Carmel-by-the-Sea City Council
October 3, 2023

WHEREAS, a Phase II report was prepared by a qualified professional, Seth Bergstein of PAST Consultants, dated June 30, 2023, and found the proposed amendments to be consistent with the Secretary of the Interior’s Standards for Rehabilitation provided the recommendations outlined in the report were carried out; and
WHEREAS, on July 17, 2023, the Historic Resources Board held a duly noticed public hearing to receive public testimony regarding the Determination of Consistency for the application, including without limitation, information provided to the Planning Commission by City staff and through public testimony on the application; and
WHEREAS, on July 17, 2023, the Historic Resources Board adopted Resolution 2023- 009-HRB issuing a Determination of Consistency for the construction a 15,351-square-foot mixeduse building with a 9,805-square-foot subterranean garage on a portion of the Northern California Savings & Loan Complex site; and
WHEREAS, on August 3, 2023, during the 10-business day appeal period of the Historic Resources Board’s decision, two City Council members requested the Council’s Right of Review of the Historic Resources Board’s decision consistent with CMC 2.04.160; and WHEREAS, the Right of Review hearing was scheduled for the next available hearing date, September 12, 2023; and
WHEREAS, on September 1, 2023, a notice of the public hearing scheduled for September 12, 2023, was published in the Carmel Pine Cone in compliance with State law (California Government Code 65091) and mailed to owners of real property within a 300-foot radius of the project indicating the date and time of the public hearing; and WHEREAS, on or before September 1, 2023, the Applicant posted the public notice on the project site and hand-delivered a copy of the public notice to each property within a 100-foot radius of the project site indicating the date and time of the public hearing; and WHEREAS, on September 12, 2023, the City Council held a de novo public hearing to receive public testimony regarding the Determination of Consistency for the application, including without limitation, information provided to the City Council by City staff and through public testimony on the application; and
WHEREAS, as part of a Right of Review hearing, the City Council may uphold the decision of the board, commission, or committee, amend the decision and/or conditions attached to the decision, overturn the decision, or remand the matter to the board, commission or committee for further consideration (CMC 2.04.160.B); and
WHEREAS, on September 12, 2023 the City Council moved to continue the project with direction to staff to prepare specific findings and conditions based on the Council discussion overturning the previous Historic Resources Board Determination of Consistency (Resolution 2023-009-HRB), with new findings of Consistency and Conditions of Approval for the project to Attachment 1
Resolution 2023-100

be brought back for adoption at the October 3, 2023 hearing in accordance with CMC

17.32.160.B.1.a; and
WHEREAS, while the request for the Right of Review was initiated due to concerns surrounding the ornamented concrete wall (“Wall”) at the southwest corner of the Community Room, additional concerns were raised regarding the proposed projects siting and spatial relationships to the Northern California Saving and Loan Complex (“Complex”) as a whole; and WHEREAS, on September 22, 2023, a notice of the public hearing scheduled for October 3, 2023, was published in the Carmel Pine Cone in compliance with State law (California Government Code 65091) and mailed to owners of real property within a 300-foot radius of the project indicating the date and time of the public hearing; and WHEREAS, on or before September 22, 2023, the Applicant posted the public notice on the project site and hand-delivered a copy of the public notice to each property within a 100-foot radius of the project site indicating the date and time of the public hearing; and WHEREAS, on October 3, 2023, the City Council held a public hearing to receive public testimony regarding the Determination of Consistency for the application, including without limitation, information provided to the City Council by City staff and through public testimony on the application; and
WHEREAS, this Resolution and its findings are made based upon evidence presented to the City Council at the hearing including, without limitation, the staff report and attachments submitted by the Community Planning and Building Department; and WHEREAS, the City Council hereby finds that to allow the remaining original intact portion of the ornamented concrete wall to be visible from the public right-of-way, a waiver from the buildto-line requirement (CMC 17.14.130) may be granted by the Planning Commission for portions of the proposed building located on Lot 8, for up to 5-feet from the property line. This waiver and creation of a Design Non-Conformity is granted in accordance with CMC 17.32.100.D, Benefits Available to Historic Resources on the Register and is intended to be a benefit to the applicant and not a mandated requirement; and
WHEREAS, the City Council did hear and consider all said reports, attachments, recommendations and testimony herein above set forth and used their independent judgement to evaluate the project; and
WHEREAS, the California Environmental Quality Act (California Public Resources Code §§ 21000, et seq., “CEQA”), together with State Guidelines (14 California Code Regulations §§ 15000, et seq., the “CEQA Guidelines”) and City Environmental Regulations (CMC 17.60) require that certain projects be reviewed for environmental impacts and that environmental documents be prepared; and
Attachment 1
Resolution 2023-100

WHEREAS, adoption of a finding of consistency is “not a project” pursuant to section 15378 of the CEQA Guidelines. Adoption of a finding of consistency does not grant any permits or entitlements approving a project which would result in a direct or indirect physical change in the environment; and
WHEREAS, the facts set forth in the recitals are true and correct and are incorporated herein by reference.

NOW THEREFORE, BE IT RESOLVED, the City Council of the City of Carmel-by-theSea makes the following findings regarding the project:

City Council Findings
No.

1. The use of the ornamented concrete method of construction was used on both the Bank Building and the site walls, and originally linked the building to its surroundings.

2. The south portion of the ornamented concrete wall remains intact enough to reveal the original stone pattern design and retain its historical significance.

3. The decision to move the concrete wall is a major alteration to a historic resource and affects the entire Northern California Savings and Loan Complex.

4. Breaking apart or moving portions of a historic resource destroys the integrity of the resource.

5. The subject concrete wall is considered a work done by a master craftsman, Brad Bowman, with careful and deliberate thought in the placement of the stones and sand finish.

6. Moving the subject concrete wall, and in turn the project, would violate three of the Secretary of the Interior’s Standards:

1. Standard #2: The historic character of a property shall be retained and preserved. The removal of historic materials or alteration of features and spaces that characterize a property shall be avoided.
a. Council Finding: The ornamented concrete walls are an original landscape element from the 1972 design that still stands substantially intact today.

Further, the spatial relationship between the Community Room and Bank Building are character defining features of the site. These spatial relationships extend beyond the building walls and include the ornamented concrete walls which were part of the original design concept and define the functional space of the complex from the parking lot.

2. Standard #5: Distinctive features, finishes, and construction techniques or examples of craftsmanship that characterize a historic property shall be preserved. a. Council Finding: The wall exhibits distinctive materials, features, finishes and construction techniques and is an outstanding landscape feature of the 1972 design.

Attachment 1
Resolution 2023-100

3. Standard #9: New additions, exterior alterations, or related new construction shall not destroy historic materials that characterize the property. The new work shall be differentiated from the old and shall be compatible with the massing, size, scale, and architectural features to protect the historic integrity of the property and its environment.
a. Council Finding: The proposed new construction will destroy historic materials if the wall is moved from its intended position. The spatial relationships that bring light and space to the entire complex, and are a character defining feature of the resource, will be forever dwarfed by the overly large and looming structure in the adjoining buildings. The Bank Building and Community Room were designed to be viewed from all four sides. Further, the complex exists on a corner in the downtown area and the environment that surrounds that building, including such landscape features, are also important. The ornamented concrete wall is significant for both its spatial significance on the site as well as the artistic value.

7. The same reasons for not moving the Community Room, which were found by the City Council on May 2, 2023 (Resolution 2023-052), also apply to the relocation of the wall.

8. The original intent of the architect’s (Burde & Shaw, whom are listed in the City’s Historic Context Statement) 1972 design must be respected which included the walls as an integral part of the design.

9. The important spatial relationships of the Northern California Saving and Loan Complex will be altered. The proposed project will loom over the Community Room. Removal of the remaining original concrete wall that shelters the community room on the south side would leave the Community Room windows looking out at the site of a new building instead of the artistic interior of the pebble wall, and eliminate and diminish the character defining spatial relationships of the site.

10. The ornamented concrete wall is a distinctive feature of the site and a piece of publicly viewed art on private property and is a character defining feature of the site.

11. The size of the proposed project itself demeans the existing Savings and Loan complex not by changing it, but rather by minimizing it into less significance. The proposed project does not subordinate to the complex but actually overwhelms it and confuses the composition of the entire block.

13. The proposed project does not respect the space of the environment and the project needs to be modified so that the Bank Building and Community Room maintain their spatial relationships and are not subordinated by the proposed development.

14. The site is a Historic Resource in the heart of downtown Carmel By the Sea. It is important that the City preserves Historic Resources consistent with municipal code section 17.32.

BE IT FURTHER RESOLVED, that an application to repair the damage to the original ornamented concrete walls as a result of the nails being installed in the wall and used to support the story poles shall be submitted to the Community Planning and Building Department within 30- calendar days of the date of this action. Failure to submit an application within 30-calendar days may result in further enforcement pursuant with CMC 17.32.190.

Attachment 1
Resolution 2023-100

BE IT FURTHER RESOLVED, based on the above findings and evidence, that the City Council of the City of Carmel-By-The-Sea does hereby overturn the July 2023 decision of the Historic Resources Board (Reso. 2023-009-HRB) and issue a Determination of Consistency with the Secretary of the Interior’s Standards for the construction of a mixed-use building with subterranean garage on a portion of the Northern California Savings & Loan Complex site. This Determination of Consistency is further predicated on the following Recommendations and Draft Conditions of Approval being incorporated into the project, and accepted and approved by the City of Carmel-by-the-sea Planning Commission as part of the discretionary permit and approval for this project:

City Council Conditions
No.

Conditions for Consistency with Secretary’s Standards

1. Ornamented Concrete Wall. Prior to review by the Planning Commission, the Design Review plans shall be revised and submitted to the Community Planning and Building Department, so that the original ornamented concrete walls located adjacent to the Community Room are shown to remain in their original locations and configuration.

2. Preservation of Spatial Relationships. Prior to review by the Planning Commission, the Design Review plans shall be revised and submitted to the Community Planning and Building Department, to preserve the existing spatial relationship of the Northern California Savings and Loan Complex.

At a minimum, all proposed structural elements shall be located outside of the Preservation Buffer as depicted in Exhibit A of this resolution. Walkways, at grade stairways, landscaping, paving, and similar features may be allowed within the Preservation Buffer, however, building elements that are defined as building coverage (CMC 17.14.130) shall not be permitted to encroach. Building eaves shall be limited to an encroachment of 18 inches or less.

3. Preservation of Site Context. To ensure the Northern California Savings and Loan Complex is not subordinated by the proposed development, prior to review by the Planning Commission, the Design Review plans shall be revised and submitted to the Community Planning and Building Department, to preserve the context of the site so that the Saving and Loan Complex remains a prominent feature as viewed from 7th Avenue and Dolores Street. Changes to be considered include but are not limited to: articulation of the front elevation to preserve and open the view from Dolores Street looking north, reducing and minimizing the mass of the structure(s) to maintain to not diminish the character of the complex, and further enhancing the open space around the Northern California Savings and Loan Complex.

Conditions of Approval

5. Ornamented Concrete Wall. The original ornamented concrete wall located at the southwest corner of the Community Room shall remain in its existing location and configuration. It shall remain unaltered and protected through construction. Site improvements shall not significantly obstruct the wall from public view and the wall shall remain accessible to the public as a piece of public art as part of a courtyard, interblock-walkway, or other means.

6. Community Room Repairs. If repairs or alteration of any nature are proposed for the Community Room, the applicant shall submit in writing to the Community Planning and Building Department an application outlining the details of any proposed work for review and approval prior to commencement of work. Any deteriorated exterior elements for the Community Room should be repaired, rather than replaced whenever possible.

Attachment 1
Resolution 2023-100

PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF CARMEL-BYTHE-SEA this 3rd day of October, 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

APPROVED: ATTEST:
_________________________ _________________________
Dave Potter Nova Romero, MMC
Mayor City Clerk
(Exhibit A attached)
Attachment 1
Resolution 2023-100

Exhibit A
Preservation Buffer Area
Figure 1. Preservation Buffer from Condition #2 illustrated in red. Build-to-Line waiver area from recitals is shown in yellow.

The buffer includes:
• A minimum setback of 5’ from the exterior of the original of the ornamented concrete wall;
• Maintaining the minimum separation around the community room on the south and east side as measured as the minimum distance from Community Room to the non-original (staff estimates 7’6” is the minimum distance from the Community Room to the non-original wall);
• Maintaining the minimum separation between the community room and the bank building (staff estimates this distance is 8’5”); and
• Keeping a 50% buffer of the minimum separation between the community room and the bank building from the northern property line adjacent to the Bank Building site (approximately 50% of the width of separation between the Bank Building and Community Room; staff estimates this distance is 4’3”).

Attachment 1

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
October 3, 2023

PUBLIC HEARINGS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Katherine Wallace, Associate Planner
APPROVED BY: Chip Rerig, City Administrator
SUBJECT:

MA 23-116 (Esperanza Carmel, LLC): Consideration of a Mills Act Contract application MA 23-116 (Esperanza Carmel LLC) for the historic "Mrs. Clinton Walker House" located at 26336 Scenic Road in the Single-Family Residential (R-1) District.

APN 009-423-001.

RECOMMENDATION:

Accept the recommendation of the Historic Resources Board and approve the Mills Act Historical Property Contract MA 23-116 (Esperanza Carmel, LLC) for the historic "Mrs. Clinton Walker House” located at 26336 Scenic Road (APN 009-423-001) and authorize the City Administrator to execute the contract (Attachment 1).

BACKGROUND/SUMMARY:

The property is located at 26336 Scenic Road in the Single Family Residential (R-1) Zoning District (Attachment 2, Exhibit A). The existing residence is known as the “Mrs. Clinton Walker House,” and is also known as “Cabin on the Rocks.” The low, one-story, concrete and Carmel stone building projects out on a granite outcropping over Carmel Bay. The residence was designed by architect Frank Lloyd Wright in 1948 and was constructed by Miles Bain and Walter Olds in 1951-1952 for the original owner, Mrs. Clinton Walker.

A Department of Parks and Recreation (DPR) Form 523 was completed for the “Mrs. Clinton Walker House” in 2001 by Richard N. Janick (Attachment 3, Exhibit B) and the resource was added to the Carmel Inventory on May 25, 2005. A Resolution Designating a Historic Resource for APN 009-423-001 was recorded with the County Recorder on January 4, 2007 (Document #2007001115).

In order to qualify for a Mills Act contract, a property must first be included on the Carmel Inventory and then added to the Carmel Register of Historic Resources. As noted above, the property was added to the Carmel Inventory in 2005. The property was also listed on the National Register (reference #16000634), and on the California Register on September 19, 2016. CMC Section 17.32.090.A.1 states, “Resources identified as significant at a State or national level in the inventory shall be automatically listed in the register.” The resource was therefore automatically added to the Carmel Register.

On May 28, 2019, then-property owner Charles Henderson submitted an application for a Mills Act Historical Property Contract. The Historic Resources Board recommended approval of the contract on June 17, 2019, and on December 8, 2020, the City Council voted to enter into a Mills Act Historical Property Contract with the property owner. However, before the contract was finalized and recorded with the County, the property owner withdrew the application.

The property was sold on February 17, 2023 to Esperanza Carmel, LLC. On April 20, 2023, Christopher Mitchell, Managing Director of Esperanza Carmel, LLC, submitted a Mills Act application (MA 23-116) on behalf of the current property owner. On August 21, 2023, the Historic Resources Board adopted Resolution 2023-011-HRB (Attachment 5), recommending that the City Council enter into a Mills Act Contract with Esperanza Carmel, LLC for the historic “Mrs. Clinton Walker House.” Contract Value
The Monterey County Assessor’s Office is responsible for determining the value of a property under Mills Act Contract in accordance with sections 439 through 439.4 of the Revenue and Taxation Code. Properties with a Mills Act Contract are not valued based on sales data; rather they are valued by a prescribed income capitalization method (Attachment 6). After a Contract is approved, it is forwarded to the Monterey County Assessor who then determines the Mills Act value.

At previous Mills Act hearings, members of Council requested that staff obtain a preliminary calculation of Mills Act Contract values for the purposes of understanding the potential local tax revenue offset. The Monterey County Assessor has informed the City that time constraints and process complexity make preliminary calculations infeasible. Therefore, staff cannot provide the actual or estimated value of property tax reduction for Council’s consideration. Jerry Gatt, Appraiser III, represented the Monterey County Assessor and attended the April 4, 2023 Council meeting to explain the assessment process.

Contract Summary
A Mills Act contract under State law is an agreement between the City of Carmel and a property owner of a historic building listed on the Carmel Register. In exchange for reduced property taxes, the property owner is contractually obligated to perform annual maintenance on the building. The property owner benefits from a reduction in property taxes. The City benefits from assurance, via contract, that the historic building is rehabilitated, maintained, and preserved with a portion of those property taxes that the city is giving up.

The primary purpose for offering Mills Act contracts in the City of Carmel-by-the-Sea is to assist in and ensure the rehabilitation or restoration and long-term maintenance of historic resources. All properties listed on the City’s Historic Register in all districts that have been preserved in their historical size, form, and design without significant alterations are eligible for Mills Act contracts.

All Mills Act contracts have a term of 10 years, and one year is added to this term annually upon each anniversary date of the contract unless one or both parties (City and property owner) have taken action to terminate the contract. The City Administrator is authorized to initiate contract termination on behalf of the City based on recommendations of the Community Planning & Building Department. The contract rights and obligations are binding upon all successive owners of the property during the life of the contract. The property retains the lower Mills Act tax rate when sold. To end a contract, either party may submit a notice of non-renewal to the other party. Such notices shall cause the contract to terminate at the end of the thencurrent 10-year contract period. Cancellation of a contract by the City due to non-compliance requires a public hearing and, if canceled, results in the immediate termination of the contract and a penalty equal to

12.5 percent of the assessed market value of the property.

The contract requires that the historical elements of the property are maintained in good condition. This includes a plan for rehabilitation and maintenance and may include a program to restore deteriorated features. All recipients of Mills Act contracts are required to implement a rehabilitation/restoration and maintenance plan prepared by a qualified professional. An annual report is submitted to the Community Planning & Building Department specifying all work that has been done to maintain and preserve the historic resource over the year in compliance with the approved rehabilitation/restoration and maintenance plan. All rehabilitation/restoration and maintenance work must be completed in conformance with the Secretary of Interior’s Standards for Rehabilitation and all proposed projects are subject to a Design Study review prior to commencement of the work. Minor alterations, as defined in CMC section 17.32.150, may be approved by staff; however, major alterations, as defined in CMC section 17.32.160 would be reviewed by a qualified professional and presented to the Historic Resources Board for review. All Mills Act contracts must specify that the rehabilitation/restoration and maintenance plan shall be updated at least every ten years by a qualified professional and approved by both parties.

The Historic Resources Board considers each application for a Mills Act contract and provides a recommendation to the City Council to approve, approve with conditions, or deny the application.

The City Council considers the recommendations from the Historic Resources Board at a public hearing and resolves to approve, approve with conditions, or deny the proposed contract with sufficient time for action by the City Clerk so that recordation of approved contracts occurs before December 31st of the year in which the application is received.

STAFF ANALYSIS
Findings
Carmel Municipal Code Section 17.32.100.B.6(c) sets forth findings that the Historic Resources Board and City Council shall make in order to grant approval of a Mills Act Contract. The required findings are listed below followed by a staff response on how the application meets the requirements.

1. The building is designated as a historic resource by the City and is listed on the Carmel Register.

Staff Response: A DPR 523 form was prepared by Richard N. Janick in 2001 (Attachment 1, Exhibit B), evaluating the property for historical significance and finding the property meets the criteria for listing as a local historic resource. The City added the property to the Carmel Inventory on May 25, 2005. A Resolution Designating a Historic Resource for APN 009-423-001 was recorded with the County Recorder on January 4, 2007 (Document #2007001115). The property was also listed on the National Register (reference #16000634), and on the California Register on September 19, 2016. CMC Section 17.32.090.A.1 states, “Resources identified as significant at a State or national level in the inventory shall be automatically listed in the register.” The resource was therefore automatically added to the Carmel Register. The application meets this finding.

2. The proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property.

Staff Response: The applicant submitted a rehabilitation and maintenance plan (Attachment 4, Exhibit C). The plan covers a period of 10 years from 2024-2033 and estimates $1,343,654 in work projects. The plan was compiled by Christopher Barlow, Architect (and qualified professional), on behalf of the applicant.

The plan includes routine maintenance (such as exterior painting) as well as more substantial repairs including replacing the roof, electrical and plumbing upgrades, window rehabilitation and replacement (if deteriorated beyond repair); and replacing the interior boiler. All rehabilitation and maintenance work will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. All exterior work is subject to Design Study approval and a determination of consistency with the Secretary of the Interior's Standards for Rehabilitation. The proposed plan meets this finding.

3. Alterations to the historic resource have been in the past, and will continue to be in the future, limited to interior work and to exterior rehabilitation and alterations that:
(A) Comply with the Secretary’s Standards (future additions only); and (B) Do not significantly alter, damage or diminish any primary elevation or characterdefining feature; and (C) Do not increase floor area on the property by more than 15 percent beyond the amount established in the documented original or historic design of the resource; and (D) Do not result in any second-story addition to a single-story historic resource.

Staff Response: Past exterior rehabilitation has not significantly altered, damaged, or diminished any primary elevation or character-defining feature or resulted in a second-story addition. An addition constructed in 1960-1961 by Sandy Walker, AIA, was based on a design by Frank Lloyd Wright and is considered part of the historic resource. As noted above, planned rehabilitation and maintenance work will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. Any future alterations are required to be consistent with conditions A-D above. Minor alterations, as defined in CMC section 17.32.150, may be approved by staff; however, major alterations, as defined in CMC section

17.32.160 would be reviewed by a qualified professional and presented to the Historic Resources Board for review. The application meets this finding.

4. The Mills Act contract will aid in offsetting the costs of rehabilitating and maintaining the historic resource.

Staff Response: Approval of the contract would assist in offsetting the rehabilitation and maintenance costs of preserving the “Mrs. Clinton Walker House” by reducing the tax liability on the property thereby freeing up funds for the rehabilitation. Some of the more notable work that is proposed to be accomplished within the first few years would include electrical and plumbing upgrades, boiler replacement, window repair (where possible) and in-kind replacement (where deteriorated beyond repair), and façade brickwork maintenance. The application meets this finding.

5. Approval of the Mills Act contract will represent an equitable balance of public and private interests and will not result in substantial adverse financial impact on the City.

Staff Response: Approval of the Mills Act Contract will be consistent with Goal 1-5 and Objective 1-16 of the Land Use & Community Character Element of the General Plan which encourages providing incentives for property owners to preserve and rehabilitate historic resources. Although the adoption of a Mills Act Contract will decrease property tax revenue to the City, this contract represents an equitable balance of public and private interests:
1) The City Council adopted Resolution 2016-068 on September 13, 2016, limiting the number of Mills Act contracts that can be approved to fifteen (15) in any three-year calendar period. No applications were approved in 2020 or 2021, four applications were approved in 2022, one application has already been approved in 2023 (L’Auberge), and four total applications are currently in review in 2023. 2) Carmel currently has 292 historic resources, and since the adoption of the Mills Act program in 2004, the City has entered into a total of fifteen Mills Act Contracts. 3) The City would continue to receive a portion of the property tax revenue (which has increased following the February 2023 sale of the property) and the investment in rehabilitation and maintenance supports local tourism, which benefits both private and public interests.

The value of preserving a historic resource offsets the loss of revenue.

FISCAL IMPACT:

The City will have a diminished tax base from the property at 26336 Scenic Road for the term of the contract. The amount is unknown at this point.

PRIOR CITY COUNCIL ACTION:

On December 8, 2020, the City Council voted to enter into a Mills Act Historical Property Contract with the then-property owner. However, before the contract was finalized and recorded with the County, the property owner withdrew the application.

On March 3, 2020, the City Council adopted standard contract language for Mills Act Contracts. On April 4, 2023, the City Council reviewed the City’s Mills Act Policy and opted not to make any changes.

Next Steps: If the City Council enters into a Mills Act Contract for this property, the contract will be recorded with the Monterey County Recorder and will take effect January 1, 2024.

ATTACHMENTS:

Attachment 1) Standard Mills Act Contract
Attachment 2) Exhibit A - Legal Description
Attachment 3) Exhibit B - DPR 523 Form “Mrs. Clinton Walker House” Attachment 4) Exhibit C - Rehabilitation/Maintenance Plan Attachment 5) Resolution 2023-011-HRB
Attachment 6) Guidelines for the Assessment of Enforceably Restricted Historical Property

RECORDING REQUESTED BY

CITY OF CARMEL-BY-THE-SEA

AND WHEN RECORDED MAIL TO

Carmel City Hall
Attn: Community Planning & Building
P.O. Box CC
Carmel-By-The-Sea, CA 93921 This space reserved for the Recorder’s use only

CITY OF CARMEL-BY-THE-SEA

MILLS ACT HISTORIC PROPERTY PRESERVATION CONTRACT
THIS AGREEMENT is made and entered by and between the CITY OF CARMEL-BY-THE-SEA a municipal corporation (hereinafter referred to as “City”), and Esperanza Carmel, LLC (hereinafter referred to as “Owner”).

RECITALS
(i) California Government Code Section 50280, et seq. (known as the Mills Act) authorizes cities to enter into contracts with the owners of qualified historic properties to provide for their appropriate use, maintenance and restoration such that these historic properties retain their historic characteristics;
(ii) The Owner possesses fee title in and to that certain real property, together with associated structures and improvements thereon, located at 26336 Scenic Road (APN:
009-423-001), Carmel-By-The-Sea, California, (hereinafter referred to as the “Historic Property”). A legal description of the Historic Property is attached hereto, marked as “Exhibit A” and is incorporated herein by reference;
(iii) The property is identified as a historic resource on the City of Carmel-By-The-Sea’s Historic Inventory and Register of Historic Resources and is further described in the DPR 523 Form attached hereto, marked as “Exhibit B” and is incorporated herein by reference;
(iv) City and Owner, for their mutual benefit, now desire to enter into this Agreement both to protect and preserve the characteristics of historical significance of the Historic Property, as it exists at the date of this contract and as described in the City’s Register of Historic Resources and the National Register of Historic Places, and to qualify the Historic Property for an assessment of valuation pursuant to the provisions of Article 1.9 (commencing with section 439) of Chapter 3 of Part 2 of Division 1 of the California Revenue and Taxation Code.

Attachment 1
NOW, THEREFORE, City and Owner, in consideration of the mutual covenants and conditions contained herein, do hereby agree as follows:

1. INCORPORATION OF RECITALS. All recitals are incorporated into this Agreement.

2. EFFECTIVE DATE AND TERM. This Agreement shall be effective and commence on the date the Agreement is signed by the City, unless otherwise indicated by the County of Monterey, and shall remain in effect for a minimum term of ten (10) years thereafter.

3. AUTOMATIC RENEWAL. Each year, upon the anniversary of the effective date of this Agreement (hereinafter referred to as “annual renewal date”), one (1) year shall be added automatically to the term of this Agreement, unless timely notice of nonrenewal is given as provided in paragraph 4 of this Agreement. The total length of the contract shall not exceed twenty (20) years.

4. NOTICE OF NONRENEWAL. If City or Owner desires in any year not to renew this Agreement, that party shall serve written notice of nonrenewal in advance of the annual renewal date of this Agreement as follows: Owner must serve written notice of nonrenewal at least ninety (90) days prior to the annual renewal date; City must serve written notice of the nonrenewal at least sixty (60) days prior to the annual renewal date.

If notice is not received, the Agreement shall automatically be renewed for another year.

Upon receipt by Owner of a notice of nonrenewal from the City, Owner may make a written protest. At any time prior to the annual renewal date, City may withdraw its notice of nonrenewal.

5. EFFECT OF NOTICE OF NONRENEWAL. If either City or Owner serves timely notice of nonrenewal in any year, and this contract is not renewed, this Agreement shall remain in effect shall remain in effect for the balance of the period remaining since the original execution or the last annual renewal date.

6. FEES. The City may require that the Owner(s) of the Historic Property pay a fee that shall not exceed the reasonable cost of providing services, such as inspections, pursuant to Government Code Section 50281.1 (Article 12 of Chapter 1 of Part 1 of Division 1 of Title 5 of the Government Code), for which the fee is charged.

7. VALUATION OF PROPERTY. During the term of this Agreement, Owner is entitled to seek assessment of valuation of the Historic Property pursuant to the provisions of Chapter 3 of Part 2 of Division 1 of the California Revenue and Taxation Code.

8. PRESERVATION OF PROPERTY. Owner shall preserve and maintain the characteristics of historical significance of the Historic Property and agrees to complete rehabilitation and/or maintenance activities as defined in the Rehabilitation/Restoration and Maintenance Plan attached as “Exhibit C”. Requests for revisions to the Maintenance and Attachment 1
Rehabilitation plan shall be reviewed by the Historic Resources Board prior to implementation. In addition, Owner shall comply with the terms of the City’s Historic Preservation Ordinance (CMC 17.32). Owners shall not be permitted to further impede any view corridor with any new structure, including but not limited to walls, fences, or shrubbery, so as to prevent the viewing of the Historic Property from the public right-ofway.

9. RESTORATION OF PROPERTY. Owner shall, where necessary, restore and rehabilitate the Historic Property to conform to the rules and regulations of the Office of Historic Preservation of the State Department of Parks and Recreation, U. S. Secretary of the Interior’s Standards for Rehabilitation, the State Historical Building Code, and the City of Carmel-by-the-Sea, all as amended.

10. INSPECTIONS. Owner shall allow periodic examinations, at least every five (5) years, with reasonable notice thereof, of the interior and exterior of the Historic Property by representatives of the County of Monterey Assessor and the City of Carmel-By-The-Sea as may be necessary to determine Owner’s compliance with the terms and provisions of this Agreement. The City will coordinate inspections by such other agencies that have jurisdiction and will keep them to the minimum necessary to determinate such compliance.

11. PROVISION OF INFORMATION. Owner shall furnish City with any and all information required by City, in order to determine the eligibility of the Historic Property, and that City deems necessary or advisable to determine compliance with the terms and provisions of this Agreement.

12. ANNUAL REPORT. Owner shall submit an annual report at least 90 days prior to each annual renewal date (October 1st) to the Department of Planning and Building specifying all work that has been done to maintain and preserve the historic resource over the preceding year in compliance with the approved maintenance plan.

13. CANCELLATION. The City has the right to cancel the contract if the owner allows the property to deteriorate to the point that it no longer meets the standards for a qualified historical property. The City also has the right to cancel this contract if the owner(s) breaches the provisions of paragraph’s # 8, 9, 10 or 12 of this Agreement after the City has provided reasonable notice of any failure to comply with the agreement, and a public hearing. Notice of the hearing shall be mailed to the last known address of each owner of the property, with the notice conforming to the provisions of Government Code section 6061., If after notice and a hearing, the contract is cancelled, termination of the Agreement is immediate, and the owner shall pay a cancellation fee equal to 12.5 percent of the current fair market value of the property, as determined by the Monterey County Assessor as though the property were free of the contractual restriction. The cancellation fee shall be paid to the Assessor, at the time and in the manner that the Assessor shall prescribe. City’s right to cancel this Agreement pursuant to this paragraph Attachment 1
shall in no way limit or restrict its rights or legal remedies arising from City’s Historic Preservation Ordinance and Municipal Code.

14. ENFORCEMENT OF AGREEMENT. In lieu of and/or in addition to any provisions to cancel this Agreement as referenced herein, City may specifically enforce, or enjoin the breach of, the terms of this Agreement.

15. WAIVER. City does not waive any claim or default by Owner if City does not enforce or cancel this Agreement. All remedies at law or in equity, which are not otherwise provided for this Agreement or in City’s regulations governing historic properties are available to City to pursue in the event there is a breach of this Agreement. No waiver by City of any breach or default under this Agreement shall be deemed to be a waiver of any other subsequent breach thereof or default hereunder.

16. BINDING EFFECT OF AGREEMENT. Owner hereby subjects the Historic Property to the covenants, reservations and restrictions set forth in this Agreement. City and Owner hereby declare their specific intent that the covenants, reservations, and restrictions as set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon Owner’s successors and assigns in title or interest to the Historic Property. A successor in interest shall have the same rights and obligations under this Agreement as the original owner who executed the Agreement.

Each and every contract, deed or other instrument hereinafter executed, governing or conveying the Historic Property, or any portion thereof, shall conclusively be held to have been executed, delivered and accepted subject to the covenants, reservations and restrictions expressed in this Agreement regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instrument.

City and Owner hereby declare their understanding and intent that the burden of the covenants, reservations and restrictions set forth herein touch and concern the land in that it restricts development of the Historic Property. City and Owner hereby further declare their understanding and intent that the benefit of such covenants, reservations and restrictions touch and concern the land by enhancing and maintaining the cultural and historic characteristics and significance of the Historic Property for the benefit of the public and Owner.

17. NOTICE. Any notice required to be given by the terms of this Agreement shall be provided at the address of the respective parties as specified below, by personal delivery or United States mail, postage prepaid, addressed as follows:

City: Carmel-By-The-Sea
Community Planning & Building Department
Attn: Community Planning & Building Director
P.O. Box CC
Carmel-By-The-Sea, CA 93921
Attachment 1
Owner: Esperanza Carmel, LLC
PO Box 134
Carmel by the Sea, CA, 93921
Notice to successors in interest to either party shall be sent to the appropriate address.

In the case of future Owner(s) of the Historic Property, notice shall be sent to the address on file with the county property tax office in power at the time.

