payments over a set of years.  These PILOT payments are done to incent development.  These negotiated payments are typically related solely to the Improvements on the property and not the pre-existing value.

Our goal was to study #2 and #3 above for the City of Albany.  How do voluntary payments from nonprofits and negotiated payments from property developers make up the $7 million?  In addition, we wanted to ask questions such as “what are the terms of these PILOT payments?”, “have the terms or approaches for PILOTs changed over time?” and “which nonprofits (churches, hospitals, colleges) are making voluntary payments to the City of Albany?”

The last question was the easiest.  We found that there are no nonprofits that are currently making payments to the City of Albany based on the data that we received from our FOIA (details below).  Our study then focused solely on #3.

What our study does not do is question the utilization of PILOT payments.  PILOT agreements have become an expected tool that supports economic and property development nationwide.  Every Capital District community that we looked at utilizes PILOTs through the community’s Industrial Development Agency (IDA).  Any community that does not use PILOTs would be at a disadvantage in attracting development to their community.  

 We filed a Freedom of Information (FOIA) request to get PILOT data from the City of Albany:

“all Actual payments to the city that fall under the "Revenue by Category" where Category="Other PILOTS & Taxes" as presented in the budget from budget years 2020 through 2024.”

What we received from our FOIA can be found in our spreadsheet in the “OriginalData” tab , a sample of which is in the image above.    

The data contains a development name, and yearly payment invoices with a description.  These invoices represent the yearly negotiated payments.  In the original data there is information for 82 separate PILOTs. 

This payment information is interesting however it is only a starting point.  We needed to bring in information from the City of Albany Industrial Development Agency.  For every commercial development PILOT we wanted to know the owner, the developer, the beginning of the PILOT and its terms.  For example, the project above is The Arcade Building and we can look in the PILOT agreement to see the project details.   

We included an image from page B-2 of the PILOT agreement (above) where we can see the terms over time.  In simple terms “the owner makes a PILOT payment on the property improvements in an amount equal to the percentage of the Normal Tax due”, e.g. if the “County/City Normal Tax” on the property is $100,000 in 2026 then the property owner pays 20% of that or $20k.

We will emphasize the word "improvements" above - the property owner still pays the Normal Tax on the value of the underlying land and pre-existing development, the PILOT exists for improvements such as a new building, additional buildings, major improvements to existing buildings, etc.

We mined the PILOT agreements from the IDA, adding in  all of the IDA data that we could find.  For our study we then removed a number of the PILOTs:

• any PILOTs associated with NY State
• any PILOTs associated with Tax Exempt organizations (e.g. Capitol Rep Theatre)
• any PILOTs that were cancelled
• any PILOTs for which we could not find a PILOT agreement
• any PILOTs for which we could not find the payment terms

We ended up with 42 PILOTs which we believe is enough of a sample to understand their use over time.  

Every PILOT has a payment schedule, which might range from 5 to 22 years.  As noted above, each year of the payment schedule is expressed as a percentage - the percentage of the “Normal Tax” that you will pay.  0% means that you pay nothing, 50% means that you pay half of your Normal Tax.  Typically these payment percentages ramp up (or hockey stick if you like your metaphors NHL-related) over the length of the agreement.

What we found were schedules that varied greatly.  In the image above are seven Developments and their payment schedules for years 1 (y1) through their final year (up to Year 20 or y20).  There are no two payment schedules that are the same.  Note the 0% payments at the beginning of several payment schedules; these are developments that do not make (or did not make) any PILOT payments until well into the agreement.

Based on sampling we wanted to capture one or more metrics that help us understand and compare PILOTs.   We invented two metrics:

1. Years of Tax Avoidance - the sum of the Tax Years that an owner did not have to pay taxes, aggregating the fractional tax years.  For example, if I owned a property with a 3 year PILOT and my payment schedule was 25%, 50% and 75% then I avoided .75, .5 and .25 years of payments for those three years, or 1.5 Years of Tax Avoidance total.

