SR-406-002 (13)
PCD:AA:AS:SR:RT:F:\CityPlanning\Share\COUNCIL\Mills Act\2005\Mills Act 2005 City Council Report (12-13-05).doc
Council Mtg: December 13, 2005 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 the Following Designated City
Landmarks and Contributing Structure to the Third Street Neighborhood
Historic District:
(05MA-001) 331 Palisades Avenue; Applicant: Hans Tiedemann
(05MA-002) 710 Adelaide Place; Applicant: Frydoun & Elsa Sheikhpour
(05MA-003) 1911 La Mesa Drive; Applicant: Michael & Gabrielle Boyd
(05MA-004) 1333 Ocean Avenue; Applicant: Hill Street Partners, III LLC
(05MA-005) 1337 Ocean Avenue; Applicant: Hill Street Partners, III LLC
(05MA-006) 2619 3rd Street; Applicant: Candra M. Docherty
(05MA-007) 404 Georgina Avenue; Applicant: Joy S. Jones
(05MA-008) 142 Adelaide Drive; Applicant: Mona E. Simpson
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 seven designated City
Landmarks and one Contributing Structure to the Third Street Neighborhood Historic
District comprised of six single-family residences and two commercial buildings.
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 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 historic
properties eligible for historic 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 residential or commercial structures that are rented, the net
operating income is determined based on actual rents received. For residential and
commercial 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.
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
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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 will be maintained. Similarly, the obligations and
property tax reduction benefits associated with the Mills Act Contract are also binding
upon successive property owners during the contract term.
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 payment of a penalty equal to
12.5% of the property’s assessed current fair market value of the property, as
determined by the County Assessor as though the property were free of the contractual
restriction. The City may also cancel the contract in the event of a breach of contract
conditions, whereby the property owner would be subject to pay the same 12.5%
penalty.
To date, there have been twenty-nine (29) Mills Act Contracts approved in the City of
Santa Monica.
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DISCUSSION/ANALYSIS
The eight (8) applications submitted in 2005 include two commercial properties and six
single-family properties. In addition to the specific restoration and repair obligations
listed below for each property, each Mills Act Contract will include a standard
requirement for ordinary maintenance and upkeep throughout the contract term for work
such as additional roof maintenance, and plumbing and electrical systems maintenance.
331 Palisades Avenue – The subject Mediterranean/Classical Revival Style single-
family residence was constructed by Frank L. Meline in 1913 and designated as a City
Landmark on July 11, 2005. A report was prepared by the architectural firm of Fonda-
Bonardi & Hohman assessing the condition of the property and its restoration and
maintenance needs, along with a schedule for completion of necessary repairs.
Because the subject residence is in excellent condition and has been very well
maintained, no restoration work of character-defining features or major repair of
structural elements is proposed at this time.
The maintenance activities proposed during the initial ten-year term of the Mills Act
Contract include the following: investigate and repair second floor roof and window
leaks within the first year; annual inspection, cleaning and repair of gutter and
downspouts; exterior repainting within five years; termite inspection and repair as
needed; re-roof of flat roof sections; and recoating the front steps with weatherproofing
materials within eight years.
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710 Adelaide Drive – The subject property, known as the Worrell “Zuni” House, is a
Pueblo Revival Style single-family residence designed by architect Robert Stacy-Judd in
1923-1924. The residence was designated as a City Landmark on March 10, 2003.
Charles Hefner, of Charles Hefner Architect, Inc., prepared the architect’s report
assessing the condition of the property and its restoration and maintenance needs. The
subject residence is in very good condition and has been well maintained by the
property owner. Significant investments have already been made for maintenance work,
repairs and upgrades over the past three years (e.g., new roof, foundation, interior
renovation, and plumbing and electrical upgrades).
The maintenance activities proposed for the residence during the initial ten-year term of
the Mills Act Contract include the following: within the first year of the Contract,
waterproof and repair the basement wall at northeast corner of building to ensure
property drainage and structural integrity; repair and refinishing of windows and exterior
doors within the first two years of the Contract; maintenance of exterior paint and finish;
and annual inspection and cleaning of rain gutters and downspouts. Consistent
maintenance and trimming of landscaping on site, specifically adjacent to the building, is
also recommended in order to reduce moisture damage to the building foundation.
