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Councii Mtg 4ctober 13, 1998 Santa Mon~ca, CalifornEa
TO Mayor and Caty Council
FROM City Staff
SUBJECT Recammendat~on to Aut~orize the C~ty Mar~ager to Negot~ate and Execute
a Mills Act Historical Property Cantract between the City o# Santa Monica
ar~d the Property Owner of 2402 Fourth Street, #9, Located m Hollister
Court, a Des~gnated City ~andmark Applicant Giorgio Scafi
INTRODUCTION
Thrs report recommends t~~t the Crty Councrl adopt a resolut~on and author~ze #he City
Manager to negotiate and execute a Mills Act HistorECal Property Contract between the
CGty of Santa Monica and the property owner of 2402 Faurth Street, #9 located ~n
Hollister Court, a des~gnated C~ty Landmark The M~IEs Act ~s a state law enablmg local
governments to enter ~nto cor~tracts wr#h owners of qua#ified histor~c properties ta
author~ze a property tax reduct~on in exchange for preservation af the histor~c structure
The proposed resolutton is contained m Attachment A and the Mi11s Act application ~s
contaEned in Attachment B
BACKGROUND
In 1991, as part of a comprehensi~e revision to #he City's Landmarks Ord~nance, the
City Council authonzed des~gnated structures af iner~t, fandmarks, and contr~b~tEng
structures located in designafed his#oric districts ta be considered "quaiified histarical
propert~es" ek~gable for histoncal property contracts submitted pursuant to the provis~ons
of Californ~a Government Code Sections 50280-50290 As a result, property awners
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of such designated histor~c properties may f~le a Mills Act Contract ApplGCation The
Miiis Acf contracf is executed between the City and property owner, and results ~n a fen
year agreement to lower property taxes As a d~rect response to the tax savings, the
property owner agrees to protect, preserrre, and maintain the h~storical and
archwtectural character of the property A list of restorat~on or repa~r Gtems to be
accomplished aver the contract period are incorporated into the Mills Act Contract
These restoration tasks are financed through savings generated by the lowered tax
rate
Once appro~~d, a M~I~s Act contract req~ires the Caunty Tax Assessor's of~ice to
tietermine the vaiue of #he historic property based upon its current net operatkng
mcome, rather than upon the traditional assessed ~aluation met~ad, resultmg in a
praperty tax reductian For awner-occupied structures, t~e net operating mcame is
determined by #he mcome the property would produce if rented In exchange for the
property tax reduction, t~e owner agrees to pratect, maintain and, if necessary, restore
the histor~c ~roperty
Under the traditional method of determining pro~erty taxes, properties are reassessed
when sold Howe~er, smce Mills Act contracts run with the property, subsequent
owners may real~ze greater tax benefts, as the assessed property ~alue typically
increases when prope~y is sold, resultmg in an e~en greatef difference between the
property taxes under the assessed valuation method ~ersus tF~e property tax calculation
permitted by the Mills Act contract This can be a signif~cant marketing feature for the
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property in terms af future sa~es and is considered an important hGStoric preservation
incentive because tF~e property will be mamtamed
The init~al Mills Act co~trac# term is ten years Howe~er, each year an the anniversary
of the contract's effective date, an add~tional year is added ta the contract term unless
the property owner or tF~e City submits a notice of non-renewal to the at~er party m a
t~mely manner Effectively, the actual term of the contract ~s at least ten years, but may
be indefinite, as it is automatical{y annually renewed
This is the fourth Mills Act contract considered by the City To date, one contract has
been reco~ded with the Los Angeles County Recarder, and filed w~th the Los Angeles