2. Percentage of Lifetime Agreement Tax Avoidance - this metric takes the Years of Tax Avoidance and divides it by the years of the agreement.  In our hypothetical example above, 1.5 Years of Tax Avoidance divided by 3 years (for the length of the agreement), means our Percentage of Lifetime Agreement Tax Avoidance is 50%.  I will pay half of the Normal taxes over the 3 year agreement lifetime.

Let’s look at these metrics for the Lofts at 733 Broadway (the first row in the image above).  This Development agreement has a 20 year term (beginning in 2016) where the owner:

• Pays 0% of Normal Tax for the first 12 years
• Pays 10% of Normal Tax for the next 8 years

Years of Tax Avoidance - 19.2

Percentage of Lifetime Agreement Tax Avoidance - 96%

While our goal at Albany Data Stories is to look dispassionately at numbers, the terms of this agreement raise real questions about equity, especially when an owner pays no taxes for years and avoids over 90% of what would typically be due. In future pieces, we’ll dig into what would have to be true for this kind of agreement to break even for the city.

For this section we would encourage any reader to follow along by looking at the Excel spreadsheet and the “FinalAnalysis” tab to see the full dataset.  We’ll show some small examples below.

Using our two metrics we can evaluate the PILOTs over time.  Below is a sample of 15 PILOTs (every third row in the spreadsheet), their beginning year, the length of the PILOT and then our two metrics - Sum Years of Avoidance and Percentage Avoidance, and then a note on whether or not the payment schedule has any 0% (payment-free) years.

We can make a few observations from the sample above and reviewing the complete list of 42 PILOTs:

• Long-term (10+ year) PILOT agreements enacted prior to 2020 had a median Percentage Avoidance of 83%, with ⅔ of all PILOT agreements starting with 0% years on their payment schedule
• Long-term (10+ year) PILOT agreements enacted in 2020 or more recently had a median Percentage Avoidance of 75%, with only a single agreement having 0% years on their payment schedule 
• Short-term PILOT agreements (< 10 years) have generally low Percentage Avoidance, regardless of the year that the agreement started, ranging from 30% to 78% avoidance

Our examination of PILOT data and PILOT agreements led us to focus on the length and terms of the agreements which was unexpected.   PILOT payments incent 100s of millions of dollars of development in Albany; it's a topic worth additional research.  There are numerous conclusions and potentials next steps that we have identified:

1. Over the last 15 years the terms of the PILOT agreements with Developers have become more City-friendly and less Developer/Owner-friendly.  In recent PILOT agreements (since 2020) we see few agreements with 0% payment years and the Percentage Avoidance is going down.  The payment schedules for the agreements now seem to follow a basic boilerplate with a low degree of variability compared with PILOTs from the 2010s.

2. We can and should examine our competition - other local IDAs - to understand how the City of Albany’s PILOT terms compare against theirs.  Are they the same, more or less generous?  A reasonable question to the City of Albany IDA is have they done this comparison and how has it changed or validated their default payment schedules?  Do the PILOTs have terms that get deals done, without giving away too much benefit?

3. No nonprofits make voluntary PILOT payments.  As we have noted in other articles, over 60% of Albany’s property is Tax Exempt and a significant portion of those owners are nonprofits.  We can examine what other cities do to incent PILOT payments from nonprofits, for example here is Baltimore’s story 

4. There are other questions that we can ask in the future using this PILOT data.  In this study we did not examine specific owners and developers and their PILOTs.  We did not look at the location of the developments.  We did not examine the revenue - past, current or future - that these PILOT developments have or will bring in.  We didn’t look at the mix of development to see where PILOTs are used the most - commercial, industrial, residential, etc.  Lastly, we didn't examine how the City of Albany's IDA measures success, for example in their 2024 end of year report.

5.  For this article we had some interesting internal discussions at Albany Data Stories about how to dig deeper into the costs (to the city) and benefits (to the developer and the city).  For example, how do we compare the outcomes related to development versus no development?  Or, how do we look at the time value of money to put a more accurate number on the developer's benefit and the cost/benefit to the city?  These, and similar questions, could drive future explorations.

Have questions or comments?  Email us at albanydatastories@gmail.com

Wonder what data stories we are working on next?  See our current queue here!  We are always looking for people to suggest additional stories and people who want to assist with any data analysis and authoring.