1911 La Mesa Drive – The subject property, known as the Niemeyer/Strick House, is
an International Style single-family residence designed by renowned Brazilian architect
Oscar Niemeyer and constructed in 1963. The residence was designated as a City
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Landmark on December 8, 2003. The current property owners initiated extensive
restoration and rehabilitation of the single-family residence in 2003. The scope of work
included the following: extensive interior and exterior restoration; removal of a
cantilevered balcony on the west end of the south elevation; conversion of the garage
and study into a two-story library; and construction of a new garage addition with an
open balcony above. In 2004, the Landmarks Commission also approved a Certificate
of Appropriateness for previously-installed metal louvers (brise-soleil) over the windows
on the primary elevation.
A report was prepared by Sharon Johnston-Lee, of Johnston Marklee Associates,
assessing the condition of the property and its restoration and maintenance needs. The
subject residence is in excellent, restored condition. Therefore, no restoration work of
character-defining features is immediately required. However, ongoing maintenance is
necessary. Because there has been some water leakage identified on the west
perimeter entrance wall, repair/replacement of the flashing will be required in the next
year. Additionally, annual maintenance and repair of the roof system and west
trellis/exposed beams; repair and replacement of sliding glass doors and window units
over the next five years; and annual maintenance of perimeter brick walls is
recommended. Installation of a sub-grade drainage system at the east foundation wall is
also included as work to be performed within the first five years of the Contract term in
order to maintain the structural integrity of the original building foundation.
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1333 Ocean Avenue and 1337 Ocean Avenue – Two Mills Act Contracts were filed for
the properties at 1333 Ocean Avenue and 1337 Ocean Avenue by the owner of both
sites, Hill Street Partners III, LLC. The subject Mills Act Contract applications evaluate
both buildings and their restoration and maintenance needs. It should be noted that
both Landmark buildings are subject to a pending Development Agreement application
for the redevelopment of the properties located at 1327-1337 Ocean Avenue into a
seventy-seven room hotel, restaurant and publicly accessible plaza. The property
owner has been advised that regardless of the outcome of the pending Development
Agreement process for redevelopment of the properties at 1327-1337 Ocean Avenue,
they will be obligated to restore and maintain both Landmark buildings according to the
terms and conditions of the two Mills Act Contracts. The property owner is also aware
that both Mills Act Contracts may need to be amended in the future in the event that the
scope of work identified in the ten-year restoration/maintenance plans are
affected/modified by the pending Development Agreement.
1333 Ocean Avenue – The subject building is a Queen Anne Style Victorian House
constructed circa 1906. The residence, now used for commercial purposes, was
designated as a City Landmark on May 14, 2001. A report was prepared by Janek
Tabencki Domrowa, of JTD Architects, assessing the condition of the Queen Anne Style
Victorian building and its restoration and maintenance needs, along with a schedule for
completion of necessary repairs and ongoing maintenance.
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The ten-year restoration/maintenance plan includes recommendations for several
immediate restoration activities during the first two years of the contract. Since exterior
finish on the wood cladding is peeling and cracked in numerous areas, the building’s
exterior, including all siding, window frames and architectural features, should be
carefully prepped and repainted within the first year of the Contract. Replacement of all
exterior drainage features is recommended for completion within two years, and
upgrades to the existing electrical and plumbing systems are recommended within the
first three years of the Contract term. Other restoration activities proposed over the term
of the Contract include removal of several non-original elements: three dormers on the
south elevation roof line, and the front porch enclosure along the south half of the
primary elevation. These items are included in the ten-year restoration/maintenance
plan that will be an attachment to the Mills Act Contract.
1337 Ocean Avenue – The subject building is a Spanish Colonial Revival Style building
constructed in 1926 that was designated as a City Landmark on July 12, 2004. A report
was prepared by Janek Tabencki Domrowa, of JTD Architects, assessing the condition
of the subject building and its restoration and maintenance needs. The building is in
generally good condition, however, several restoration and upgrade activities are
proposed within the first three years of the Contract: removal of all non-original windows
and doors and installation of compatible replacements; and upgrade of all plumbing and
electrical systems in the building. Repainting of the entire exterior building, including all
window frames; roof inspection and repair; replacement of all exterior drainage features;
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and foundation inspection and repair are also recommended over the initial Contract
term.
