SR-406-002 (9)
PCD:SF:JT:AS:KC:EB:F:\PLAN\SHARE\COUNCIL\Mills Act\MA 2003 CC rpt .doc
Council Mtg: December 9, 2003 Santa Monica, California
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Mills Act Historical Property Agreements between the City of Santa Monica
and the Property Owners of 2402 4th Street, #3 (Hollister Court), a
Designated City Landmark; 317 Georgina Avenue (A. McFadden
Residence), a Designated City Landmark; 555 Seventh Street (Fones
Residence), a Designated City Landmark; 2607 Third Street, a Contributor to
the Third Street Neighborhood Historic District; and 502 Raymond Avenue
(Craftsman Bungalow), a Designated City Landmark.
Applicants: Pamina Gorbach (2402 4th Street, #3)
Jeffrey R. Beall and Lori Jean Swanson (317 Georgina Avenue)
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Danna Meyer (555 7 Street)
James Bianco & Lisa Mead (2607 Third Street)
Gail Howell (502 Raymond Avenue)
INTRODUCTION
This report recommends that the City Council adopt resolutions authorizing the City
Manager to negotiate and execute Mills Act Historic Property Preservation Agreements
between the City of Santa Monica and the property owners of five residential properties – a
designated contributor to the Third Street Neighborhood Historic District, and four
individually designated Landmarks.
BACKGROUND
The Mills Act is a state law that enables local governments to enter into contracts with
owners of qualified historic properties to authorize a property tax reduction. The Mills Act
is one of the few financial incentives available to owners of historic properties and is an
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important tool in the City’s efforts to encourage the designation and long-term preservation
of the City’s historic resources.
In 1991, as part of a comprehensive revision to the City’s Landmarks Ordinance, the City
Council authorized designated structures of merit, landmarks, and contributing structures
located in designated historic districts to be considered qualified historical properties
eligible for historical property contracts submitted pursuant to the provisions of California
Government Code Sections 50280-50290. As a result, property owners of such
designated historic properties may file a Mills Act Contract Application. Once approved, a
Mills Act contract requires the County Tax Assessor’s office to determine the value of the
historic property based upon its current net operating income, rather than upon the
traditional assessed valuation method, resulting in most cases in a property tax reduction.
For structures that are owner-occupied, the net operating income is determined by the
income the property would produce if rented. In exchange for the property tax reduction,
the owner agrees to protect, maintain and, if necessary, restore the historic property. To
date, there have been 13 Mills Act Contracts approved in the City of Santa Monica.
Under the traditional method of determining property taxes, properties are reassessed
when sold. However, since Mills Act contracts run with the property, subsequent owners
may realize greater tax benefits, as the assessed property value typically increases when
property is sold, resulting in an even greater difference between the property taxes under
the assessed valuation method versus the property tax calculation permitted by the Mills
Act contract. This can be a significant marketing feature for the property in terms of future
sales and is considered an important historic preservation incentive because the property
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will be maintained.
The initial Mills Act Contract term is a ten-year period. The agreement is renewed
automatically each year on the contract’s anniversary, and an additional year is added to
the contract term. This effectively makes the actual term of the contract at least ten years
but possibly indefinite unless the owner or City submits a notice of non-renewal. If such a
notice on non-renewal were submitted, the contract would terminate at the end of the then
current ten-year term. Alternatively, the owner may petition the City to initiate an
immediate cancellation, which would result in a penalty equal to 12% of the property’s
assessed market value. The City may also cancel the contract in the case of breach of the
contract conditions. The rights and obligations to the contract are also binding upon
successive property owners during the contract term.
ANALYSIS
2402 4th Street, #3
2402 4th Street, #3 (Hollister Court) is a unit that is part of a property designated as a City
Landmark on December 13, 1990. The property consists of two rows of Craftsman-style
bungalows facing a central walk street.
The one-story bungalow at 2402 Fourth Street, #3, is located in the center of the property
on the north side of the central walk street. The structure is generally in good condition,
with the most immediate repair needs focused on the front and rear decks where wood
boards and bricks require maintenance and weatherproofing. Otherwise, proposed
projects include general maintenance and smaller repairs.
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317 Georgina Avenue
The Spanish Colonial Revival style single-family residence at 317 Georgina Avenue
(known as the A. McFadden Residence) was built in 1923 and designated as a City
Landmark on February 10, 2003. Prior to the property’s designation as a landmark, the
current owners extensively restored and remodeled the structure (the front façade was not
affected apart from installing French doors similar to the originals on the staircase
landing). As part of this work, some new windows were installed that match original
windows that had been removed and the atrium skylight (an original feature in the house)
was sealed to stop the water damage that had been occurring. In addition, during the
renovation structural defects of an earlier remodel were revealed, and additional supports
were added. Currently, the structure is in very good repair.
The proposed maintenance plan includes some work this year to repair and augment rain
gutters that are inadequate or rotting. Other than this particular repair, general monitoring
and maintenance are proposed.
2607 Third Street
This multi-family property including a California bungalow-style main house at the front and
a rear structure with two units is a contributor to the Third Street Neighborhood Historic
District, designated on July 1, 1990. Both structures were built prior to 1915 and are
considered to be contributing structures. The main house was extensively restored in
2001-2002, including structural reinforcement and foundation improvements. Recently, the
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owner has also undertaken some repair to the rear structure containing two rental units,
including installation of a new roof. Because both structures are in generally good repair
at this time, the proposed maintenance plan includes general maintenance, interior and
exterior painting in 2007, and roof replacement in 2010. All exterior work would require
Landmarks Commission approval, through processes required for the Third Street
Neighborhood Historic District [SMMC Chapter 9.40].
