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 Aqualified 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. The Mills Act contract is executed between the City and property owner, and results in a ten year agreement to lower property taxes. As a direct response to the tax savings, the property owner agrees to protect, preserve, and maintain the historical and architectural character of the property. A list of restoration or repair items to be accomplished over the contract period are incorporated into the Mills Act Contract. These restoration tasks are financed through savings generated by the lowered tax rate.

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 a property tax reduction. For owner-occupied structures, 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.

The initial Mills Act contract term is ten years. However, each year on the anniversary of the contract=s effective date, an additional year is added to the contract term unless the property owner or the City submits a notice of non-renewal to the other party in a timely manner. Effectively, the actual term of the contract is at least ten years, but may be indefinite, as it is automatically annually renewed.

This is the sixth Mills Act contract considered by the City. To date, five contracts have been recorded with the Los Angeles County Recorder, and filed with the Los Angeles County Assessor to complete the new tax assessment. The tax adjustment for this Mills Act contracts will be reflected on the property owners= October, 2000 tax bill

to the property=s historic integrity, including painting, roofing, chimney and window repairs, landscaping (including new fencing), and a bathroom upgrade.

The maintenance plan for this property is included in the Mills Act application and will be incorporated into the Mills Act contract. The maintenance plan provides a list of projects to be completed by the property owner during the initial ten year contract term. In addition, the application provides an estimate of the property owner=s tax savings as well as an estimate of the City=s annual costs due to the property tax reduction. Since this estimate is based on financial data submitted by the applicant, the County Assessor will verify the calculation prior to the final tax assessment. By executing the contract, the City does not corroborate the applicant=s submitted financial statement, but authorizes tax abatement for the property.

The Landmarks Commission reviewed this request earlier this year and directed Staff to forward a recommendation to the Council supporting the application. The Mills Act is one of the few financial incentives available to owners of historic properties and is an important tool in the Commission=s efforts to encourage the designation and long term preservation of the City=s historic resources.