2619 3rd Street – The subject property contains a Craftsman Style bungalow
constructed in 1909 and a guest house in the rear of the property. The subject primary
residence is a Contributing Structure to the Third Street Neighborhood Historic District
which was established by the City on July 24, 1990. The current property owner has
implemented extensive repair and restoration work on both the interior and exterior of
the residence and guest house on the property.
A report was prepared by Rachel Allen, AIA, of Rachel Allen Architecture, assessing the
condition of the main residence and guest house and their restoration and maintenance
needs, along with a schedule for completion of necessary repairs and ongoing
maintenance. Both the primary residence and guest house are in excellent condition
and have been very well maintained. Therefore, no restoration work of character-
defining features is proposed at this time. The ten-year restoration/maintenance plan
include the following work: installation of front and rear rain gutters on the main house
during the first year of the Contract; perform periodic inspection of the building
foundations and repair as required; maintenance of all exterior wood finishes, including
all wood siding, window frames, eaves, etc. and repaint the building exteriors within the
first five years of the Contract term; maintain existing asphalt shingle roof on main
house and replace in 2009; and maintain existing asphalt shingle roof on guest house
and replace in 2014.
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404 Georgina Avenue – The subject property, known as the John Byers Adobe
Residence, is a Mexican Colonial Revival Style single-family residence designed and
constructed by John Byers in 1920. The residence was designated as a City Landmark
on November 8, 2004. The Landmarks Commission approved on September 12, 2005 a
Certificate of Appropriateness for a 1,306 SF addition to the residence and substantial
associated interior rehabilitation.
Brian Murphy, of BAM Construction & Design, prepared the architect’s report assessing
the condition of the property and its restoration and maintenance needs. The ten-year
restoration/maintenance plan includes a list of substantial and immediate restoration
activities planned for the first year of the Contract: repair/replacement/upgrade of the
plumbing and electrical systems in the residence; replacement of deteriorated structural
framing; removal of existing interior ceilings for mold abatement; crawl space excavation
for better air circulation; and interior painting and restoration of interior wood finishes.
Termite inspection and extermination treatment; gutter and roof drain repair and
maintenance; courtyard paver replacement will also be required during the first year of
the Contract. Ongoing maintenance of site landscaping and site drainage systems will
also be required.
142 Adelaide Drive – The subject Craftsman Style single-family residence, known as
the Henry Weaver House, was designed and constructed by the Milwaukee Building
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Company in 1910. The residence was designated as a City Landmark on May 11, 1989
and was also listed on the National Register of Historic Places on December 27, 1989.
Brian Murphy, of BAM Construction & Design, prepared the architect’s report assessing
the condition of the property and its restoration and maintenance needs. The subject
residence is in excellent condition and has been very well restored and maintained. The
ten-year restoration/maintenance plan includes a list of interior and exterior work
recommended during the initial ten-year term of the Contract including the following:
repair and restoration of inoperable window sashes; replacement of damaged window
screens to match existing; remove abandoned electrical and plumbing lines; upgrade
plumbing system; install ventilation fans in the crawlspace; annual replacement of
deteriorated shingles and exterior wood trim; periodic termite inspection and abatement
as necessary; and application of exterior weatherproofing sealer on all exterior wood
finishes (woodwork, trim, shingles, casing) every three years.
The eight attachments contain information for each property, including a proposed
resolution, a draft Mills Act Contract (Historic Property Preservation Agreement), a Mills
Act Contract application with financial analysis for the property, and a proposed
restoration/maintenance 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
restore/rehabilitate in order to ensure the resource’s historic integrity and structural
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stability. Staff conducts a site visit to verify the information contained in the report. Staff
may identify additional restoration and maintenance items as necessary. The
recommendations in the architect’s report are reflected in the proposed 10-year
restoration/maintenance plan which becomes an attachment to the Mills Contract
entered into between the City of Santa Monica and the property owner(s).
