Otter Tail City, once a thriving town on the eastern shore of Otter Tail Lake, was temporarily designated the county seat of Otter Tail County by the Minnesota Territorial Legislature on March 18, 1858, and that designation became permanent when the county was officially established in 1868. In 1871, business leaders in Fergus Falls challenged Otter Tail City by proposing a new Holcomb County made from Range 44 of the yet to be established Wilkin County and 21 western Otter Tail County townships, but voters defeated the division that November by a vote of 761 to 611. Later that year, Otter Tail City's prospects collapsed when a landowner refused to grant the Northern Pacific railroad a right of way, prompting the railroad to move its line north through Perham. The town was devastated, and people and businesses quickly left. Concluding that Otter Tail City was no longer a suitable county seat, state legislator E. E. Corliss introduced a bill to move the county seat to Fergus Falls, and voters approved the change at the general election in November 1872. The county records were then moved in an orderly way under the direction of the county commissioners, despite later claims that they had been stolen in the night.