18. RECORDATION. No later than twenty (20) days after the parties execute and enter into this Agreement, the City shall cause this Agreement to be recorded in the Office of the County Recorder of the County of Monterey. From and after the time of the recordation, this Agreement shall impart a notice thereof to all persons as is afforded under state law.

19. STATE LAW. The Owner or agent of Owner shall provide written notice of this Agreement to the State Office of Historic Preservation within six (6) months of the date of this Agreement.

20. GOVERNING LAW; VENUE. This Agreement shall be constructed and governed in accordance with the laws of the State of California. Should either party to this agreement bring legal action against the other, the case shall be handled in Monterey County, California and the party prevailing in such action shall be entitled to a reasonable attorney fee which shall be fixed by the judge hearing the case and such fee shall be included in the judgment together with all costs.

21. AMENDMENTS. This agreement may be amended in whole or in part, only by a writtenrecorded instrument executed by the parties hereto.

22. DESTRUCTION OF PROPERTY; EMINENT DOMAIN; CANCELLATION. If the Historic Property is destroyed by earthquake, fire, flood, or other natural disaster such that in the opinion of the City Building Official more than sixty percent (60%) of the original fabric of the structure must be preplaced, this Agreement shall be cancelled because the historic value of the structure will have been destroyed. If the Historic Property is acquired in whole or in part by eminent domain or other acquisition by any entity authorized to exercise the power of eminent domain, and the acquisition is determined by the City Council to frustrate the purpose of this Agreement, this Agreement shall be cancelled.

No cancellation fee pursuant to Government Code Section 50286 shall be imposed if the Agreement is cancelled pursuant to this paragraph. Such Agreement shall be null and void for all purposes of determining the value of the property so acquired.

23. INDEMNIFICATION. Owner shall defend, indemnify, and hold harmless City and its elected officials, officers, agents and employees from any actual or alleged claims, demands, causes of action, liability, loss, damage, or injury to property or persons, including wrongful death, whether imposed by a court of law or by administrative action of any Attachment 1
federal, state or local government agency, arising out of or incident to the direct or indirect use, operation, or maintenance of the Historic Property by Owner or any contractor, subcontractor, employee, agent, lessee, licensee, invitee, or any other person; (ii) Owner’s activities in connection with the Historic Property; and (iii) any restriction on the use of development of the Historic Property, from application or enforcement of the City’s Municipal Code, or from the enforcement of this Agreement.

This indemnification includes, without limitation, the payment of all penalties, fines, judgments, awards, decrees, attorneys’ fees, and related costs or expenses, and the reimbursement of the City, its elected officials, employees, and/or agents for all legal expenses and costs incurred by each of them. Owner’s obligation to indemnify shall survive the termination, cancellation, or expiration of this Agreement and shall not be restricted to insurance proceeds, if any, received by City, its elected officials, employees, or agents.

24. SEVERABILITY. In the event that any of the provisions of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, or by subsequent preemptive legislation, the validity and enforceability of the remaining provisions, or portions thereof, shall not be affected thereby.

IN WITNESS THEREOF, the City and Owners have executed this Agreement on the day and year written above.

CITY OF CARMEL-BY-THE-SEA:

By: _______________________ Date: __________________
Name: Richard L. Rerig (“Chip”)
Title: City Administrator

PROPERTY OWNER(S):

By: __________________________ Date: ___________________ Name: Christopher Mitchell on behalf of Esperanza
Carmel, LLC
Title: Managing Director
Attachment 1

EXHIBIT A

LEGAL DESCRIPTION

EXHIBIT B
DPR 523 FORM

EXHIBIT C

REHABILITATION AND MAINTENANCE PLAN
Attachment 1
All of Block “B-18”, as show on that certain map of Addition No. 7 Carmel-by-the-Sea, in the City of Carmel-by-the-Sea, County of Monterey, State of California, filed for record May 4, 1910 in the Office of the County Recorder of said county in Volume 2 of Maps, “Cities and Towns”, at page 24; Also that certain strip of land lying between said block “B-18” and the shore line of the Pacific Ocean and bounded on its easterly end by a line running N. 20 a 17’ W., from the most easterly point of said Block “B-18”; and bounded on its westerly end by the common line between lots 16 and 18 in Block “B-16”, as show on said map, projected northerly to the shore line of the Pacific Ocean.

Attachment 2
P1. Other ldentHler:. __ C_a_b_i_n _________________ .....,.. _____________ _ •P2. Location: D Not for Publication • Unrestricted •a. County _M_o_n_t_e_r_e_.y ___________ _ and (P2b and P2c or P2d. Attach a Location Map as necessary.) •b. USGS7.5'0uad __________ Date __ T~ R~ _¼of _¼of Sec_; ___ B.M. c. Address N. S. Santa Lucia bet. Martin Way & BaV. City Carmel By The Sea Zip 93921 d. UTM: (Give more than one for large and/or linear resources) Zone~ _____ mE/ _____ mN e. Other Locational Data: (e.g., parcel#, directions to resource: elevation, etc., as appropriate) Monterey County Assessor's Parcel #9-423-1 (Block B, Lot 18) •P3a. Description: (Describe resource and its major elements. Include design, materials, condition, alterations, size, setting, and boundaries) See Continuation Sheet.
•P3b. Resource Attributes: (List attributes and codes) HP-2 Single Family Residence •P4. Rl'' · tn:: t: 1:c "di, =F<, --:x,ject • SHe D
.,. - 1 of District • Other (Isolates, etc.)
,PSb. Description of Photo:.(View,
daJe, a~ssicm #J West Facade
8/14/01 1tl857-1B
•P&. Date Constructed/Age and
Sources: • Historic
f!Jsi~!t~ri~'The ~8:nn on
the Rocks 11 (1994)
•P1. Owner and Addreaa:

H~ndersaa Eawi J y Trnst 77 New Place Road
Hillsborough, CA 94010
•PS. Recorded by: (Name,
,affiliation, and address)" ·· Richard N. Jani-c~k---
MART
•P9, Date Recorded: 7 /20/01
•P10. Survey Type: (Describe)
Carmel HRI
2001
•i,1. Re_pqrt ~it;itiq_n,: (Cite s~rvey repot,t ;ind other ~qrces, or enter "none.'),. ~C.-~~-,,~ -- -_,__:_:~~ --,-:•,~~=·~~--- - __ . _, · _ _ - _ _ , ___ . -- · - _ ____ . - Carmel By-Tne-Sea Survey J 989 J 996 • Attachments: NONE • Location Map • Sketch Map • Continuation Sheet • Building, Structure, and Object Record • Archaeological Record • District Record • Linear Feature Record • Milling Station Record • Rock Art Record • Artifact Record • Photograph Record D Other (List) ________________________ _ DPR 523A (1195) •Required Information
Attachment 3
Page _I_ of -2_ "1\lRHP Status Code ____ 3=S------~------ •Resource Name or# (Assigned by recorder) Mrs. Clinton Walker House

81. Historic Name: Mrs. Clinton Walker House

82. Common Name:_-:--.,,,:--""':"":=--=---,--,---------------:-:-----::------------- B3. Original Use: Single Family Residence B4. Present use:_V.,;;,.a..;;_c.,;;,.a....ct..;;;i....co...;;.n'--H""'o""'u'"'s""'e'--_________ _ •es. .t\rchltectural Style: Frank Lloyd Wright - Organic Architecture QBG. Coilstructlon History: (Constructton date, alterations. and date of alterations) See Continuation Sheet.
•a1. Mov~? IINo • Y~lll • UnlmolAm Ost~: ___ _ Original Location: _____________ _ 0 88. RelEiied Fealu~~:

1. The stone work was done by the DeMaria Bros. and was Mrs. Walker's contribution to the design when the"Desert Masonry" proved ineffective. 2. A kitchen door was also fabricated by Mrs. Walker's insistance against Wright's plan~ BSa. Architect Frank Llovd Wright b. Builder: ____ .,.,M,...i_l_e_s_B--=a=-i_n_(-'--,L..,..o... c_a_l~)_a_n_d_ "810. Slgr.tflc11nce: "fh~me "Organic Architecture" Am~ _______ W_a_l_t_e_r_· _O_l_d_s_-'-(B_a.....a:,.y_A_r_e_a..c.)_ Period oI Significance Post WW II ProP®rty Type1_S..;..._F.;... R-"-. _____ Applicable Criteria CR3 (Discuss importance in tenns of historical or architectural conteict as defined by theme, period, arni geographic scope. Also address integrity.) See Continuation Sheet.
811. Additional Resource Attributes: (List attributes and codes) HP-2 Single Family Residence "B12. Aef~rences:

See Continuation Sheet.

B 13. Remarks:

Zoning R-1
*B14. Evaluator: Richard N. Janick, MARI
0 Date of Evaluation: Carmel HRI, Summer 2001
(This space reserved for official comments.)
DPR 523B (1/95) •Required information
Attachment 3
Primary 1# State of California - The Resources Agency

DEPARTMENT OF PARKS ANO RECREATION
HAI# ______________ _
CONTINUATION SHEET Trtnomial
•Resource Name or# (Assigned by recorder) rs. Clinton Walker Honse Page_of_ •Recorded by
Richard N. Janick •OateSumrner 2001 • Continuation • Update P3a. Description:

A low one-story concrete and "Carmel Stone" house that projects out on a granite outcropping into Carmel Bay. The plan features a hexagonal living room covered by a hexagonal low hipped roof sheathed in weathered copper. The gabled roof bedroom wing extends into a hipped roof carport that features an open window to a Thomas Church-landscaped garden and the ocean. The waves of Carmel Bay break against a triangular ship-like prow of concrete and "Carmel Stone" forming a terrace beyond the panoramic glazed living room. Inverse stepped windows framed in Cherokee-red painted steel enclose and surround the living room. The bedroom wing features a loggia of redwood French doors that open out into the garden and diagonal redwood screens that shield the wind. The master bedroom, the stud10· addition of 1960-61, features a fireplace and extends at an angle opposite the carport giving the plan a footprint of a "fish" form when seen from above. The stepped in window treatment is used in the master bedroom and two smaller guest bedrooms.

A glass and steel screen shields a private patio off the master bedroom accessible through redwood and glass French doors. A long redwood fence and overgrown cypress trees shield the property from Scenic Road and a trapezoidal shaped redwood gate extends from the fence to a concrete and "Carmel Stone" triangular support post that originally contained a circular planter filled with blue-green tinted glass spheres illuminated by recessed lighting. The house sits on a concrete slab foundation and red-tinted concrete floor inscribed by hexagonal patterns and containing copper tubes for radiant heating. From the west, the terrace and living room form a distinct ship cutting through the waves. From the east, the terrace disappears and the long-low roof line and ribboned windows of the guest bedrooms form a natural extension of the rock outcrop that anchors the house to the site.

B6. Construction History:

1. First Rendering and Plans - 1948 - Carport facing southwest copper roof.

2. Revised Rendering and Plans - 1949 - Carport facing southeast copper roof.

3. Working Drawings - Specifications - 1950 - Based on Revised 1949 Plan.

4. Monterey County Zoning Permit Application #C-46, 4/24/50. Architect: Frank Lloyd Wright. Contractor:

Miles Bain. Building 2,000 sq. ft. - 9,170 sq. ft. lot. Initial Projected Cost: $35,000.

5. Construction Period (April 1951 to November 1952):
a. "Desert Masonry" changed to "Carmel Stone." Supervising Architects: Aaron Green and Walter Olds. b. Concrete floor instead of "Green Slate."
c. "Kitchen door" added- against Wright's scheme.
d. Fireplace in bedroom - main fireplace problems (Pole wood). e. Loggia doors and screens on west versus east.
f. Copper roof changed to "Ludowichi-Celadon" roof. Triangular ceramic glazed interlocking metal panels in blue-green color pattern. Architectural porcelain construction - Oakland - Roos Roofing Co. Final cost $55,000.
g. Tommy Church Landscape.
•Required Information
DPR 523L (1/95}
Attachment 3
Primary-,; State of California - The Resources Agency

DEPARTMENT OF PARKS AND RECREATION
HAI# ______________ _
CONTINUATION SHEET Trtnomial
P f *Resource Name or# (Assigned by recorder) rs· age_o _ •Recorded by Richard N. Janick
inton Walker House
•oateSummer 2001 D Continuation D Update
B6. Construction History (Continued):
h. Roofleaks (May 1956). Replaced with copper panels of original design - P.M.C. Roofing Co., Pacheco, California ·

1. Studio Addition design to bedroom -November 1956 - later carried out in 1960-61 by Sandy Walker, A.I.A., nephew of Mrs. Walker (Wright died in April 1959. Became Master Bedroom.

J. Mermaid Sculpture on deck - Mrs. Walker acquisition. k. Permit #97-102-May 1997 - new copper roof by P.M.C. Roofing, Pachec0, California - $50,000 - original contractors in 1956.

I. N_ew Gate - 1999 - Built to original specifications. m. Permit# R.E. 00-41 - New fence built to exact specifications of old fence - October 2000 ( completed 2001) (horizontal redwood board and batten - 5 ft. high).

6. 1996 - "Frank Lloyd Wright Conservancy" - detailed "as-is" analysis of the house, identifying future maintenance.

BIO. Significance:

This house qualifies as both a State Historical Resource and National Historic Resource under Criteria #3 as the only house designed and constructed by Frank Lloyd Wright in Carmel that also relates directly to its seaside location and environment. It has been internationally photographed and published and was even featured in the 1960 motion picture "A Summer Place." The house, originally designed as a vacation home, has been willed to the Henderson Family Trust (Harriet Henderson is Mrs. Clinton Walker's daughter), and continues to be utilized with its original intent. Wright also designed three other houses on coastal sites in the Carmel-Pebble Beach area

1. The John Nesbitt House - "Sea Garden" 1941 - Pebble Beach.

2. The Stuart Haldorn House- "The Wave" 1945 - Carmel Point.

3. The George Clark House - "Sunbonnet" 1952- Carmel Beach. that were not built.

The Clark House was adapted to the Arizona Desert for Georgine Boomer in 1955-1956. The Nesbitt and the Haldom Houses were featured in a color portfolio of Wright's renderings published in the 1960s.

The Walker House fully embodies Wright's concept of "organic" architecture. The hexagonal plan derives from the Paul Hanna House. At Stanford University (1937) and the stepped recessed window pattern is seen in the Haldom House of 1945 and was also utilized at "Kentuck-Nob," S.W. Pennsylvania in the mid-1950s.

The walls of native "Carmel Stone" and the natural redwood and Douglas fir trim speak to Wright's use of "natural" materials. Radiant heating and the steel-framed inverse pyramid windows express Wright's innovative use of new technology. The unique siting, it's the only house in complete public view within Carmel City limits on the ocean side, is a masterpiece, as each fa~ade emphasizes its harmony with nature.

This house is one of the trademarks within Wright's vast architectural spectrum and universally recognized throughout the world.
*Required Information
DPR 523L (1/95)
Attachment 3
Slate of California - The Resources Agency Primary•
DEPARTMENT OF PARKS AND RECREATION HAI# ______________ _ CONTINUATION SHEET Trlnomial
Page_ of ---2
Richard •Recorded by
*Resource Name or# (Assigned by recorder) rs• Clinton Walker Honse N. Janick •oate Summer 2001 D Continuation 0 Update
BIO. Significance (Continued):

THOMAS D. CHURCH
Church was born in 1902 and graduated from the University of California, Berkeley, in 1921. In 1925, he received the degree of Master of Arts in Landscape Architecture from Harvard University. Since 1928, he has practiced in the San Francisco Bay Area and has made a major contribution to the field of modern landscape design, principally•in the decades 1930-1960.

The Walker family are descended from the Walker Art Center in Minneapolis,_~innesota, and the Henderson Family Trust also owns houses designed by William Wilson Wurster in Hillsborough, California, and Joseph Frederick in Lake Tahoe, California.

B12. References:
"The Cabin on the Rocks," Chronology of Mrs. Clinton Walker's House, correspondence from Tahesin Archives, compiled by Richard N. Janick, Carmel, California, 1994.

Homes Illustrated: Carmel By The Sea, Home for Mrs. Clinton Walker. Photography by George Seidenech.

List of Contractors.

DPR 523L ( 1/95} *Required Information
Attachment 3
Mills Act Application - Frank Lloyd Wright House 'Cabin on the Rocks' 10 Year Rehabilitation and Maintenance Plan
Work Item 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Totals Year 1 2 3 4 5 6 7 8 9 10
Front Gate Repair & Maintenance (incl. front pedestal light) $10,000.00 $5,000.00 $500.00 $515.00 $530.45 $546.36 $562.75 $579.64 $597.03 $614.94 $19,446.17 Replace Roof $600,000.00 $600,000.00
Roof & Roof Drainage Maintenance Programme $1,000.00 $1,030.00 $1,060.90 $1,092.73 $1,125.51 $1,159.27 $1,194.05 $1,229.87 $1,266.77 $1,304.77 $11,463.88 Electrical Upgrade & Maintenance Programme $4,000.00 $20,000.00 $1,500.00 $1,545.00 $1,591.35 $1,639.09 $1,688.26 $1,738.91 $1,791.08 $1,844.81 $37,338.50 Plumbing Upgrade & Maintenance Programme $3,000.00 $3,090.00 $10,000.00 $3,278.18 $3,376.53 $3,477.82 $3,582.16 $3,689.62 $3,800.31 $3,914.32 $41,208.94 Replace Interior Boiler $18,000.00 $18,000.00
Exterior Window Rehabilitation / Repair & Maintenance $1,000.00 $1,030.00 $50,000.00 $1,092.73 $1,125.51 $55,000.00 $1,194.05 $1,229.87 $60,000.00 $1,304.77 $172,976.94 Brickwork / Façade Maintenance Programme $2,000.00 $2,060.00 $20,000.00 $2,185.45 $2,251.02 $2,318.55 $2,388.10 $25,000.00 $2,533.54 $2,609.55 $63,346.21 Ongoing Patio Restoration & Maintenance Programme $16,000.00 $16,000.00 $16,000.00 $16,000.00 $16,000.00 $16,000.00 $16,000.00 $16,000.00 $16,000.00 $16,000.00 $160,000.00 Exterior Painting Programme $3,000.00 $3,180.00 $3,370.80 $3,573.05 $3,787.43 $16,911.28 Interior Stonework Repair, Cleaning and Restoration $3,000.00 $3,000.00 $3,000.00 $3,000.00 $3,000.00 $3,000.00 $3,000.00 $3,000.00 $3,000.00 $3,000.00 $30,000.00 Interior Wood Panel Restoration Programme $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,000.00 $5,796.37 $30,796.37 Historic Fireplace Maintenance Programme $1,030.00 $1,092.73 $1,159.27 $1,229.87 $1,304.77 $5,816.65 Exterior Lighting Maintenance / Replacement Programme $3,182.70 $3,477.82 $3,800.31 $10,460.83 Repair Upper Level of existing Stone Steps $8,000.00 $8,000.00 Ongoing Maintenance: House $5,000.00 $5,150.00 $5,304.50 $5,463.64 $5,627.54 $5,796.37 $5,970.26 $6,149.37 $6,333.85 $6,523.87 $57,319.40 Ongoing Maintenance: Grounds $5,000.00 $5,150.00 $5,304.50 $5,463.64 $5,627.54 $5,796.37 $5,970.26 $6,149.37 $6,333.85 $6,523.87 $57,319.40 Administrative budget for new 10 year budget $3,250.00 $3,250.00 Totals $50,000.00 $96,540.00 $120,852.60 $48,909.09 $45,255.45 $707,741.74 $47,346.28 $69,569.58 $105,456.74 $51,983.10 $1,343,654.56

MAINTENANCE TABLE

CITY OF CARMEL-BY-THE-SEA

HISTORIC RESOURCES BOARD

HISTORIC RESOURCES BOARD RESOLUTION NO. 2023-011-HRB

A RESOLUTION OF THE HISTORIC RESOURCES BOARD OF THE CITY OF CARMEL-BY-THE-SEA

RECOMMENDING THAT THE CITY COUNCIL ENTER INTO A MILLS ACT CONTRACT WITH ESPERANZA CARMEL, LLC FOR THE PROPERTY LOCATED AT 26336 SCENIC ROAD IN THE SINGLE-FAMILY RESIDENTIAL DISTRICT (APN 009-423-001).

WHEREAS, on April 20, 2023, Christopher Mitchell, Managing Director of Esperanza Carmel, LLC (“Applicant”) submitted an application on behalf of Esperanza Carmel, LLC (“Owner”) requesting to enter into a Mills Act contract (MA 23-116, Esperanza Carmel, LLC) described herein as (“Application”) for the historic “Mrs. Clinton Walker House”; and WHEREAS, the Application has been submitted for the property located at 26336 Scenic Road, in the Single Family Residential (R-1) District (Block B, Lot 18); and WHEREAS, the historic “Mrs. Clinton Walker House” is listed on the Carmel Inventory and the Carmel Register of Historic Resources; and
WHEREAS, one of the benefits of being included on the Register is the ability to enter into a Mills Act Historical Property Contract with the City; and WHEREAS, the Applicant is requesting to enter into a Mills Act contract with the City and in accordance with Carmel Municipal Code (CMC) Section 17.32.100.B.6 (Review Process), the Historic Resources Board shall consider the application and make a recommendation to the City Council to approve, approve with conditions, or deny the application; and WHEREAS, on August 11, 2023, notice of the August 21, 2023 public hearing was published in the Carmel Pine Cone, in compliance with State law (California Government Code 65091), and mailed to owners of real property within a 300-foot radius of the project indicating the date and time of the public hearing; and
WHEREAS, on or before August 11, 2023 the Applicant posted the public notice on the project site and hand-delivered a copy of the public notice to each property within a 100-foot radius of the project site indicating the date and time of the public hearing; and WHEREAS, on or before August 18, 2023 the meeting agenda was posted in three locations in compliance with State law indicating the date and time of the public hearing; and WHEREAS, on August 21, 2023, the Historic Resources Board held a public meeting to consider the application for a Mills Act contract, including without limitation, information provided to the Historic Resources Board by City staff and through public testimony; and DocuSign Envelope ID: 33392135-F8F6-45DF-BDA3-0C9F63588F42 Attachment 5
Resolution No. 2023-011-HRB

WHEREAS, this Resolution and its findings are made based upon evidence presented to the Historic Resources Board at the August 21, 2023 meeting including, without limitation, the staff report and attachments submitted by the Community Planning and Building Department; and WHEREAS, the Historic Resources Board did hear and consider all said reports, attachments, recommendations and testimony herein above set forth and used their independent judgement to evaluate the project; and
WHEREAS, the facts set forth in the recitals are true and correct and are incorporated herein by reference.

NOW, THEREFORE, BE IT RESOLVED, that the Historic Resources Board of the City of CarmelBy-The-Sea does hereby make the following findings and determinations regarding the Mills Act Contract:

FINDINGS REQUIRED FOR A MILLS ACT CONTRACT
For each of the required findings listed below, staff has indicated whether the application supports the adoption of the findings. For all findings checked "no" the staff report discusses the issues to facilitate the Historic Resources Board's decision-making. Findings checked "yes" may or may not be discussed in the report depending on the issues.

CMC 17.32.100.B.6.c YES NO
i. The building is designated as an historic resource by the City and is listed on the Carmel Register.
✔
ii. The proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property. ✔
iii. Alterations to the historic resource have been in the past, and will continue to be in the future, limited to interior work and to exterior rehabilitation and alterations that:
(A) Comply with the Secretary’s Standards (future additions only); and (B) Do not significantly alter, damage or diminish any primary elevation or character-defining feature; and
(C) Do not increase floor area on the property by more than 15 percent beyond the amount established in the documented original or historic design of the resource; and
(D) Do not result in any second-story addition to a single-story historic resource.
✔
iv. The Mills Act contract will aid in offsetting the costs of rehabilitating and maintaining the historic resource.
✔
DocuSign Envelope ID: 33392135-F8F6-45DF-BDA3-0C9F63588F42 Attachment 5
Resolution No. 2023-011-HRB

v. Approval of the Mills Act contract will represent an equitable balance of public and private interests and will not result in substantial adverse financial impact on the City.
✔
BE IT FURTHER RESOLVED that the Historic Resources Board of the City of Carmel-by-theSea does hereby recommend that the City Council enter into a Mills Act Contract (MA 23-116, Esperanza Carmel, LLC) for the historic “Mrs. Clinton Walker House” located at 26336 Scenic Road (APN 009-423-001).

PASSED, APPROVED AND ADOPTED BY THE HISTORIC RESOURCES BOARD OF THE CITY OF CARMEL-BY-THE-SEA this 21
th day of August, 2023, by the following vote:

AYES: Chroman, Dyar, Pomeroy, Goodhue, Hall
NOES:

ABSENT:

ABSTAIN:

APPROVED: ATTEST:
_________________________ _________________________
Jordan Chroman Leah Young
Chair Historic Resources Board Secretary

DocuSign Envelope ID: 33392135-F8F6-45DF-BDA3-0C9F63588F42 Attachment 5

STATE OF CALIFORNIA
June 2, 2005
TO COUNTY ASSESSORS AND INTERESTED PARTIES:

NOTICE OF BOARD ACTION

GUIDELINES FOR THE ASSESSMENT OF

ENFORCEABLY RESTRICTED HISTORICAL PROPERTY
On May 25, 2005, the Board of Equalization approved the following guidelines pertaining to the assessment of enforceably restricted historical property. These guidelines supersede Letter To Assessors No. 77/174 (dated December 19, 1977).

On June 8, 1976, the voters of California approved Proposition 7 which amended section 8 of article XIII of the California Constitution. This amendment requires that enforceably restricted historical property be valued on a basis that is consistent with its restrictions and uses. Sections 439 through 439.4 were added to the Revenue and Taxation Code to implement Proposition 7.

These statutes, in particular section 439.2, prohibit a valuation of enforceably restricted historical property based on sales data and instead require that such property be valued by a prescribed income capitalization method.

Staff drafted these guidelines in consultation with interested parties and, after discussions, no issues remained unresolved. The guidelines discuss the enforceably restricted historical property requirements, the income to be capitalized, the capitalization rate, the effect of Proposition 13 upon enforceably restricted historical properties that undergo change in ownership or new construction, and the valuation of property under notice of nonrenewal.

The guidelines are posted on the Board's website at www.boe.ca.gov/proptaxes/guideproc.htm.

We hope this information proves useful and promotes uniformity of assessment for these properties. If you have any questions, please contact our Real Property Technical Services Unit at 916-445-4982.

Sincerely,
/s/ David J. Gau
David J. Gau
Deputy Director
Property and Special Taxes Department
DJG:grs
Enclosure
BETTY T. YEE
Acting Member
First District, San Francisco

BILL LEONARD
Second District, Sacramento/Ontario

CLAUDE PARRISH
Third District, Long Beach

JOHN CHIANG
Fourth District, Los Angeles

STEVE WESTLY
State Controller, Sacramento
RAMON J. HIRSIG
Executive Director
No. 2005/035

STATE BOARD OF EQUALIZATION

PROPERTY AND SPECIAL TAXES DEPARTMENT
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0064
916 445-4982 z FAX 916 323-8765
www.boe.ca.gov
Attachment 6
1 GUIDELINES FOR THE ASSESSMENT OF

ENFORCEABLY RESTRICTED HISTORICAL PROPERTY

HISTORY
Effective March 7, 1973, Chapter 1442 of the Statutes of 1972 (also known as the Mills Act) added sections 50280 through 50289 to the Government Code to allow an owner of qualified historical property to enter into a preservation contract with local government. When property is placed under such a contract, the owner agrees to restore the property if necessary, maintain its historic character, and use it in a manner compatible with its historic characteristics.

Prior to the passage of Proposition 7 in 1976, these agreements (i.e., Mills Act contracts) constituted enforceable restrictions on the use of land within the meaning of Revenue and Taxation Code section 402.11
(Property Tax Rule 60, repealed January 10, 1978). However, Proposition 7 added the second paragraph to section 8 of article XIII of the California Constitution:

To promote the preservation of property of historical significance, the Legislature may define such property and shall provide that when it is enforceably restricted, in a manner specified by the Legislature, it shall be valued for property tax purposes only on a basis that is consistent with its restrictions and uses.

To implement Proposition 7, Chapter 1040 of the Statutes of 1977 (Senate Bill 380) added sections 439 through 439.4 to the Revenue and Taxation Code. These statutes, in particular section 439.2, prohibit a valuation of enforceably restricted historical property based on sales data and instead require that such property be valued by a prescribed income capitalization method.

ENFORCEABLY RESTRICTED HISTORICAL PROPERTY
Under section 439, historical property is "enforceably restricted" if it meets the definition of a "qualified historical property" as defined in Government Code section 50280.1 and is subject to a historical property contract executed pursuant to Government Code section 50280 and following.

A qualified historical property includes qualified historical improvements and the land on which the improvements are situated, as specified in the historical property contract. If the contract does not specify the land to be included, the qualified historical property includes only a land area of reasonable size to situate the improvements.

A qualified historical property is privately-owned property that is not exempt from property taxation and that also meets either of the following criteria:
• The property is listed in the National Register of Historic Places, or is located within a registered historic district; or

1 Unless otherwise noted, all statutory references are to the Revenue and Taxation Code.

Attachment 6
2 • The property is listed in any official state, county, city, or city and county official register of historical or architecturally significant sites, places or landmarks, including the California Register of Historical Resources, California Historical Landmarks, State Points of Historical Interest, local landmarks, and local survey listings of historical properties.

The historical property contract must have a minimum term of ten years, and, as applicable, must contain certain other elements, including the following:
• A provision relating to the preservation of the qualified historical property and, when necessary, the restoration and rehabilitation of the property in conformance with state historic preservation guidelines;
• A requirement for the periodic examination of the property to ensure compliance with the agreement;
• A requirement that the historical property agreement be binding upon successor owners of the qualified historical property; and
• A provision for an automatic one-year extension of the contract, with an additional year added to the initial contract term on each anniversary of the contract, unless either party provides notice of nonrenewal. If a notice of nonrenewal is given, the contract runs for its remaining term.

Once a contract is signed, accepted, and recorded, the property subject to the contract must be assessed under section 439.2 on the ensuing lien date. For example, if a contract were recorded in August 2004, the property should have been valued pursuant to section 439.2 for lien date January 1, 2005.

Local authorities may cancel a historical property agreement for breach of contract or failure to protect the historical property. Alternatively, the local entity may take legal action to enforce the contract.

ASSESSMENT
The assessment of an enforceably restricted historical property involves the following aspects:
(1) valuing the restricted historical property; (2) properly applying certain assessment provisions relating to article XIII A of the California Constitution (Prop 13); (3) valuing the restricted historical property following a notice of nonrenewal; and (4) valuing the restricted historical property following cancellation of the contract.

Valuing the Restricted Historical Property
Section 439.2 prohibits the assessor from using sales data relating to similar properties, whether or not enforceably restricted, to value an enforceably restricted historical property. Instead, the assessor must annually value a restricted historical property using an income approach that Attachment 6
3 follows the specific provisions of section 439.2. These provisions explicitly address (1) the determination of the income to be capitalized, (2) the development of the capitalization rate, (3) the capitalization technique to be used, and (4) the determination of the restricted historical property's taxable value on each lien date.

Income to be Capitalized
As provided in section 439.2(a), the income to be capitalized when valuing a restricted historical property is the property's fair rent less allowed expenditures, or allowed expenses. In general, section 439.2(a) follows Property Tax Rule 8(c), with fair rent in section 439.2 corresponding to gross return in Rule 8(c); allowed expenditures, or allowed expenses, in section 439.2 corresponding to gross outgo in Rule 8(c); and the income to be capitalized in section 439.2 corresponding to net return in Rule 8(c). In addition, for the purposes here, "gross income" is synonymous with fair rent, and "net operating income" is synonymous with the income to be capitalized.

The parties to a historical property agreement may stipulate a minimum annual income to be capitalized, in which case the income to be capitalized may not be less than the stipulated amount.

Fair rent, or gross income. The gross income of a restricted historical property is the fair rent for the property considering the restrictions on the property's use. When establishing the fair rent for a restricted historical property, the appraiser should consider the actual rent and typical rents in the area for similar properties in similar use, where the owner pays the property taxes.

The actual rent received by the owner of the subject restricted historical property is relevant to an estimate of fair market rent only if the actual rent is the same rent that would be expected if the existing lease were renegotiated in light of current market conditions, including the subject property's enforceable restrictions on use. With respect to rents from similar, or comparable, properties, if such rents are from properties outside the geographic or market area of the subject property, or from properties that are otherwise dissimilar to the subject property, the rents may not be relevant to an estimate of the subject property's fair rent.

Comparable rental data for single-family residences can be obtained from real estate brokers, rental agencies, and newspaper ads. Many assessors offices maintain rental data for commercial properties, and this data may be helpful when establishing the fair rent for restricted historical property when the contract allows a commercial use. Rental data for commercial property also can be obtained from commercial real estate brokers. For the purpose of estimating anticipated market fair rent and expenditures for use in calculating the subject property's value, rental and expense data for existing restricted historical properties, including the subject historical property, can be obtained through an annual questionnaire sent to property owners.

If sufficient rental data are not available, or such data are unreliable, the appraiser must impute a gross income for the subject restricted historical property. The imputed income should be based on what an informed investor would reasonably expect the property to yield under prudent management, given the provisions under which the property is enforceably restricted.

Attachment 6
4 Allowed expenditures. Section 439.2(a)(3) defines allowed expenditures, or allowed expenses, as expenses necessary for the maintenance of the property's income. Allowed expenses are the same as those permitted in Property Tax Rule 8(c).