County Assessor to complete the new tax assessment Staff is currently working with
property owners to exec~te the remammg contracts, which must be recarded by
December 31, 1998 to be cons~dered under the assessor's ne~ tax year The tax
ad~ustment for the approved Mills Act contracts would then be reflected on the property
owners' Qctober 1999 tax b~lk As a result, ~one of these M~IIs Act propert~es have
commenced the restoration or repair pro~ects identified in the property contract
ANALYSIS
The property owner of 2402 Fourth Street, #9 has requested to enter into a Mills Act
contract to offset the cost af normal maintenance and repa~rs The Mills Act contract
savings would be used for cor~tinued maintenar~ce of bu~idEng detaiis which are integral
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to the property's hrstor~c ~ntegrrty, ~ncluding parnt~ng, roof~ng and w~ndow repa~rs,
landscaping, insulation, kile work, and f~oor refirnsh~ng
The maintenance plan for th~s property is mcluded in the Mills Act application and will
be incorporated into the Mills Act contract The maintenance plan pro~ides a list ~f
pro~ects to be completed by the property owner durmg the initial ten year contract term
In addition, the applica#ion pro~~des an estEmate of the property owne~'s tax sav~ngs as
wel~ as an est~mate of the City's annual costs due to the property tax reduction S~nce
th~s estrmate rs based on frnancral data submEtted by the applreant, the County
Assessor will ~erify the calculation prior to the f~nal tax assessment By executing #he
contract, the Gity does not corraborate the applicant's submitted financial statemen#,
but author~zes tax aba#emen# for the property
LANDMARKS COMMISSION REVIEW
The Landmarks Commiss~on rev~ewed this request at its June 8, 1998 meeting and
d~rec#ed Staff to forward a recommendation to the Council supporting the applicat~on
The Mifls Act is one of the few financiaf mcentr~es ava~lat~Ee ta owners of historrc
p~operties and is an im~ortant #ool in the Commission's efforts to encourage the
designat~on and long term preservat~on of the City's histonc resources
BUDGETIFISCAL IMPACT
Execution of this Mills Act contract would result in reduced property tax re~er~ue to t~e
City The actual amount of the tax reduction is determmed by the Los A~geles County
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Assessor, based on an evaluation of the worksheet pra~~ded with the application The
current annual property taxes for this property are approximately $2,754 Although the
application states that the annual cost to the Ci#y ~n lost tax re~enue would began at
$2fi7 00 and mcrease at a rate just below 1% each year, the actual re~enue loss is
sub~ect to re~iew and determmation by the County Tax Assessor once the contract F~as
been executed and recorded with the County
RECOMMENDATI~N
!t rs recommer~ded that the City Co~nc~! adopt the attached reso~~t~on and aut~orrze the
City Manager to execute an Historical Property Preservatian Agreement under the M~IIs
Act, between the C~t~ of Santa Monica, and the propert~ owner of 24D2 Fourth Streef,
#9, located m Hollister Court, a designated City Landmark
Prepared by Suzanne Fr~ck, Director
Karen G~nsberg, PlannGng Manager
Amanda Schachter, Senior Planner
Donna Jerex, Associate Planner
C~ty Planning Division
Plann~r~g and Communrty Developmer~t Department
Attachmen#s A Mil1s Act Resolut~an
B. Mills Act Contract Application
F 1PLAN15HAREICOUNCILISTR~T1hAILLSACT #4wpd
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ATTACHMFNT A
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F 1PLAN~ISHAREILMKIMILLSACT'1RES0240244th #9 wpd
City Counc~i l~ieeting 10/13/98 Santa Monica, Galiforn~a
RESOLUTION I~LTMBER 9325 CCS
(Crty Council Senes)
A RESOLUTION ~F THE CITY COUNCIL OF THE CITY OF SANTA MONICA
ALFTHORIZING THE CITY ~VIANAGER TO EXECUTE A HISTORICAL
PROPERTY CONTRACT PV ACCORDANCE WITH GOVERNME~IT
