The Sherman Economic Development Corp. is projected to run at a $1.35 million deficit for the 2019-2020 fiscal year. The SEDCO board and the Sherman City Council have approved a $5.57 million budget for the organization for the upcoming fiscal year.

For the 2020 budget, the economic developer is expecting to bring in nearly $4.22 million in sales tax revenue and investment interest, and with the deficit, SEDCO is still projected to maintain a fund balance of about $10.40 million by the end of the fiscal year.

“We kept the sales tax flat,” SEDCO President Kent Sharp said Tuesday during a joint SEDCO and city council meeting. “I know the city is actively projecting a little more than that.”

Sharp attributed the majority of the deficit to incentives that are projected to come in the next year. In addition to incentives for 2019-2020, other incentives that were expected to come to fruition this year are now included in next year’s budget.

The two largest that are expected to be paid to Tyson and Globitech for expansions of their Sherman production plants, and the payments are expected to cost $750,000 and $950,000 respectively. Globitech is also expected to collect a $32,500 payment that was from a previous incentive from about two years ago, Sharp said.

Modular Power Solutions is expected to collect about $330,000 for the ongoing construction of its new facility on Fallon Drive. Meanwhile, Emerson and Elevate Recoveries could collect $25,000 and $144,000.

“That is going to be a huge contributor to the $1.3 million deficit,” Sharp said.

SEDCO is also expected to invest $1.55 million in capital improvements next year. The vast majority of these funds will go toward the $1.2 million extension of Progress Drive to Flanary Road. This will allow SEDCO to open the sixth and seventh sections of its Progress Park industrial park, Sharp said.

The remaining $350,000 will be dedicate to contingency expenses in the event something unbudgeted comes up.

The latest budget does not include any funds dedicated for property acquisition, as Sharp said he would prefer to bring such matters before the board for approval. If a property was needed, it would instead be included in the revised budget, which is issued in April or May.

“That’s the thing with economic development — you don’t know what projects you might have in any given year,” he said.

This issue was highlighted during Tuesday’s meeting when the board discussed variances to the 2018-2019 budget. While SEDCO initially budgeted nearly $2.6 million for land acquisition, but only used $462,000.

Despite the deficit for the upcoming fiscal year, Sharp said that SEDCO remains in a comfortably position financially. In optimal situations, organizations like SEDCO typically maintain about twice the amount that they earn in a year in the general fund. With more than $10 million in reserves, Sharp said the deficit is of little concern.