Typical expenses include the cost of utilities, maintenance and repair, insurance and property management. Allowed expenses also may include amounts owing for special assessments and special taxes. Expenses related to debt service, general property taxes, and depreciation should not be deducted.

In general, to arrive at the net income to be capitalized, allowed expenses are subtracted from the estimated rental income. However, in order to properly process the income, the appraiser must be aware of the structure of the lease with regard to how expenses are shared between the landlord-owner and the tenant.

The proper perspective from which to view the processing of income and expenses is that of the landlord-owner. The objective is to estimate the net income to the landlord-owner—this is the amount that should be capitalized—and the correct question to ask is the following: What, if any, allowed expenses must the landlord-owner pay out of the rental income that he or she receives?
In a gross lease, almost all of the allowed expenses must be paid out of the gross rent and, therefore, must be subtracted from the gross rent to arrive at the net income to be capitalized. In a net lease, relatively few allowed expenses must be paid by the landlord-owner out of the net rent (because the tenant pays most expenses) and only these expenses should be subtracted from the net rent to arrive at the net income to be capitalized. Frequently, there is a hybrid arrangement—some expenses are paid by the landlord-owner and some by the tenant. How expenses are shared often depends upon the property type together with local conventions.

Income to be capitalized, or net operating income. The income to be capitalized, or net operating income, is simply the fair rent, or gross income, described above less the allowed expenditures described above.

Capitalization Rate
The method of developing the capitalization rate to be used when valuing restricted historical property is prescribed by statute; a capitalization rate derived from sales data or the band of investment is not permitted.

Section 439.2 prescribes two types of capitalization rates for restricted historical property: (1) a capitalization rate to be used when valuing restricted historical property that is an owneroccupied single-family residence and (2) a capitalization rate to be used when valuing all other restricted historical property. Both types of capitalization rates include components for interest (i.e., yield), risk, property taxes, and amortization of improvements; in fact, the two rates are identical except for the amount of the risk component. The capitalization rate contains the following components:

Attachment 6
5 • An interest component annually determined by the State Board of Equalization and based on the effective rate on conventional mortgages as determined by the Federal Housing Finance Board. The interest component is announced annually, in a Letter To Assessors, by October 1 of the preceding assessment year.
• A historical property risk component determined by property type. For owner-occupied single-family residences, the rate is 4 percent; for all other types of restricted historical property, the rate is 2 percent.
• An amortization component for improvements defined as a percentage equal to the reciprocal of the remaining life of the improvements (e.g., if the remaining economic life of the improvements were 20 years, the amortization component would be 5 percent). Since the amortization component applies only to improvements, not to land, which is a nondepreciating asset, it is necessary to adjust the amortization component described in the statute. We recommend the following method of adjustment:

1. Based upon market data, estimate the percentage of total property value attributable to improvements.

2. Multiply this percentage by the amortization component described in the statute (i.e., by the reciprocal of the remaining life of the improvements). For example, if the remaining life of the improvements was 20 years, yielding a reciprocal percentage of 5 percent, and if 70 percent of the total property value was attributable to the improvements, the adjusted amortization factor would be 3.5 percent (0.05 x 0.70 =

0.035).

3. Add the adjusted amortization component to the other capitalization rate components to arrive at the total capitalization rate.
• A property taxes component equal to the percentage of the estimated total tax rate applicable to the property for the assessment year multiplied by the assessment ratio. Typically, the property tax component includes the basic tax rate of 1 percent plus an additional ad valorem rate related to any bonded indebtedness pertaining to the tax rate area in which the property is located. Special district assessments and special taxes are not included in the property tax component. As noted above, they should be treated as allowed expenses.

Capitalization Technique
The capitalization technique to be used when valuing a restricted historical property is prescribed by statute and is formulaic. Section 439.2(e) provides that the restricted value shall be the income to be capitalized, or net operating income, developed as prescribed by statute, divided by one of the two types of capitalization rates prescribed by statute. In other words, the restricted value is the simple quotient of the prescribed income to be capitalized and the prescribed capitalization rate.

Attachment 6
6 Determination of Taxable Value on Each Lien Date
Section 439.2(d) provides that a historical property's restricted value may not be enrolled if it exceeds either (1) the value of the subject property as determined under section 110 (i.e., current market value) or (2) the value of the subject property as determined under section 110.1 (i.e., factored base year value). In other words, section 439.2 states that the taxable value of a restricted historical property on each lien date shall be the lowest of its restricted value, current market value, or factored base year value. The factored base year value for an enforceably restricted historical property is the value that was established for the 1975 lien date2 or as of the
date of the most recent change in ownership, whichever is later, adjusted by the annual inflation factor.

Article XIII A (Prop 13) Considerations
This section discusses how three important elements relating to implementation of article XIII A—change in ownership, new construction, and supplemental assessment—relate to the assessment of restricted historical property. Also discussed is the case in which only a portion of a property is subject to the historical property agreement—that is, the case in which a single property unit contains both restricted and unrestricted portions.

Change in Ownership
When a property subject to a historical property contract undergoes a change in ownership, a new base year value should be established for the property as of the date of change in ownership, as provided in section 110.1. Typically, a restricted historical property's base year value will be greater than its restricted value determined under section 439.2 and hence will not be enrolled as the property's taxable value. However, the establishment of a new base year value enables the assessor to perform the three-way value comparison prescribed by section 439.2(d) and described above. The establishment of a base year value is also necessary in order to calculate the assessed values of historical property should the historical property agreement enter nonrenewal status.

New Construction
Section IV of National Register Bulletin #15 defines a "building" as follows:

A building, such as a house, barn, church, hotel, or similar construction, is created principally to shelter any form of human activity. "Building" may also be used to refer to a historically and functionally related unit, such as a courthouse and jail or a house and barn.

Section IV further specifies that "[b]uildings eligible for the National Register must include all of their basic structural elements. Parts of buildings, such as interiors, facades, or wings, are not eligible independent of the rest of the existing building. The whole building must be considered,

2 Sections 110.1(d) and 405.5 do not apply to historical properties under contract as of lien date 1975 because the constitutional amendment which placed the valuation of historical property under article XIII rather than article XIII A had not yet been passed and, thus, was not in effect for the 1975 lien date.

Attachment 6
7 and its significant features must be identified." Thus, eligibility for the National Register is determined by the extent to which the basic structural elements of an existing building are intact.

In general, a newly constructed building would not be eligible because it is not an existing building with basic structural elements.3
Also, a newly constructed building is not a historic resource, and, thus, is not a qualified historical property within the meaning of Government Code section 50280.1. For example, a newly constructed detached garage (assuming it is not a reconstruction of a historical garage) clearly would not be eligible because it has no significance in American history or architecture, nor does it meet any of the other requisite criteria.

Bulletin 15, however, does list one type of newly constructed property that may be eligible for inclusion under the Mills Act. A reconstructed historic building is eligible for the National Register if the reconstruction is "accurately executed in a suitable environment and presented in a dignified manner as part of a restoration master plan, and when no other building or structure with the same association has survived."
The historical property contract typically specifies the scope and type of any work to be performed on the historical improvements. Improvements existing as of the date of the contract would be subject to the provisions of section 439.2 unless specifically excluded by the contract.

Any new construction made to the historical structure after the issuing date of the contract would not be subject to the provisions of section 439.2 unless specifically included in the contract or an amendment to the contract. Any questions regarding new construction to enforceably restricted historical structures should be directed to the counsel of the legislative body of the city, county, or city and county that contracted with the property owner.

Assuming that the newly constructed property is subject to the historical property contract, a base year value should be established for the newly constructed portion and this value added to the factored base year value of the existing restricted property.

In some cases, an existing historical property may include a portion that is restricted (i.e., subject to a historical property contract) and a portion that is unrestricted. In this case, separate factored base year values should be maintained for the restricted and unrestricted portions and the base year value of any newly constructed property added to the appropriate portion. The assessment treatment of this type of property is discussed further below.

Supplemental Assessment
Although the assessor is required to establish a new base year value upon a change in ownership or completed new construction involving restricted historical property, such property is not subject to supplemental assessment. As provided in Revenue and Taxation Code section 75.14:

Supplemental assessment; limitation. A supplemental assessment pursuant to this chapter shall not be made for any property not subject to the assessment

3 National Register Bulletin 15, "How to Apply the National Register Criteria for Evaluation," U.S. Department of the Interior, National Park Service (www.cr.nps.gov/nr/publications/).

Attachment 6
8 limitations of Article XIII A of the California Constitution. All property subject to the assessment limitations of Article XIII A of the California Constitution shall be subject to the provisions of this chapter, except as otherwise provided in this article.

As discussed above, the assessment of enforceably restricted historical property is subject to the provisions of article XIII, section 8 of the California Constitution, not article XIII A. Thus, section 75.14 precludes the assessor from enrolling supplemental assessments for enforceably restricted historical property.

Historical property not yet under contract that undergoes a change in ownership or new construction is subject to supplemental assessment, even if the property owner later executes a historical property contract in the same fiscal year. Also, any new construction involving a historical property that does not come under the existing historical property contract (e.g., a detached garage added to a restricted historical property) would be subject to supplemental assessment.

When a Property Contains Both Restricted and Unrestricted Portions When only a portion of a property that would normally be considered a single appraisal unit is restricted by a historical property contract, the assessed value should be determined by making a comparison of three values, determined as follows. First, the portion under contract should be valued using the capitalization method prescribed by section 439.2. Added to this figure should be the lower of the unrestricted portion's fair market value or factored base year value. The resulting sum should be compared to both the fair market value and the factored base year value of the entire property (i.e., both restricted and unrestricted portions) and the lowest of the three figures should be enrolled.

Valuing Property Under Notice of Nonrenewal
As provided in Government Code section 50282, either the owner of a restricted historical property or the local government entity may serve notice that it does not intend to renew the historical property contract. If such notice is not given, another year is automatically added to the term of the initial contract, thus creating a "rolling" contract term that is always equal to the initial contract term.

Section 439.3 prescribes the valuation method for a restricted historical property in nonrenewal status; this valuation method applies until the end of the restricted period (i.e., until the existing contract expires). In essence, the method results in a restricted value that gradually approaches the historical property's factored base year value as the remaining term under the contract decreases. For a property in nonrenewal status, the assessor must annually value the property as follows:

1. Determine the full cash value (i.e., factored base year value) of the property in accordance with section 110.1. (Alternatively, if the property will not be subject to section 110.1 when the historical property agreement expires, determine its fair market value in accordance with Attachment 6
9 section 110, as if the property were free of the agreement's restrictions; or, if the property will be subject to another type of restricted value standard when the historical property agreement expires, determine the property's value as if it were subject to the new restrictions.)

2. Determine the restricted value of the property by the capitalization of income method provided in section 439.2.

3. Subtract the restricted value determined in Step 2 from the factored base year (or other) value determined in Step 1.

4. Using the amount for the interest rate component (section 439.2(b)(1)) announced by the Board, discount the amount obtained in Step 3 for the number of years remaining until the termination of the contract.

5. Determine the restricted value of the property in nonrenewal status by adding the value determined in Step 2 to the amount obtained in Step 4.

The historical property's restricted value in nonrenewal status—that is, the value determined above, in accordance with section 439.3—should be compared with the historical property's factor base year and current market values, and the lowest of these three values should be enrolled as the property's taxable value.

Cancellation of Contract
The government entity party to a historical property contract may cancel the contract, after notice and a public hearing, if it determines that either the owner has breached the agreement or the property has deteriorated to the extent that it no longer meets the standards of a historical property. If the contract is cancelled, the property owner must pay a cancellation fee equal to 12½ percent of the property's current fair market value as though free of the contractual restriction, such value to be determined by the county assessor. After a contract is cancelled, the lower of the property's factored base year value or current market value should be enrolled for the ensuing lien date.

SUMMARY
The key points contained in these guidelines can be summarized as follows:

1. An owner of qualified historical property may enter into a preservation contract with local government. When property is placed under such a contract, the owner agrees to restore the property if necessary, maintain its historic character, and use it in a manner compatible with its historic characteristics. Such property receives the special valuation treatment prescribed under Revenue and Taxation Code sections 439 through 439.4.

2. Enforceably restricted historical property is to be annually valued by the income capitalization method prescribed in section 439.2, which contains specific instructions with Attachment 6
10 regard to the income to be capitalized, the capitalization rate, and the capitalization technique to be used. The restricted value must be compared to the property's current market value and factored base year value, with the lowest of these three values enrolled as the property's taxable value.

3. When assessing restricted historical property, the appraiser should consider how three important elements of article XIII A—change in ownership, new construction, and supplemental assessment—relate to the assessment. The appraiser should consider how a property should be assessed when only a portion of it is subject to a historical property agreement.

4. Restricted historical property under a notice of nonrenewal should be valued in accordance with section 439.3.

5. The government entity party to a historical property contract may cancel the contract. The cancellation fee is 12½ percent of the property's current fair market value as though free of the contractual restriction, with such value to be determined by the local assessor.

Additional information about Mills Act contracts may be obtained from the state Office of Historic Preservation, either by telephone at 916-653-6624, or from their website (www.ohp.parks.ca.gov).
(Note: Please see the assessment examples following.)
Attachment 6
Historical Property Valuation Examples Page 1
EXAMPLE 1 (OWNER-OCCUPIED SINGLE-FAMILY RESIDENCE)
Subject Restricted Historical Property
Restored, 105-year-old, Victorian single-family residence. Excellent condition. Under Mills Act contract since 1985 and not in nonrenewal status. Owner-occupied.

Determination of Restricted Value (current lien date)
Gross income (Fair rent)
$1,500 per month x 12 months = $18,000
Less: Anticipated vacancy and collection loss
$18,000 x 5% - 900
Effective gross income $17,100
Less: Anticipated operating expenses
Grounds maintenance $600
Fire insurance 400
Management Fee 360
Water and garbage 240
Building maintenance + 500 - 2,100
Net Operating Income $15,000
Restricted Capitalization Rate
Rate Components:

Interest rate .080
Risk (owner-occupied SFR) .040
Property tax (ad valorem) .015
Amortization (50-year remaining life; improvements
constitute 70% of total property market value;

0.02 x 0.70 – 0.014) + .014 .149
Restricted Value
$15,000 ÷ .149 = $100,671
Taxable Value—Three-Way Value Comparison
Restricted value $100,671
Factored base year value (based on prior change in ownership) $357,000 Current market value (based on comparable sales) $450,000 The lowest of the three possible values is the restricted value. Thus, the net taxable value would be $93,671 ($100,671 restricted value less the homeowners' exemption of $7,000).

Note 1: If this property had been a non-owner-occupied SFR, the only difference in the determination of the restricted value would have been the use of a risk rate component of 2% rather than 4% in the capitalization rate.

Note 2: In this and the following examples, the gross income, or fair rent, is presented on a gross rent basis, that is, under the assumption that the landlord-owner pays all operating expenses out of the gross income.

Attachment 6
Historical Property Valuation Examples Page 2
EXAMPLE 2 (OFFICE USE)
Subject Restricted Historical Property
Multi-tenant, restored historical office building in a downtown commercial district. Under Mills Act contract since 1985 and not in nonrenewal status.

Determination of Restricted Value (current lien date)
Gross Income (Fair rent):

Offices 140,000 sf @ $1.75/sf = $245,000
x 12 months = $2,940,000
Less: Anticipated vacancy and collection loss
$2,940,000 x 5% - 147,000
Effective gross income $2,793,000
Less: Anticipated operating expenses
Management $290,000
Maintenance 95,000
Insurance 75,000
Utilities 360,000
Janitorial + 140,000 - 960,000
Net Operating Income $1,833,000
Restricted Capitalization Rate
Rate Components:

Interest component .08
Risk .02
Property tax (ad valorem) .011
Amortization (50-year remaining life; improvements
constitute 75% of total property market value

0.02 x 0.75 = 0.015) + .015 .126
Restricted Value
($1,833,000 ÷ .126) = $14,547,619
Taxable Value—Three-Way Value Comparison
Restricted value $14,547,619
Factored base year value (based on prior change in ownership) $18,191,077 Current market value (based on comparable sales) $21,000,000 The lowest of the three possible values is the restricted value. Thus, the taxable value would be $14,547,619
Attachment 6
Historical Property Valuation Examples Page 3
EXAMPLE 3 (MIXED USE—RESIDENTIAL AND OFFICE)
Subject Restricted Historical Property
Two-story, restored historical property in a downtown district. Upper level is residential unit occupied by owner. Lower level contains three office spaces subject to short-term rental agreements. The income stream for the upstairs unit must be calculated separately from the downstairs unit because the risk rate is different for the owner-occupied unit.

Determination of Restricted Value
Separate restricted values for the upper-level residence and the lower-level office space must be determined, because the risk components are different for the two types of use. The total restricted value is sum of these two values.

Upper-Level Unit
Gross income (Fair rent) based upon comparable rent data $975 per month x 12 months = $11,700
Less: Anticipated vacancy and collection loss
$11,700 x 5% - 585
Effective gross income $11,115
Less: Anticipated operating expenses
Grounds maintenance $300
Fire insurance 200
Management Fee 180
Water and garbage 120
Building maintenance + 250 - 1,050
Upper-Level Net Operating Income $10,065
Restricted Capitalization Rate (owner-occupied SFR)
Rate components:

Interest rate .080
Risk .040
Property tax .010
Amortization ( 50-year remaining life; improvements
constitute 70% of total property market value;

0.02 x 0.70 = 0.014) + .014 .144
Upper-level Restricted Value ($10,065 ÷ .144) = $69,895 Lower-Level Offices
Gross income (Fair rent)
1000 sf @ $1.60/sf = $1,600 x 12 months $19,200
Less: Anticipated vacancy and collection loss
$19,200 x 5% - 960
Effective gross income $18,240
Attachment 6
Historical Property Valuation Examples Page 4
Less: Anticipated operating expenses
Grounds maintenance $300
Fire insurance 200
Management Fee 180
Water and garbage 120
Building maintenance + 250 - 1,050
Lower-Level Net Operating Income $17,190
Restricted Capitalization Rate
Rate components:

Interest component .080
Risk .020
Property tax .010
Amortization (50-year remaining life; improvements
constitute 70% of total property market value;

0.02 x 0.70 = 0.014) + .014 .124
Lower Level Restricted Value ($17,190 ÷ .124) $138,629
Add: Upper Level Restricted Value + $69,895
Total Restricted Value $208,524
Taxable Value—Three-Way Value Comparison
Restricted Value $208,524
Factored base year value (based upon prior change in ownership) $364,140 Current market value (based upon comparable sales data) $400,000 The lowest of the three possible values is the restricted value. Thus, the net taxable value would be $201,524 ($208,524 less the homeowners' exemption of $7,000).

Attachment 6
Historical Property Valuation Examples Page 5
EXAMPLE 4 (MIXED VALUATION—PART RESTRICTED AND PART UNRESTRICTED) Description of Subject Property (Comprises Both Restricted and Unrestricted Portions) The subject property is a 10-acre parcel with a farmhouse and barn situated on 2 acres; the remaining 8 acres are farmland. The farmhouse and barn are used as an owner-occupied singlefamily residence; this portion of the property is restricted under a Mills Act contract. The remaining 8 acres of farmland are unrestricted.

Value of Restricted Portion (current lien date)
Gross income (Fair rent) for farmhouse and barn
$2,000 per month x 12 months = $24,000
Less: Anticipated vacancy and collection loss
$24,000 x 5% - 1,200
Effective gross income $22,800
Less: Anticipated operating expenses
Grounds maintenance $600
Fire insurance 400
Management Fee 360
Water and garbage 240
Building maintenance + 500 - 2,100
Net Operating Income = $20,700
Restricted Capitalization Rate
Rate components:

Interest component .080
Risk (owner-occupied) .040
Property tax (ad valorem) .010
Amortization (50-year remaining life; improvements
constitute 70% of total property market value

0.02 x 0.70 = 0.014) + .014 .144
Restricted Value ($20,700 ÷ .144) = $143,750
Taxable Value—Three-Way Comparison
Total Property Restricted Value (sum of restricted value above and lower of FBYV or current market value of unrestricted portion)
Restricted Value (portion under contract) $143,750
FBYV (unrestricted portion) + $102,000
Restricted Value (total property) $245,750
Factored base year values (based upon a prior change in ownership of the entire property, allocated between restricted and unrestricted portions):

Farmhouse, barn, and 2 acres (restricted portion) $204,000 8 acres (unrestricted portion) + $102,000
Total FBYV (total property) $306,000
Attachment 6
Historical Property Valuation Examples Page 6
Current market values (based upon comparable sales data):

Farmhouse, barn, and 2 acres (restricted portion) $230,000 8 acres (unrestricted portion) + $120,000
Total Current Market Value (total property) $350,000
The lowest of the three values is the Restricted Value (total property), $245,750. Thus, the net taxable value would be $238,750 ($245,750 less $7,000 homeowners' exemption).

Attachment 6
Historical Property Valuation Examples Page 7
EXAMPLE 5 (PROPERTY IN NONRENEWAL STATUS)
Description of Subject Restricted Historical Property
The same property as in Example 2, except the property owner has served notice of renewal.

The Mills Act contract covering the property was originally executed in September 1995, and the owner served notice of nonrenewal in June 2004. Value the property for the 2005 lien date, reflecting its nonrenewal status. Assume that the property's restricted, current market, and factored base year values from Example 2, provided below, also refer to January 1, 2005.

Restricted value $14,547,619
Current market value $21,000,000
Factored base year value $18,191,077
Restricted Value in Nonrenewal Status
Value as if unrestricted (factored base year value) $18,191,077 Restricted value - 14,547,619
Difference $ 3,643,458
Present worth of difference
PW1 @ 6.00 %, 9 years (interest component for lien date 2005) x .591898 = $ 2,156,555
Plus restricted value + $14,547,619
Restricted value in nonrenewal status—lien date January 1, 2005 $16,704,174 Taxable Value
Since the restricted value in nonrenewal status, $16,704,174, is less than either the property's current market value or its factored base year value, this is the taxable value.

Attachment 6

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
October 3, 2023

PUBLIC HEARINGS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Katherine Wallace, Associate Planner
APPROVED BY: Chip Rerig, City Administrator
SUBJECT:

MA 23-146 (Lopez 5 NW, LLC): Consideration of a Mills Act Contract application MA 23-146 (Lopez 5 NW, LLC) for the historic "Cosmas House" located on Lopez Avenue 5 northwest of 4th Avenue in the Single-Family Residential (R-1) District.

APN 010-232-028.

RECOMMENDATION:

Accept the recommendation of the Historic Resources Board and approve the Mills Act Historical Property Contract MA 23-146 (Lopez 5 NW, LLC) for the historic “Cosmas House” located on Lopez Avenue 5 northwest of 4th Avenue in the Single-Family Residential (R-1) District (APN 010-232-028) and authorize the City Administrator to execute the contract (Attachment 1).

BACKGROUND/SUMMARY:

The site is located on Lopez Avenue 5 northwest of 4th Avenue in the Single Family Residential (R-1) Zoning District (Attachment 2, Exhibit A). The residence, also known as the “Cosmas House,” was designed by architect Albert Henry Hill and his partner, John Kruse, and was built in 1961 by contractor Grove Bishop. The building is one of three unique, adjacent, “Weekend Houses” designed by Hill on Lopez Avenue. The dominant design element of the “Cosmas House” is the steeply pitched roof which folds down over the walls like the wings of a paper airplane. The house has been determined significant as a good example of the Bay Region Modern/Second Bay Region style designed by Henry Hill and John Kruse; both the style and the architects are recognized in the Carmel Historic Context Statement.

A Department of Parks of Recreation (DPR) 523 Form was completed on February 15, 2002 by Richard Janick, who found the property to be significant under California Register criterion 3 (Architecture). In 2003 the house was included in the DOCOMO-MO survey of significant properties of the Modern Movement. In October 2004, the California Coastal Commission accepted the Cosmas House as part of the City’s Inventory of Historic Resources. However, on December 16, 2006, the Historic Resources Board granted an appeal (submitted by the then-property owner) resulting in the property being removed from the City’s Inventory of Historic Resources. The appeal was granted because at that time, the City’s Historic Context Statement did not cover post-1940 development and the residence was only 44 years old. The staff report at that time recommended that the house be re-evaluated once it reached the 50-year threshold and when an updated Historic Context Statement was available.

On June 2, 2021, the new (and current) property owner applied for a Design Study to remodel the lower level of the house and pursue fenestration changes. The Design Study application triggered the reevaluation of the property, having since crossed the 50-year threshold. An updated Department of Parks and Recreation (DPR) Form 523 was completed for the property in 2021 by Margaret Clovis (Attachment 3, Exhibit B). The evaluation again determined that the property meets California Register criterion three (Architecture) as a representative of the historic context theme of Architectural Development. A Resolution Designating a Historic Resource for the property on Lopez Avenue 5 northwest of 4th Avenue was recorded with the County Recorder on April 19, 2023 (Document #2023011567).

On May 16, 2023, project architect Karen “KC” Cullen submitted an application for a Mills Act Historical Property Contract on behalf of the property owner. In order to qualify for a Mills Act contract, a property must first be included on the Carmel Inventory and then added to the Carmel Register of Historic Resources. As noted above, the property was added (back) to the Carmel Inventory in 2021. On September 18, 2023, the Historic Resources Board adopted Resolution 2023-014-HRB (Attachment 5), adding the property to the Carmel Register and recommending that the City Council enter into a Mills Act Contract with Lopez 5 NW, LLC, for the historic “Cosmas House.” Contract Value
The Monterey County Assessor’s Office is responsible for determining the value of a property under Mills Act Contract in accordance with sections 439 through 439.4 of the Revenue and Taxation Code. Properties with a Mills Act Contract are not valued based on sales data; rather they are valued by a prescribed income capitalization method (Attachment 6). After a Contract is approved, it is forwarded to the Monterey County Assessor who then determines the Mills Act value.

At previous Mills Act hearings, members of Council requested that staff obtain a preliminary calculation of Mills Act Contract values for the purposes of understanding the potential local tax revenue offset. The Monterey County Assessor has informed the City that time constraints and process complexity make preliminary calculations infeasible. Therefore, staff cannot provide the actual or estimated value of property tax reduction for Council’s consideration. Jerry Gatt, Appraiser III, represented the Monterey County Assessor and attended the April 4, 2023 Council meeting to explain the assessment process.

Contract Summary
A Mills Act contract under State law is an agreement between the City of Carmel and a property owner of a historic building listed on the Carmel Register. In exchange for reduced property taxes, the property owner is contractually obligated to perform annual maintenance on the building. The property owner benefits from a reduction in property taxes. The City benefits from assurance, via contract, that the historic building is rehabilitated, maintained, and preserved with a portion of those property taxes that the city is giving up.

The primary purpose for offering Mills Act contracts in the City of Carmel-by-the-Sea is to assist in and ensure the rehabilitation or restoration and long-term maintenance of historic resources. All properties listed on the City’s Historic Register in all districts that have been preserved in their historical size, form, and design without significant alterations are eligible for Mills Act contracts.

All Mills Act contracts have a term of 10 years, and one year is added to this term annually upon each anniversary date of the contract unless one or both parties (City and property owner) have taken action to terminate the contract. The City Administrator is authorized to initiate contract termination on behalf of the City based on recommendations of the Community Planning & Building Department. The contract rights and obligations are binding upon all successive owners of the property during the life of the contract. The property retains the lower Mills Act tax rate when sold. To end a contract, either party may submit a notice of non-renewal to the other party. Such notices shall cause the contract to terminate at the end of the then- current 10-year contract period. Cancellation of a contract by the City due to non-compliance requires a public hearing and, if canceled, results in the immediate termination of the contract and a penalty equal to

12.5 percent of the assessed market value of the property.

The contract requires that the historical elements of the property are maintained in good condition. This includes a plan for rehabilitation and maintenance and may include a program to restore deteriorated features. All recipients of Mills Act contracts are required to implement a rehabilitation/restoration and maintenance plan prepared by a qualified professional. An annual report is submitted to the Community Planning & Building Department specifying all work that has been done to maintain and preserve the historic resource over the year in compliance with the approved rehabilitation/restoration and maintenance plan. All rehabilitation/restoration and maintenance work must be completed in conformance with the Secretary of Interior’s Standards for Rehabilitation, and all proposed projects are subject to a Design Study prior to commencement of work. Minor alterations, as defined in CMC Section 17.32.150, may be approved by staff; however, major alterations (CMC Section 17.32.160) would be reviewed by a qualified professional and presented to the Historic Resources Board for review. All Mills Act contracts must specify that the rehabilitation/restoration and maintenance plan shall be updated at least every ten years by a qualified professional and approved by both parties.

The Historic Resources Board considers each application for a Mills Act contract and provides a recommendation to the City Council to approve, approve with conditions, or deny the application.

The City Council considers the recommendations from the Historic Resources Board at a public hearing and resolves to approve, approve with conditions, or deny the proposed contract with sufficient time for action by the City Clerk so that recordation of approved contracts occurs before December 31st of the year in which the application is received.

STAFF ANALYSIS:

Findings
Carmel Municipal Code Section 17.32.100.B.6(c) sets forth findings that the Historic Resources Board and City Council shall make in order to grant approval of a Mills Act Contract. The required findings are listed below followed by a staff response on how the application meets the requirements.

1. The building is designated as a historic resource by the City and is listed on the Carmel Register.

Staff Response: The residence was the subject of a historic evaluation in 2021 by Margaret Clovis and was placed on the Carmel Inventory of Historic Resources in 2021. The Historic Resources Board added the resource to the Carmel Register on September 18, 2023. The application meets this finding.

2. The proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property.

Staff Response: The applicant submitted a rehabilitation and maintenance plan (Attachment 4, Exhibit C). The plan covers a period of 10 years from 2024-2033 and estimates $87,300 in work projects. The plan, compiled by KC Cullen, Architect (and qualified professional), includes rehabilitation and maintenance work including: structural deck/roof wood post repair or replacement; new roof; stain exterior deck and siding; repaint door and window trim; re-paint beams and eaves; termite testing and repairs, landscape maintenance; and sump cleanout/maintenance. All planned rehabilitation and maintenance work will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. All exterior work is subject to Design Study approval and a determination of consistency with the Secretary of the Interior's Standards for Rehabilitation.

While the repair of the structural wood post qualifies as rehabilitation, the majority of the planned work items qualify as maintenance rather than rehabilitation. Replacement of the roof with treated Cedar shakes and restaining of the historic Redwood exterior siding and deck would be considered more significant than routine maintenance, whereas re-painting, landscaping, sump cleanout/maintenance, and termite inspection would be considered routine maintenance expected for any property.

The current property owners recently completed a rehabilitation project (BP 21-0440 finaled on May 2, 2023) which resulted in a 2024-2033 Mills Act work plan that contains primarily maintenance rather than rehabilitation items. The Council should consider the purpose of the Mills Act, intended as an incentive program to encourage future rehabilitation work to happen. If an owner was able to successfully complete their project without financial subsidy, there is no established need for granting a Mills Act contract. While the City’s municipal code does not explicitly speak to completed work, the code language clearly requires that the “proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property.” The Council should consider whether the plan is satisfactory to meet Finding #2.

3. Alterations to the historic resource have been in the past, and will continue to be in the future, limited to interior work and to exterior rehabilitation and alterations that:
(A) Comply with the Secretary’s Standards (future additions only); and (B) Do not significantly alter, damage or diminish any primary elevation or characterdefining feature; and (C) Do not increase floor area on the property by more than 15 percent beyond the amount established in the documented original or historic design of the resource; and (D) Do not result in any second-story addition to a single-story historic resource.

Staff Response: The Cosmas House retains a high degree of integrity as few exterior changes have been made to the house since its construction. A new Class A shake roof was added in 2004 (BP 04-9) and fenestration alterations were carried out in 2022-23 (new windows and doors permitted under DS 21-191, on secondary elevations). As noted above, planned rehabilitation and maintenance work will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. Any future alterations are required to be consistent with conditions A-D above. Minor alterations, as defined in CMC Section 17.32.150, may be approved by staff; however, major alterations (CMC Section 17.32.160) would be reviewed by a qualified professional and presented to the Historic Resources Board for review.

It should be noted that a major rehabilitation occurred in 2022-2023 (Design Study 21-191, BP 21-0220, LeComte/Bergeron), involving the removal of original knob and tube electrical wiring and necessary electrical upgrades; additional concrete footings retrofitted to the existing foundation; and replacement of the main sewer line. The renovation also included the above-mentioned fenestration changes. When the current owner purchased the home in January 2021, it was not a listed historic resource (having been removed following a successful 2006 appeal by previous owners). In June of 2021 they applied for Design Study 21-191, and by August 2021, the property was listed on the Carmel Historic Inventory. The owner did not apply for a Mills Act contract at that time, and instead moved forward with the desired fenestration changes as well as the electrical work, foundation retrofit, and sewer line. The recently completed work (BP 21-0440 finaled on May 2, 2023) has resulted in a 2024-2033 Mills Act work plan that contains primarily maintenance rather than rehabilitation items.

4. The Mills Act contract will aid in offsetting the costs of rehabilitating and maintaining the historic resource.

Staff Response: Approval of the contract would assist in offsetting the rehabilitation and maintenance costs of preserving the “Cosmas House” by reducing the tax liability on the property thereby freeing up funds for the rehabilitation. The application meets this finding.

5. Approval of the Mills Act contract will represent an equitable balance of public and private interests and will not result in substantial adverse financial impact on the City.

