Preservation Gets a Boost,
Landmark Owners Get a Break
By Dennis Sullivan
According to a recent list of Redondo Beach historical landmarks there are sixty-five registered properties. That means that sixty-five owners have chosen to provide stewardship over the historical importance of their building. In many cases, this commitment comes with a cost. No longer will they simply replace old windows with simple aluminum ones nor will they stucco over that old redwood siding. Doing the right thing for historic preservation doesn’t always come cheap. Fortunately for us, a state senator named James Mills recognized the importance of preserving California’s historical landmarks and came up with a brilliant plan that is good for homeowners, cities and businesses.
In 1972, Mills pushed through legislation that would provide property tax reduction for historic landmark owners. The Mills Act legislation allows cities and counties to contract with landmark property owners as an incentive toward historical preservation of a qualified property and, when necessary, to restore and rehabilitate that property to conform to the rules and regulations of various state and federal agencies.
The Mills Act agreement is for a minimum 10 year committment that is automatically renewed each anniverary date for the initial contract term. Effectively, this is a self-perpetuating contract. Furthermore, the contract is passed on to new owners of the property who assume all the benefits and conditions of the contract.
Some owners have used the Mills Act not to get tax relief for themselves, but to protect future owners or to add value to their home. Proposition 13, another California property tax law, protects houses purchased before 1978 from extreme increases in property taxes. By using the Mills Act, current owners of these Prop 13 properties can protect new owners from large increases in their property taxes when the property changes hands and gets reassessed to the current market value.
Cancellation by the landmark owner or the city is possible under the code’s guidelines. If the owner options not to renew the contract they must pay a cancellation fee of 12.5 percent of the current fair market value of the property. As an example, if the home is worth $450,000 on the market then the cancellation fee would be $56,250.
The city may cancel a contract if it determines that the owner has breached any of it’s conditions or has allowed the property to deteriorate to the point that it no longer meets the standards for a qualified historical property. The city may also cancel a contract if it determines that the owner has failed to restore or rehabilitate the property in the manner outlined in the contract. The contract will not be canceled until after the city has given notice and held a public hearing.
The contract does provide for periodic examinations of the interior and exterior of the premises to be certain that the owner is meeting the terms of the agreement. Unless the city has reason to doubt the owner’s compliance, the inspection would normally be limited to a drive-by examination.
Redondo Beach has offered Mills Act contracts to its landmark property owners since October 1992. Although the law gives cities fairly wide liberty with how the Mills Act works in a community, Redondo Beach’s implementation is very true to the spirit and letter of the law. Other cities have limited areas for qualification or have added market value limits for participation. Our city clearly encourages qualified property owners to take advantage of this money saving incentive.
Sample Mills Act Tax Calculation