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555 7 Street
This single-family Craftsman bungalow, known as the Fones Residence, was constructed
in 1914 and was designated on April 10, 2000, as a City Landmark. The structure is
currently undergoing major renovation, which was approved by the Landmarks
Commission through the Certificate of Appropriateness process. Prior to this work, the
structure was in very poor repair with a great deal of rotted wood and outdated electrical
and plumbing systems. Following completion of the current work, the house will be in very
good condition, so the proposed tasks include normal maintenance and repair.
502 Raymond Avenue
This two-unit residential property includes a Craftsman-style bungalow in the front
constructed in 1913 and designated on April 14, 2003, as a City Landmark. Prior to
designation, this property underwent a major restoration that restored its original character,
through repair and retention of the Craftsman features including uncovering the original
brick columns on the patio. During that construction, the front structure received a new
foundation, as well as upgraded electrical and plumbing systems. The property is,
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therefore, in very good repair at this time and ordinary maintenance is proposed along with
installation of screens in the first few years of the contract.
DISCUSSION/ANALYSIS
The five attachments contain information for each property, including a proposed
resolution, a draft contract (Historic Property Preservation Agreement), a Mills Act Contract
application with financial analysis for the property and a proposed restorative/rehabilitation
plan.
The City requires Mills Act Contract applicants to provide a report prepared by a qualified
architect regarding the condition of the structure and the need to rehabilitate in order to
ensure the resource’s historic integrity and structural stability. The recommendations in
the report are reflected in the proposed 10-year plan. Financial data is also requested in
order to roughly calculate the tax reduction and provide guidance to the Landmarks
Commission and Council in making a decision on this request. The County Assessor will
make a final determination of the taxes due when the approved contract is submitted and
recorded.
County Assessor data shows that property tax assessments of the 13 Santa Monica
historic properties with Mills Acts Contracts have been reduced by amounts between 14%
and 75%, with the median at 47%, when compared to their “Proposition 13 Values.” From
these assessments, correspondingly lower taxes have been levied at these properties.
Properties purchased fairly recently at higher sales prices have generally realized a
greater reduction in their assessments, as would be expected. This is particularly
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illustrated by two assessments of similar Hollister Court units, at which reduction from the
current property assessment differed by 37% even though the assessments only differed
by about $5,000.
LANDMARKS COMMISSION REVIEW
The Landmarks Commission reviewed these five requests at its October 13, 2003, meeting
and directed staff to forward recommendations to the Council in support of all five
applications.
BUDGET/FISCAL IMPACT
Execution of these Mills Act contracts will result in reduced property tax revenues to the
City estimated at $7,200. However, the amount of revenue loss is not significant in terms
of total property tax revenues.
RECOMMENDATION
The Mills Act applications for all five of these properties have been properly submitted,
contain appropriate maintenance/restoration plans and will assist the property owners to
preserve these City Landmarks. It is recommended that the City Council adopt the five
attached resolutions and authorize the City Manager to execute Historical Property
Preservation Agreements under the Mills Act, between the City of Santa Monica and each
of the property owners of 2402 Fourth Street #3, 317 Georgina Avenue, 2607 Third Street,
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555 7 Street and 502 Raymond Avenue.
Prepared by: Suzanne Frick, Director
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Amanda Schachter, Principal Planner
Kimberly Christensen, AICP, Senior Planner
Elizabeth Bar-El, AICP, Associate Planner
City Planning Division
Planning and Community Development Department
SEE CITY CLERK’S OFFICE FOR THE FOLLOWING ATTACHMENTS TO THIS STAFF
REPORT. ASK FOR THE CONTRACT AND OR RESOLUTION NUMBERS AS
INDICATED BELOW:
Attachments: A. 2402 Fourth Street, #3: Supporting Documentation (including the draft
Mills Act Resolution and draft Historic Property Preservation
Agreement). The Mills Act Contract Application, Architect’s Report,
Financial Analysis, and photographs are attachments which are not
SEE CONTRACT NO. 8299 (CCS)
available electronically.
SEE RESOLUTION #9910 (CCS)
B. 317 Georgina Avenue: Supporting Documentation (including the draft
Mills Act Resolution and draft Historic Property Preservation
Agreement). The Mills Act Contract Application, Architect’s Report,
Financial Analysis, and photographs are attachments which are not
SEE CONTRACT NO. 8300 (CCS)
available electronically.
SEE RESOLUTION #9911 (CCS)
C. 2607 Third Street: Supporting Documentation (including the draft
Mills Act Resolution and draft Historic Property Preservation
Agreement). The Mills Act Contract Application, Architect’s Report,
Financial Analysis, and photographs are attachments which are not
SEE CONTRACT NO. 8301(CCS)
available electronically.
SEE RESOLUTION #9912 (CCS)
D. 555 7th Street: Supporting Documentation (including the draft Mills
Act Resolution and draft Historic Property Preservation Agreement).
The Mills Act Contract Application, Architect’s Report, Financial
Analysis, and photographs are attachments which are not available
SEE CONTRACT NO. 8302 (CCS)
electronically.
SEE RESOLUTION #9913 (CCS)
E.
502 Raymond Avenue: Supporting Documentation (including the draft
Mills Act Resolution and draft Historic Property Preservation
Agreement). The Mills Act Contract Application, Financial Analysis,
and photographs are attachments which are not available
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SEE CONTRACT NO. 8303 (CCS),
electronically.
SEE RESOLUTION #9914 (CCS)
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