Staff Response: Approval of the Mills Act Contract will be consistent with Goal 1-5 and Objective 1-16 of the Land Use & Community Character Element of the General Plan which encourages providing incentives for property owners to preserve and rehabilitate historic resources. Although the adoption of a Mills Act Contract will decrease property tax revenue to the City, this contract represents an equitable balance of public and private interests:
1) The City Council adopted Resolution 2016-068 on September 13, 2016, limiting the number of Mills Act contracts that can be approved to fifteen (15) in any three-year calendar period. No applications were approved in 2020 or 2021, four applications were approved in 2022, one application has already been approved in 2023 (L’Auberge), and four total applications are currently in review in 2023. 2) Carmel currently has 292 historic resources, and since the adoption of the Mills Act program in 2004, the City has entered into a total of fifteen Mills Act Contracts. 3) The City would continue to receive a portion of the property tax revenue and the investment in rehabilitation and maintenance supports local tourism, which benefits both private and public interests. 4) The value of preserving a historic resource offsets the loss of revenue.

FISCAL IMPACT:

The City will have a diminished tax base from the property at Lopez Avenue 5 NW of 4 th Avenue for the
term of the contract. The amount is unknown at this point.

PRIOR CITY COUNCIL ACTION:

On March 3, 2020, the City Council adopted standard contract language for Mills Act Contracts. On April 4, 2023, the City Council reviewed the City’s Mills Act Policy and opted not to make any changes.

Next Steps: If the City Council enters into a Mills Act Contract for this property, the contract will be recorded with the Monterey County Recorder and will take effect January 1, 2024.

ATTACHMENTS:

Attachment 1) Standard Mills Act Contract
Attachment 2) Exhibit A - Legal Description
Attachment 3) Exhibit B - DPR 523 Form “Cosmas House”
Attachment 4) Exhibit C - Rehabilitation/Maintenance Plan Attachment 5) Resolution 2023-014-HRB
Attachment 6) Guidelines for the Assessment of Enforceably Restricted Historical Property

RECORDING REQUESTED BY

CITY OF CARMEL-BY-THE-SEA

AND WHEN RECORDED MAIL TO

Carmel City Hall
Attn: Community Planning & Building
P.O. Box CC
Carmel-By-The-Sea, CA 93921 This space reserved for the Recorder’s use only

CITY OF CARMEL-BY-THE-SEA

MILLS ACT HISTORIC PROPERTY PRESERVATION CONTRACT
THIS AGREEMENT is made and entered by and between the CITY OF CARMEL-BY-THE-SEA a municipal corporation (hereinafter referred to as “City”), and Lopez 5 NW, LLC (hereinafter referred to as “Owner”).

RECITALS
(i) California Government Code Section 50280, et seq. (known as the Mills Act) authorizes cities to enter into contracts with the owners of qualified historic properties to provide for their appropriate use, maintenance and restoration such that these historic properties retain their historic characteristics;
(ii) The Owner possesses fee title in and to that certain real property, together with associated structures and improvements thereon, located on Lopez Avenue 5 northwest of 4th Avenue (APN: 010-232-028), Carmel-By-The-Sea, California, (hereinafter referred to as the “Historic Property”). A legal description of the Historic Property is attached hereto, marked as “Exhibit A” and is incorporated herein by reference; (iii) The property is identified as a historic resource on the City of Carmel-By-The-Sea’s Historic Inventory and Register of Historic Resources and is further described in the DPR 523 Form attached hereto, marked as “Exhibit B” and is incorporated herein by reference;
(iv) City and Owner, for their mutual benefit, now desire to enter into this Agreement both to protect and preserve the characteristics of historical significance of the Historic Property, as it exists at the date of this contract and as described in the City’s Register of Historic Resources and the National Register of Historic Places, and to qualify the Historic Property for an assessment of valuation pursuant to the provisions of Article 1.9 (commencing with section 439) of Chapter 3 of Part 2 of Division 1 of the California Revenue and Taxation Code.

Attachment 1
NOW, THEREFORE, City and Owner, in consideration of the mutual covenants and conditions contained herein, do hereby agree as follows:

1. INCORPORATION OF RECITALS. All recitals are incorporated into this Agreement.

2. EFFECTIVE DATE AND TERM. This Agreement shall be effective and commence on the date the Agreement is signed by the City, unless otherwise indicated by the County of Monterey, and shall remain in effect for a minimum term of ten (10) years thereafter.

3. AUTOMATIC RENEWAL. Each year, upon the anniversary of the effective date of this Agreement (hereinafter referred to as “annual renewal date”), one (1) year shall be added automatically to the term of this Agreement, unless timely notice of nonrenewal is given as provided in paragraph 4 of this Agreement. The total length of the contract shall not exceed twenty (20) years.

4. NOTICE OF NONRENEWAL. If City or Owner desires in any year not to renew this Agreement, that party shall serve written notice of nonrenewal in advance of the annual renewal date of this Agreement as follows: Owner must serve written notice of nonrenewal at least ninety (90) days prior to the annual renewal date; City must serve written notice of the nonrenewal at least sixty (60) days prior to the annual renewal date.

If notice is not received, the Agreement shall automatically be renewed for another year.

Upon receipt by Owner of a notice of nonrenewal from the City, Owner may make a written protest. At any time prior to the annual renewal date, City may withdraw its notice of nonrenewal.

5. EFFECT OF NOTICE OF NONRENEWAL. If either City or Owner serves timely notice of nonrenewal in any year, and this contract is not renewed, this Agreement shall remain in effect shall remain in effect for the balance of the period remaining since the original execution or the last annual renewal date.

6. FEES. The City may require that the Owner(s) of the Historic Property pay a fee that shall not exceed the reasonable cost of providing services, such as inspections, pursuant to Government Code Section 50281.1 (Article 12 of Chapter 1 of Part 1 of Division 1 of Title 5 of the Government Code), for which the fee is charged.

7. VALUATION OF PROPERTY. During the term of this Agreement, Owner is entitled to seek assessment of valuation of the Historic Property pursuant to the provisions of Chapter 3 of Part 2 of Division 1 of the California Revenue and Taxation Code.

8. PRESERVATION OF PROPERTY. Owner shall preserve and maintain the characteristics of historical significance of the Historic Property and agrees to complete rehabilitation and/or maintenance activities as defined in the Rehabilitation/Restoration and Maintenance Plan attached as “Exhibit C”. Requests for revisions to the Maintenance and Attachment 1
Rehabilitation plan shall be reviewed by the Historic Resources Board prior to implementation. In addition, Owner shall comply with the terms of the City’s Historic Preservation Ordinance (CMC 17.32). Owners shall not be permitted to further impede any view corridor with any new structure, including but not limited to walls, fences, or shrubbery, so as to prevent the viewing of the Historic Property from the public right-ofway.

9. RESTORATION OF PROPERTY. Owner shall, where necessary, restore and rehabilitate the Historic Property to conform to the rules and regulations of the Office of Historic Preservation of the State Department of Parks and Recreation, U. S. Secretary of the Interior’s Standards for Rehabilitation, the State Historical Building Code, and the City of Carmel-by-the-Sea, all as amended.

10. INSPECTIONS. Owner shall allow periodic examinations, at least every five (5) years, with reasonable notice thereof, of the interior and exterior of the Historic Property by representatives of the County of Monterey Assessor and the City of Carmel-By-The-Sea as may be necessary to determine Owner’s compliance with the terms and provisions of this Agreement. The City will coordinate inspections by such other agencies that have jurisdiction and will keep them to the minimum necessary to determinate such compliance.

11. PROVISION OF INFORMATION. Owner shall furnish City with any and all information required by City, in order to determine the eligibility of the Historic Property, and that City deems necessary or advisable to determine compliance with the terms and provisions of this Agreement.

12. ANNUAL REPORT. Owner shall submit an annual report at least 90 days prior to each annual renewal date (October 1st) to the Department of Planning and Building specifying all work that has been done to maintain and preserve the historic resource over the preceding year in compliance with the approved maintenance plan.

13. CANCELLATION. The City has the right to cancel the contract if the owner allows the property to deteriorate to the point that it no longer meets the standards for a qualified historical property. The City also has the right to cancel this contract if the owner(s) breaches the provisions of paragraph’s # 8, 9, 10 or 12 of this Agreement after the City has provided reasonable notice of any failure to comply with the agreement, and a public hearing. Notice of the hearing shall be mailed to the last known address of each owner of the property, with the notice conforming to the provisions of Government Code section 6061., If after notice and a hearing, the contract is cancelled, termination of the Agreement is immediate, and the owner shall pay a cancellation fee equal to 12.5 percent of the current fair market value of the property, as determined by the Monterey County Assessor as though the property were free of the contractual restriction. The cancellation fee shall be paid to the Assessor, at the time and in the manner that the Assessor shall prescribe. City’s right to cancel this Agreement pursuant to this paragraph Attachment 1
shall in no way limit or restrict its rights or legal remedies arising from City’s Historic Preservation Ordinance and Municipal Code.

14. ENFORCEMENT OF AGREEMENT. In lieu of and/or in addition to any provisions to cancel this Agreement as referenced herein, City may specifically enforce, or enjoin the breach of, the terms of this Agreement.

15. WAIVER. City does not waive any claim or default by Owner if City does not enforce or cancel this Agreement. All remedies at law or in equity, which are not otherwise provided for this Agreement or in City’s regulations governing historic properties are available to City to pursue in the event there is a breach of this Agreement. No waiver by City of any breach or default under this Agreement shall be deemed to be a waiver of any other subsequent breach thereof or default hereunder.

16. BINDING EFFECT OF AGREEMENT. Owner hereby subjects the Historic Property to the covenants, reservations and restrictions set forth in this Agreement. City and Owner hereby declare their specific intent that the covenants, reservations, and restrictions as set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon Owner’s successors and assigns in title or interest to the Historic Property. A successor in interest shall have the same rights and obligations under this Agreement as the original owner who executed the Agreement.

Each and every contract, deed or other instrument hereinafter executed, governing or conveying the Historic Property, or any portion thereof, shall conclusively be held to have been executed, delivered and accepted subject to the covenants, reservations and restrictions expressed in this Agreement regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instrument.

City and Owner hereby declare their understanding and intent that the burden of the covenants, reservations and restrictions set forth herein touch and concern the land in that it restricts development of the Historic Property. City and Owner hereby further declare their understanding and intent that the benefit of such covenants, reservations and restrictions touch and concern the land by enhancing and maintaining the cultural and historic characteristics and significance of the Historic Property for the benefit of the public and Owner.

17. NOTICE. Any notice required to be given by the terms of this Agreement shall be provided at the address of the respective parties as specified below, by personal delivery or United States mail, postage prepaid, addressed as follows:

City: Carmel-By-The-Sea
Community Planning & Building Department
Attn: Community Planning & Building Director
P.O. Box CC
Carmel-By-The-Sea, CA 93921
Attachment 1
Owner: Lopez 5 NW, LLC
3912 Alamanda Drive
Sarasota, FL, 34238
Notice to successors in interest to either party shall be sent to the appropriate address.

In the case of future Owner(s) of the Historic Property, notice shall be sent to the address on file with the county property tax office in power at the time.

18. RECORDATION. No later than twenty (20) days after the parties execute and enter into this Agreement, the City shall cause this Agreement to be recorded in the Office of the County Recorder of the County of Monterey. From and after the time of the recordation, this Agreement shall impart a notice thereof to all persons as is afforded under state law.

19. STATE LAW. The Owner or agent of Owner shall provide written notice of this Agreement to the State Office of Historic Preservation within six (6) months of the date of this Agreement.

20. GOVERNING LAW; VENUE. This Agreement shall be constructed and governed in accordance with the laws of the State of California. Should either party to this agreement bring legal action against the other, the case shall be handled in Monterey County, California and the party prevailing in such action shall be entitled to a reasonable attorney fee which shall be fixed by the judge hearing the case and such fee shall be included in the judgment together with all costs.

21. AMENDMENTS. This agreement may be amended in whole or in part, only by a writtenrecorded instrument executed by the parties hereto.

22. DESTRUCTION OF PROPERTY; EMINENT DOMAIN; CANCELLATION. If the Historic Property is destroyed by earthquake, fire, flood, or other natural disaster such that in the opinion of the City Building Official more than sixty percent (60%) of the original fabric of the structure must be preplaced, this Agreement shall be cancelled because the historic value of the structure will have been destroyed. If the Historic Property is acquired in whole or in part by eminent domain or other acquisition by any entity authorized to exercise the power of eminent domain, and the acquisition is determined by the City Council to frustrate the purpose of this Agreement, this Agreement shall be cancelled.

No cancellation fee pursuant to Government Code Section 50286 shall be imposed if the Agreement is cancelled pursuant to this paragraph. Such Agreement shall be null and void for all purposes of determining the value of the property so acquired.

23. INDEMNIFICATION. Owner shall defend, indemnify, and hold harmless City and its elected officials, officers, agents and employees from any actual or alleged claims, demands, causes of action, liability, loss, damage, or injury to property or persons, including wrongful death, whether imposed by a court of law or by administrative action of any Attachment 1
federal, state or local government agency, arising out of or incident to the direct or indirect use, operation, or maintenance of the Historic Property by Owner or any contractor, subcontractor, employee, agent, lessee, licensee, invitee, or any other person; (ii) Owner’s activities in connection with the Historic Property; and (iii) any restriction on the use of development of the Historic Property, from application or enforcement of the City’s Municipal Code, or from the enforcement of this Agreement.

This indemnification includes, without limitation, the payment of all penalties, fines, judgments, awards, decrees, attorneys’ fees, and related costs or expenses, and the reimbursement of the City, its elected officials, employees, and/or agents for all legal expenses and costs incurred by each of them. Owner’s obligation to indemnify shall survive the termination, cancellation, or expiration of this Agreement and shall not be restricted to insurance proceeds, if any, received by City, its elected officials, employees, or agents.

24. SEVERABILITY. In the event that any of the provisions of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, or by subsequent preemptive legislation, the validity and enforceability of the remaining provisions, or portions thereof, shall not be affected thereby.

IN WITNESS THEREOF, the City and Owners have executed this Agreement on the day and year written above.

CITY OF CARMEL-BY-THE-SEA:

By: _______________________ Date: __________________
Name: Richard L. Rerig (“Chip”)
Title: City Administrator

PROPERTY OWNER(S):

By: __________________________ Date: ___________________ Name: Pierre LeComte, on behalf of Lopez 5 NW, LLC
Title: Property Owner
By: __________________________ Date: ___________________ Name: Vittoria Bergeron, on behalf of Lopez 5 NW, LLC
Title: Property Owner
Attachment 1

EXHIBIT A

LEGAL DESCRIPTION

EXHIBIT B
DPR 523 FORM

EXHIBIT C

MAINTENANCE PLAN
Attachment 1
LOT 14, IN BLOCK "LL", AS SAID LOT AND BLOCK ARE SHOWN ON THAT CERTAIN MAP ENTITLED, “MAP OF ADDITION NO. 3, CARMEL-BYTHESEA, MONTEREY COUNTY, CALIFORNIA, SURVEYED DEC. 1906 AND APRIL 1907 BY H.B. FISHER, SURVEYOR & C.E.", FILED AUGUST 12, 1907 IN VOLUME 2, MAPS OF "CITIES AND TOWNS", AT PAGE 5, IN THE

OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF MONTEREY, STATE OF CALIFORNIA.

Attachment 2
DPR 523A (1/95) *Required Information
State of California -- The Resources Agency

DEPARTMENT OF PARKS AND RECREATION

PRIMARY RECORD
Primary # ___________________________________________
HRI # ______________________________________________
Trinomial ___________________________________________
NRHP Status Code
Other Listings
Review Code ______ Reviewer ______________________ Date _______________________

P1. Other Identifier: Cosmas House
*P2. Location: Not for Publication Unrestricted *a. County Monterey and (P2b and P2c or P2d. Attach a Location Map as necessary) *b. USGS 7.5’ Quad Monterey Date 2012 T ; R ; ¼ of ¼ of Sec ; Mount Diablo B.M. c. Address Lopez 5NW of 4th City Carmel by the Sea Zip 93921 d. UTM: (Give more than one for large and/or linear resources) Zone ; mE/ mN e. Other Locational Data: (e.g., parcel #, directions to resource, elevation, etc., as appropriate) APN 010-232-028, Block LL, Lot 14
*P3a. Description: (Describe resource and its major elements. Include design, materials, condition, alterations, size, setting and boundaries) Built in 1961, the two-story Cosmas House has a parallelogram plan set on a diagonal axis across a steep, sloping site. The roof dominates the design and rests on the walls like a paper airplane with wings that almost graze the ground. Redwood decks are located at the front and rear of the house at the points of the parallelogram. The design emphasis is on verticality which is achieved by vertical flush redwood siding and the randomly placed vertical windows. Purple frames outline the windows, and some windows have opaque, colored glass. A wide, Carmel stone chimney breaks up the southwest elevation. The open-framed, overhanging roof eaves, create shadow patterns on the walls and the orange rafters are carried into the house.

A wood ramp with sculptural metal railings leads to the front entrance. The house is set in an Orientalinfluenced designed landscape accented by native oaks. (Continued on page 3) P5b. Description of Photo: (View,
date, accession #) Front Elevation, 07/2021
*P6. Date Constructed/Age and
Sources: 1961 Historic
Prehistoric Both
Building Permit
*P7. Owner and Address:

Lopez 5 NW LLC
3912 Alamanda Drive
Sarasota, FL 34238
*P8. Recorded by: (Name,
affiliation, and address)
Meg Clovis
14024 Reservation Rd.

Salinas, CA 93908
*P9. Date Recorded: 07/2021
*P10. Survey Type: (Describe)
Intensive
*P3b. Resource Attributes: (List attributes and codes) HP2, Single family residence *P4. Resources Present: Building Structure Object Site District Element of District Other (Isolates, etc.) *P11. Report Citation: (cite survey report and other sources, or enter “none.”) 2002 Intensive Survey by Richard Janick *Attachments: NONE Location Map Sketch Map Continuation Sheet Building, Structure and Object Record Archaeological Record District Record Linear Feature Record Milling Station Record Rock Art Record Artifact Record Photograph Record Other (List)
Attachment 3
DPR 523B (1/95) *Required Information
State of California -- The Resources Agency

DEPARTMENT OF PARKS AND RECREATION
Primary # __________________________________________
HRI # _____________________________________________

BUILDING, STRUCTURE, AND OBJECT RECORD

B1. Historic Name: Cosmas House
B2. Common Name: Cosmas House
B3. Original Use: Residence B4. Present Use: Residence
*B5. Architectural Style: Second Bay Area
*B6. Construction History: (Construction date, alteration, and date of alterations) Constructed in 1961 (BP#3715); Kitchen & stairs remodel in 1991 (BP#91-36); Reroof in 2004 (BP#04-9)
*B7. Moved? No Yes Unknown Date: Original Location:
*B8. Related Features: Designed Garden
B9a. Architect: Albert Henry Hill & John Kruse b. Builder: Grove Bishop *B10. Significance: Theme Architectural Development Area Carmel by the Sea Period of Significance 1961 Property Type Building Applicable Criteria CR 3 (Discuss importance in terms of historical or architectural context as defined by theme, period, and geographic scope. Address integrity.) The Cosmas House is one of three weekend homes on Lopez Avenue designed by architect Albert Henry Hill and his partner John Kruse. Hill purchased the property to build his own home. When his partner, John Kruse and client John Cosmas wanted to build as well, Hill subdivided his property into three pie-shaped lots and designed three distinct homes for each. Although each house is a unique design, his placement of the buildings on the lots creates an illusion of space between each house.

Hill designed the Cosmas family’s main residence in Marin’s Kent Woodlands. The house was featured on the cover of the March 1953 issue of Progressive Architecture magazine. He also designed the Cosmas Office Building in Vancouver, B.C. Mr. Cosmas gave the architect free reign in the design of his beach house, and only requested a sloping roof, which Hill made the dominant design element. The roof folds down over the walls like the wings of a paper airplane.

John Andreas Cosmas (1905 -1967) emigrated from Greece with his wife, Phopho (continued on pg. 3) (This space reserved for official comments.)
(Sketch Map with north arrow required.)
N←
B11. Additional Resource Attributes (List attributes and codes): HP2 *B12. References:

Carmel Context Statement & Historic Preservation Ordinance Architecture of the Monterey Peninsula, 1976
Building File, Carmel Planning Dept.

National Register Bulletin 15
Environmental Design Archives, UC Berkeley
Cosmas Obit., Daily Independent Journal, 11/27/1967, pg. 4 Seavey, Kent. Carmel: A History in Architecture, 2007
B13. Remarks
*B14. Evaluator: Meg Clovis
*Date of Evaluation: 08/2021
Attachment 3
State of California -- The Resources Agency

DEPARTMENT OF PARKS AND RECREATION

CONTINUATION SHEET
Primary #
HRI#
Trinomial

*Recorded by Meg Clovis *Date 08/2021  Continuation  Update DPR 523L (1/95) *Required Information
P3a. Description:

The Cosmas House retains a high degree of integrity as very few exterior changes have been made to the house since its construction. Permitted changes include:
• Permit #91-36 (3/11/1991): Remodel of kitchen and interior stairs • Permit #04-9 (1/13/2004): Reroof
Character Defining Features
Character refers to all the visual aspects and physical features that comprise the appearance of a historic building. Character-defining features include the overall shape of the building, its materials, craftsmanship, decorative details, and the various aspects of its site and environment. The Cosmas House reflects many of Henry Hill’s distinctive design traits as well as characteristics of the Second Bay Region style as described in Carmel’s Historic Context Statement. These include:
 Parallelogram plan and dramatic sloping roof
 Sharp, angular forms and irregular massing
 Vertical redwood siding and wide Carmel stone chimney  Plate glass window walls with some opaque glazing
 Sculptural metal railings
 Color details such as orange rafters and purple window frames  Decks set in the points of the parallelogram
 Setting and designed landscape.

B10. Significance:
in 1941 and became a naturalized U.S. citizen. He was a merchant marine captain and wealthy shipping executive. Cosmas was part owner of the Hermes Steamship Agency in San Francisco and President of the Standard Ship Building Corporation in San Pedro.

Albert Henry Hill (1913-1984) was born in England to American parents and came to California at the age of three when his parents divorced. Hill grew up in the Berkeley hills and studied architecture at UC Berkeley. In 1938 he received his master’s degree at Harvard, studying with Water Gropius, one of the founders of the International Style at the German Bauhaus. Hill returned to the Bay Area, joining the office of John Ekin Dinwiddie, a pioneering Bay Area modernist. He became a partner in the firm in 1939. During World War II Hill served with the Office of Special Services. After the war he returned to San Francisco and the Dinwiddie firm, where he worked with pioneering modernist Eric Mendelsohn who had fled Nazi Germany.

In 1947 Hill established his own practice designing residences in the Bay Area, California, and throughout the United States. Hills’s individual style combined International modernism with regional, vernacular influences, placing him among the second phase of Bay Area regional architecture.

His commissions were not limited to private residences. During the 1950s, her served as a consultant to U.S. Steel, and he designed U.S. Embassy staff housing in Vienna for the State Department. In 1955 he won an invitation-only competition to design the hiring hall of the international Longshoreman’s and Warehouseman’s Union near Fisherman’s Wharf in San Francisco. He also designed the AIA award-winning chapel at the public hospital in Moline, IL. Additionally, he served as a lecturer in Architecture at Stanford University from 1948 to 1965.

Attachment 3
State of California -- The Resources Agency

DEPARTMENT OF PARKS AND RECREATION

CONTINUATION SHEET
Primary #
HRI#
Trinomial

*Recorded by Meg Clovis *Date 08/2021  Continuation  Update DPR 523L (1/95) *Required Information
In 1965, Hill took on long-time associate John (Jack)
Kruse as a partner in his architecture practice. Kruse
was born in Davenport, Iowa in 1918 and attended
Cornell University and MIT. After serving in World
War II as a lieutenant in the U.S. Navy, he settled in
San Francisco and began working with Hill in 1948.

With Hill as the designer and Kruse as the structural
expert, the prolific partnership would result in more
than 500 residential and commercial buildings in
California, Hawaii, Connecticut, Illinois, Kentucky,
Quebec, and El Salvador. Hill and Kruse won
numerous awards for design throughout their
careers, together and individually. Both are listed in
Carmel’s Historic Context Statement as significant
architects. Site plan for Lopez Avenue Weekend Houses.

Henry Hill helped to define the Second Bay Region style, a building tradition that is important to Carmel’s architectural chronology. The Historic Context states, “A Bay Region building was viewed as an organic extension of nature. Large expanses of glass window walls, sliding doors and partitions, and lofty ceilings allowed the outdoors to flow flawlessly into interior living spaces. In a place like Carmel where the natural environment reigned supreme, the Bay Region was a perfect fit.” Hill’s designs have been described as flamboyant and whimsical. He often started with a hillside lot. From there he added a rectangular box with walls of glass and a roof with wide, overhanging eaves. Details could include lattices and slats arranged vertically and horizontally to create patterns of dappled light, opaque glass to filter light, colored light fixtures, circular stairways, windows with perfectly framed views, and gold leaf fireplaces. Hill was an avid gardener and gardens were integral to his designs, often serving as courtyard atriums. He defined exterior space with mini-walls, free-standing or structural, that extended out from the façade at 90-degree angles. Decks, doorway canopies, and facades were often a series of angles. Hills signature color palette combined natural shades of grays, browns, and golds accented by window frames of orange, purple, or green. He often created total environments, designing, or choosing furnishings, deciding the color of lightbulbs and even where clients should hang their artwork.

In 1971 Hill moved permanently to his home on Lopez Avenue in Carmel. He became active in the community and served on the Carmel Planning Commission from 1972 to 1977. He died of cancer in 1984.

Evaluation for Significance
Historians use National Register Bulletin 151 as a guide when evaluating a property’s significance whether on a local, state, or national level. As a first step, to determine whether or not a property is significant, it must be evaluated within its historic context and the City of Carmel’s Historic Context Statement2 provides this context.

The City of Carmel’s Historic Preservation Ordinance (Section 17.32.040) reiterates the role of National Register Bulletin 15 in the evaluation of historic resources. Adopted eligibility criteria is modeled on the California Register’s four criteria with the addition of specific qualifications for criterion 3 (Section 17.32.040.D).

The Cosmas House is eligible for listing in the Carmel Inventory under Criterion Three (architecture) because it was designed by Henry Hill and John Kruse, architects who are recognized as significant in the Historic Context Statement (Carmel Historic Preservation Ordinance Section 17.32.040.D(1)). In addition, it is a good 1 How to Apply the National Register Criteria for Evaluation. National Park Service. 1998. 2 Historic Context Statement: Carmel-by-the-Sea (updated). Adopted by the City Council September 9, 2008.

Attachment 3
State of California -- The Resources Agency

DEPARTMENT OF PARKS AND RECREATION

CONTINUATION SHEET
Primary #
HRI#
Trinomial

*Recorded by Meg Clovis *Date 08/2021  Continuation  Update DPR 523L (1/95) *Required Information
example of the Second Bay Region style which is important in Carmel’s architectural legacy and recognized as significant in the Historic Context Statement (Carmel Historic Preservation Ordinance Section 17.32.040.D(3)).

The Cosmas House is not eligible under Criterion One (Event) as no specific event led to the construction of this building and no important event took place in the building. The Cosmas House is not eligible under Criterion Two (Person) as John Cosmas is not individually significant within Carmel’s historic context. Mr.

Cosmas was a prominent shipping executive in the San Francisco Bay Area and his productive life is best reflected by his permanent residence in Marin County, also designed by Henry Hill, and not his vacation home on Lopez Avenue. The Cosmas House is not eligible for Criterion Four (Information Potential) because there is no evidence of archaeological resources at the site.

To be eligible for the Carmel Inventory a resource must represent a theme in the Context Statement, retain substantial integrity, be at least 50 years old, and meet at least one of the four criteria for listing in the California Register. The Cosmas House represents the theme of Architectural Development, and it is over 50 years old. It meets Criterion Three of the California Register on the local level because it is representative of Carmel’s architectural chronology, specifically the Second Bay Region style, as described in the Context Statement. A discussion of integrity follows.

Integrity is defined as the ability of a property to convey its significance. There are seven aspects of integrity:

Location, Design, Setting, Materials, Workmanship, Feeling, and Association. To retain historic integrity a property must retain several, if not most of the aspects. As stated in the Description, the Cosmas House has retained a high degree of integrity. Very few changes have been made over time (as outlined in the listing of building permits) and none have affected the building’s location, design, setting, materials, workmanship, feeling, and association.

In summary, the Carmel Context Statement, the Carmel Historic Preservation Ordinance, and the historical record support the eligibility of the Cosmas House for the Carmel Historic Inventory.

Attachment 3
Mills Act Application
Lopez Avenue 5 NW of 4th Avenue APN 010-232-028-000
This Mills Act Application was prepared by Architect Karen (KC) Cullen and Vittoria Bergeron, one of the property owners. Ms. Cullen is a registered architect with 30 years of experience restoring and renovating Mid-century Modern architecture; and worked on other architectural preservation projects with Palo Alto Stanford Heritage and the Palo Alto Historical Association.

The Lopez Avenue house was designed by Henry Hill and John Kruse along with two adjacent houses in 1961. The house was not on the historic register when the current owners purchased it several years ago. During a design review application in 2021 for remodeling the ground floor rooms, the house was evaluated by Meg Clovis and subsequently added to the Carmel Inventory as the Cosmas House (original owner).

The house had been remodeled on the interior in 1991. The latest remodel completed in 2023 included the addition of new windows at the ground floor level, mainly on the back of the house. During the course of the renovation, several infrastructure issues came up that the owners and contractor had to address immediately, that added significantly to the cost of the renovation.

The owners were not able to apply for Mills Act relief before doing the completed rehabilitation work because the house was not considered historic when they bought it, or when they planned their renovation. The recent work makes it possible for the attached plan to be mostly maintenance.

Rehabilitation Items (Complete):

1. Knob and tube electrical wiring was discovered inside the walls and ceiling, requiring replacement to current code, and an additional $25,000.

2. The structural engineer recommended additional footings retrofitted to the existing foundation, which added $38,000. including the engineering and site visit costs.

3. The main sewer line servicing the bathrooms and kitchen of the upper house as well as the new work had to be replaced to the exterior connection, at a cost of $22,000.

Rehabilitation Items (Remaining):

4. The contractor has observed significant rot to an original structural wood post that supports both the 2nd floor balcony/deck and the roof, at the apex. This will require engineering and creative installation.

Maintenance Items (Planned):

1. Replace roof shakes. New Western Red Cedar pressure treated shakes correctly installed over a fire retardant fiberglass underlayment that meet the Class 'A' rating for fire safety.

The new roof will also require periodic inspection and re-coating for fire protection.

2. Re-stain Exterior Siding and Deck. Existing rustic redwood siding is in fairly good shape for its age; periodic inspection and re- staining will ensure it remains so.

3. Re-paint exterior door and window trim. The bright colors of the old doors and window trim need to be painted to look as fresh as the newer window and door trim.

4. Re-paint beams and ceiling. Beams and ceiling are painted the same colors inside and out.

The orange color of the beams is a feature of the house and will need to be maintained.

Attachment 4

5. Landscape Maintenance. The existing landscaping survived the recent construction fairly well, but will require work in some areas.

6.Sump cleanout/maintenance.

7.Termite inspections and treatment as required.
-KC Cullen
Rehabilitation Item Photos (complete, Building Permit 21-0440 finaled 05/04/2023):

Knob and Tube Wiring
Retrofitting foundation Retrofitting foundation
Attachment 4
Retrofitted foundation Old sewer line
Rehabilitation/Maintenance Item Photos (planned, 2024-2033) Structural wood post (orange) supporting balcony and roof to be replaced Attachment 4
Replace Roof Shakes Exterior Redwood Siding and Deck
Attachment 4

Paint Door and Window Trim Paint Beams and Ceiling
Maintain Landscape
Attachment 4
0 LOPEZ 5 NW OF 4TH AVENUE - 10 YEAR REHABILITATION / MAINTENANCE PLAN

WORK ITEM YEAR OF COMPLETION COST ESTIMATE
2 0
2 4
2 0
2 5
2 0
2 6
2 0
2 7
2 0
2 8
2 0
2 9
2 0
3 0
2 0
3 1
2 0
3 2
2 0
3 3

RE-STAIN

EXTERIOR
SIDING
X X X $10,000.00

RE-PAINT

EXTERIOR

DOORS AND

WINDOW TRIM
X X $16,000.00

RE-PAINT

BEAMS AND

CEILING
X $10,000.00

REPLACE

CLASS A

ROOF SHAKES
X
$25,000.00

RE-STAIN

EXISTING
DECK
X X $1,000.00

REPLACE

STRUCTURAL

POST THRU

DECK TO
ROOF
X
X $20,000.00

MAINTAIN

LANDSCAPING
X XX X X X X X X X $5,000.00
SUMP

CLEANOUT /

MAINTENANCE
X X X X X $300.00

TERMITE

INSPECTION
AND

TREATMENT
X $1,200.00
TOTAL $87,300.00
Attachment 4

CITY OF CARMEL-BY-THE-SEA

HISTORIC RESOURCES BOARD

HISTORIC RESOURCES BOARD RESOLUTION NO. 2023-014-HRB

A RESOLUTION OF THE HISTORIC RESOURCES BOARD OF THE CITY OF CARMEL-BY-THE-SEA

ADDING A HISTORIC RESOURCE TO THE CARMEL REGISTER AND RECOMMENDING THAT THE CITY COUNCIL ENTER INTO A MILLS ACT CONTRACT WITH LOPEZ 5 NW, LLC FOR THE PROPERTY LOCATED ON LOPEZ AVENUE 5 NORTHWEST OF 4TH AVENUE (APN 010-232-028).

