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Perham City Council approves Steve's Sanitation expansion

At a special Perham City Council Meeting on September 27, the council approved a request from Steve's Sanitation for Tax Increment Financing for an expansion to their existing facility in the industrial Park, to include approximately 1,600 square...

At a special Perham City Council Meeting on September 27, the council approved a request from Steve's Sanitation for Tax Increment Financing for an expansion to their existing facility in the industrial Park, to include approximately 1,600 square feet of office space and 9,375 square feet for an additional truck service facility.

Based on building specs for the project, the Otter Tail county assessor valued the project at $815,200, with a corresponding tax increase of $26,589, and a TIF increment of $154,080.

According to the The Research Department of the Minnesota House of Representatives, Tax increment financing (TIF) uses the increased property taxes that a new real estate development generates to finance costs of the development.

The Research Department goes on to say, that in Minnesota TIF is used for two basic purposes: to convince a developer to build an office building, retail, industrial, or housing development that otherwise would not be constructed. To do so, the increased property taxes are used to pay for costs (e.g., land acquisition or site preparation) that the developer would normally pay. To finance public infrastructure (streets, sewer, water, or parking facilities) that are related to the development. In some cases, the developer would be required to pay for this infrastructure through special assessments or other charges. In other cases, all taxpayers would pay through general city taxes.

How does TIF work? When a new TIF district is created, the county auditor certifies (1) the current net tax capacity (i.e., property tax base) of the TIF district and (2) the local property tax rates. As the net tax capacity of the district increases, the property taxes (i.e., the "tax increment") paid by this increase in value is dedicated and paid to the development authority. The tax increment is limited to the tax derived from the certified tax rate. Increases in value that generate increment may be caused by construction of the development or by general inflation in property values. The authority uses the increment to pay qualifying costs (e.g., land acquisition, site preparation, and public infrastructure) that it has incurred for the TIF project.

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