New Westwind home addition seeks tax increment financing
A residential development on the northwest side of Perham will benefit from tax increment financing. The parcel of land is located southwest of the Lakeside Golf Course, right next to the Westwind addition. The developer is the Perham Capitol Group.
A residential development on the northwest side of Perham will benefit from tax increment financing.
The parcel of land is located southwest of the Lakeside Golf Course, right next to the Westwind addition. The developer is the Perham Capitol Group.
A total of 37 homes are planned at the site.
The Perham-Dent School Board learned about the proposal at the Sept. 13 meeting. Because of time constraints in moving the project ahead this fall, Perham city manager Bob Louiseau asked the board to waive the required timelines in order to expedite the project.
The school, county and city are required to approve Tax Increment Financing, because of the potential impact of TIF on taxing jurisdictions.
Developers requested TIF because of the high cost of extending sewer, water, streets and utilities to the parcel. These costs are up almost 60 percent per lot, said Louiseau. At that cost, developers didn't believe they could develop the site and attract the low and moderate income families that the lots and homes are intended for.
Under TIF, cities can "capture" part of the taxes that are generated after the improvement of a property. This "increment" can than be tapped to repay site preparation, utility and street expenses incurred. Those development costs are projected to be $1.72 million.
For this new development, which is Westwind Third Addition, the present value of the undeveloped land is $18,052. After development, the taxable value of the land is expected to be $6.43 million.
Based on the present value and the value after development, the project qualifies for a total of $1.73 million in "captured tax increment" over 25 years.
For this project, the increment is not returned directly to the developer, but rather to the home buyers--in the form of lower assessments. Buyers are mostly families, and the income requirements to qualify are earnings of $55,000 or less, said Louiseau.
"The developers don't feel they can put the lots and homes on the market without TIF," said Louiseau, noting that utilities and assessments increase the lot prices by at least $10,000 each.
Under the TIF agreement, 80 percent of the captured increment is returned to home buyers, and 20 percent is returned to the city for administration expenses.
The school board voted to waive the timelines and allow the city and developer to proceed with the TIF process. The Otter Tail County Board and the city council must also vote to waive the timelines.