Summary:

 Senate Bill 348 (SB 348) requires the state to make payments in lieu of taxes (PILT) to local governments when acquiring real property. The bill establishes a Payments in Lieu of Taxes Fund, administered by the Taxation and Revenue Department, to compensate political subdivisions for lost property tax revenue. The requirement does not apply to property acquired by the Department of Transportation for public roadways. The bill takes effect on July 1, 2025. 

Legislation Overview:

 Senate Bill 348 (SB 348) mandates that whenever the state acquires real property through purchase or eminent domain, it must compensate local governments that previously received property tax revenue from the acquired property. Annual payments in lieu of taxes (PILT) will continue as long as the state retains ownership of the property.

State agencies acquiring real property must determine the prior year’s property tax liability from county records and remit an equivalent amount annually to the state treasurer for deposit into the PILT Fund. The Taxation and Revenue Department (TRD) will oversee the fund and distribute payments to affected local governments. PILT payments will be adjusted annually based on changes in property values and tax rates.

The bill exempts property acquired by the Department of Transportation for public roadways or highways. It also specifies that PILT payments are contingent on legislative appropriations, meaning they will only be made if the legislature allocates sufficient funding. The bill takes effect on July 1, 2025.

Implications

SB 348 aims to mitigate the financial impact on local governments when taxable property is transferred to state ownership, preserving revenue for services such as schools, law enforcement, and infrastructure. However, because PILT payments are subject to legislative appropriations, local governments may not receive payments in years when funding is not allocated. This could create financial uncertainty for affected jurisdictions.

The bill may increase costs for state agencies acquiring property, as they will be required to account for PILT payments in addition to acquisition costs. TRD will assume new administrative responsibilities for managing the PILT Fund, determining payment adjustments, and ensuring compliance with the law. 

Current Law:

 Under current law, when the state acquires real property, local governments lose property tax revenue without any mandatory compensation. While some federal and state PILT programs exist for certain lands, there is no general statutory requirement for the state to make PILT payments for all state-acquired properties.