By Tom Hintgen

Otter Tail County Correspondent

County commissioners held a public meeting on May 21 and subsequently passed a resolution of support for Tax Increment Financing (TIF) related to the development of infrastructure for new residential parcels in Pelican Rapids, referred to as Pinewood Estates.

TIF is a method of financing real estate development costs in Otter Tail County and throughout the state of Minnesota. TIF uses the additional property taxes paid as a result of development in the district to pay for part of the development costs. 

If the project proceeds on schedule, infrastructure construction is anticipated to be completed this summer with construction on new homes beginning this fall or next spring.

The location of a former county government garage, located near NE Fifth Street in Pelican Rapids, presented an opportunity for Otter Tail County’s Community Development Agency (CDA) to partner with the City of Pelican Rapids to address local housing needs. 

When a new building is constructed, the market value of the property and its property taxes typically rise. Classic examples would be building a new store on an undeveloped parcel or replacing one or more old buildings with a new, larger building. In both of these instances, the market value of the property will rise because the improvements add value to the parcel.

After a TIF district is created, the county auditor certifies the current tax capacity of the properties in the district such as the one in Pelican Rapids. As the property in the district increases in value, these increases above the original tax capacity are “captured.” The law refers to this amount as the district’s “captured tax capacity.” 

The county auditor also certifies an original tax rate which is the total property tax rate that applies in the district.  Tax rates as part of TIF include all local governments that levy taxes (cities, townships, the county, school districts and special taxing authorities).