WHEREAS, on June 2, 2023, KC Cullen, Architect (“Applicant”) submitted an application on behalf of Lopez 5 NW, LLC (“Owner”) requesting to add the historic “Cosmas House” to the Carmel Register of Historic Resources and enter into a Mills Act contract (MA 23-146, Lopez 5 NW, LLC) described herein as (“Application”); and
WHEREAS, the Application has been submitted for the property located on Lopez Avenue 5 northwest of 4th Avenue, in the Single Family Residential (R-1) District (Block LL, Lot 14, part Lot 12); and
WHEREAS, the Applicant is requesting to add the historic “Cosmas House” to the Carmel Register of Historic Resources; and
WHEREAS, in accordance with Carmel Municipal Code (CMC) Section 17.32.090 (Carmel Register of Historic Resources) the City shall maintain a Register of Historic Resources designated by the City for public recognition and benefits; and
WHEREAS, historic resources identified as significant at a local or regional level shall be eligible for listing in the Register at the request of the property owner and upon approval by the Historic Resources Board; and
WHEREAS, one of the benefits of being included on the Register is the ability to enter into a Mills Act Historical Property Contract with the City; and WHEREAS, the Applicant is also requesting to enter into a Mills Act contract with the City and in accordance with Carmel Municipal Code (CMC) Section 17.32.100.B.6 (Review Process), the Historic Resources Board shall consider the application and make a recommendation to the City Council to approve, approve with conditions, or deny the application; and WHEREAS, on September 8, 2023, notice of the September 18, 2023 public hearing was published in the Carmel Pine Cone in compliance with State law (California Government Code 65091), and mailed to owners of real property within a 300-foot radius of the project indicating the date and time of the public hearing; and
DocuSign Envelope ID: D122F7FD-7642-4820-837F-10D4A3B2A067 Attachment 5
Resolution No. 2023-014-HRB

WHEREAS, on or before September 8, 2023, the Applicant posted the public notice on the project site and hand-delivered a copy of the public notice to each property within a 100- foot radius of the project site indicating the date and time of the public hearing; and WHEREAS, on or before September 15, 2023 the meeting agenda was posted in three locations in compliance with State law indicating the date and time of the public hearing; and WHEREAS, on September 18, 2023, the Historic Resources Board held a public meeting to consider adding the historic “Cosmas House” to the Carmel Register and to consider the application for a Mills Act contract, including without limitation, information provided to the Historic Resources Board by City staff and through public testimony; and WHEREAS, this Resolution and its findings are made based upon the evidence presented to the Historic Resources Board at the September 18, 2023 meeting including, without limitation, the staff report and attachments submitted by the Community Planning and Building Department; and
WHEREAS, the Historic Resources Board did hear and consider all said reports, attachments, recommendations and testimony herein above set forth and used their independent judgment to evaluate the project; and
WHEREAS, the facts set forth in the recitals are true and correct and are incorporated herein by reference.

NOW, THEREFORE, BE IT RESOLVED, that the Historic Resources Board of the City of CarmelBy-The-Sea does hereby make the following findings and determinations regarding the Mills Act Contract:

FINDINGS REQUIRED FOR A MILLS ACT CONTRACT
For each of the required findings listed below, staff has indicated whether the application supports the adoption of the findings. For all findings checked "no" the staff report discusses the issues to facilitate the Historic Resources Board’s decision-making. Findings checked "yes" may or may not be discussed in the report depending on the issues.

CMC 17.32.100.B.6.c YES NO
i. The building is designated as an historic resource by the City and is listed on the Carmel Register.
✔
ii. The proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property. ✔
iii. Alterations to the historic resource have been in the past, and will continue to be in the future, limited to interior work and to exterior rehabilitation and alterations that:
✔
DocuSign Envelope ID: D122F7FD-7642-4820-837F-10D4A3B2A067 Attachment 5
Resolution No. 2023-014-HRB

(A) Comply with the Secretary’s Standards (future additions only); and (B) Do not significantly alter, damage or diminish any primary elevation or character-defining feature; and
(C) Do not increase floor area on the property by more than 15 percent beyond the amount established in the documented original or historic design of the resource; and
(D) Do not result in any second-story addition to a single-story historic resource.
iv. The Mills Act contract will aid in offsetting the costs of rehabilitating and maintaining the historic resource.
✔
v. Approval of the Mills Act contract will represent an equitable balance of public and private interests and will not result in substantial adverse financial impact on the City.
✔
BE IT FURTHER RESOLVED that the Historic Resources Board of the City of Carmel-by-theSea does hereby add the historic “Cosmas House” to the Carmel Register of Historic Resources and recommend that the City Council enter into a Mills Act Contract (MA 23-146, Lopez 5 NW, LLC) for the property located on Lopez Avenue 5 northwest of 4th Avenue (APN 010-232-028).

PASSED, APPROVED AND ADOPTED BY THE HISTORIC RESOURCES BOARD OF THE CITY OF CARMEL-BY-THE-SEA this 18th day of September, 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

APPROVED: ATTEST:
_________________________ _________________________
Jordan Chroman for Leah Young
Chair Historic Resources Board Secretary

DocuSign Envelope ID: D122F7FD-7642-4820-837F-10D4A3B2A067 Attachment 5

STATE OF CALIFORNIA
June 2, 2005
TO COUNTY ASSESSORS AND INTERESTED PARTIES:

NOTICE OF BOARD ACTION

GUIDELINES FOR THE ASSESSMENT OF

ENFORCEABLY RESTRICTED HISTORICAL PROPERTY
On May 25, 2005, the Board of Equalization approved the following guidelines pertaining to the assessment of enforceably restricted historical property. These guidelines supersede Letter To Assessors No. 77/174 (dated December 19, 1977).

On June 8, 1976, the voters of California approved Proposition 7 which amended section 8 of article XIII of the California Constitution. This amendment requires that enforceably restricted historical property be valued on a basis that is consistent with its restrictions and uses. Sections 439 through 439.4 were added to the Revenue and Taxation Code to implement Proposition 7.

These statutes, in particular section 439.2, prohibit a valuation of enforceably restricted historical property based on sales data and instead require that such property be valued by a prescribed income capitalization method.

Staff drafted these guidelines in consultation with interested parties and, after discussions, no issues remained unresolved. The guidelines discuss the enforceably restricted historical property requirements, the income to be capitalized, the capitalization rate, the effect of Proposition 13 upon enforceably restricted historical properties that undergo change in ownership or new construction, and the valuation of property under notice of nonrenewal.

The guidelines are posted on the Board's website at www.boe.ca.gov/proptaxes/guideproc.htm.

We hope this information proves useful and promotes uniformity of assessment for these properties. If you have any questions, please contact our Real Property Technical Services Unit at 916-445-4982.

Sincerely,
/s/ David J. Gau
David J. Gau
Deputy Director
Property and Special Taxes Department
DJG:grs
Enclosure
BETTY T. YEE
Acting Member
First District, San Francisco

BILL LEONARD
Second District, Sacramento/Ontario

CLAUDE PARRISH
Third District, Long Beach

JOHN CHIANG
Fourth District, Los Angeles

STEVE WESTLY
State Controller, Sacramento
RAMON J. HIRSIG
Executive Director
No. 2005/035

STATE BOARD OF EQUALIZATION

PROPERTY AND SPECIAL TAXES DEPARTMENT
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0064
916 445-4982 z FAX 916 323-8765
www.boe.ca.gov
Attachment 6
1 GUIDELINES FOR THE ASSESSMENT OF

ENFORCEABLY RESTRICTED HISTORICAL PROPERTY

HISTORY
Effective March 7, 1973, Chapter 1442 of the Statutes of 1972 (also known as the Mills Act) added sections 50280 through 50289 to the Government Code to allow an owner of qualified historical property to enter into a preservation contract with local government. When property is placed under such a contract, the owner agrees to restore the property if necessary, maintain its historic character, and use it in a manner compatible with its historic characteristics.

Prior to the passage of Proposition 7 in 1976, these agreements (i.e., Mills Act contracts) constituted enforceable restrictions on the use of land within the meaning of Revenue and Taxation Code section 402.11
(Property Tax Rule 60, repealed January 10, 1978). However, Proposition 7 added the second paragraph to section 8 of article XIII of the California Constitution:

To promote the preservation of property of historical significance, the Legislature may define such property and shall provide that when it is enforceably restricted, in a manner specified by the Legislature, it shall be valued for property tax purposes only on a basis that is consistent with its restrictions and uses.

To implement Proposition 7, Chapter 1040 of the Statutes of 1977 (Senate Bill 380) added sections 439 through 439.4 to the Revenue and Taxation Code. These statutes, in particular section 439.2, prohibit a valuation of enforceably restricted historical property based on sales data and instead require that such property be valued by a prescribed income capitalization method.

ENFORCEABLY RESTRICTED HISTORICAL PROPERTY
Under section 439, historical property is "enforceably restricted" if it meets the definition of a "qualified historical property" as defined in Government Code section 50280.1 and is subject to a historical property contract executed pursuant to Government Code section 50280 and following.

A qualified historical property includes qualified historical improvements and the land on which the improvements are situated, as specified in the historical property contract. If the contract does not specify the land to be included, the qualified historical property includes only a land area of reasonable size to situate the improvements.

A qualified historical property is privately-owned property that is not exempt from property taxation and that also meets either of the following criteria:
• The property is listed in the National Register of Historic Places, or is located within a registered historic district; or

1 Unless otherwise noted, all statutory references are to the Revenue and Taxation Code.

Attachment 6
2 • The property is listed in any official state, county, city, or city and county official register of historical or architecturally significant sites, places or landmarks, including the California Register of Historical Resources, California Historical Landmarks, State Points of Historical Interest, local landmarks, and local survey listings of historical properties.

The historical property contract must have a minimum term of ten years, and, as applicable, must contain certain other elements, including the following:
• A provision relating to the preservation of the qualified historical property and, when necessary, the restoration and rehabilitation of the property in conformance with state historic preservation guidelines;
• A requirement for the periodic examination of the property to ensure compliance with the agreement;
• A requirement that the historical property agreement be binding upon successor owners of the qualified historical property; and
• A provision for an automatic one-year extension of the contract, with an additional year added to the initial contract term on each anniversary of the contract, unless either party provides notice of nonrenewal. If a notice of nonrenewal is given, the contract runs for its remaining term.

Once a contract is signed, accepted, and recorded, the property subject to the contract must be assessed under section 439.2 on the ensuing lien date. For example, if a contract were recorded in August 2004, the property should have been valued pursuant to section 439.2 for lien date January 1, 2005.

Local authorities may cancel a historical property agreement for breach of contract or failure to protect the historical property. Alternatively, the local entity may take legal action to enforce the contract.

ASSESSMENT
The assessment of an enforceably restricted historical property involves the following aspects:
(1) valuing the restricted historical property; (2) properly applying certain assessment provisions relating to article XIII A of the California Constitution (Prop 13); (3) valuing the restricted historical property following a notice of nonrenewal; and (4) valuing the restricted historical property following cancellation of the contract.

Valuing the Restricted Historical Property
Section 439.2 prohibits the assessor from using sales data relating to similar properties, whether or not enforceably restricted, to value an enforceably restricted historical property. Instead, the assessor must annually value a restricted historical property using an income approach that Attachment 6
3 follows the specific provisions of section 439.2. These provisions explicitly address (1) the determination of the income to be capitalized, (2) the development of the capitalization rate, (3) the capitalization technique to be used, and (4) the determination of the restricted historical property's taxable value on each lien date.

Income to be Capitalized
As provided in section 439.2(a), the income to be capitalized when valuing a restricted historical property is the property's fair rent less allowed expenditures, or allowed expenses. In general, section 439.2(a) follows Property Tax Rule 8(c), with fair rent in section 439.2 corresponding to gross return in Rule 8(c); allowed expenditures, or allowed expenses, in section 439.2 corresponding to gross outgo in Rule 8(c); and the income to be capitalized in section 439.2 corresponding to net return in Rule 8(c). In addition, for the purposes here, "gross income" is synonymous with fair rent, and "net operating income" is synonymous with the income to be capitalized.

The parties to a historical property agreement may stipulate a minimum annual income to be capitalized, in which case the income to be capitalized may not be less than the stipulated amount.

Fair rent, or gross income. The gross income of a restricted historical property is the fair rent for the property considering the restrictions on the property's use. When establishing the fair rent for a restricted historical property, the appraiser should consider the actual rent and typical rents in the area for similar properties in similar use, where the owner pays the property taxes.

The actual rent received by the owner of the subject restricted historical property is relevant to an estimate of fair market rent only if the actual rent is the same rent that would be expected if the existing lease were renegotiated in light of current market conditions, including the subject property's enforceable restrictions on use. With respect to rents from similar, or comparable, properties, if such rents are from properties outside the geographic or market area of the subject property, or from properties that are otherwise dissimilar to the subject property, the rents may not be relevant to an estimate of the subject property's fair rent.

Comparable rental data for single-family residences can be obtained from real estate brokers, rental agencies, and newspaper ads. Many assessors offices maintain rental data for commercial properties, and this data may be helpful when establishing the fair rent for restricted historical property when the contract allows a commercial use. Rental data for commercial property also can be obtained from commercial real estate brokers. For the purpose of estimating anticipated market fair rent and expenditures for use in calculating the subject property's value, rental and expense data for existing restricted historical properties, including the subject historical property, can be obtained through an annual questionnaire sent to property owners.

If sufficient rental data are not available, or such data are unreliable, the appraiser must impute a gross income for the subject restricted historical property. The imputed income should be based on what an informed investor would reasonably expect the property to yield under prudent management, given the provisions under which the property is enforceably restricted.

Attachment 6
4 Allowed expenditures. Section 439.2(a)(3) defines allowed expenditures, or allowed expenses, as expenses necessary for the maintenance of the property's income. Allowed expenses are the same as those permitted in Property Tax Rule 8(c).

Typical expenses include the cost of utilities, maintenance and repair, insurance and property management. Allowed expenses also may include amounts owing for special assessments and special taxes. Expenses related to debt service, general property taxes, and depreciation should not be deducted.

In general, to arrive at the net income to be capitalized, allowed expenses are subtracted from the estimated rental income. However, in order to properly process the income, the appraiser must be aware of the structure of the lease with regard to how expenses are shared between the landlord-owner and the tenant.

The proper perspective from which to view the processing of income and expenses is that of the landlord-owner. The objective is to estimate the net income to the landlord-owner—this is the amount that should be capitalized—and the correct question to ask is the following: What, if any, allowed expenses must the landlord-owner pay out of the rental income that he or she receives?
In a gross lease, almost all of the allowed expenses must be paid out of the gross rent and, therefore, must be subtracted from the gross rent to arrive at the net income to be capitalized. In a net lease, relatively few allowed expenses must be paid by the landlord-owner out of the net rent (because the tenant pays most expenses) and only these expenses should be subtracted from the net rent to arrive at the net income to be capitalized. Frequently, there is a hybrid arrangement—some expenses are paid by the landlord-owner and some by the tenant. How expenses are shared often depends upon the property type together with local conventions.

Income to be capitalized, or net operating income. The income to be capitalized, or net operating income, is simply the fair rent, or gross income, described above less the allowed expenditures described above.

Capitalization Rate
The method of developing the capitalization rate to be used when valuing restricted historical property is prescribed by statute; a capitalization rate derived from sales data or the band of investment is not permitted.

Section 439.2 prescribes two types of capitalization rates for restricted historical property: (1) a capitalization rate to be used when valuing restricted historical property that is an owneroccupied single-family residence and (2) a capitalization rate to be used when valuing all other restricted historical property. Both types of capitalization rates include components for interest (i.e., yield), risk, property taxes, and amortization of improvements; in fact, the two rates are identical except for the amount of the risk component. The capitalization rate contains the following components:

Attachment 6
5 • An interest component annually determined by the State Board of Equalization and based on the effective rate on conventional mortgages as determined by the Federal Housing Finance Board. The interest component is announced annually, in a Letter To Assessors, by October 1 of the preceding assessment year.
• A historical property risk component determined by property type. For owner-occupied single-family residences, the rate is 4 percent; for all other types of restricted historical property, the rate is 2 percent.
• An amortization component for improvements defined as a percentage equal to the reciprocal of the remaining life of the improvements (e.g., if the remaining economic life of the improvements were 20 years, the amortization component would be 5 percent). Since the amortization component applies only to improvements, not to land, which is a nondepreciating asset, it is necessary to adjust the amortization component described in the statute. We recommend the following method of adjustment:

1. Based upon market data, estimate the percentage of total property value attributable to improvements.

2. Multiply this percentage by the amortization component described in the statute (i.e., by the reciprocal of the remaining life of the improvements). For example, if the remaining life of the improvements was 20 years, yielding a reciprocal percentage of 5 percent, and if 70 percent of the total property value was attributable to the improvements, the adjusted amortization factor would be 3.5 percent (0.05 x 0.70 =

0.035).

3. Add the adjusted amortization component to the other capitalization rate components to arrive at the total capitalization rate.
• A property taxes component equal to the percentage of the estimated total tax rate applicable to the property for the assessment year multiplied by the assessment ratio. Typically, the property tax component includes the basic tax rate of 1 percent plus an additional ad valorem rate related to any bonded indebtedness pertaining to the tax rate area in which the property is located. Special district assessments and special taxes are not included in the property tax component. As noted above, they should be treated as allowed expenses.

Capitalization Technique
The capitalization technique to be used when valuing a restricted historical property is prescribed by statute and is formulaic. Section 439.2(e) provides that the restricted value shall be the income to be capitalized, or net operating income, developed as prescribed by statute, divided by one of the two types of capitalization rates prescribed by statute. In other words, the restricted value is the simple quotient of the prescribed income to be capitalized and the prescribed capitalization rate.

Attachment 6
6 Determination of Taxable Value on Each Lien Date
Section 439.2(d) provides that a historical property's restricted value may not be enrolled if it exceeds either (1) the value of the subject property as determined under section 110 (i.e., current market value) or (2) the value of the subject property as determined under section 110.1 (i.e., factored base year value). In other words, section 439.2 states that the taxable value of a restricted historical property on each lien date shall be the lowest of its restricted value, current market value, or factored base year value. The factored base year value for an enforceably restricted historical property is the value that was established for the 1975 lien date2 or as of the
date of the most recent change in ownership, whichever is later, adjusted by the annual inflation factor.

Article XIII A (Prop 13) Considerations
This section discusses how three important elements relating to implementation of article XIII A—change in ownership, new construction, and supplemental assessment—relate to the assessment of restricted historical property. Also discussed is the case in which only a portion of a property is subject to the historical property agreement—that is, the case in which a single property unit contains both restricted and unrestricted portions.

Change in Ownership
When a property subject to a historical property contract undergoes a change in ownership, a new base year value should be established for the property as of the date of change in ownership, as provided in section 110.1. Typically, a restricted historical property's base year value will be greater than its restricted value determined under section 439.2 and hence will not be enrolled as the property's taxable value. However, the establishment of a new base year value enables the assessor to perform the three-way value comparison prescribed by section 439.2(d) and described above. The establishment of a base year value is also necessary in order to calculate the assessed values of historical property should the historical property agreement enter nonrenewal status.

New Construction
Section IV of National Register Bulletin #15 defines a "building" as follows:

A building, such as a house, barn, church, hotel, or similar construction, is created principally to shelter any form of human activity. "Building" may also be used to refer to a historically and functionally related unit, such as a courthouse and jail or a house and barn.

Section IV further specifies that "[b]uildings eligible for the National Register must include all of their basic structural elements. Parts of buildings, such as interiors, facades, or wings, are not eligible independent of the rest of the existing building. The whole building must be considered,

2 Sections 110.1(d) and 405.5 do not apply to historical properties under contract as of lien date 1975 because the constitutional amendment which placed the valuation of historical property under article XIII rather than article XIII A had not yet been passed and, thus, was not in effect for the 1975 lien date.

Attachment 6
7 and its significant features must be identified." Thus, eligibility for the National Register is determined by the extent to which the basic structural elements of an existing building are intact.

In general, a newly constructed building would not be eligible because it is not an existing building with basic structural elements.3
Also, a newly constructed building is not a historic resource, and, thus, is not a qualified historical property within the meaning of Government Code section 50280.1. For example, a newly constructed detached garage (assuming it is not a reconstruction of a historical garage) clearly would not be eligible because it has no significance in American history or architecture, nor does it meet any of the other requisite criteria.

Bulletin 15, however, does list one type of newly constructed property that may be eligible for inclusion under the Mills Act. A reconstructed historic building is eligible for the National Register if the reconstruction is "accurately executed in a suitable environment and presented in a dignified manner as part of a restoration master plan, and when no other building or structure with the same association has survived."
The historical property contract typically specifies the scope and type of any work to be performed on the historical improvements. Improvements existing as of the date of the contract would be subject to the provisions of section 439.2 unless specifically excluded by the contract.

Any new construction made to the historical structure after the issuing date of the contract would not be subject to the provisions of section 439.2 unless specifically included in the contract or an amendment to the contract. Any questions regarding new construction to enforceably restricted historical structures should be directed to the counsel of the legislative body of the city, county, or city and county that contracted with the property owner.

Assuming that the newly constructed property is subject to the historical property contract, a base year value should be established for the newly constructed portion and this value added to the factored base year value of the existing restricted property.

In some cases, an existing historical property may include a portion that is restricted (i.e., subject to a historical property contract) and a portion that is unrestricted. In this case, separate factored base year values should be maintained for the restricted and unrestricted portions and the base year value of any newly constructed property added to the appropriate portion. The assessment treatment of this type of property is discussed further below.

Supplemental Assessment
Although the assessor is required to establish a new base year value upon a change in ownership or completed new construction involving restricted historical property, such property is not subject to supplemental assessment. As provided in Revenue and Taxation Code section 75.14:

Supplemental assessment; limitation. A supplemental assessment pursuant to this chapter shall not be made for any property not subject to the assessment

3 National Register Bulletin 15, "How to Apply the National Register Criteria for Evaluation," U.S. Department of the Interior, National Park Service (www.cr.nps.gov/nr/publications/).

Attachment 6
8 limitations of Article XIII A of the California Constitution. All property subject to the assessment limitations of Article XIII A of the California Constitution shall be subject to the provisions of this chapter, except as otherwise provided in this article.

As discussed above, the assessment of enforceably restricted historical property is subject to the provisions of article XIII, section 8 of the California Constitution, not article XIII A. Thus, section 75.14 precludes the assessor from enrolling supplemental assessments for enforceably restricted historical property.

Historical property not yet under contract that undergoes a change in ownership or new construction is subject to supplemental assessment, even if the property owner later executes a historical property contract in the same fiscal year. Also, any new construction involving a historical property that does not come under the existing historical property contract (e.g., a detached garage added to a restricted historical property) would be subject to supplemental assessment.

When a Property Contains Both Restricted and Unrestricted Portions When only a portion of a property that would normally be considered a single appraisal unit is restricted by a historical property contract, the assessed value should be determined by making a comparison of three values, determined as follows. First, the portion under contract should be valued using the capitalization method prescribed by section 439.2. Added to this figure should be the lower of the unrestricted portion's fair market value or factored base year value. The resulting sum should be compared to both the fair market value and the factored base year value of the entire property (i.e., both restricted and unrestricted portions) and the lowest of the three figures should be enrolled.

Valuing Property Under Notice of Nonrenewal
As provided in Government Code section 50282, either the owner of a restricted historical property or the local government entity may serve notice that it does not intend to renew the historical property contract. If such notice is not given, another year is automatically added to the term of the initial contract, thus creating a "rolling" contract term that is always equal to the initial contract term.

Section 439.3 prescribes the valuation method for a restricted historical property in nonrenewal status; this valuation method applies until the end of the restricted period (i.e., until the existing contract expires). In essence, the method results in a restricted value that gradually approaches the historical property's factored base year value as the remaining term under the contract decreases. For a property in nonrenewal status, the assessor must annually value the property as follows:

1. Determine the full cash value (i.e., factored base year value) of the property in accordance with section 110.1. (Alternatively, if the property will not be subject to section 110.1 when the historical property agreement expires, determine its fair market value in accordance with Attachment 6
9 section 110, as if the property were free of the agreement's restrictions; or, if the property will be subject to another type of restricted value standard when the historical property agreement expires, determine the property's value as if it were subject to the new restrictions.)

2. Determine the restricted value of the property by the capitalization of income method provided in section 439.2.

3. Subtract the restricted value determined in Step 2 from the factored base year (or other) value determined in Step 1.

4. Using the amount for the interest rate component (section 439.2(b)(1)) announced by the Board, discount the amount obtained in Step 3 for the number of years remaining until the termination of the contract.

5. Determine the restricted value of the property in nonrenewal status by adding the value determined in Step 2 to the amount obtained in Step 4.

The historical property's restricted value in nonrenewal status—that is, the value determined above, in accordance with section 439.3—should be compared with the historical property's factor base year and current market values, and the lowest of these three values should be enrolled as the property's taxable value.

Cancellation of Contract
The government entity party to a historical property contract may cancel the contract, after notice and a public hearing, if it determines that either the owner has breached the agreement or the property has deteriorated to the extent that it no longer meets the standards of a historical property. If the contract is cancelled, the property owner must pay a cancellation fee equal to 12½ percent of the property's current fair market value as though free of the contractual restriction, such value to be determined by the county assessor. After a contract is cancelled, the lower of the property's factored base year value or current market value should be enrolled for the ensuing lien date.

SUMMARY
The key points contained in these guidelines can be summarized as follows:

1. An owner of qualified historical property may enter into a preservation contract with local government. When property is placed under such a contract, the owner agrees to restore the property if necessary, maintain its historic character, and use it in a manner compatible with its historic characteristics. Such property receives the special valuation treatment prescribed under Revenue and Taxation Code sections 439 through 439.4.

2. Enforceably restricted historical property is to be annually valued by the income capitalization method prescribed in section 439.2, which contains specific instructions with Attachment 6
10 regard to the income to be capitalized, the capitalization rate, and the capitalization technique to be used. The restricted value must be compared to the property's current market value and factored base year value, with the lowest of these three values enrolled as the property's taxable value.

3. When assessing restricted historical property, the appraiser should consider how three important elements of article XIII A—change in ownership, new construction, and supplemental assessment—relate to the assessment. The appraiser should consider how a property should be assessed when only a portion of it is subject to a historical property agreement.

4. Restricted historical property under a notice of nonrenewal should be valued in accordance with section 439.3.

5. The government entity party to a historical property contract may cancel the contract. The cancellation fee is 12½ percent of the property's current fair market value as though free of the contractual restriction, with such value to be determined by the local assessor.

Additional information about Mills Act contracts may be obtained from the state Office of Historic Preservation, either by telephone at 916-653-6624, or from their website (www.ohp.parks.ca.gov).
(Note: Please see the assessment examples following.)
Attachment 6
Historical Property Valuation Examples Page 1
EXAMPLE 1 (OWNER-OCCUPIED SINGLE-FAMILY RESIDENCE)
Subject Restricted Historical Property
Restored, 105-year-old, Victorian single-family residence. Excellent condition. Under Mills Act contract since 1985 and not in nonrenewal status. Owner-occupied.

Determination of Restricted Value (current lien date)
Gross income (Fair rent)
$1,500 per month x 12 months = $18,000
Less: Anticipated vacancy and collection loss
$18,000 x 5% - 900
Effective gross income $17,100
Less: Anticipated operating expenses
Grounds maintenance $600
Fire insurance 400
Management Fee 360
Water and garbage 240
Building maintenance + 500 - 2,100
Net Operating Income $15,000
Restricted Capitalization Rate
Rate Components:

Interest rate .080
Risk (owner-occupied SFR) .040
Property tax (ad valorem) .015
Amortization (50-year remaining life; improvements
constitute 70% of total property market value;

0.02 x 0.70 – 0.014) + .014 .149
Restricted Value
$15,000 ÷ .149 = $100,671
Taxable Value—Three-Way Value Comparison
Restricted value $100,671
Factored base year value (based on prior change in ownership) $357,000 Current market value (based on comparable sales) $450,000 The lowest of the three possible values is the restricted value. Thus, the net taxable value would be $93,671 ($100,671 restricted value less the homeowners' exemption of $7,000).

Note 1: If this property had been a non-owner-occupied SFR, the only difference in the determination of the restricted value would have been the use of a risk rate component of 2% rather than 4% in the capitalization rate.

Note 2: In this and the following examples, the gross income, or fair rent, is presented on a gross rent basis, that is, under the assumption that the landlord-owner pays all operating expenses out of the gross income.

Attachment 6
Historical Property Valuation Examples Page 2
EXAMPLE 2 (OFFICE USE)
Subject Restricted Historical Property
Multi-tenant, restored historical office building in a downtown commercial district. Under Mills Act contract since 1985 and not in nonrenewal status.

Determination of Restricted Value (current lien date)
Gross Income (Fair rent):

Offices 140,000 sf @ $1.75/sf = $245,000
x 12 months = $2,940,000
Less: Anticipated vacancy and collection loss
$2,940,000 x 5% - 147,000
Effective gross income $2,793,000
Less: Anticipated operating expenses
Management $290,000
Maintenance 95,000
Insurance 75,000
Utilities 360,000
Janitorial + 140,000 - 960,000
Net Operating Income $1,833,000
Restricted Capitalization Rate
Rate Components:

Interest component .08
Risk .02
Property tax (ad valorem) .011
Amortization (50-year remaining life; improvements
constitute 75% of total property market value

0.02 x 0.75 = 0.015) + .015 .126
Restricted Value
($1,833,000 ÷ .126) = $14,547,619
Taxable Value—Three-Way Value Comparison
Restricted value $14,547,619
Factored base year value (based on prior change in ownership) $18,191,077 Current market value (based on comparable sales) $21,000,000 The lowest of the three possible values is the restricted value. Thus, the taxable value would be $14,547,619
Attachment 6
Historical Property Valuation Examples Page 3
EXAMPLE 3 (MIXED USE—RESIDENTIAL AND OFFICE)
Subject Restricted Historical Property
Two-story, restored historical property in a downtown district. Upper level is residential unit occupied by owner. Lower level contains three office spaces subject to short-term rental agreements. The income stream for the upstairs unit must be calculated separately from the downstairs unit because the risk rate is different for the owner-occupied unit.

Determination of Restricted Value
Separate restricted values for the upper-level residence and the lower-level office space must be determined, because the risk components are different for the two types of use. The total restricted value is sum of these two values.

Upper-Level Unit
Gross income (Fair rent) based upon comparable rent data $975 per month x 12 months = $11,700
Less: Anticipated vacancy and collection loss
$11,700 x 5% - 585
Effective gross income $11,115
Less: Anticipated operating expenses
Grounds maintenance $300
Fire insurance 200
Management Fee 180
Water and garbage 120
Building maintenance + 250 - 1,050
Upper-Level Net Operating Income $10,065
Restricted Capitalization Rate (owner-occupied SFR)
Rate components:

Interest rate .080
Risk .040
Property tax .010
Amortization ( 50-year remaining life; improvements
constitute 70% of total property market value;

0.02 x 0.70 = 0.014) + .014 .144
Upper-level Restricted Value ($10,065 ÷ .144) = $69,895 Lower-Level Offices
Gross income (Fair rent)
1000 sf @ $1.60/sf = $1,600 x 12 months $19,200
Less: Anticipated vacancy and collection loss
$19,200 x 5% - 960
Effective gross income $18,240
Attachment 6
Historical Property Valuation Examples Page 4
Less: Anticipated operating expenses
Grounds maintenance $300
Fire insurance 200
Management Fee 180
Water and garbage 120
Building maintenance + 250 - 1,050
Lower-Level Net Operating Income $17,190
Restricted Capitalization Rate
Rate components:

Interest component .080
Risk .020
Property tax .010
Amortization (50-year remaining life; improvements
constitute 70% of total property market value;

0.02 x 0.70 = 0.014) + .014 .124
Lower Level Restricted Value ($17,190 ÷ .124) $138,629
Add: Upper Level Restricted Value + $69,895
Total Restricted Value $208,524
Taxable Value—Three-Way Value Comparison
Restricted Value $208,524
Factored base year value (based upon prior change in ownership) $364,140 Current market value (based upon comparable sales data) $400,000 The lowest of the three possible values is the restricted value. Thus, the net taxable value would be $201,524 ($208,524 less the homeowners' exemption of $7,000).

Attachment 6
Historical Property Valuation Examples Page 5
EXAMPLE 4 (MIXED VALUATION—PART RESTRICTED AND PART UNRESTRICTED) Description of Subject Property (Comprises Both Restricted and Unrestricted Portions) The subject property is a 10-acre parcel with a farmhouse and barn situated on 2 acres; the remaining 8 acres are farmland. The farmhouse and barn are used as an owner-occupied singlefamily residence; this portion of the property is restricted under a Mills Act contract. The remaining 8 acres of farmland are unrestricted.

