(a) Exemption.--All public property used for public purposes, with the ground thereto annexed and necessary for the occupancy and enjoyment of the same, shall be exempt from all county, city and school tax, but shall not include property otherwise taxable which is owned or held by an agency of the United States Government, nor shall this act be construed to exempt from taxation any privilege, act or transaction conducted upon public property by persons or entities which would be taxable if conducted upon nonpublic property regardless of the purpose or purposes for which such activity occurs, even if conducted as agent for or lessee of any public authority.

(b) Payments in lieu of taxes.--For public property used for public purposes constructed after the effective date of this section, the city shall impose in lieu of all city, county and school district real property taxes an amount annually equal to 2% of the costs of the project as are agreed to by the city and the facility developer prior to the commencement of construction of the facility, plus such other amount as agreed upon by the city and the facility developer. Such payment shall be made to the city treasury. The in lieu of payment shall commence at the expiration of five years from the effective date of the agreement between the public authority and the facility developer.