PORTSMOUTH — The 250 businesses at Pease International Tradeport pay a total of about $7 million to the city.

They don’t make their payments through property taxes the way other commercial enterprises in other parts of the city do. Rather, they pay through a combination of payments in lieu of taxes and municipal services fees.

It’s a system of payments the state negotiated with the city as officials sought to transition from a closed air force base, with aging infrastructure of buildings and roads, to the thriving Tradeport it is today, some 26 years later.

Even though Tradeport occupants don’t pay property taxes, “the methodology by which they get there is very similar,” said Lynn Marie Hinchee, general counsel and deputy director for the Pease Development Authority, which oversees the Tradeport.

“It’s very unique,” Hinchee said. “The idea was that Portsmouth would provide the services and the businesses would pay for the services and it would be seamless.”

Tradeport officials estimate its payments represent 13 percent of Portsmouth’s entire tax revenue.

According to the most recent statistics assembled by PDA officials, 4.4 million square feet of commercial and industrial space has been developed since the base’s closing in 1991. Those 250 companies employ 10,250 people directly, with another 5,125 jobs affected by companies not located at Pease but do direct business with companies at Pease. That amounts to a wage base of $700 million a year, according to the data.

While $7 million goes to Portsmouth to pay for police, fire and public works, another $16 million is paid to the state in business profits taxes and rooms and meals taxes.

There are two methods of how municipal services are paid by Tradeport tenants, depending on where the tenant is located. The arrangement was worked out with city officials in the late 1990s, according to Hinchee. One area – bounded by New Hampshire Avenue, International Drive and Corporate Drive – is in a so-called business commercial zone. Businesses there have a payment in lieu of taxes – called PILOT, for short.

According to Hinchee, although all PILOT property is in the business commercial zone of Pease, not all business commercial zone property is PILOT property. Business commercial property that was included in the 1992 public benefit conveyance was not removed from the Airport District and remained subject to the municipal services fee. The PILOT was only applicable to Portsmouth property from the 1997 conveyance.

A PILOT is a common practice, made to a municipality to compensate for some or all of the tax revenue lost due to tax-exempt ownership or use – as in the case of the Tradeport – of a particular piece of real property. Tenants outside the PILOT zone, including those in the designated zone of airport-related enterprises and all property in the town of Newington, pay a municipal services fee.

The city assesses each property on the Tradeport for a value.

“We don’t control the assessment. It’s done individually just like every other piece of property in the city,” said PDA Executive Director David Mullen.

Tenants in the PILOT get a bill from the city and pay it directly. Other tenants also pay, but not by way of a direct bill from the city, but as part of their monthly lease payments to the PDA, which then pays the city twice a year.

PILOT businesses pay the full amount that includes municipal, county, state education and the local education taxes. The tax rate announced by the city in November is $15.38 per $1,000 of assessed valuation, which includes $7.27 municipal, $1.03 county, $2.13 state education and $4.95 local education.

Businesses that pay municipal services fees through their lease payments do not pay the state or local education portion, which means their fees reflect a tax of $8.30 per $1,000 of assessed valuation. It is a bit of a wash, according to PDA officials, since most Tradeport workers live in other towns and don't have children in the Portsmouth school system.

“Portsmouth does quite well with Pease as many of the 10,000 people who work at Pease do not live in Portsmouth and thus the cost of educating the employees’ children is borne by the town where they reside,” Mullen said.