CODE SECTION 54280 WZTH THE OWNER OF THE PROPERTY
LOCATED AT 2402 FOURTH STREET, #9
W"HEREAS, Governrnen~ Code Section 502$0 et se~c authonzes a c~ty to enter into a
histoncal propert,v contract wzth the owner of any qualified historical property to restnct the use
of such property so that ~t retains its histoncally sagnificant charactenstics in return for which the
property awner obtauis properiy tax relFef,
WHEREAS, Santa Monica ~1~lurucipal Code Sect~on 9 ~6.27Q(g) provides that designated
structures of inent, landmarks, and contnbuung structures located in historic districts that are
pri~ately awned shall be considered qualifiec~ histoncal properties eligible to enter mto histoncal
properiy contracts w~th the City upon resolutton b~ the City Council,
WHEREAS, the property tocated at 2402 Fourth Street, #9 is a designated City iandmark
and the owner of the property has filed an application to enter inta a histoncal properry contract
w-~th tlie City;
WHEREA~, the Landmarks Commission re~iewed the owner's application at its June 8
9, 1998 meeting and d~rected City Staff to forward a recommendatian to the City Council in
support af the application,
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WHEREAS, the City Cvuncil has determmed that it is a~propnate for the Crty to ertter
into a hastorical property contract w~th the ow~ner of the propert}~ located at 2402 Fourth Street,
#9
~10W THEREFORE, THE CITY COUNGIL QF THE CITY QF SANTA MONICA
DOES HEREBY RESOLVE AS FOLLOWS
SECTIOIvr 1 Pursuant to Santa ~Ioruca Mumcipal Code Section 9 36 270{g), the Ciry
Counc~l authorizes the Crty Manager ta enter into a histoncal property contract w~th the ow~er of
the properry lacated at 2402 Fourth 5treet, #9, Santa Mon2ca, Cahfornia tn accordance w~th
Government Code SectLon ~0280 et seq
SECTION 2. The City Clerk shall certify to the adoption of tlus Resolution and
thenceforth the same shall be in fuli force and effect
AFPROVED AS TO FORM
L~.~ `"~`~
MARSHA J ~ S IvIQUTRIE
City attorney
F'PL.A.~~SHARElLhIIC'~.MILLSACTitE502442~1th ~9 w~pd
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Adopted an~ approved th~s '~3th of October, 1998
~~~~~T ~`~L~s~nr
Robert Holbrook, Mayar
4, Mar~a M Stewart, C~ty Clerk of the C~ty of Santa Nlon~ca, do hereby cert~fy that
the foregoing Resolutian 9325 (CCS) was duly adop#ed at a meetmg of the Santa
Monica City Gouncil hefd or~ ~he 13th of October, 1998 by the follow~ng ~ote
Ayes Counc~lmembers
Noes Councilmembers
Abstam Co~ancilmembers
Abser~t Councilmembers
Ebner, Feinstem, Ge~ser, Holbrooic, O'Connor
None
None
Rosenstein
ATTEST
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Maria M Stewart, City Clerk
ATTACHMFNT B
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~ Cit~~ of
Santa Monica
Plann~ng and Commun~ty Development Department
City Plamm~g Dzvisian
(310} 458-8341
MILLS ACT CONTRACT APPLICATION
(Please Type or Pnnt All Inforrnat~on)
Ap I tion T r{s) Fited ~~~~~
~i-~~4-~~~~. ~~e ~
Rece~pt H~~
$y ~~
PROJECT ADDRESS ~ ~ ~ Z ~ T ~ ~ T _ ~ ~
I,and Use Element D~stnct Zomng D~str~ct
Legal Descr~pt~on (Lot, $lock, Tract) ~~T
Lega1 Descnpuon ~Boak, Page, Parcel #} ~ 2~~~ Q d~~ D b~
[Please attach copy of legal descnpt~on Generally #tus is "~xtub~t A" on a Deed ]
APPLICAlYT
Address G[ D~- ~ I G ~ C~- ~. t Phone ~ r b-~S Z~ l:S3 ~}
Sant~ Monica Busmess ~~cense No
CO'.~iTACT PERSON
Address ~`~D L~~~~' # r Fhone 3 t~~` ~`T Z- 1•~~ I
5an:a :~4oc.~~a Busxness L:cens:
Vc
.
DESIGNER/ARCHI'rr:CT
Address Phone
Professional Licer~se Alumber
5ant$ Mor~ca Busmess L~cense No
ATTORNEY
Address Phone
Sauta Mamca Business License No
PROPERTY OVYNER
Address ~~~ Z ~{ ~-~' c~ j , ~ I Phone .~ ~ ~ - ~.SZ- «.~ ~
s~r~ ~zaNt~ ~ q~ ~oJ
l Certiiy that this a~apiica~suu ~~ ;eu~~ ,~r~~z ri.* :,:,,. ^^~e^.•
PROPERTY OWNER'S SIGNATURE
~~ ~ ~
ExssUng Use of Property
Rehabilisat~on or ~via~ntenance Needed
(Attach ettiier t~~e Rehab~Iitation ar Maintenattce Plan, as appropnate.)
