Supporting infrastructure growth in one of its major upcoming developments along its southern border, Sherman gave the green light to a putting resident taxes to a growing investment zone Monday night. The City Council voted to expand the footprint of Tax Increment Reinvestment Zone no. 7, which will encompass the proposed Terra Perpetua development along FM 1417.
The reinvestment zone will allow the city to recoup a portion of the property taxes generated from the area and set them specifically for infrastructure improvements.
Here are five things to know about TIRZ districts:
1. What is a TIRZ?
A Tax Increment Reinvestment Zone is a special designation that the city can put on a specific area. Through the TIRZ, the city will set aside a part of the tax revenue generated from the property to be reinvested in the zone in the form of public improvements.
The designation has previously been used to pay off improvements including street construction and water and sewer infrastructure for major developments or areas that may soon see development. Currently, the city has 11 TIRZ districts in place, with the most recent one formed in what will become The Village mixed-use development along FM 1417.
“The successes of TIRZ around the Sherman Crossroads and Sherman Commons has caused the city to be aggressive when we feel the commercial and retail components are strong enough to support a TIRZ,” Sherman Community and Support Services Manager Nate Strauch said.
2. How does it work?
When a TIRZ is created, city and county officials assess the value of the property and set a base value. As the property increases in value through improvements, the city will set aside a portion of the tax revenue into the TIRZ fund to be used specifically for improvements within the district.
These funds can be used in several ways, Strauch said. The funds can be saved toward future infrastructure projects, or used by the city to recoup its expenses or bond payments. If it is a developer who is installing public infrastructure as a part of development, these funds can be used to offset their costs as a part of agreements with the city.
In the case of TIRZ no. 7, the city is setting aside 50 percent of the tax revenue based on the incremental growth. Grayson County Commissioners are slated to discuss setting aside 50 percent of the county’s revenue during Tuesday morning’s session.
3. What is TIRZ no. 7?
TIRZ no. 7 was created in 2017 and encompassed about 22 acres of land along the southeast corner of the intersection of FM 1417 and U.S. Highway 75. This encompassed the site for Schulman’s Movie Bowl Grille and the greater Legacy Village area, including a Douglass Distributing location and restaurant pad sites.
With this expansion of the TIRZ, an additional 280 acres will be added to the zone’s footprint. This additional space will be utilized for the proposed Terra Perpetua mixed-use development, which could see a mixture of residential, retail and other uses.
Terra Perpetua is one of two major mixed-use developments proposed along FM 1417, alongside The Village — a 600-acre development proposed near the future Sherman High School site. While both developments will feature a mixture of retail and residential uses, Terra Perpetua will lean more toward residential purposes, city leaders have previously said.
While 2017 served as the base year for the first portion of the TIRZ, the base value for the additional 280 acres will be based on 2019’s valuations.
4. Why is a TIRZ needed?
Strauch said a TIRZ can serve several purposes ranging from sending a clear message of support for a project to setting long-term goals for the city.
“It is absolutely a way for the city to show developers who are considering putting large amounts of money on the table that the funds to build the infrastructure to build their developments will be there.” Strauch said. “When you use a TIRZ you know that money will be uses for their developments and will not be vultured away to pay for other developments and priorities in other parts of the city.”
The designation can also be used to set long term goals for the city that extend well beyond the tenure of a single city council, he added.
“It provides certainty over the course of decades when you are talking about political changes, changes in the political lens won’t be able to necessarily impact the priority of the construction with these new developments,” Strauch said.
5. How long does a TIRZ last?
With regard to TIRZ no. 7, Strauch said the initial bonds for infrastructure were with a 25-year term, and improvements in the new addition should be similar. However, the additional development could spur further value increases and lead to additional funds being deposited in the TIRZ fund.
This could lead the city to pay off the bond debt for these projects early, or expand them. As an example, Strauch said the city has discuss further road infrastructure that would connect Terra Perpetua and Legacy Village in the future.