It is important to note that property owners will be required to obtain all applicable
entitlements such as a Certificate of Appropriateness approved by the Landmarks
Commission or Landmarks Commission Secretary, and all associated building permits
for work proposed in the ten-year restoration/maintenance plan. Furthermore, all work
proposed in the ten-year restoration/maintenance plan must comply with “The Secretary
of the Interior’s Standards for the Treatment of Historic Properties with Guidelines for
Preserving, Rehabilitating, Restoring & Reconstructing Historic Buildings” (Weeks &
Grimmer, 1995).
Financial data is also requested in order to estimate the potential 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. Property tax assessments are
subject to re-assessment each year by the County.
Los Angeles County Assessor’s Office data shows that for the 2005-2006 tax year,
property value assessments of the twenty-nine (29) Santa Monica historic properties
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with executed Mills Acts Contracts have been reduced by 12% to 90%, with the average
reduction being 51%, when compared to their “Proposition 13” values. From these Mills
Act Contract assessments, correspondingly lower taxes have been levied at these
properties.
LANDMARKS COMMISSION REVIEW
The Landmarks Commission reviewed each of the eight Mills Act Contract requests at
its October 10, 2005 meeting and directed staff to forward recommendations to the
Council in support of all eight applications.
BUDGET/FISCAL IMPACT
Execution of these Mills Act Contracts will result in reduced property tax revenues to the
City estimated at $26,777 for the 2006-2007 fiscal year. However, the amount of
revenue loss is not significant in terms of total property tax revenues collected from all
properties in the City. A summary financial analysis table is included as an attachment
to the staff report (Attachment I).
RECOMMENDATION
It is recommended that the City Council adopt the eight 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 331 Palisades Avenue; 710 Adelaide Place; 1911 La Mesa Drive; 1333 Ocean
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Avenue; 1337 Ocean Avenue; 2619 3rd Street; 404 Georgina Avenue; and 142
Adelaide Drive.
Prepared by: Andy Agle, Interim Director
Amanda Schachter, Planning Manager
Stephanie Reich, Urban Designer
Roxanne Tanemori, Associate Planner
City Planning Division
Planning and Community Development Department
Attachments:
A. 331 Palisades Avenue: Draft Mills Act Resolution, Site Photographs, Architect’s
(See Adopted Resolution No. 10090 (CCS)).
Report, and Financial Analysis
Reference Contract No. 8533 (CCS).
B. 710 Adelaide Place: Draft Mills Act Resolution, Site Photographs, Architect’s
(See Adopted Resolution No. 10091 (CCS)).
Report, and Financial Analysis
Reference Contract No. 8534 (CCS).
C. 1911 La Mesa Drive: Draft Mills Act Resolution, Site Photographs, Architect’s
(See Adopted Resolution No. 10092 (CCS)).
Report, and Financial Analysis
Reference Contract No. 8535 (CCS).
D. 1333 Ocean Avenue: Draft Mills Act Resolution, Site Photographs, Architect’s
(See Adopted Resolution No. 10093 (CCS)).
Report, and Financial Analysis
Reference Contract No. 8536 (CCS).
E. 1337 Ocean Avenue: Draft Mills Act Resolution, Site Photographs, Architect’s
(See Adopted Resolution No. 10094 (CCS)).
Report, and Financial Analysis
Reference Contract No. 8537 (CCS).
F. 2619 3rd Street: Draft Mills Act Resolution, Site Photographs, Architect’s Report,
(See Adopted Resolution No. 10095 (CCS)).
and Financial Analysis
Reference Contract No. 8538 (CCS).
G. 404 Georgina Avenue: Draft Mills Act Resolution, Site Photographs, Architect’s
(See Adopted Resolution No. 10096 (CCS)).
Report, and Financial Analysis
Reference Contract No. 8539 (CCS).
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H. 142 Adelaide Drive: Draft Mills Act Resolution, Site Photographs, Architect’s
(See Adopted Resolution No. 10097 (CCS)).
Report, and Financial Analysis
Reference Contract No. 8540 (CCS).
I. Summary Table with financial information for the eight subject applications.
Additional attachments (hard copies) are available in the City Clerk’s
Office.
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