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' ~ate of Locaf Destgnanon
Is the praperty designat~d as part of an histonc district' If so, what d~str~ct~
Is the propert~~ ]~sied on the ~lational Register nf Histanc Places" Yzs _ tio
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Is the propert~• listed as part of an histaric district`' If so, «~hat district~
Please aiso attach
1 A restoration,'rehabilita~ion plan for ttie des~gnated histonc property. tf the butlding is
already restared and ~n good cond~t~an, a mau~tenar~ce list musr be s~bm~tted to svpport
the need for tax relief
? a cost estimate of the restoration,-'rehabiljtat~on plan from a cert-fed archrtect
3 A completed Financial .~nalysis of 14fills Act Contract form
4 Photographs of all b~.ulding elevauo~s and character defimn~ Ieatures usmg 35 mjn black
and wlute film
I certify that the infarmat~on contsined ~n the app~ication is correct to the best of my
knowledge and that this appiicarioe~ i9 made wrt~ the knowledge ~nd consent of the
property owner.
APPLICANT'S SIGNATURE 1 DATE `S^ 11^ 1 a
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Dnver's L~cense Number State Expirat~on Date
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f ~planlshazellmklmillsapp
k/l t.'28/45
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N!'NANCIAI. ANALYSIS OF MT[.IS ACT CONTRACT
1lnizuai
RH VENUCS li~~ieasc C'ikrrent Year 1 Year 2 1'car 3 Year 4 Year 5 Yea~b Year 7 Year 8 Year 9 Year 1~
1 Mc~~zthly Rental Inc.orne ~~ 2.y U~0
2 Annua~ Renlal [nccymc 3% ,~ Z..~~000
(1 II1L' I x 12) {Eifcrc~se 13y 3`%n C3LIl vcarJ -~-~--- .^...-_ .~.. . ---•- ---- --- ---
ANNUA[, EXPF,NSFS [Dc~es not inc.lude Taxes, Martgage or I~terest ]
3 insur~~ncc 5~, ,~ aoQd _..-- --- ---~.. ....~_... ..-- -
4 lJul~ties fi~~ ~ J2rd 0 ___.^- --- -- _.--- ...~- _~
5 Matintcnan~c S l ~
° fr _ ~ 0 _ -- '--- -- - .~.~
fi Mana~ement 5 ~'~ ,,~ ~i y ~ 4 _. , .--- ------ ------ - • --
7 (?tt~er (Qperatmg ~xpenses) 2 % ~ So0 ~ _ _ _ __ ~_ _
8 '1 c~tal ~xpenses
(sum I,.mcs 3 Ihrnugh 7) 7 ~~~ ______ ~,,_. ~~.._. --~..- ---.-- _
NF7' (IYERATIN(~ iNC(.)MF.
{Line 2 minus [ ~~~e K~ ,~ l~t.26o Y ~_... . .~ .~ -- ---
CAPITALf7.AT10N KATF.
