Understanding PILOT Programs

What They Mean for Local Municipalities

There’s a lot of talk these days about Municipal PILOT (Payment in Lieu of Taxes) programs. What’s often missing from the chatter however, is a clear explanation of what a PILOT actually mean for our town — for schools, services, and your tax bill.



What is a PILOT Program?

A PILOT Program is a tax abatement initiative that allows a developer to pay negotiated fees "directly to the municipality" instead of regular property taxes, where the majority goes to the County. The idea is simple: reduce taxes enough up front to spark new development, especially in areas that might otherwise stay vacant or run-down. These payments are calculated based on a percentage of either project revenue or total project costs.

The logic is simple – incentivizing development by reducing the tax burden during the early stages of a project, where financial risks are at their peak.

Who Really Benefits?

The primary winner here is the municipality - period. Municipalities also receive MORE REVENUE through a PILOT program. Traditional taxes are split among the town, the county, and the county school system. But with PILOTs, the municipalities typically keeps around 95% of those payments - meaning more local resources for local school systems, improving roads, and holding down your taxes. The longer a PILOT stays in effect, the more the community benefits from extra revenue.

What About Schools and Local Control?

A common criticism of a PILOT is that is takes money earmarked by the county, for local schools. However, in reality, the program puts more control in the town’s hands to spend on their schools as they see fit. If a well-run municipality chooses extra funds from PILOTs to support schools directly, without detours through county bureaucracy, they can choose to do so. Everyone wins.

Addressing Concerns: The Developer Incentive Narrative

Yes, developers pay less initially. But without structured financial incentives, many sites would languish for years — generating nothing and potentially triggering state-mandated high density housing that could crowd schools and strain resources. PILOTs turn neglected lots into community assets. Because PILOT revenues don’t get filtered through multiple layers of County and State government, the municipality calls the shots on where the money goes.

Local Control and Lower Residential Taxes

When structured properly, PILOT programs give the community both the means and the ability to decide on its own priorities. It’s about putting resources — and real choices — back into the hands of town leaders and residents. From predictable, stable revenue and long-term growth, to sound infrastructure and lowering taxes, the financial and community benefits of a PILOT are clear.

The Bottom Line: PILOTs Build Stronger, Smarter Communities

When local officials neglect the facts or lack a general understanding of what a PILOT program can do, communities end up footing the bill through higher taxes and a diminished quality of life. On the other hand, transparent, well-negotiated PILOT's empower towns to make smart investments, and deliver stable, predictable benefits for everyone.



Curious about PILOTs or how they’re being used across the State? Let’s have a real conversation — and focus on what’s best for our communities. More to come.

The More You Know....

Frank Pallotta

'20, '22 Republican House Candidate, NJ05

Wall Street Veteran