Value of Restricted Portion (current lien date)
Gross income (Fair rent) for farmhouse and barn
$2,000 per month x 12 months = $24,000
Less: Anticipated vacancy and collection loss
$24,000 x 5% - 1,200
Effective gross income $22,800
Less: Anticipated operating expenses
Grounds maintenance $600
Fire insurance 400
Management Fee 360
Water and garbage 240
Building maintenance + 500 - 2,100
Net Operating Income = $20,700
Restricted Capitalization Rate
Rate components:

Interest component .080
Risk (owner-occupied) .040
Property tax (ad valorem) .010
Amortization (50-year remaining life; improvements
constitute 70% of total property market value

0.02 x 0.70 = 0.014) + .014 .144
Restricted Value ($20,700 ÷ .144) = $143,750
Taxable Value—Three-Way Comparison
Total Property Restricted Value (sum of restricted value above and lower of FBYV or current market value of unrestricted portion)
Restricted Value (portion under contract) $143,750
FBYV (unrestricted portion) + $102,000
Restricted Value (total property) $245,750
Factored base year values (based upon a prior change in ownership of the entire property, allocated between restricted and unrestricted portions):

Farmhouse, barn, and 2 acres (restricted portion) $204,000 8 acres (unrestricted portion) + $102,000
Total FBYV (total property) $306,000
Attachment 6
Historical Property Valuation Examples Page 6
Current market values (based upon comparable sales data):

Farmhouse, barn, and 2 acres (restricted portion) $230,000 8 acres (unrestricted portion) + $120,000
Total Current Market Value (total property) $350,000
The lowest of the three values is the Restricted Value (total property), $245,750. Thus, the net taxable value would be $238,750 ($245,750 less $7,000 homeowners' exemption).

Attachment 6
Historical Property Valuation Examples Page 7
EXAMPLE 5 (PROPERTY IN NONRENEWAL STATUS)
Description of Subject Restricted Historical Property
The same property as in Example 2, except the property owner has served notice of renewal.

The Mills Act contract covering the property was originally executed in September 1995, and the owner served notice of nonrenewal in June 2004. Value the property for the 2005 lien date, reflecting its nonrenewal status. Assume that the property's restricted, current market, and factored base year values from Example 2, provided below, also refer to January 1, 2005.

Restricted value $14,547,619
Current market value $21,000,000
Factored base year value $18,191,077
Restricted Value in Nonrenewal Status
Value as if unrestricted (factored base year value) $18,191,077 Restricted value - 14,547,619
Difference $ 3,643,458
Present worth of difference
PW1 @ 6.00 %, 9 years (interest component for lien date 2005) x .591898 = $ 2,156,555
Plus restricted value + $14,547,619
Restricted value in nonrenewal status—lien date January 1, 2005 $16,704,174 Taxable Value
Since the restricted value in nonrenewal status, $16,704,174, is less than either the property's current market value or its factored base year value, this is the taxable value.

Attachment 6

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
October 3, 2023

PUBLIC HEARINGS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Katherine Wallace, Associate Planner
APPROVED BY: Chip Rerig, City Administrator
SUBJECT:

MA 23-117 (Griffin): Consideration of a Mills Act Contract application MA 23-117 (Griffin) for the historic "Agnes Shorting House" located on 3rd Avenue 2 northwest of Junipero Avenue in the Single-Family Residential (R-1) District. APN 010-108-007.

RECOMMENDATION:

Accept the recommendation of the Historic Resources Board and approve the Mills Act Historical Property Contract MA 23-117 (Griffin) for the historic “Agnes Shorting House” located on 3 rd Avenue 2 northwest of
Junipero Avenue (APN 010-108-007) and authorize the City Administrator to execute the contract (Attachment 1).

BACKGROUND/SUMMARY:

The property is located on 3
rd Avenue 2 northwest of Junipero Avenue in the Single-Family Residential (R1) District (Attachment 1, Exhibit A). The residence was designed and built in 1927 by Frederick Bigland, a well-known Carmel designer/builder. The property is significant in the area of Architecture, as an English Cottage-style Bigland-designed residence.

A Department of Parks and Recreation (DPR) Form 523 was completed for the property in 2004 by Kent Seavey (Attachment 1, Exhibit B) and the resource was added to the Carmel Inventory on May 25, 2005.

The DPR form notes that in addition to significance as a Bigland-designed cottage, the property “may” potentially be significant for a detached garage built of Thermotite, a unique locally manufactured building material (also used at Flanders Mansion). A Resolution Designating a Historic Resource for the property on 3 rd Avenue 2 northwest of Junipero Avenue was recorded with the County Recorder on January 4, 2007 (Document #2007001180).

On April 20, 2023, Christopher Barlow, Architect, submitted an application for a Mills Act Historical Property Contract on behalf of the property owner (Michael Griffin and Kimberly S. Griffin Trust). In order to qualify for a Mills Act contract, a property must be included on the Carmel Inventory and added to the Carmel Register of Historic Resources. On August 21, 2023, the Historic Resources Board adopted Resolution 2023-012-HRB (Attachment 2), adding the property to the Carmel Register and recommending that the City Council enter into a Mills Act Contract with Michael Griffin and Kimberly S. Griffin Trust for the historic “Agnes Shorting House.”
Contract Value
The Monterey County Assessor’s Office is responsible for determining the value of a property under Mills Act Contract in accordance with sections 439 through 439.4 of the Revenue and Taxation Code. Properties with a Mills Act Contract are not valued based on sales data; rather they are valued by a prescribed income capitalization method (Attachment 3). After a Contract is approved, it is forwarded to the Monterey County Assessor who then determines the Mills Act value.

At previous Mills Act hearings, members of Council requested that staff obtain a preliminary calculation of Mills Act Contract values for the purposes of understanding the potential local tax revenue offset. The Monterey County Assessor has informed the City that time constraints and process complexity make preliminary calculations infeasible. Therefore, staff cannot provide the actual or estimated value of property tax reduction for Council’s consideration. Jerry Gatt, Appraiser III, represented the Monterey County Assessor and attended the April 4, 2023 Council meeting to explain the assessment process.

Contract Summary
A Mills Act contract under State law is an agreement between the City of Carmel and a property owner of a historic building listed on the Carmel Register. In exchange for reduced property taxes, the property owner is contractually obligated to perform annual maintenance on the building. The property owner benefits from a reduction in property taxes. The City benefits from assurance, via contract, that the historic building is rehabilitated, maintained, and preserved with a portion of those property taxes that the city is giving up.

The primary purpose for offering Mills Act contracts in the City of Carmel-by-the-Sea is to assist in and ensure the rehabilitation or restoration and long-term maintenance of historic resources. All properties listed on the City’s Historic Register in all districts that have been preserved in their historical size, form, and design without significant alterations are eligible for Mills Act contracts.

All Mills Act contracts have a term of 10 years, and one year is added to this term annually upon each anniversary date of the contract unless one or both parties (City and property owner) have taken action to terminate the contract. The City Administrator is authorized to initiate contract termination on behalf of the City based on recommendations of the Community Planning & Building Department. The contract rights and obligations are binding upon all successive owners of the property during the life of the contract. The property retains the lower Mills Act tax rate when sold. To end a contract, either party may submit a notice of non-renewal to the other party. Such notices shall cause the contract to terminate at the end of the thencurrent 10-year contract period. Cancellation of a contract by the City due to non-compliance requires a public hearing and, if canceled, results in the immediate termination of the contract and a penalty equal to

12.5 percent of the assessed market value of the property.

The contract requires that the historical elements of the property are maintained in good condition. This includes a plan for rehabilitation and maintenance and may include a program to restore deteriorated features. All recipients of Mills Act contracts are required to implement a rehabilitation/restoration and maintenance plan prepared by a qualified professional. An annual report is submitted to the Community Planning & Building Department specifying all work that has been done to maintain and preserve the historic resource over the year in compliance with the approved rehabilitation/restoration and maintenance plan. All rehabilitation/restoration and maintenance work must be completed in conformance with the Secretary of Interior’s Standards for Rehabilitation and all proposed projects are subject to a Design Study review prior to commencement of the work. Minor alterations, as defined in CMC section 17.32.150, may be approved by staff; however, major alterations, as defined in CMC section 17.32.160 would be reviewed by a qualified professional and presented to the Historic Resources Board for review. All Mills Act contracts must specify that the rehabilitation/restoration and maintenance plan shall be updated at least every ten years by a qualified professional and approved by both parties.

The Historic Resources Board considers each application for a Mills Act contract and provides a recommendation to the City Council to approve, approve with conditions, or deny the application.

The City Council considers the recommendations from the Historic Resources Board at a public hearing and resolves to approve, approve with conditions, or deny the proposed contract with sufficient time for action by the City Clerk so that recordation of approved contracts occurs before December 31st of the year in which the application is received.

STAFF ANALYSIS:

Findings
Carmel Municipal Code Section 17.32.100.B.6(c) sets forth findings that the Historic Resources Board and City Council shall make in order to grant approval of a Mills Act Contract. The required findings are listed below followed by a staff response on how the application meets the requirements.

1. The building is designated as a historic resource by the City and is listed on the Carmel Register.

Staff Response: The residence was the subject of a historic evaluation in 2004 by Kent Seavey and was placed on the Carmel Inventory of Historic Resources in 2005. The Historic Resources Board added the resource to the Carmel Register on August 21, 2023. The application meets this finding.

2. The proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property.

Staff Response: The applicant submitted a rehabilitation and maintenance plan (Attachment 1, Exhibit C). The plan covers a period of 10 years from 2024-2033 and estimates $282,750 in work projects. The plan, compiled by Christopher Barlow, Architect (and qualified professional), includes rehabilitation and maintenance work including: foundation inspection and repairs as needed; plumbing repairs including sewer lateral; exterior painting; chimney inspection; rehabilitation and installation of original window shutters; exterior door and window assessment and repair; in-kind roof and gutter repair; stone repair at the property line and throughout; insulation repair and replacement; and termite testing and repairs. All rehabilitation and maintenance work will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. All exterior work is subject to Design Study approval and a determination of consistency with the Secretary of the Interior's Standards for Rehabilitation. The proposed plan meets this finding.

3. Alterations to the historic resource have been in the past, and will continue to be in the future, limited to interior work and to exterior rehabilitation and alterations that:
(A) Comply with the Secretary’s Standards (future additions only); and (B) Do not significantly alter, damage or diminish any primary elevation or characterdefining feature; and (C) Do not increase floor area on the property by more than 15 percent beyond the amount established in the documented original or historic design of the resource; and (D) Do not result in any second-story addition to a single-story historic resource.

Staff Response: The resource retains physical integrity; a 1937 addition extended the building footprint seven feet to the south and is consistent with the architectural character of the building. The 1937 addition itself meets the 50-year threshold and was documented in the DPR Form 523 as compatible with the original building.

As noted above, planned rehabilitation and maintenance work will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. Any future alterations are required to be consistent with conditions A-D above. Minor alterations, as defined in CMC Section 17.32.150, may be approved by staff; however, major alterations (CMC Section 17.32.160) would be reviewed by a qualified professional and presented to the Historic Resources Board for review. The application meets this finding.

4. The Mills Act contract will aid in offsetting the costs of rehabilitating and maintaining the historic resource.

Staff Response: Approval of the contract would assist in offsetting the rehabilitation and maintenance costs of preserving the “Agnes Shorting House” by reducing the tax liability on the property thereby freeing up funds for the rehabilitation. Some of the more notable work that is proposed to be accomplished within the first few years would include: plumbing repairs, rehabilitating and installing original window shutters, and termite testing/repairs. The application meets this finding.

5. Approval of the Mills Act contract will represent an equitable balance of public and private interests and will not result in substantial adverse financial impact on the City.

Staff Response: Approval of the Mills Act Contract will be consistent with Goal 1-5 and Objective 1-16 of the Land Use & Community Character Element of the General Plan which encourages providing incentives for property owners to preserve and rehabilitate historic resources. Although the adoption of a Mills Act Contract will decrease property tax revenue to the City, this contract represents an equitable balance of public and private interests:
1) The City Council adopted Resolution 2016-068 on September 13, 2016, limiting the number of Mills Act contracts that can be approved to fifteen (15) in any three-year calendar period. No applications were approved in 2020 or 2021, four applications were approved in 2022, one application has already been approved in 2023 (L’Auberge), and four total applications are currently in review in 2023. 2) Carmel currently has 292 historic resources, and since the adoption of the Mills Act program in 2004, the City has entered into a total of fifteen Mills Act Contracts. 3) The City would continue to receive a portion of the property tax revenue and the investment in rehabilitation and maintenance supports local tourism, which benefits both private and public interests. 4) The value of preserving a historic resource offsets the loss of revenue.

FISCAL IMPACT:

The City will have a diminished tax base from the property at 3 rd Avenue 2 northwest of Junipero Avenue for
the term of the contract. The amount is unknown at this point.

PRIOR CITY COUNCIL ACTION:

On March 3, 2020, the City Council adopted standard contract language for Mills Act Contracts. On April 4, 2023, the City Council reviewed the City’s Mills Act Policy and opted not to make any changes.

Next Steps: If the City Council enters into a Mills Act Contract for this property, the contract will be recorded with the Monterey County Recorder and will take effect January 1, 2024.

ATTACHMENTS:

Attachment 1) Standard Mills Act Contract
Attachment 2) Exhibit A - Legal Description
Attachment 3) Exhibit B - DPR 523 Form “Agnes Shorting House” Attachment 4) Exhibit C - Rehabilitation/Maintenance Plan Attachment 5) Resolution 2023-012-HRB
Attachment 6) Guidelines for the Assessment of Enforceably Restricted Historical Property

RECORDING REQUESTED BY

CITY OF CARMEL-BY-THE-SEA

AND WHEN RECORDED MAIL TO

Carmel City Hall
Attn: Community Planning & Building
P.O. Box CC
Carmel-By-The-Sea, CA 93921 This space reserved for the Recorder’s use only

CITY OF CARMEL-BY-THE-SEA

MILLS ACT HISTORIC PROPERTY PRESERVATION CONTRACT
THIS AGREEMENT is made and entered by and between the CITY OF CARMEL-BY-THE-SEA a municipal corporation (hereinafter referred to as “City”), and the Michael Griffin and Kimberly S.

Griffin Trust (hereinafter referred to as “Owner”).

RECITALS
(i) California Government Code Section 50280, et seq. (known as the Mills Act) authorizes cities to enter into contracts with the owners of qualified historic properties to provide for their appropriate use, maintenance and restoration such that these historic properties retain their historic characteristics;
(ii) The Owner possesses fee title in and to that certain real property, together with associated structures and improvements thereon, located on 3rd Avenue 2 northwest of Junipero Avenue (APN: 010-108-007), Carmel-By-The-Sea, California, (hereinafter referred to as the “Historic Property”). A legal description of the Historic Property is attached hereto, marked as “Exhibit A” and is incorporated herein by reference; (iii) The property is identified as a historic resource on the City of Carmel-By-The-Sea’s Historic Inventory and Register of Historic Resources and is further described in the DPR 523 Form attached hereto, marked as “Exhibit B” and is incorporated herein by reference;
(iv) City and Owner, for their mutual benefit, now desire to enter into this Agreement both to protect and preserve the characteristics of historical significance of the Historic Property, as it exists at the date of this contract and as described in the City’s Register of Historic Resources and the National Register of Historic Places, and to qualify the Historic Property for an assessment of valuation pursuant to the provisions of Article 1.9 (commencing with section 439) of Chapter 3 of Part 2 of Division 1 of the California Revenue and Taxation Code.

Attachment 1
NOW, THEREFORE, City and Owner, in consideration of the mutual covenants and conditions contained herein, do hereby agree as follows:

1. INCORPORATION OF RECITALS. All recitals are incorporated into this Agreement.

2. EFFECTIVE DATE AND TERM. This Agreement shall be effective and commence on the date the Agreement is signed by the City, unless otherwise indicated by the County of Monterey, and shall remain in effect for a minimum term of ten (10) years thereafter.

3. AUTOMATIC RENEWAL. Each year, upon the anniversary of the effective date of this Agreement (hereinafter referred to as “annual renewal date”), one (1) year shall be added automatically to the term of this Agreement, unless timely notice of nonrenewal is given as provided in paragraph 4 of this Agreement. The total length of the contract shall not exceed twenty (20) years.

4. NOTICE OF NONRENEWAL. If City or Owner desires in any year not to renew this Agreement, that party shall serve written notice of nonrenewal in advance of the annual renewal date of this Agreement as follows: Owner must serve written notice of nonrenewal at least ninety (90) days prior to the annual renewal date; City must serve written notice of the nonrenewal at least sixty (60) days prior to the annual renewal date.

If notice is not received, the Agreement shall automatically be renewed for another year.

Upon receipt by Owner of a notice of nonrenewal from the City, Owner may make a written protest. At any time prior to the annual renewal date, City may withdraw its notice of nonrenewal.

5. EFFECT OF NOTICE OF NONRENEWAL. If either City or Owner serves timely notice of nonrenewal in any year, and this contract is not renewed, this Agreement shall remain in effect shall remain in effect for the balance of the period remaining since the original execution or the last annual renewal date.

6. FEES. The City may require that the Owner(s) of the Historic Property pay a fee that shall not exceed the reasonable cost of providing services, such as inspections, pursuant to Government Code Section 50281.1 (Article 12 of Chapter 1 of Part 1 of Division 1 of Title 5 of the Government Code), for which the fee is charged.

7. VALUATION OF PROPERTY. During the term of this Agreement, Owner is entitled to seek assessment of valuation of the Historic Property pursuant to the provisions of Chapter 3 of Part 2 of Division 1 of the California Revenue and Taxation Code.

8. PRESERVATION OF PROPERTY. Owner shall preserve and maintain the characteristics of historical significance of the Historic Property and agrees to complete rehabilitation and/or maintenance activities as defined in the Rehabilitation/Restoration and Maintenance Plan attached as “Exhibit C”. Requests for revisions to the Maintenance and Attachment 1
Rehabilitation plan shall be reviewed by the Historic Resources Board prior to implementation. In addition, Owner shall comply with the terms of the City’s Historic Preservation Ordinance (CMC 17.32). Owners shall not be permitted to further impede any view corridor with any new structure, including but not limited to walls, fences, or shrubbery, so as to prevent the viewing of the Historic Property from the public right-ofway.

9. RESTORATION OF PROPERTY. Owner shall, where necessary, restore and rehabilitate the Historic Property to conform to the rules and regulations of the Office of Historic Preservation of the State Department of Parks and Recreation, U. S. Secretary of the Interior’s Standards for Rehabilitation, the State Historical Building Code, and the City of Carmel-by-the-Sea, all as amended.

10. INSPECTIONS. Owner shall allow periodic examinations, at least every five (5) years, with reasonable notice thereof, of the interior and exterior of the Historic Property by representatives of the County of Monterey Assessor and the City of Carmel-By-The-Sea as may be necessary to determine Owner’s compliance with the terms and provisions of this Agreement. The City will coordinate inspections by such other agencies that have jurisdiction and will keep them to the minimum necessary to determinate such compliance.

11. PROVISION OF INFORMATION. Owner shall furnish City with any and all information required by City, in order to determine the eligibility of the Historic Property, and that City deems necessary or advisable to determine compliance with the terms and provisions of this Agreement.

12. ANNUAL REPORT. Owner shall submit an annual report at least 90 days prior to each annual renewal date (October 1st) to the Department of Planning and Building specifying all work that has been done to maintain and preserve the historic resource over the preceding year in compliance with the approved maintenance plan.

13. CANCELLATION. The City has the right to cancel the contract if the owner allows the property to deteriorate to the point that it no longer meets the standards for a qualified historical property. The City also has the right to cancel this contract if the owner(s) breaches the provisions of paragraph’s # 8, 9, 10 or 12 of this Agreement after the City has provided reasonable notice of any failure to comply with the agreement, and a public hearing. Notice of the hearing shall be mailed to the last known address of each owner of the property, with the notice conforming to the provisions of Government Code section 6061., If after notice and a hearing, the contract is cancelled, termination of the Agreement is immediate, and the owner shall pay a cancellation fee equal to 12.5 percent of the current fair market value of the property, as determined by the Monterey County Assessor as though the property were free of the contractual restriction. The cancellation fee shall be paid to the Assessor, at the time and in the manner that the Assessor shall prescribe. City’s right to cancel this Agreement pursuant to this paragraph Attachment 1
shall in no way limit or restrict its rights or legal remedies arising from City’s Historic Preservation Ordinance and Municipal Code.

14. ENFORCEMENT OF AGREEMENT. In lieu of and/or in addition to any provisions to cancel this Agreement as referenced herein, City may specifically enforce, or enjoin the breach of, the terms of this Agreement.

15. WAIVER. City does not waive any claim or default by Owner if City does not enforce or cancel this Agreement. All remedies at law or in equity, which are not otherwise provided for this Agreement or in City’s regulations governing historic properties are available to City to pursue in the event there is a breach of this Agreement. No waiver by City of any breach or default under this Agreement shall be deemed to be a waiver of any other subsequent breach thereof or default hereunder.

16. BINDING EFFECT OF AGREEMENT. Owner hereby subjects the Historic Property to the covenants, reservations and restrictions set forth in this Agreement. City and Owner hereby declare their specific intent that the covenants, reservations, and restrictions as set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon Owner’s successors and assigns in title or interest to the Historic Property. A successor in interest shall have the same rights and obligations under this Agreement as the original owner who executed the Agreement.

Each and every contract, deed or other instrument hereinafter executed, governing or conveying the Historic Property, or any portion thereof, shall conclusively be held to have been executed, delivered and accepted subject to the covenants, reservations and restrictions expressed in this Agreement regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instrument.

City and Owner hereby declare their understanding and intent that the burden of the covenants, reservations and restrictions set forth herein touch and concern the land in that it restricts development of the Historic Property. City and Owner hereby further declare their understanding and intent that the benefit of such covenants, reservations and restrictions touch and concern the land by enhancing and maintaining the cultural and historic characteristics and significance of the Historic Property for the benefit of the public and Owner.

17. NOTICE. Any notice required to be given by the terms of this Agreement shall be provided at the address of the respective parties as specified below, by personal delivery or United States mail, postage prepaid, addressed as follows:

City: Carmel-By-The-Sea
Community Planning & Building Department
Attn: Community Planning & Building Director
P.O. Box CC
Carmel-By-The-Sea, CA 93921
Attachment 1
Owner: Michael Griffin and Kimberly S. Griffin Trust
1165 Altschul Avenue
Menlo Park, CA, 94025
Notice to successors in interest to either party shall be sent to the appropriate address.

In the case of future Owner(s) of the Historic Property, notice shall be sent to the address on file with the county property tax office in power at the time.

18. RECORDATION. No later than twenty (20) days after the parties execute and enter into this Agreement, the City shall cause this Agreement to be recorded in the Office of the County Recorder of the County of Monterey. From and after the time of the recordation, this Agreement shall impart a notice thereof to all persons as is afforded under state law.

19. STATE LAW. The Owner or agent of Owner shall provide written notice of this Agreement to the State Office of Historic Preservation within six (6) months of the date of this Agreement.

20. GOVERNING LAW; VENUE. This Agreement shall be constructed and governed in accordance with the laws of the State of California. Should either party to this agreement bring legal action against the other, the case shall be handled in Monterey County, California and the party prevailing in such action shall be entitled to a reasonable attorney fee which shall be fixed by the judge hearing the case and such fee shall be included in the judgment together with all costs.

21. AMENDMENTS. This agreement may be amended in whole or in part, only by a writtenrecorded instrument executed by the parties hereto.

22. DESTRUCTION OF PROPERTY; EMINENT DOMAIN; CANCELLATION. If the Historic Property is destroyed by earthquake, fire, flood, or other natural disaster such that in the opinion of the City Building Official more than sixty percent (60%) of the original fabric of the structure must be preplaced, this Agreement shall be cancelled because the historic value of the structure will have been destroyed. If the Historic Property is acquired in whole or in part by eminent domain or other acquisition by any entity authorized to exercise the power of eminent domain, and the acquisition is determined by the City Council to frustrate the purpose of this Agreement, this Agreement shall be cancelled.

No cancellation fee pursuant to Government Code Section 50286 shall be imposed if the Agreement is cancelled pursuant to this paragraph. Such Agreement shall be null and void for all purposes of determining the value of the property so acquired.

23. INDEMNIFICATION. Owner shall defend, indemnify, and hold harmless City and its elected officials, officers, agents and employees from any actual or alleged claims, demands, causes of action, liability, loss, damage, or injury to property or persons, including wrongful death, whether imposed by a court of law or by administrative action of any Attachment 1
federal, state or local government agency, arising out of or incident to the direct or indirect use, operation, or maintenance of the Historic Property by Owner or any contractor, subcontractor, employee, agent, lessee, licensee, invitee, or any other person; (ii) Owner’s activities in connection with the Historic Property; and (iii) any restriction on the use of development of the Historic Property, from application or enforcement of the City’s Municipal Code, or from the enforcement of this Agreement.

This indemnification includes, without limitation, the payment of all penalties, fines, judgments, awards, decrees, attorneys’ fees, and related costs or expenses, and the reimbursement of the City, its elected officials, employees, and/or agents for all legal expenses and costs incurred by each of them. Owner’s obligation to indemnify shall survive the termination, cancellation, or expiration of this Agreement and shall not be restricted to insurance proceeds, if any, received by City, its elected officials, employees, or agents.

24. SEVERABILITY. In the event that any of the provisions of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, or by subsequent preemptive legislation, the validity and enforceability of the remaining provisions, or portions thereof, shall not be affected thereby.

IN WITNESS THEREOF, the City and Owners have executed this Agreement on the day and year written above.

CITY OF CARMEL-BY-THE-SEA:

By: _______________________ Date: __________________
Name: Richard L. Rerig (“Chip”)
Title: City Administrator

PROPERTY OWNER(S):

By: __________________________ Date: ___________________ Name: Michael Griffin, on behalf of Michael Griffin and Kimberly S. Griffin Trust Title: Property Owner
By: __________________________ Date: ___________________ Name: Kimberly Griffin, on behalf of Michael Griffin and Kimberly S. Griffin Trust Title: Property Owner
Attachment 1

EXHIBIT A

LEGAL DESCRIPTION

EXHIBIT B
DPR 523 FORM

EXHIBIT C

REHABILITATION AND MAINTENANCE PLAN
Attachment 1
A PORTION OF LOTS 17, 18, 19 AND 20 IN BLOCK 27, AS SAID LOTS AND BLOCK ARE SHOWN ON THAT CERTAIN MAP ENTITLED "MAP OF ADDITION NO. 4, CARMEL-BY-THE-SEA, MONTEREY COUNTY, CALIFORNIA, SURVEYED SEPT. 1907 BY H.B. FISHER, SURVEYOR &. C.E.", FILED MARCH 6, 1908 IN THE

OFFICE OF THE COUNTY RECORDER OF THE COUNTY OF MONTEREY, STATE OF CALIFORNIA, IN VOLUME 1 OF MAPS, "CITIES AND TOWNS", AT PAGE 46-1/2, DESCRIBED AS FQLLOWS:

BEGINNING AT A POINT ON THE NORTHERLY LINE OF THIRD AVENUE, DISTANT WESTERLY 80 FEET FROM

THE INTERSECTION OF THE WESTERLY LINE OF JUNIPERO STREET, WITH THE NORTHERLY LINE OF THIRD AVENUE; THENCE RUNNING WESTERLY ALONG THE NORTHERLY LINE OF THIRD AVENUE 40 FEET, THENCE NORTHERLY PARALLEL WITH JUNIPERO STREET, 80 FEET; THENCE EASTERLY PARALLEL WITH THIRD AVENUE, 40 FEET; THENCE SOUTHERLY PARALLEL WITH JUNIPERO STREET, 80 FEET TO THE POINT OF BEGINNING.

Attachment 2
I
State of California - The Resources Agency

DEPARTMENT OF PARKS AND RECREATION
.,RIMARY RECORD
Primary#
HRI#
Trinomial
NRHP Status Code
Other Listings
Review Code __ Reviewer
Looking north towards the south side-elev.,
Date

P1. Other Identifier:

P2. Location: , Not for Publication : · j Unrestricted a. County Monterey and (P2b and P2c or P2d. Attach a Location Map as necessary.) b. USGS 7 .5' Quad Date T ; R 1/4 of 1/4 of Sec
c. Address: City Carmel by-the-Sea Zip 93921
d. UTM: (Give more than one for large and/linear resources) mEI mN e. Other Locational Data (Enter Parcel#, legal description, directions to resource, elevation, etc., as appropriate) 2 W of Junipero, Nlside 3rd (Blk 27, Lots Wpt. 17 & 19 Ept. 18 & 20) Parcel No. 010-108-007
B.M.

P3. Description (Desare resot.rraand its map eJernens. lrrl.declesi!J,, maeres, anim, ciea1o is,~ sellrg, and l::xx.n:.lae;) A one-story, wood-framed English Cottage style residence, irregular in plan, resting on a concrete foundation. The exterior wall cladding is a textured cement stucco. The intersecting pyramidal roof system has rolled eaves, as does the roof on the detached garage There is one Carmel stone exterior eave wall chimney present. It is located about midway along the west (rear) elevation. All roofing is composition shingle. Fenestration is irregular, with a combination of 4/4 double-hung wood sash, fixed mum-paned wood windows, and multi-paned wood casement type. The principal entry is located on the east (front) elevation at the inside junction of an ell, formed by the main building block and a lower bay, projecting toward the south. This feature was extended seven feet in a 1937 addition. The work was consistent with the architectural character of the building and would clearly meet the current Secretary of the Interior's Standards for the Treatment of Historic Buildings. There is a detached one-car garage at the SW er. of the parcel, designed in the style of the residence, and using a locally produced cement building block called Thermotite. The house is well set back from the street on a wooded parcel in an informal landscape setting of low shrubbery and flowering plants. It is located in a residential neighborhood of one and two-story residences of varying ages & styles, fronting on several new commercial properties along the south side of 3rd Avenue.
'b. Resource Attributes: (List attributes and codes)
t'4. Resources Present i : Building iJ Structure [.I Object [] Site D District [J Element of District O Other (Isolates, etc.) ---- -------- -~ P5a_ Photograph or O@wiflg(Pt,otograph required for buildings, structures, and objects) P5b. 03sapm ct Pl-do: (\iew, CEie, cUESSO , ,,, '·" - r---· (View toward ). Photo No: 5046-, .

P&. Date Constructed/Age and Sources:

D Prehistoric D Historic D Both
1927 Carmel bldg. records
P7. Owner and Address
Charles & Lynda Dunbar
2094 University Park D
Sacramento, CA 95825
PS. Recorded by:(Na-ne,afticfu,,andatre.s)
Kent L. Seavey, Preservation Consultant, 310
Ughthouse Ave., Pacific Grove, CA 93950
P9. Date Recorded: 9ll/2O04
P10. Survey Type: (Describe)
Intensive-Carmel Historic Resource
Inventory-ongoing
I. Report Citation: (Cite survey report and other sources, or enter "none") me
Attachments . NONE
: Location Map
i Sketch Map
DPR 523A (1 195) Histol)IMaker 4
Continuation Sheet [] District Record D Rock Art Record [] Other: (List) Building, Structure, and Object Record [] Linear Feature Record D Artifact Record Archaeological Record D Milling Station Record D Photograph Record San Buenaventura Resean:h Associates
Attachment 3
I
State of California - The Resources Agency

DEPARTMENT OF PARKS AND RECREATION
~UILDING, STRUCTURE, AND OBJECT RECORD HRI# Primary# ·------·---···-·--·--- ·-- 1e 2 of NRHP Status Code
Resource Name or#: (Assigned by recorder) Agnes Shorling House

81. Historic Name:

82. Common Name:

B3. Original Use: residence B4. Present Use: residence

85. Architectural Style: Tudor Revival (English Cottage substy/e)

86. Construction History:(Construction date, alterations, and date of alterations) Constructed 1927 {CBP# 1956); small addition to the south 1937 (CBP# 220)

87. Moved? i I No ; J Yes i ) Unknown Date: Original Location:

88. Related Features: Masonry one-car garage 1927 (CBP# 1956) B9a. Architect Designer-Frederick Big/and b. Builder: Frederick Big/and 810. Significance: Theme: Architectural Development Area: Carmel by-the-Sea Period of Significance: 1903-1940 Property Type: single family residence Applicable Criteria: CR 3 (Discuss importance in terms of historical or architectural context as defined by theme, period and geographic scope. Also address integrity.} The Agnes Shorling House is significant under California Criterion 3, in the area of architecture, as a good example of the residential design of well known Carmel designer-builder Frederick Big/and. It may also be significant for its use of Thennotite masonry in its detached garage. The use of a pyramidal roof system, with rolled eaves to suggest thatching is typical of the English Cottage substyle of the Tudor Revival architectural mode. The textured stucco wall cladding, and abundance of small, multi-paned wood windows is also consistent with the style. All are present on the Shorling house. The banded windows that are part of the 1937 minor addition to the lower south bay are more typically found in Craftsman style houses, but both the Tudor and Craftsman styles evolve from medieval building forms. The use of wide bands of windows in Cannel, to connect the outside with the inside, is integral to the building traditions of the village.

Frederick Big/and, the designer/builder was a native of England, who came to Carmel in 1926 seeking relief from asthma. He constructed a home on Mtn. View and several residences and rental properlies in the village. Most of his work was in the Tudor Revival style, with which he was quite familiar. However, he also designed several Spanish Eclectic style homes, including a remodeling of the Marble Ranch in Robinson Canyon on the south side of Carmel Valley. Big/and was a well respected craftsman who left the village for a wanner climate about 1931.

