Finisar Corp. is set to save $4.5 million on its local property tax payments through the year 2032 thanks to a pair of agreements approved by Sherman Monday.
The Sherman City Council unanimously approved a 10-year tax abatement and a five-year Chapter 380 tax rebate agreement for the electronics components manufacturer. City staff estimated the tax abatement agreement would save the company around $3.3 million in property taxes, and the tax rebate agreement would save it around $1.2 million.
“Assuming a level investment of $140 million at the current tax rate, the city will realize about $2.7 million in property taxes, and Finisar will receive a benefit of about $3.3 million,” Director of Finance Mary Lawrence said of the tax abatement agreement before discussing the tax rebate agreement. “A tax abatement may only last for 10 years, including extensions, so we grant additional incentives after the tax abatement period expires. The additional five years is about $3 million total in property taxes — the city realizes about $1.8 million of that, with Finisar getting the benefit of about $1.2 million.”
The five-year tax rebate agreement will see the city giving a grant back to Finisar after its full tax bill is paid in years 11 through 15. The grants will be for 45 percent of the taxes paid in each of the first two years of the agreement, 40 percent for the third and fourth years and 35 percent for the final year.
“The (Chapter) 380 (agreement) is really used in just a very few circumstances to kind of super size the tax abatement, if we needed to do that,” City Manager Robby Hefton said.
The 10-year tax abatement agreement will give Finisar a 60 percent tax abatement for each of the first three years, a 55 percent abatement for each of the following three years and a 50 percent abatement for the final four years of the agreement.
Finisar announced in December that it would begin producing vertical-cavity surface-emitting lasers for Apple at its new Sherman facility later this year. VCSELs are small semiconductor devices that emit light vertically and measure the depth at which that light is reflected. That depth-sensing technology helps power Apple product features such as Face ID, Animoji, portrait mode selfies and proximity-sensing capabilities.
Hefton said the 15-year incentives give Finisar a reason to stay in Sherman.
“The idea here is that if in years seven, eight, (or) 10, they’re on the bubble about things, having this economic incentive would help keep them here and have those people employed and then continue to invest here while they have this incentive in place,” Hefton said.
Finisar’s work at its new local facility is slated to include investments of between $20 million and $30 million in the building and land, and an additional $120 million in manufacturing equipment. The company began remodeling work on the building late last year and expects to have the facility operational for the third quarter of 2018. The company announced it was creating 500 new jobs in Sherman, but its tax abatement application showed it expected 587 employees once the facility is operational.
Hefton said the estimated $140 million investment is likely a conservative figure.
“We would love it if they would invest $200 million,” Hefton said. “We’ll abate everything that — there’s no ceiling to it. There’s a floor but no ceiling to it. We’d be glad to abate more investment here.”