y ]riter~,~st Cor~~ponent 7 S°l~ (Septem~er 1995-1996} fAd~usted eath year hy State Board of Equal~zat~on ]
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FINANCIAL ANALYSIS QF MILLS ACT CUNTRACT
Attnual '~
l~crease C'urrent Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year Year 9 Ye_ a~ 10 Y
10 l~istoric Property ~
Risk Component ° v
(5mgle ~am~ly Home = 4`7~y (Fixed %)
(All Other Property = 2%) ~
11 Properry 'Fax Com~oneni
12 Amortizat~on ComQonent
(reciprocal of life qf property)
13 Tatal ~ Capttal~xatson Rate
(sum lines 9 throug~ 12}
TAXES
14 Mdls Act Assessment
(Net Operat~ng Encomel
Lrne 13)
i%a (F`ixed at 1% due to Proposition 13)
3% (30 years = 1130 = 3% Generally constant but may 1~e read~usted based u~on structure'S CURS[fl1L[10I1 S1i3I~fl3I5 }
I~,S ~lb
,~~a4~ ~03 _
15 Tax Under Mills Act ,~~ I1 j~ f? ~ ~,~ _
(Lme 14 x 01058816)
16 Currcnt '~x 2% ~ 2~ ~s~ ~ 0,~
1 ~ Tax Savings ~-1~ 6`f 3, ~ 0
(Lme lb rn~nus Lrne 15)
I$ Annua~ Cost to C~ty ,~ 2.~ ~~ 0~ -
{L~ne 17 x 14%)
FINANCIAL ANALYSIS QF MILLS ACT CONTRACT - 1424 2402 Fourth 5treet, #9 (HoHister Terrace)
REVENUES Current Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
1) Monthly Rental lncome 3% $2,000
2) Annual Rental Income $24,000 $24,720 $25,462 $28,225 $27,012 $27,823 $28,657 $29,517 $30,402 $31,315 $32,254
ANNUALEXPENSES
3} insurance 5% $3,000 $3,150 $3,308 $3,473 $3,647 $3,829 $4,p20 $4,221 $4,432 $4,654 $4,867
4) Ut~hties 6% $1,200 $1,z72 $1,348 $1,429 $1,515 $1,606 $1,7U2 $1,904 $1,913 $2,027 $2,149
5) Maintenance 5% $1,800 $1,680 $1,7fi4 $1,652 $1,945 $2,042 $2,144 $2,251 $2,364 $2,482 $2,606
6j Management 5°Ja $9,440 $7,512 $1,588 $7,667 $1,750 $1,838 $1,93a $2,026 $2,128 $2,23a $2,346
7) Othe~ 2% $500 $510 $520 $531 $541 $552 $563 $574 $58fi ~59$ $649
8) Tota! Expenses $7,7a0 $8,124 $8,528 $8,952 $9,398 $9,867 $10,359 $10,87$ $'k1,422 $11,995 $12,597
(Sum Lines 3 - 7)
NES OPERTING INCOME $16,260 $16,596 $16,934 $17,274 $17,614 $17,956 $18,298 $18,839 $'E8,980 $19,320 $19,657
{LinO 2 Manus 8)
CAPITALkZATION RATE
9) Interest Componenf 8°/a
10) Historic Property Risk 4%
{2% to 4%)
11} Property Tax Gomponent 9%
~2) Amortization Component 3"/0
13} Capitalization Rate 1fi%
(Sum Line 9 - 12)
TAXES
14) MilEsActAssessment $104,803 $107,071 $1~9,251 $ii1,442 $ii3,641 $1i5,845 $1T8,050 $920,254 $122,453 $924,&43 $126,819
(NOlI Line 13)
15) Tax Under Mdls Act $1,0$6 $1,108 $1,131 $1,'!54 $1,176 $1,199 $1,222 $1,245 $1,268 $1,29Q $1,313
( l.ine 'i 4 X 01035146}
1fi) CurrentTax 2°/a $2,754 $2,809 $2,865 $2,923 $2,981 $3,041 $9,101 $3164 $3,227 $3,291 $3,357
17) 7ax Savings
(Line 16-Lme 15) $1,668 $1,701 $1,734 $1,769 $1,$05 $1,842 $1,$79 $7,919 $1,959 $2,001 $2,044
18) Annual Costs to CiEy
(Line 17 X 16%) $267 $272 $278 $283 $289 $295 $301 $307 $313 $320 $327
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EXHIBIT "C"
(;ItY~F ~.`,'~:~~r'.k°^:
HISTORIC PROPERTY PRESERVAT~~ ~~~~~~F~'
PROPOSED HOME IMPROVEMENTS
'98 MAY 1 ~ Al0 :39
The followmg renavation pro~ects shall be completed by the applicant over the inrtial IO year
term of the contract
Item Year Task
1 ~~ -1~ 4 0~ ~-} d ~J F
~ ~ ~t~ ~ fi ~~Pc~4f=~ S ~~N ~ `~~-
3. f~EP~4~ ~Zo K-~n! ~l i N10~ ~l
4 ~+°~ c N T ~~~ o~-
s ~ A'!V P ~S C -~r ~ ~
6 ~--~ T f c..~ ~/~'1~ S'
~ ~~ ~~ ~ut,~ }~ ~o n ~-~'
s [ ~l~ U ~~,~
9.
10
11
12
lmklrr~il~sact
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