Bigland's masonry block garage for the Shorling House was built of Thermotite, a locally manufactured building material that was advertised as, fireproof, waterproof, warm and practically everlasting". Mr. Alberl Otey fabricated the masonry block in a plant on Santa Fe, just south of 3rd Avenue. This is one of the few residential applications of the building material identified in Carmel. The Shorling House reflects the findings of, and is consistent with the 1997 Carmel Historic Context Statement under the theme of architectural development. '
B11. Additional Resource Attributes: (List attributes and codes) HP2 - Single Family Properly 812. References:

Carmel bldg. records, Carmel Planning Dept., City Hall, Carmel Carmel Historic Context Statement 1997
Cannel Pine Cone, "Homes Make of Carmel a Place of Distinction", 8/30/29, pp. 23-24
______ ,Mrs.A. P. Shorting (Obit.) 2/28/50
B13. Remarks: Zoning R-1

CHCS (ADJ
814. Evaluator:

Date of Evaluation:

Kent L. Seavey
91712004
I (This space reserved for official comments.)
- - -----------------~
DPR 523B (1195) HisloryMaker 4
l
(Sketch Map with north arrow required.)
s, SAN CARLOS •
~
lr
Attachment 3
---·---·--·- ·-·--·-··-"·-·-·-·-----------~-=------------------------- State of California - The Resources Agency

DEPARTMENT OF PARKS AND RECREATION
~ONTINUATION SHEET
~e of
_..;orded by:

Resource Name or#: (Assigned by recorder)
Kent L. Seavey
Primary#
HRI#
Trinomial
Agnes Shorting House
Date 9/7/2004 ,_,,,_,_. ,.,,,._, __ ,._,_,,_, ______ ,,_,, ____ _____________ _ CPR 523L (1/95) HisloryMaker 4
D Continuation [J Update
Attachment 3
Property Address: Monte Verde St. at Seventh Ave.

Owner Name: Kim Griffin
Owner Telephone No.: (831) 917-2322
Plan Prepared by: Christopher Barlow AIA, LEED AP, NCARB 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
$20,000
$20,000
$15,000 $20,000
$1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $20,000
$250 $8,000 $250 $250 $5,000 $250 $250 $5,000 $250 $250 $60,000
$500 $500 $500 $500 $500 $500 $500 $500 $500 $500
$10,000
$15,000 $15,000
$45,000
$8,000
$56,750 $24,500 $61,750 $46,750 $14,500 $1,750 $31,750 $26,500 $1,750 $16,750 $56,750 $81,250 $143,000 $189,750 $204,250 $206,000 $237,750 $264,250 $266,000 $282,750 In kind' Roof and gutter $60,000
$20,000

BUILDING SYSTEM UPGRADES
City of Carmel
Mills Act Rehabilitation and Maintenance Plan
as needed (Maintenance)
$45,000
$19,750
$10,000
$30,000
Inspect Chimney/
Cost Estimate
(net per item)
assessment and repair (Rehab.)
Insulation repairs and
replacement (Rehabilitation)
Termite testing and repairs

ANNUAL TOTAL
Replace cracked walkways
Restore stone planter at front of
(Maintenance)
property (Rehabilitation)
(Rehabilitation)

HARDSCAPE AND LANDSCAPE

RUNNING TOTAL
Notes: Frequency of repairs continues beyond 2032 based on interval proposed. Dollar amounts will be reviewed at 10 year intervals and adjusted for inflation as appropriate $282,750

CUMULATIVE TOTAL
$8,000
Mills Act Rehabilitation and Maintenance Plan
Agnes Shorting House (a.k.a. the Bird House) Third Street 2 NW of Junipero Street, Carmel CA

STRUCTURAL UPGRADES
Paint all Exterior of all walls $35,000
Foundation insp. & repairs
Work Item
(Maintenance/Rehabilitation)

EXTERIOR FEATURES, MATERIALS, AND FINISHES
Plumbing repairs incl. sewer
lateral (Rehabilitation)
Anticipated Year of Completion
$20,000
Repairs to stone steps, wall and $5,000
fence at property line (Rehab)
replacement (Rehabilitation)
Exterior door and window
Flues and fireplace (Maint.)
every 6 years (Maintenance)
Rehabilitate and install original
window shutters (Rehab.)
$10,000
$20,000
Attachment 4

EXISTING WINDOW TYPES

SIZE DETAIL
REFERENCE R.O.HEAD HEIGHT TEMPERED REPAIRS NEEDED - (SEE NOTES)

NOTES LETTER/ LOCATION WINDOW TYPE MATERIAL

WIDTH HEIGHT
REFER TO SHT. VINYL WOOD
HEAD JAMB SILL A I 2'-8" 4'-0" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREENS

ADD INTERIOR SCREENS
B II 5'-0" 4'-0" 1 - - +/- 7'-0" NO
C I 2'-8" 4'-0" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN

ADD INTERIOR SCREEN
D III 2'-0" 4'-2" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN

ADD INTERIOR SCREEN
E III 2'-0" 4'-2" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN

ADD INTERIOR SCREEN
F III 2'-0" 4'-2" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN ADD INTERIOR SCREEN G III 2'-0" 4'-2" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN

ADD INTERIOR SCREEN
H III 2'-0" 4'-2" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN

ADD INTERIOR SCREEN
I III 2'-0" 4'-2" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN

ADD INTERIOR SCREEN
J III 2'-0" 4'-2" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN

ADD INTERIOR SCREEN
K I 2'-8" 4'-2" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN

ADD INTERIOR SCREEN
L IV 1'-2" 2'-0" 1 - - +/- 7'-0" NO NON-HISTORIC,
IN REAR OF HOUSE M V 3'-0" 2'-6" 1 - - +/- 7'-0" YES REPAIR DRY ROT DAMAGED

PORTIONS OF WINDOW
N VI 1'-9" 4'-0" 1 - - +/- 7'-0" YES REPAIR DRY ROT DAMAGED

PORTIONS OF WINDOW
O VII 5'-10" 4'-0" 1 - - +/- 7'-0" YES REPAIR DRY ROT DAMAGED

PORTIONS OF WINDOW
P VI 1'-9" 4'-0" 1 - - +/- 7'-0" YES
(OPPOSITE HAND) REPAIR DRY ROT DAMAGED PORTIONS OF WINDOW Q VIII 1'-4" 4'-3" 1 - - +/- 7'-0" YES REPAIR DRY ROT DAMAGED

PORTIONS OF WINDOW
R VIII 1'-4" 4'-3" 1 - - +/- 7'-0" YES
(OPPOSITE HAND) REPAIR DRY ROT DAMAGED PORTIONS OF WINDOW S III 2'-0" 4'-2" 1 - - +/- 7'-0" NO ELIMINATE EXTERIOR SCREEN

ADD INTERIOR SCREEN

EXISTING WINDOW SCHEDULE
I. DOUBLE HUNG
WOOD
II. FIXED
WOOD
V. CASEMENT
WOOD
VIII. CASEMENT
WOOD
III. DOUBLE HUNG
WOOD
IV. DOUBLE HUNG
VINYL
VI. CASEMENT
WOOD
VII. FIXED
WOOD
2'-8" 4'-0"
PER
SCHEDULE PER SCHEDULE 4'-2"
2'-0" PER

SCHEDULE PER SCHEDULE
PER

SCHEDULE PER SCHEDULE
PER

SCHEDULE PER SCHEDULE
PER

SCHEDULE PER

SCHEDULE PER SCHEDULE PER SCHEDULE

EXISTING WINDOW

LOCATIONS
SCALE: 1

EXISTING

WINDOW HEAD NOT TO SCALE

EXISTING PLASTER

EXTERIOR FINISH

EXISTING WINDOW

INSTALL NEW

INTERIOR

RETRACTABLE

SCREEN & FRAME REMOVE EXISTING

NON-HISTORICAL SCREEN
Attachment 4

CITY OF CARMEL-BY-THE-SEA

HISTORIC RESOURCES BOARD
HISTORIC RESOURCES BOARD RESOLUTION NO. 2023-012-HRB

A RESOLUTION OF THE HISTORIC RESOURCES BOARD OF THE CITY OF CARMEL-BY-THE-SEA

ADDING A HISTORIC RESOURCE TO THE CARMEL REGISTER AND RECOMMENDING THAT THE CITY COUNCIL ENTER INTO A MILLS ACT CONTRACT WITH THE MICHAEL AND KIMBERLY S. GRIFFIN TRUST FOR THE PROPERTY LOCATED ON 3
RD AVENUE 2 NORTHWEST OF JUNIPERO STREET (APN
010-108-007)
WHEREAS, on April 20, 2023, Christopher Barlow, Architect (“Applicant”) submitted an application on behalf of the Michael Griffin and Kimberly S. Griffin Trust (“Owner”) requesting to add the historic “Agnes Shorting House” to the Carmel Register of Historic Resources and enter into a Mills Act contract (MA 23-117, Griffin) described herein as (“Application”); and WHEREAS, the Application has been submitted for the property located on 3rd Avenue 2 northwest of Junipero Street, in the Single Family Residential (R-1) District (Block 27, Lots parts of 17, 19); and
WHEREAS, the Applicant is requesting to add the historic “Agnes Shorting House” to the Carmel Register of Historic Resources; and
WHEREAS, in accordance with Carmel Municipal Code (CMC) Section 17.32.090 (Carmel Register of Historic Resources) the City shall maintain a Register of Historic Resources designated by the City for public recognition and benefits; and
WHEREAS, historic resources identified as significant at a local or regional level shall be eligible for listing in the Register at the request of the property owner and upon approval by the Historic Resources Board; and
WHEREAS, one of the benefits of being included on the Register is the ability to enter into a Mills Act Historical Property Contract with the City; and WHEREAS, the Applicant is also requesting to enter into a Mills Act contract with the City and in accordance with Carmel Municipal Code (CMC) Section 17.32.100.B.6 (Review Process), the Historic Resources Board shall consider the application and make a recommendation to the City Council to approve, approve with conditions, or deny the application; and WHEREAS, on August 11, 2023, notice of the August 21, 2023 public hearing was published in the Carmel Pine Cone in compliance with State law (California Government Code 65091), and mailed to owners of real property within a 300-foot radius of the project indicating the date and time of the public hearing; and
DocuSign Envelope ID: 3C279F06-EF9F-4154-8EF7-8C1F616E9B5B Attachment 5
Resolution No. 2023-012-HRB

WHEREAS, on or before August 11, 2023 the Applicant posted the public notice on the project site and hand-delivered a copy of the public notice to each property within a 100-foot radius of the project site indicating the date and time of the public hearing; and WHEREAS, on or before August 18, 2023 the meeting agenda was posted in three locations in compliance with State law indicating the date and time of the public hearing; and WHEREAS, on August 21, 2023, the Historic Resources Board held a public meeting to consider adding the historic “Agnes Shorting House” to the Carmel Register and to consider the application for a Mills Act contract, including without limitation, information provided to the Historic Resources Board by City staff and through public testimony; and WHEREAS, this Resolution and its findings are made based upon the evidence presented to the Historic Resources Board at the August 21, 2023 meeting including, without limitation, the staffreport and attachmentssubmitted by the Community Planning and Building Department; and WHEREAS, the Historic Resources Board did hear and consider all said reports, attachments, recommendations and testimony herein above set forth and used their independent judgment to evaluate the project; and
WHEREAS, the facts set forth in the recitals are true and correct and are incorporated herein by reference.

NOW, THEREFORE, BE IT RESOLVED, that the Historic Resources Board of the City of CarmelBy-The-Sea does hereby make the following findings and determinations regarding the Mills Act Contract:

FINDINGS REQUIRED FOR A MILLS ACT CONTRACT
For each of the required findings listed below, staff has indicated whether the application supports the adoption of the findings. For all findings checked "no" the staff report discusses the issues to facilitate the Historic Resources Board's decision-making. Findings checked "yes" may or may not be discussed in the report depending on the issues.

CMC 17.32.100.B.6.c YES NO
i. The building is designated as an historic resource by the City and is listed on the Carmel Register.
✔
ii. The proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property. On August 21, 2023, the Historic Resources Board directed the applicant to revise the maintenance plan to include an evaluation of the historic status, material, and condition of each window and to specify the removal of the contemporary window screens. The applicant shall revise the estimated rehabilitation costs if necessary. ✔
iii. Alterations to the historic resource have been in the past, and will continue to be in the future, limited to interior work and to exterior rehabilitation and alterations that:
(A) Comply with the Secretary’s Standards (future additions only); and ✔
DocuSign Envelope ID: 3C279F06-EF9F-4154-8EF7-8C1F616E9B5B Attachment 5
Resolution No. 2023-012-HRB

(B) Do not significantly alter, damage or diminish any primary elevation or character-defining feature; and
(C) Do not increase floor area on the property by more than 15 percent beyond the amount established in the documented original or historic design of the resource; and
(D) Do not result in any second-story addition to a single-story historic resource.
iv. The Mills Act contract will aid in offsetting the costs of rehabilitating and maintaining the historic resource.
✔
v. Approval of the Mills Act contract will represent an equitable balance of public and private interests and will not result in substantial adverse financial impact on the City.
✔
BE IT FURTHER RESOLVED that the Historic Resources Board of the City of Carmel-by-theSea does hereby add the historic “Agnes Shorting House” to the Carmel Register of Historic Resources and recommend that the City Council enter into a Mills Act Contract (MA 23-117, Griffin) for the property located at 3rd Avenue 2 northwest of Junipero Street (APN 010-108-007).

PASSED, APPROVED AND ADOPTED BY THE HISTORIC RESOURCES BOARD OF THE CITY OF CARMEL-BY-THE-SEA this 21st day of August, 2023, by the following vote:

AYES: Chroman, Dyar, Goodhue, Pomeroy, Hall
NOES:

ABSENT:

ABSTAIN:

APPROVED: ATTEST:

Jordan Chroman Leah Young
Chair Historic Resources Board Secretary
DocuSign Envelope ID: 3C279F06-EF9F-4154-8EF7-8C1F616E9B5B Attachment 5

STATE OF CALIFORNIA
June 2, 2005
TO COUNTY ASSESSORS AND INTERESTED PARTIES:

NOTICE OF BOARD ACTION

GUIDELINES FOR THE ASSESSMENT OF

ENFORCEABLY RESTRICTED HISTORICAL PROPERTY
On May 25, 2005, the Board of Equalization approved the following guidelines pertaining to the assessment of enforceably restricted historical property. These guidelines supersede Letter To Assessors No. 77/174 (dated December 19, 1977).

On June 8, 1976, the voters of California approved Proposition 7 which amended section 8 of article XIII of the California Constitution. This amendment requires that enforceably restricted historical property be valued on a basis that is consistent with its restrictions and uses. Sections 439 through 439.4 were added to the Revenue and Taxation Code to implement Proposition 7.

These statutes, in particular section 439.2, prohibit a valuation of enforceably restricted historical property based on sales data and instead require that such property be valued by a prescribed income capitalization method.

Staff drafted these guidelines in consultation with interested parties and, after discussions, no issues remained unresolved. The guidelines discuss the enforceably restricted historical property requirements, the income to be capitalized, the capitalization rate, the effect of Proposition 13 upon enforceably restricted historical properties that undergo change in ownership or new construction, and the valuation of property under notice of nonrenewal.

The guidelines are posted on the Board's website at www.boe.ca.gov/proptaxes/guideproc.htm.

We hope this information proves useful and promotes uniformity of assessment for these properties. If you have any questions, please contact our Real Property Technical Services Unit at 916-445-4982.

Sincerely,
/s/ David J. Gau
David J. Gau
Deputy Director
Property and Special Taxes Department
DJG:grs
Enclosure
BETTY T. YEE
Acting Member
First District, San Francisco

BILL LEONARD
Second District, Sacramento/Ontario

CLAUDE PARRISH
Third District, Long Beach

JOHN CHIANG
Fourth District, Los Angeles

STEVE WESTLY
State Controller, Sacramento
RAMON J. HIRSIG
Executive Director
No. 2005/035

STATE BOARD OF EQUALIZATION

PROPERTY AND SPECIAL TAXES DEPARTMENT
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0064
916 445-4982 z FAX 916 323-8765
www.boe.ca.gov
Attachment 6
1 GUIDELINES FOR THE ASSESSMENT OF

ENFORCEABLY RESTRICTED HISTORICAL PROPERTY

HISTORY
Effective March 7, 1973, Chapter 1442 of the Statutes of 1972 (also known as the Mills Act) added sections 50280 through 50289 to the Government Code to allow an owner of qualified historical property to enter into a preservation contract with local government. When property is placed under such a contract, the owner agrees to restore the property if necessary, maintain its historic character, and use it in a manner compatible with its historic characteristics.

Prior to the passage of Proposition 7 in 1976, these agreements (i.e., Mills Act contracts) constituted enforceable restrictions on the use of land within the meaning of Revenue and Taxation Code section 402.11
(Property Tax Rule 60, repealed January 10, 1978). However, Proposition 7 added the second paragraph to section 8 of article XIII of the California Constitution:

To promote the preservation of property of historical significance, the Legislature may define such property and shall provide that when it is enforceably restricted, in a manner specified by the Legislature, it shall be valued for property tax purposes only on a basis that is consistent with its restrictions and uses.

To implement Proposition 7, Chapter 1040 of the Statutes of 1977 (Senate Bill 380) added sections 439 through 439.4 to the Revenue and Taxation Code. These statutes, in particular section 439.2, prohibit a valuation of enforceably restricted historical property based on sales data and instead require that such property be valued by a prescribed income capitalization method.

ENFORCEABLY RESTRICTED HISTORICAL PROPERTY
Under section 439, historical property is "enforceably restricted" if it meets the definition of a "qualified historical property" as defined in Government Code section 50280.1 and is subject to a historical property contract executed pursuant to Government Code section 50280 and following.

A qualified historical property includes qualified historical improvements and the land on which the improvements are situated, as specified in the historical property contract. If the contract does not specify the land to be included, the qualified historical property includes only a land area of reasonable size to situate the improvements.

A qualified historical property is privately-owned property that is not exempt from property taxation and that also meets either of the following criteria:
• The property is listed in the National Register of Historic Places, or is located within a registered historic district; or

1 Unless otherwise noted, all statutory references are to the Revenue and Taxation Code.

Attachment 6
2 • The property is listed in any official state, county, city, or city and county official register of historical or architecturally significant sites, places or landmarks, including the California Register of Historical Resources, California Historical Landmarks, State Points of Historical Interest, local landmarks, and local survey listings of historical properties.

The historical property contract must have a minimum term of ten years, and, as applicable, must contain certain other elements, including the following:
• A provision relating to the preservation of the qualified historical property and, when necessary, the restoration and rehabilitation of the property in conformance with state historic preservation guidelines;
• A requirement for the periodic examination of the property to ensure compliance with the agreement;
• A requirement that the historical property agreement be binding upon successor owners of the qualified historical property; and
• A provision for an automatic one-year extension of the contract, with an additional year added to the initial contract term on each anniversary of the contract, unless either party provides notice of nonrenewal. If a notice of nonrenewal is given, the contract runs for its remaining term.

Once a contract is signed, accepted, and recorded, the property subject to the contract must be assessed under section 439.2 on the ensuing lien date. For example, if a contract were recorded in August 2004, the property should have been valued pursuant to section 439.2 for lien date January 1, 2005.

Local authorities may cancel a historical property agreement for breach of contract or failure to protect the historical property. Alternatively, the local entity may take legal action to enforce the contract.

ASSESSMENT
The assessment of an enforceably restricted historical property involves the following aspects:
(1) valuing the restricted historical property; (2) properly applying certain assessment provisions relating to article XIII A of the California Constitution (Prop 13); (3) valuing the restricted historical property following a notice of nonrenewal; and (4) valuing the restricted historical property following cancellation of the contract.

Valuing the Restricted Historical Property
Section 439.2 prohibits the assessor from using sales data relating to similar properties, whether or not enforceably restricted, to value an enforceably restricted historical property. Instead, the assessor must annually value a restricted historical property using an income approach that Attachment 6
3 follows the specific provisions of section 439.2. These provisions explicitly address (1) the determination of the income to be capitalized, (2) the development of the capitalization rate, (3) the capitalization technique to be used, and (4) the determination of the restricted historical property's taxable value on each lien date.

Income to be Capitalized
As provided in section 439.2(a), the income to be capitalized when valuing a restricted historical property is the property's fair rent less allowed expenditures, or allowed expenses. In general, section 439.2(a) follows Property Tax Rule 8(c), with fair rent in section 439.2 corresponding to gross return in Rule 8(c); allowed expenditures, or allowed expenses, in section 439.2 corresponding to gross outgo in Rule 8(c); and the income to be capitalized in section 439.2 corresponding to net return in Rule 8(c). In addition, for the purposes here, "gross income" is synonymous with fair rent, and "net operating income" is synonymous with the income to be capitalized.

The parties to a historical property agreement may stipulate a minimum annual income to be capitalized, in which case the income to be capitalized may not be less than the stipulated amount.

Fair rent, or gross income. The gross income of a restricted historical property is the fair rent for the property considering the restrictions on the property's use. When establishing the fair rent for a restricted historical property, the appraiser should consider the actual rent and typical rents in the area for similar properties in similar use, where the owner pays the property taxes.

The actual rent received by the owner of the subject restricted historical property is relevant to an estimate of fair market rent only if the actual rent is the same rent that would be expected if the existing lease were renegotiated in light of current market conditions, including the subject property's enforceable restrictions on use. With respect to rents from similar, or comparable, properties, if such rents are from properties outside the geographic or market area of the subject property, or from properties that are otherwise dissimilar to the subject property, the rents may not be relevant to an estimate of the subject property's fair rent.

Comparable rental data for single-family residences can be obtained from real estate brokers, rental agencies, and newspaper ads. Many assessors offices maintain rental data for commercial properties, and this data may be helpful when establishing the fair rent for restricted historical property when the contract allows a commercial use. Rental data for commercial property also can be obtained from commercial real estate brokers. For the purpose of estimating anticipated market fair rent and expenditures for use in calculating the subject property's value, rental and expense data for existing restricted historical properties, including the subject historical property, can be obtained through an annual questionnaire sent to property owners.

If sufficient rental data are not available, or such data are unreliable, the appraiser must impute a gross income for the subject restricted historical property. The imputed income should be based on what an informed investor would reasonably expect the property to yield under prudent management, given the provisions under which the property is enforceably restricted.

Attachment 6
4 Allowed expenditures. Section 439.2(a)(3) defines allowed expenditures, or allowed expenses, as expenses necessary for the maintenance of the property's income. Allowed expenses are the same as those permitted in Property Tax Rule 8(c).

Typical expenses include the cost of utilities, maintenance and repair, insurance and property management. Allowed expenses also may include amounts owing for special assessments and special taxes. Expenses related to debt service, general property taxes, and depreciation should not be deducted.

In general, to arrive at the net income to be capitalized, allowed expenses are subtracted from the estimated rental income. However, in order to properly process the income, the appraiser must be aware of the structure of the lease with regard to how expenses are shared between the landlord-owner and the tenant.

The proper perspective from which to view the processing of income and expenses is that of the landlord-owner. The objective is to estimate the net income to the landlord-owner—this is the amount that should be capitalized—and the correct question to ask is the following: What, if any, allowed expenses must the landlord-owner pay out of the rental income that he or she receives?
In a gross lease, almost all of the allowed expenses must be paid out of the gross rent and, therefore, must be subtracted from the gross rent to arrive at the net income to be capitalized. In a net lease, relatively few allowed expenses must be paid by the landlord-owner out of the net rent (because the tenant pays most expenses) and only these expenses should be subtracted from the net rent to arrive at the net income to be capitalized. Frequently, there is a hybrid arrangement—some expenses are paid by the landlord-owner and some by the tenant. How expenses are shared often depends upon the property type together with local conventions.

Income to be capitalized, or net operating income. The income to be capitalized, or net operating income, is simply the fair rent, or gross income, described above less the allowed expenditures described above.

Capitalization Rate
The method of developing the capitalization rate to be used when valuing restricted historical property is prescribed by statute; a capitalization rate derived from sales data or the band of investment is not permitted.

Section 439.2 prescribes two types of capitalization rates for restricted historical property: (1) a capitalization rate to be used when valuing restricted historical property that is an owneroccupied single-family residence and (2) a capitalization rate to be used when valuing all other restricted historical property. Both types of capitalization rates include components for interest (i.e., yield), risk, property taxes, and amortization of improvements; in fact, the two rates are identical except for the amount of the risk component. The capitalization rate contains the following components:

Attachment 6
5 • An interest component annually determined by the State Board of Equalization and based on the effective rate on conventional mortgages as determined by the Federal Housing Finance Board. The interest component is announced annually, in a Letter To Assessors, by October 1 of the preceding assessment year.
• A historical property risk component determined by property type. For owner-occupied single-family residences, the rate is 4 percent; for all other types of restricted historical property, the rate is 2 percent.
• An amortization component for improvements defined as a percentage equal to the reciprocal of the remaining life of the improvements (e.g., if the remaining economic life of the improvements were 20 years, the amortization component would be 5 percent). Since the amortization component applies only to improvements, not to land, which is a nondepreciating asset, it is necessary to adjust the amortization component described in the statute. We recommend the following method of adjustment:

1. Based upon market data, estimate the percentage of total property value attributable to improvements.

2. Multiply this percentage by the amortization component described in the statute (i.e., by the reciprocal of the remaining life of the improvements). For example, if the remaining life of the improvements was 20 years, yielding a reciprocal percentage of 5 percent, and if 70 percent of the total property value was attributable to the improvements, the adjusted amortization factor would be 3.5 percent (0.05 x 0.70 =

0.035).

3. Add the adjusted amortization component to the other capitalization rate components to arrive at the total capitalization rate.
• A property taxes component equal to the percentage of the estimated total tax rate applicable to the property for the assessment year multiplied by the assessment ratio. Typically, the property tax component includes the basic tax rate of 1 percent plus an additional ad valorem rate related to any bonded indebtedness pertaining to the tax rate area in which the property is located. Special district assessments and special taxes are not included in the property tax component. As noted above, they should be treated as allowed expenses.

Capitalization Technique
The capitalization technique to be used when valuing a restricted historical property is prescribed by statute and is formulaic. Section 439.2(e) provides that the restricted value shall be the income to be capitalized, or net operating income, developed as prescribed by statute, divided by one of the two types of capitalization rates prescribed by statute. In other words, the restricted value is the simple quotient of the prescribed income to be capitalized and the prescribed capitalization rate.

Attachment 6
6 Determination of Taxable Value on Each Lien Date
Section 439.2(d) provides that a historical property's restricted value may not be enrolled if it exceeds either (1) the value of the subject property as determined under section 110 (i.e., current market value) or (2) the value of the subject property as determined under section 110.1 (i.e., factored base year value). In other words, section 439.2 states that the taxable value of a restricted historical property on each lien date shall be the lowest of its restricted value, current market value, or factored base year value. The factored base year value for an enforceably restricted historical property is the value that was established for the 1975 lien date2 or as of the
date of the most recent change in ownership, whichever is later, adjusted by the annual inflation factor.

Article XIII A (Prop 13) Considerations
This section discusses how three important elements relating to implementation of article XIII A—change in ownership, new construction, and supplemental assessment—relate to the assessment of restricted historical property. Also discussed is the case in which only a portion of a property is subject to the historical property agreement—that is, the case in which a single property unit contains both restricted and unrestricted portions.

Change in Ownership
When a property subject to a historical property contract undergoes a change in ownership, a new base year value should be established for the property as of the date of change in ownership, as provided in section 110.1. Typically, a restricted historical property's base year value will be greater than its restricted value determined under section 439.2 and hence will not be enrolled as the property's taxable value. However, the establishment of a new base year value enables the assessor to perform the three-way value comparison prescribed by section 439.2(d) and described above. The establishment of a base year value is also necessary in order to calculate the assessed values of historical property should the historical property agreement enter nonrenewal status.

New Construction
Section IV of National Register Bulletin #15 defines a "building" as follows:

A building, such as a house, barn, church, hotel, or similar construction, is created principally to shelter any form of human activity. "Building" may also be used to refer to a historically and functionally related unit, such as a courthouse and jail or a house and barn.

Section IV further specifies that "[b]uildings eligible for the National Register must include all of their basic structural elements. Parts of buildings, such as interiors, facades, or wings, are not eligible independent of the rest of the existing building. The whole building must be considered,

2 Sections 110.1(d) and 405.5 do not apply to historical properties under contract as of lien date 1975 because the constitutional amendment which placed the valuation of historical property under article XIII rather than article XIII A had not yet been passed and, thus, was not in effect for the 1975 lien date.

Attachment 6
7 and its significant features must be identified." Thus, eligibility for the National Register is determined by the extent to which the basic structural elements of an existing building are intact.

In general, a newly constructed building would not be eligible because it is not an existing building with basic structural elements.3
Also, a newly constructed building is not a historic resource, and, thus, is not a qualified historical property within the meaning of Government Code section 50280.1. For example, a newly constructed detached garage (assuming it is not a reconstruction of a historical garage) clearly would not be eligible because it has no significance in American history or architecture, nor does it meet any of the other requisite criteria.

Bulletin 15, however, does list one type of newly constructed property that may be eligible for inclusion under the Mills Act. A reconstructed historic building is eligible for the National Register if the reconstruction is "accurately executed in a suitable environment and presented in a dignified manner as part of a restoration master plan, and when no other building or structure with the same association has survived."
The historical property contract typically specifies the scope and type of any work to be performed on the historical improvements. Improvements existing as of the date of the contract would be subject to the provisions of section 439.2 unless specifically excluded by the contract.

Any new construction made to the historical structure after the issuing date of the contract would not be subject to the provisions of section 439.2 unless specifically included in the contract or an amendment to the contract. Any questions regarding new construction to enforceably restricted historical structures should be directed to the counsel of the legislative body of the city, county, or city and county that contracted with the property owner.

Assuming that the newly constructed property is subject to the historical property contract, a base year value should be established for the newly constructed portion and this value added to the factored base year value of the existing restricted property.

In some cases, an existing historical property may include a portion that is restricted (i.e., subject to a historical property contract) and a portion that is unrestricted. In this case, separate factored base year values should be maintained for the restricted and unrestricted portions and the base year value of any newly constructed property added to the appropriate portion. The assessment treatment of this type of property is discussed further below.

Supplemental Assessment
Although the assessor is required to establish a new base year value upon a change in ownership or completed new construction involving restricted historical property, such property is not subject to supplemental assessment. As provided in Revenue and Taxation Code section 75.14:

Supplemental assessment; limitation. A supplemental assessment pursuant to this chapter shall not be made for any property not subject to the assessment

3 National Register Bulletin 15, "How to Apply the National Register Criteria for Evaluation," U.S. Department of the Interior, National Park Service (www.cr.nps.gov/nr/publications/).

Attachment 6
8 limitations of Article XIII A of the California Constitution. All property subject to the assessment limitations of Article XIII A of the California Constitution shall be subject to the provisions of this chapter, except as otherwise provided in this article.

As discussed above, the assessment of enforceably restricted historical property is subject to the provisions of article XIII, section 8 of the California Constitution, not article XIII A. Thus, section 75.14 precludes the assessor from enrolling supplemental assessments for enforceably restricted historical property.

Historical property not yet under contract that undergoes a change in ownership or new construction is subject to supplemental assessment, even if the property owner later executes a historical property contract in the same fiscal year. Also, any new construction involving a historical property that does not come under the existing historical property contract (e.g., a detached garage added to a restricted historical property) would be subject to supplemental assessment.

When a Property Contains Both Restricted and Unrestricted Portions When only a portion of a property that would normally be considered a single appraisal unit is restricted by a historical property contract, the assessed value should be determined by making a comparison of three values, determined as follows. First, the portion under contract should be valued using the capitalization method prescribed by section 439.2. Added to this figure should be the lower of the unrestricted portion's fair market value or factored base year value. The resulting sum should be compared to both the fair market value and the factored base year value of the entire property (i.e., both restricted and unrestricted portions) and the lowest of the three figures should be enrolled.

Valuing Property Under Notice of Nonrenewal
As provided in Government Code section 50282, either the owner of a restricted historical property or the local government entity may serve notice that it does not intend to renew the historical property contract. If such notice is not given, another year is automatically added to the term of the initial contract, thus creating a "rolling" contract term that is always equal to the initial contract term.

Section 439.3 prescribes the valuation method for a restricted historical property in nonrenewal status; this valuation method applies until the end of the restricted period (i.e., until the existing contract expires). In essence, the method results in a restricted value that gradually approaches the historical property's factored base year value as the remaining term under the contract decreases. For a property in nonrenewal status, the assessor must annually value the property as follows:

1. Determine the full cash value (i.e., factored base year value) of the property in accordance with section 110.1. (Alternatively, if the property will not be subject to section 110.1 when the historical property agreement expires, determine its fair market value in accordance with Attachment 6
9 section 110, as if the property were free of the agreement's restrictions; or, if the property will be subject to another type of restricted value standard when the historical property agreement expires, determine the property's value as if it were subject to the new restrictions.)

2. Determine the restricted value of the property by the capitalization of income method provided in section 439.2.

3. Subtract the restricted value determined in Step 2 from the factored base year (or other) value determined in Step 1.

4. Using the amount for the interest rate component (section 439.2(b)(1)) announced by the Board, discount the amount obtained in Step 3 for the number of years remaining until the termination of the contract.

5. Determine the restricted value of the property in nonrenewal status by adding the value determined in Step 2 to the amount obtained in Step 4.

The historical property's restricted value in nonrenewal status—that is, the value determined above, in accordance with section 439.3—should be compared with the historical property's factor base year and current market values, and the lowest of these three values should be enrolled as the property's taxable value.

Cancellation of Contract
The government entity party to a historical property contract may cancel the contract, after notice and a public hearing, if it determines that either the owner has breached the agreement or the property has deteriorated to the extent that it no longer meets the standards of a historical property. If the contract is cancelled, the property owner must pay a cancellation fee equal to 12½ percent of the property's current fair market value as though free of the contractual restriction, such value to be determined by the county assessor. After a contract is cancelled, the lower of the property's factored base year value or current market value should be enrolled for the ensuing lien date.

