Monday evening marked the first time that Sherman has used such an agreement like the one that the City Council approved with Riverside Homebuilders. The agreement that will benefit both the developer and the city, was unanimously approved.
The tax remittance agreement will allow the builders to remit sales taxes from supplies purchased elsewhere in the state to the city of Sherman.
While the practice is fairly common in larger municipalities, this was the first time it was done in Sherman, city officials said. For this agreement, the city is poised to see nearly $150,000 in additional income while Riverside could see a $100,000 payout.
“The way I look at this, it’s maybe $150,000 over the course of three years, five years, however long it takes to develop,” Sherman Director of Finance Mary Lawrence said. “It is kinda free money, isn’t it?”
Under the terms of the agreement, Riverside will be able to remit a portion the sales tax for building supplies and other items purchased in another city for a project that is taking place in Sherman. The taxes would then instead go to Sherman rather than the city where the initial purchases were made.
These agreements are primarily used with larger developments where the scale, and the lengthy process, make the payout worthwhile. Riverside currently has plans to build nearly 300 new residential homes over the course of the next few years. The project is currently in development along Quail Run, with plans to extend to the west and south following initial build out, city officials said.
Lawrence said that the city has no risk in the agreement as it does not have to pay the developer has filed the paperwork with the state comptroller’s office and the city receives a report back. Lawrence said the payments would likely be made twice a year over the course of the development.
If the developer does not build the houses, or the paperwork is not filed, the city will have no obligation to pay, she said.
“The worst that could happen is zero and the best is the estimated value to us of about $246,000,” Lawrence said, adding that the developer would be rebated just under $100,000.
Despite being passed unanimously, council member Shawn Teamann said he feels these types of agreements should likely be reviewed on the state level as they encourage cities to compete for sales dollars that are tied directly to a city of purchase. Despite this, he said he viewed this as a positive move for the city.