Monday, October 30, 2006

PART I: Mills Act Workshop

CITY COUNCIL SPECIAL MEETING
MILLS ACT WORKSHOP
24 OCTOBER 2006


Senior Planner Sean Conroy gave a “brief powerpoint presentation on the Mills Act, a general overview.”

MILLS ACT WORKSHOP
• Origins
• State Requirements
• Property Tax Example
• City Requirements/Objectives
• Discussion

THE MILLS ACT
• State legislation enacted in 1972.
• Gives cities authority to directly assist property owners in historic preservation.
• Gives property owners public recognition and an economic incentive to restore and preserve their properties.

PROGRAM FLEXIBILITY
• There is no requirement to implement the Mills Act. This decision is left to each city.
• The Act sets minimum standards to qualify for benefit.
• The Act also allows each city to customize the program to suit local needs.

SELECTION FLEXIBILITY
• Mills Act contracts are not permits.
• Contracts are completely discretionary.
• Some of Carmel’s selection criteria require judgment. This allows for interpretation and flexibility on a case-by-case basis.

STATE REQUIREMENTS
• Properties must be identified as historic (National, State or Local level)
• The minimum contract term is 10 years.
• Contracts must contain renewal provisions.
• Owner must provide written notice of the contract to Office of Historic Preservation.

BENEFITS
• Benefit to property owner:
Property tax is reduced by using its “income value,” rather than “market value.”
• Benefit to City:
Historic resource is rehabilitated, maintained and protected from significant alternations in the future.

MILLS ACT EXAMPLE
• Normal Assessment vs. Mills Act Example
Property Tax 1% of Assessed Value = Market Value vs. Property Tax based on Rental Income, Net Operating Income and Capitalization Rate.
(Generally, a 40% - 60% Property Tax Reduction for Property Owner)

CITY FINANCES
• The County collects less in taxes.
• City receives less than 1% of the taxes collected by the County.
• The total pool of property taxes is distributed to the State, County and Cities. The property tax reduction is diffused among all jurisdictions Statewide.
• Financial impact to the City is limited.

CITY ORDINANCE
• Preservation Ordinance is part of the Local Coastal Program
• The Mills Act is one of several benefits included in the ordinance.
• Other benefits include reduced building permit fees, use of the State Historic Building Code and more flexibility with development standards.

INTENT OF (CITY) STANDARD
• Provide economic benefit to owners of historic resources
• Establish process that includes Historic Resources Board and City Council review.
• Establish criteria that limits the number of properties that can qualify to minimize fiscal impacts on the City.

MINIMUM (CITY) STANDARDS
• Property must be listed on the City’s Register of Historic Resources.
• A maintenance and management plan must be prepared and approved.
• Any historic R-1 property is eligible.

All past alternations must:
• Comply with the Secretary of Interior’s Standards for historic properties.
• Meet all current zoning standards.

No past alternation:
• Increased floor area on the site by more than 15% beyond historic size.
• Resulted in a second story addition.
• Affected the basic form and design of the original historic structure.
• Altered, damaged or diminished any character defining feature.

Senior Planner Sean Conroy: The current criteria is…”very strict and they are very limiting as far as how many properties would be able to quality.”

CURRENT OBJECTIVES
• Reward owners of well-preserved historic properties with only minimal alterations.
• Help offset rehabilitation costs.

POSSIBLE NEW OBJECTIVES
• Recognize only the best/most important examples of each historic resource type
• Help offset rehabilitation costs only for seriously damaged/degraded properties.
• Help offset significantly diminished development opportunities.

OTHER COMMUNITIES
• Most communities only require that a property be identified as historic to qualify.
• Several communities limit the number of contracts per year. (Coronado, Belvedere, Sierra Madre.) I.e. 2-3.year.
• Los Angeles does not allow contracts for properties valued over $1.5 million.

DISCUSSION
• Which objectives should contracts satisfy?
• Are the City’s standards and selection criteria appropriate?
• How strictly should the City’s discretionary criteria be applied?
• Should the City set an annual limit on the number of contracts?

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