SUMMARY
The key points contained in these guidelines can be summarized as follows:

1. An owner of qualified historical property may enter into a preservation contract with local government. When property is placed under such a contract, the owner agrees to restore the property if necessary, maintain its historic character, and use it in a manner compatible with its historic characteristics. Such property receives the special valuation treatment prescribed under Revenue and Taxation Code sections 439 through 439.4.

2. Enforceably restricted historical property is to be annually valued by the income capitalization method prescribed in section 439.2, which contains specific instructions with Attachment 6
10 regard to the income to be capitalized, the capitalization rate, and the capitalization technique to be used. The restricted value must be compared to the property's current market value and factored base year value, with the lowest of these three values enrolled as the property's taxable value.

3. When assessing restricted historical property, the appraiser should consider how three important elements of article XIII A—change in ownership, new construction, and supplemental assessment—relate to the assessment. The appraiser should consider how a property should be assessed when only a portion of it is subject to a historical property agreement.

4. Restricted historical property under a notice of nonrenewal should be valued in accordance with section 439.3.

5. The government entity party to a historical property contract may cancel the contract. The cancellation fee is 12½ percent of the property's current fair market value as though free of the contractual restriction, with such value to be determined by the local assessor.

Additional information about Mills Act contracts may be obtained from the state Office of Historic Preservation, either by telephone at 916-653-6624, or from their website (www.ohp.parks.ca.gov).
(Note: Please see the assessment examples following.)
Attachment 6
Historical Property Valuation Examples Page 1
EXAMPLE 1 (OWNER-OCCUPIED SINGLE-FAMILY RESIDENCE)
Subject Restricted Historical Property
Restored, 105-year-old, Victorian single-family residence. Excellent condition. Under Mills Act contract since 1985 and not in nonrenewal status. Owner-occupied.

Determination of Restricted Value (current lien date)
Gross income (Fair rent)
$1,500 per month x 12 months = $18,000
Less: Anticipated vacancy and collection loss
$18,000 x 5% - 900
Effective gross income $17,100
Less: Anticipated operating expenses
Grounds maintenance $600
Fire insurance 400
Management Fee 360
Water and garbage 240
Building maintenance + 500 - 2,100
Net Operating Income $15,000
Restricted Capitalization Rate
Rate Components:

Interest rate .080
Risk (owner-occupied SFR) .040
Property tax (ad valorem) .015
Amortization (50-year remaining life; improvements
constitute 70% of total property market value;

0.02 x 0.70 – 0.014) + .014 .149
Restricted Value
$15,000 ÷ .149 = $100,671
Taxable Value—Three-Way Value Comparison
Restricted value $100,671
Factored base year value (based on prior change in ownership) $357,000 Current market value (based on comparable sales) $450,000 The lowest of the three possible values is the restricted value. Thus, the net taxable value would be $93,671 ($100,671 restricted value less the homeowners' exemption of $7,000).

Note 1: If this property had been a non-owner-occupied SFR, the only difference in the determination of the restricted value would have been the use of a risk rate component of 2% rather than 4% in the capitalization rate.

Note 2: In this and the following examples, the gross income, or fair rent, is presented on a gross rent basis, that is, under the assumption that the landlord-owner pays all operating expenses out of the gross income.

Attachment 6
Historical Property Valuation Examples Page 2
EXAMPLE 2 (OFFICE USE)
Subject Restricted Historical Property
Multi-tenant, restored historical office building in a downtown commercial district. Under Mills Act contract since 1985 and not in nonrenewal status.

Determination of Restricted Value (current lien date)
Gross Income (Fair rent):

Offices 140,000 sf @ $1.75/sf = $245,000
x 12 months = $2,940,000
Less: Anticipated vacancy and collection loss
$2,940,000 x 5% - 147,000
Effective gross income $2,793,000
Less: Anticipated operating expenses
Management $290,000
Maintenance 95,000
Insurance 75,000
Utilities 360,000
Janitorial + 140,000 - 960,000
Net Operating Income $1,833,000
Restricted Capitalization Rate
Rate Components:

Interest component .08
Risk .02
Property tax (ad valorem) .011
Amortization (50-year remaining life; improvements
constitute 75% of total property market value

0.02 x 0.75 = 0.015) + .015 .126
Restricted Value
($1,833,000 ÷ .126) = $14,547,619
Taxable Value—Three-Way Value Comparison
Restricted value $14,547,619
Factored base year value (based on prior change in ownership) $18,191,077 Current market value (based on comparable sales) $21,000,000 The lowest of the three possible values is the restricted value. Thus, the taxable value would be $14,547,619
Attachment 6
Historical Property Valuation Examples Page 3
EXAMPLE 3 (MIXED USE—RESIDENTIAL AND OFFICE)
Subject Restricted Historical Property
Two-story, restored historical property in a downtown district. Upper level is residential unit occupied by owner. Lower level contains three office spaces subject to short-term rental agreements. The income stream for the upstairs unit must be calculated separately from the downstairs unit because the risk rate is different for the owner-occupied unit.

Determination of Restricted Value
Separate restricted values for the upper-level residence and the lower-level office space must be determined, because the risk components are different for the two types of use. The total restricted value is sum of these two values.

Upper-Level Unit
Gross income (Fair rent) based upon comparable rent data $975 per month x 12 months = $11,700
Less: Anticipated vacancy and collection loss
$11,700 x 5% - 585
Effective gross income $11,115
Less: Anticipated operating expenses
Grounds maintenance $300
Fire insurance 200
Management Fee 180
Water and garbage 120
Building maintenance + 250 - 1,050
Upper-Level Net Operating Income $10,065
Restricted Capitalization Rate (owner-occupied SFR)
Rate components:

Interest rate .080
Risk .040
Property tax .010
Amortization ( 50-year remaining life; improvements
constitute 70% of total property market value;

0.02 x 0.70 = 0.014) + .014 .144
Upper-level Restricted Value ($10,065 ÷ .144) = $69,895 Lower-Level Offices
Gross income (Fair rent)
1000 sf @ $1.60/sf = $1,600 x 12 months $19,200
Less: Anticipated vacancy and collection loss
$19,200 x 5% - 960
Effective gross income $18,240
Attachment 6
Historical Property Valuation Examples Page 4
Less: Anticipated operating expenses
Grounds maintenance $300
Fire insurance 200
Management Fee 180
Water and garbage 120
Building maintenance + 250 - 1,050
Lower-Level Net Operating Income $17,190
Restricted Capitalization Rate
Rate components:

Interest component .080
Risk .020
Property tax .010
Amortization (50-year remaining life; improvements
constitute 70% of total property market value;

0.02 x 0.70 = 0.014) + .014 .124
Lower Level Restricted Value ($17,190 ÷ .124) $138,629
Add: Upper Level Restricted Value + $69,895
Total Restricted Value $208,524
Taxable Value—Three-Way Value Comparison
Restricted Value $208,524
Factored base year value (based upon prior change in ownership) $364,140 Current market value (based upon comparable sales data) $400,000 The lowest of the three possible values is the restricted value. Thus, the net taxable value would be $201,524 ($208,524 less the homeowners' exemption of $7,000).

Attachment 6
Historical Property Valuation Examples Page 5
EXAMPLE 4 (MIXED VALUATION—PART RESTRICTED AND PART UNRESTRICTED) Description of Subject Property (Comprises Both Restricted and Unrestricted Portions) The subject property is a 10-acre parcel with a farmhouse and barn situated on 2 acres; the remaining 8 acres are farmland. The farmhouse and barn are used as an owner-occupied singlefamily residence; this portion of the property is restricted under a Mills Act contract. The remaining 8 acres of farmland are unrestricted.

Value of Restricted Portion (current lien date)
Gross income (Fair rent) for farmhouse and barn
$2,000 per month x 12 months = $24,000
Less: Anticipated vacancy and collection loss
$24,000 x 5% - 1,200
Effective gross income $22,800
Less: Anticipated operating expenses
Grounds maintenance $600
Fire insurance 400
Management Fee 360
Water and garbage 240
Building maintenance + 500 - 2,100
Net Operating Income = $20,700
Restricted Capitalization Rate
Rate components:

Interest component .080
Risk (owner-occupied) .040
Property tax (ad valorem) .010
Amortization (50-year remaining life; improvements
constitute 70% of total property market value

0.02 x 0.70 = 0.014) + .014 .144
Restricted Value ($20,700 ÷ .144) = $143,750
Taxable Value—Three-Way Comparison
Total Property Restricted Value (sum of restricted value above and lower of FBYV or current market value of unrestricted portion)
Restricted Value (portion under contract) $143,750
FBYV (unrestricted portion) + $102,000
Restricted Value (total property) $245,750
Factored base year values (based upon a prior change in ownership of the entire property, allocated between restricted and unrestricted portions):

Farmhouse, barn, and 2 acres (restricted portion) $204,000 8 acres (unrestricted portion) + $102,000
Total FBYV (total property) $306,000
Attachment 6
Historical Property Valuation Examples Page 6
Current market values (based upon comparable sales data):

Farmhouse, barn, and 2 acres (restricted portion) $230,000 8 acres (unrestricted portion) + $120,000
Total Current Market Value (total property) $350,000
The lowest of the three values is the Restricted Value (total property), $245,750. Thus, the net taxable value would be $238,750 ($245,750 less $7,000 homeowners' exemption).

Attachment 6
Historical Property Valuation Examples Page 7
EXAMPLE 5 (PROPERTY IN NONRENEWAL STATUS)
Description of Subject Restricted Historical Property
The same property as in Example 2, except the property owner has served notice of renewal.

The Mills Act contract covering the property was originally executed in September 1995, and the owner served notice of nonrenewal in June 2004. Value the property for the 2005 lien date, reflecting its nonrenewal status. Assume that the property's restricted, current market, and factored base year values from Example 2, provided below, also refer to January 1, 2005.

Restricted value $14,547,619
Current market value $21,000,000
Factored base year value $18,191,077
Restricted Value in Nonrenewal Status
Value as if unrestricted (factored base year value) $18,191,077 Restricted value - 14,547,619
Difference $ 3,643,458
Present worth of difference
PW1 @ 6.00 %, 9 years (interest component for lien date 2005) x .591898 = $ 2,156,555
Plus restricted value + $14,547,619
Restricted value in nonrenewal status—lien date January 1, 2005 $16,704,174 Taxable Value
Since the restricted value in nonrenewal status, $16,704,174, is less than either the property's current market value or its factored base year value, this is the taxable value.

Attachment 6

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
October 3, 2023

PUBLIC HEARINGS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Katherine Wallace, Associate Planner
APPROVED BY: Chip Rerig, City Administrator
SUBJECT:

MA 23-103 (Cypress Inn): Consideration of a Mills Act Contract application MA 23- 103 (Cypress Inn) for the historic "La Ribera Hotel" located on the northeast corner of Lincoln Street and 7th Avenue in the Residential-Commercial (R-C) District. APN 010-147-008.

RECOMMENDATION:

Accept the recommendation of the Historic Resources Board and approve the Mills Act Historical Property Contract MA 23-103 (Cypress Inn) for the historic “La Ribera Hotel” located on the northeast corner of 7 th
Avenue and Lincoln Street (APN 010-147-008) and authorize the City Administrator to execute the contract (Attachment 1).

BACKGROUND/SUMMARY:

The property (APN 010-147-008) is located on the northeast corner of 7 th Avenue and Lincoln Street in the
Residential-Commercial (R-C) Zoning District (Attachment 1, Exhibit A). Originally named “La Ribera,” the hotel was designed by Blaine & Olsen (an Oakland-based architectural firm) and built by Meese & Briggs in 1929. The hotel was re-named “Cypress West” c.1960 and later renamed “The Cypress Inn,” in the 1980s. The property is significant as an excellent example of Spanish Eclectic commercial design by Blaine & Olsen. The reinforced concrete building is particularly notable for its red ceramic roof tiles, Moorish-style 3-story tower with a ziggurat top, and central courtyard. It is also significant for its 1949 twostory addition located at the southwest corner of the building, designed by San Francisco architect, Gardner Dailey, and built by Harold Geyer.

In 1990, a 4,000-square-foot property (APN 010-147-009) located immediately north of the Cypress Inn was acquired by the hotel owners. The property contained the Mary DeNeale Morgan studio, a building deemed historically significant but which had lost integrity. The studio was demolished to accommodate a north addition to the Cypress Inn, containing a restaurant space and six new hotel units, which was approved by the Historic Resources Board (then called the Historic Preservation Committee) and the Planning Commission in 1999. Although the north addition is physically connected to the original hotel building, the lot (APN 010-147-009) was not merged with the original hotel property (APN 010-147-008) and the lots remain separate to this day. The north addition (APN 010-147-009) is located in the Central Commercial (CC) zone, and the original Cypress Inn (APN 010-147-008) is located in the Residential Commercial (RC) zone. Additionally, the north addition (APN 010-147-009) is not listed on the Carmel Inventory nor the Carmel Register and is not part of this Mills Act application.

The Cypress Inn was first identified as a significant historic resource in 1978, in the “Monterey Architecture Resource Inventory” survey conducted by Richard Janick and the Monterey Peninsula College. In 1990, the property was documented by Erling Lagerholm; in 1997, Lagerholm prepared a Department of Parks and Recreation (DPR) Form 523 that included a more extensive description and analysis. In 2003, another updated DPR was completed by Kent Seavey (Attachment 1, Exhibit B). Also in 2003, a “Historic Preservation/Conservation Easement” for Block 75, lots 16, 18, 20, and 22 was recorded with the Monterey County Recorder. The Easement record does not list Assessor Parcel Numbers. Lot 16 is associated with APN 010-147-009 (the north addition to the Cypress Inn), while lots 18, 20, and 22 are all associated with APN 010-147-008 (the original Cypress Inn property). It appears as though lot 16 was included in the Easement to ensure appropriate historical documentation and interpretation of the Mary DeNeale Morgan studio (i.e. a commemorative plaque).

In order to qualify for a Mills Act contract, a property must be included on the Carmel Inventory and added to the Carmel Register of Historic Resources. At the request of the then-property owner, the Planning Commission designated the Cypress Inn as a historic resource on June 9, 1999 following a unanimous recommendation by the Historic Preservation Committee on May 17, 1999. The resource was added to the Carmel Register on June 9, 1999 and later listed on the Carmel Inventory on May 25, 2005 (following the adoption of the City’s Local Coastal Plan). A Resolution designating a Historic Resource for APN 010-147- 008 was recorded with the County Recorder on January 4, 2007 (Document #2007001226). Please note that the designation recorded with the County Recorder lists only APN 010-147-008 as a historic resource (not APN 010-147-009, the separate north lot accommodating the 2003 north addition).

On April 4, 2023, Gerard A. Rose, Attorney, submitted an application (MA 23-103, Cypress Inn) for a Mills Act Historical Property Contract for APN 010-147-008 on behalf of the property owner, Sentimental Journey LLC. On August 21, 2023, the Historic Resources Board adopted Resolution 2023-011-HRB (Attachment 2), recommending that the City Council enter into a Mills Act Contract with Sentimental Journey, LLC for the historic “La Ribera Hotel.”
Contract Value
The Monterey County Assessor’s Office is responsible for determining the value of a property under Mills Act Contract in accordance with sections 439 through 439.4 of the Revenue and Taxation Code. Properties with a Mills Act Contract are not valued based on sales data; rather they are valued by a prescribed income capitalization method (Attachment 3). After a Contract is approved, it is forwarded to the Monterey County Assessor who then determines the Mills Act value.

At previous Mills Act hearings, members of Council requested that staff obtain a preliminary calculation of Mills Act Contract values for the purposes of understanding the potential local tax revenue offset. The Monterey County Assessor has informed the City that time constraints and process complexity make preliminary calculations infeasible. Therefore, staff cannot provide the actual or estimated value of property tax reduction for Council’s consideration. Jerry Gatt, Appraiser III, represented the Monterey County Assessor and attended the April 4, 2023 Council meeting to explain the assessment process.

Contract Summary
A Mills Act contract under State law is an agreement between the City of Carmel and a property owner of a historic building listed on the Carmel Register. In exchange for reduced property taxes, the property owner is contractually obligated to perform annual maintenance on the building. The property owner benefits from a reduction in property taxes. The City benefits from assurance, via contract, that the historic building is rehabilitated, maintained, and preserved with a portion of those property taxes that the city is giving up.

The primary purpose for offering Mills Act contracts in the City of Carmel-by-the-Sea is to assist in and ensure the rehabilitation or restoration and long-term maintenance of historic resources. All properties listed on the City’s Historic Register in all districts that have been preserved in their historical size, form, and design without significant alterations are eligible for Mills Act contracts.

All Mills Act contracts have a term of 10 years, and one year is added to this term annually upon each anniversary date of the contract unless one or both parties (City and property owner) have taken action to terminate the contract. The City Administrator is authorized to initiate contract termination on behalf of the City based on recommendations of the Community Planning & Building Department. The contract rights and obligations are binding upon all successive owners of the property during the life of the contract. The property retains the lower Mills Act tax rate when sold. To end a contract, either party may submit a notice of non-renewal to the other party. Such notices shall cause the contract to terminate at the end of the thencurrent 10-year contract period. Cancellation of a contract by the City due to non-compliance requires a public hearing and, if canceled, results in the immediate termination of the contract and a penalty equal to

12.5 percent of the assessed market value of the property.

The contract requires that the historical elements of the property are maintained in good condition. This includes a plan for rehabilitation and maintenance and may include a program to restore deteriorated features. All recipients of Mills Act contracts are required to implement a rehabilitation/restoration and maintenance plan prepared by a qualified professional. An annual report is submitted to the Community Planning & Building Department specifying all work that has been done to maintain and preserve the historic resource over the year in compliance with the approved rehabilitation/restoration and maintenance plan. All rehabilitation/restoration and maintenance work must be completed in conformance with the Secretary of Interior’s Standards for Rehabilitation and all proposed projects are subject to a Design Study review prior to commencement of the work. Minor alterations, as defined in CMC section 17.32.150, may be approved by staff; however, major alterations, as defined in CMC section 17.32.160 would be reviewed by a qualified professional and presented to the Historic Resources Board for review. All Mills Act contracts must specify that the rehabilitation/restoration and maintenance plan shall be updated at least every ten years by a qualified professional and approved by both parties.

The Historic Resources Board considers each application for a Mills Act contract and provides a recommendation to the City Council to approve, approve with conditions, or deny the application.

The City Council considers the recommendations from the Historic Resources Board at a public hearing and resolves to approve, approve with conditions, or deny the proposed contract with sufficient time for action by the City Clerk so that recordation of approved contracts occurs before December 31st of the year in which the application is received.

STAFF ANALYSIS:

Findings
Carmel Municipal Code Section 17.32.100.B.6(c) sets forth findings that the Historic Resources Board and City Council shall make in order to grant approval of a Mills Act Contract. The required findings are listed below followed by a staff response on how the application meets the requirements.

1. The building is designated as a historic resource by the City and is listed on the Carmel Register.

Staff Response: The resource was added to the Carmel Register on June 6, 1999 and listed on the Carmel Inventory on May 25, 2005. The application meets this finding.

2. The proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property.

Staff Response: The applicant submitted a rehabilitation and maintenance plan (Attachment 1, Exhibit C). The plan covers a period of 10 years from 2024-2033 and estimates the total cost of work at $1,114,000. The plan has been compiled by Christopher Barlow, Architect (and qualified professional), and includes rehabilitation and on-going maintenance including structural upgrades; building system upgrades; rehabilitation and maintenance of exterior features, materials, and finishes; and hardscape/landscape projects. All rehabilitation and maintenance work will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. All exterior work is subject to Design Study approval and a determination of consistency with the Secretary of the Interior's Standards for Rehabilitation. The proposed plan meets this finding.

3. Alterations to the historic resource have been in the past, and will continue to be in the future, limited to interior work and to exterior rehabilitation and alterations that:
(A) Comply with the Secretary’s Standards (future additions only); and (B) Do not significantly alter, damage or diminish any primary elevation or characterdefining feature; and (C) Do not increase floor area on the property by more than 15 percent beyond the amount established in the documented original or historic design of the resource; and (D) Do not result in any second-story addition to a single-story historic resource.

Staff Response: Regarding 3.(C), which necessitates that past alterations “not increase floor area on the property by more than 15 percent beyond the amount established in the documented original or historic design of the resource” staff has identified two additions of note. For different reasons, neither addition appears to disqualify the Cypress Inn for Mills Act contract eligibility.

In 1949, a two-story volume was added to the southwest corner of the hotel’s original 1929 design. This was documented in Kent Seavey’s DPR 523 form as a significant addition that contributes to the historicity of the resource. Not only does the southwest addition meet the 50-year-old age threshold, but it is significant as “the earliest known Carmel design by noted California architect, Gardner Dailey.” Therefore, as part of the established historic design of the resource, the southwest addition complies with 3.(C) (full code citation is CMC 17.32.100.B.6.c.iii.C).

In 1990, then-owners of the Cypress Inn acquired an adjacent, 4,000-square-foot property (APN 010-147- 009) located immediately north of the hotel (APN 010-147-008). In 1999, the Historic Resources Board (then called the Historic Preservation Committee) approved a proposal to redevelop the adjacent north lot to accommodate a hotel restaurant (100 plus seats) and six additional rooms for the Cypress Inn. The 1999 project plans by Mandurrago, Mandurrago, and Sullivan are titled, “Cypress Inn Addition” and by that time the hotel featured 16,917 square feet of floor area. The north addition added 5,738 square feet of floor area (resulting in a floor area increase of 34%).

While the addition is physically connected to the original hotel and is clearly perceived as an addition, the lots were not merged, and the addition remains on a separate lot of record. In addition to remaining on a separate lot of record, the north addition is not included on the City’s Historic Inventory nor the Historic Register, and it is not recorded as historic with Monterey County. If the two lots had been merged, the Council would need to consider whether the merging of the lots violates 3(C) and thereby disqualifies the hotel from a Mills Act Contract. However, that is not the case in this situation. Staff finds, for the reasons cited above, that the north addition does not disqualify the Cypress Inn under section 3(C).

If the City Council votes to enter into a Mills Act contract for the Cypress Inn, the Monterey County Assessor would calculate the tax benefit on the original Cypress Inn property (APN 010-147-008); the property upon which the north addition sits (APN 010-147-009) would be excluded.

Regarding finding 3 (A, B, and D), the planned rehabilitation and maintenance work for 2024-2032 will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. Any future alterations are required to be consistent with conditions A-D. Minor alterations, as defined in CMC section

17.32.150, may be approved by staff; however, major alterations, as defined in CMC section 17.32.160 would be reviewed by a qualified professional and presented to the Historic Resources Board for review.

The application meets this finding.

4. The Mills Act contract will aid in offsetting the costs of rehabilitating and maintaining the historic resource.

Staff Response: Approval of the contract would assist in offsetting the rehabilitation/ restoration and maintenance costs of preserving the Cypress Inn by reducing the tax liability on the property thereby freeing up funds for the necessary work. The application meets this finding.

5. Approval of the Mills Act contract will represent an equitable balance of public and private interests and will not result in substantial adverse financial impact on the City.

Staff Response: Approval of the Mills Act Contract will be consistent with Goal 1-5 and Objective 1-16 of the Land Use & Community Character Element of the General Plan which encourages providing incentives for property owners to preserve and rehabilitate historic resources. Although the adoption of a Mills Act Contract will decrease property tax revenue to the City, this contract represents an equitable balance of public and private interests:
1) The City Council adopted Resolution 2016-068 on September 13, 2016, limiting the number of Mills Act contracts that can be approved to fifteen (15) in any three-year calendar period. No applications were approved in 2020 or 2021, four applications were approved in 2022, one application has already been approved in 2023 (L’Auberge), and four total applications are currently in review in 2023. 2) Carmel currently has 292 historic resources, and since the adoption of the Mills Act program in 2004, the City has entered into a total of fifteen Mills Act Contracts. 3) The City would continue to receive a portion of the property tax revenue and the investment in rehabilitation and maintenance supports local tourism, which benefits both private and public interests. 4) The value of preserving a historic resource offsets the loss of revenue.

As previously described, this application is for APN 010-147-008; it does not include APN 011-147-009.

The contract, if approved by the City Council, would apply only to APN 010-147-008.

FISCAL IMPACT:

The City will have a diminished tax base from the property at the northeast corner of Lincoln Street and 7 th
Avenue for the term of the contract. The amount is unknown at this point.

PRIOR CITY COUNCIL ACTION:

On March 3, 2020, the City Council adopted standard contract language for Mills Act Contracts. On April 4, 2023, the City Council reviewed the City’s Mills Act Policy and opted not to make any changes.

Next Steps: If the City Council enters into a Mills Act Contract for this property, the contract will be recorded with the Monterey County Recorder and will take effect January 1, 2024.

ATTACHMENTS:

Attachment 1) Standard Mills Act Contract
Attachment 2) Exhibit A - Legal Description
Attachment 3) Exhibit B - DPR 523 Form “La Ribera Hotel” Attachment 4) Exhibit C - Rehabilitation/Maintenance Plan Attachment 5) Resolution 2023-010-HRB
Attachment 6) Guidelines for the Assessment of Enforceably Restricted Historical Property

RECORDING REQUESTED BY

CITY OF CARMEL-BY-THE-SEA

AND WHEN RECORDED MAIL TO

Carmel City Hall
Attn: Community Planning & Building
P.O. Box CC
Carmel-By-The-Sea, CA 93921 This space reserved for the Recorder’s use only

CITY OF CARMEL-BY-THE-SEA

MILLS ACT HISTORIC PROPERTY PRESERVATION CONTRACT
THIS AGREEMENT is made and entered by and between the CITY OF CARMEL-BY-THE-SEA a municipal corporation (hereinafter referred to as “City”), and Sentimental Journey LLC (hereinafter referred to as “Owner”).

RECITALS
(i) California Government Code Section 50280, et seq. (known as the Mills Act) authorizes cities to enter into contracts with the owners of qualified historic properties to provide for their appropriate use, maintenance and restoration such that these historic properties retain their historic characteristics;
(ii) The Owner possesses fee title in and to that certain real property, together with associated structures and improvements thereon, located on the northeast corner of Lincoln Street and 7th Avenue (APN: 010-147-008), Carmel-By-The-Sea, California, (hereinafter referred to as the “Historic Property”). A legal description of the Historic Property is attached hereto, marked as “Exhibit A” and is incorporated herein by reference;
(iii) The property is identified as a historic resource on the City of Carmel-By-The-Sea’s Historic Inventory and Register of Historic Resources and is further described in the DPR 523 Form attached hereto, marked as “Exhibit B” and is incorporated herein by reference;
(iv) City and Owner, for their mutual benefit, now desire to enter into this Agreement both to protect and preserve the characteristics of historical significance of the Historic Property, as it exists at the date of this contract and as described in the City’s Register of Historic Resources, and to qualify the Historic Property for an assessment of valuation pursuant to the provisions of Article 1.9 (commencing with section 439) of Chapter 3 of Part 2 of Division 1 of the California Revenue and Taxation Code.

Attachment 1
NOW, THEREFORE, City and Owner, in consideration of the mutual covenants and conditions contained herein, do hereby agree as follows:

1. INCORPORATION OF RECITALS. All recitals are incorporated into this Agreement.

2. EFFECTIVE DATE AND TERM. This Agreement shall be effective and commence on the date the Agreement is signed by the City, unless otherwise indicated by the County of Monterey, and shall remain in effect for a minimum term of ten (10) years thereafter.

3. AUTOMATIC RENEWAL. Each year, upon the anniversary of the effective date of this Agreement (hereinafter referred to as “annual renewal date”), one (1) year shall be added automatically to the term of this Agreement, unless timely notice of nonrenewal is given as provided in paragraph 4 of this Agreement. The total length of the contract shall not exceed twenty (20) years.

4. NOTICE OF NONRENEWAL. If City or Owner desires in any year not to renew this Agreement, that party shall serve written notice of nonrenewal in advance of the annual renewal date of this Agreement as follows: Owner must serve written notice of nonrenewal at least ninety (90) days prior to the annual renewal date; City must serve written notice of the nonrenewal at least sixty (60) days prior to the annual renewal date.

If notice is not received, the Agreement shall automatically be renewed for another year.

Upon receipt by Owner of a notice of nonrenewal from the City, Owner may make a written protest. At any time prior to the annual renewal date, City may withdraw its notice of nonrenewal.

5. EFFECT OF NOTICE OF NONRENEWAL. If either City or Owner serves timely notice of nonrenewal in any year, and this contract is not renewed, this Agreement shall remain in effect shall remain in effect for the balance of the period remaining since the original execution or the last annual renewal date.

6. FEES. The City may require that the Owner(s) of the Historic Property pay a fee that shall not exceed the reasonable cost of providing services, such as inspections, pursuant to Government Code Section 50281.1 (Article 12 of Chapter 1 of Part 1 of Division 1 of Title 5 of the Government Code), for which the fee is charged.

7. VALUATION OF PROPERTY. During the term of this Agreement, Owner is entitled to seek assessment of valuation of the Historic Property pursuant to the provisions of Chapter 3 of Part 2 of Division 1 of the California Revenue and Taxation Code.

8. PRESERVATION OF PROPERTY. Owner shall preserve and maintain the characteristics of historical significance of the Historic Property and agrees to complete rehabilitation and/or maintenance activities as defined in the Rehabilitation/Restoration and Maintenance Plan attached as “Exhibit C”. Requests for revisions to the Maintenance and Attachment 1
Rehabilitation plan shall be reviewed by the Historic Resources Board prior to implementation. In addition, Owner shall comply with the terms of the City’s Historic Preservation Ordinance (CMC 17.32). Owners shall not be permitted to further impede any view corridor with any new structure, including but not limited to walls, fences, or shrubbery, so as to prevent the viewing of the Historic Property from the public right-ofway.

9. RESTORATION OF PROPERTY. Owner shall, where necessary, restore and rehabilitate the Historic Property to conform to the rules and regulations of the Office of Historic Preservation of the State Department of Parks and Recreation, U. S. Secretary of the Interior’s Standards for Rehabilitation, the State Historical Building Code, and the City of Carmel-by-the-Sea, all as amended.

10. INSPECTIONS. Owner shall allow periodic examinations, at least every five (5) years, with reasonable notice thereof, of the interior and exterior of the Historic Property by representatives of the County of Monterey Assessor and the City of Carmel-By-The-Sea as may be necessary to determine Owner’s compliance with the terms and provisions of this Agreement. The City will coordinate inspections by such other agencies that have jurisdiction and will keep them to the minimum necessary to determinate such compliance.

11. PROVISION OF INFORMATION. Owner shall furnish City with any and all information required by City, in order to determine the eligibility of the Historic Property, and that City deems necessary or advisable to determine compliance with the terms and provisions of this Agreement.

12. ANNUAL REPORT. Owner shall submit an annual report at least 90 days prior to each annual renewal date (October 1st) to the Department of Planning and Building specifying all work that has been done to maintain and preserve the historic resource over the preceding year in compliance with the approved maintenance plan.

13. CANCELLATION. The City has the right to cancel the contract if the owner allows the property to deteriorate to the point that it no longer meets the standards for a qualified historical property. The City also has the right to cancel this contract if the owner(s) breaches the provisions of paragraph’s # 8, 9, 10 or 12 of this Agreement after the City has provided reasonable notice of any failure to comply with the agreement, and a public hearing. Notice of the hearing shall be mailed to the last known address of each owner of the property, with the notice conforming to the provisions of Government Code section 6061., If after notice and a hearing, the contract is cancelled, termination of the Agreement is immediate, and the owner shall pay a cancellation fee equal to 12.5 percent of the current fair market value of the property, as determined by the Monterey County Assessor as though the property were free of the contractual restriction. The cancellation fee shall be paid to the Assessor, at the time and in the manner that the Assessor shall prescribe. City’s right to cancel this Agreement pursuant to this paragraph Attachment 1
shall in no way limit or restrict its rights or legal remedies arising from City’s Historic Preservation Ordinance and Municipal Code.

14. ENFORCEMENT OF AGREEMENT. In lieu of and/or in addition to any provisions to cancel this Agreement as referenced herein, City may specifically enforce, or enjoin the breach of, the terms of this Agreement.

15. WAIVER. City does not waive any claim or default by Owner if City does not enforce or cancel this Agreement. All remedies at law or in equity, which are not otherwise provided for this Agreement or in City’s regulations governing historic properties are available to City to pursue in the event there is a breach of this Agreement. No waiver by City of any breach or default under this Agreement shall be deemed to be a waiver of any other subsequent breach thereof or default hereunder.

16. BINDING EFFECT OF AGREEMENT. Owner hereby subjects the Historic Property to the covenants, reservations and restrictions set forth in this Agreement. City and Owner hereby declare their specific intent that the covenants, reservations, and restrictions as set forth herein shall be deemed covenants running with the land and shall pass to and be binding upon Owner’s successors and assigns in title or interest to the Historic Property. A successor in interest shall have the same rights and obligations under this Agreement as the original owner who executed the Agreement.

Each and every contract, deed or other instrument hereinafter executed, governing or conveying the Historic Property, or any portion thereof, shall conclusively be held to have been executed, delivered and accepted subject to the covenants, reservations and restrictions expressed in this Agreement regardless of whether such covenants, reservations and restrictions are set forth in such contract, deed or other instrument.

City and Owner hereby declare their understanding and intent that the burden of the covenants, reservations and restrictions set forth herein touch and concern the land in that it restricts development of the Historic Property. City and Owner hereby further declare their understanding and intent that the benefit of such covenants, reservations and restrictions touch and concern the land by enhancing and maintaining the cultural and historic characteristics and significance of the Historic Property for the benefit of the public and Owner.

17. NOTICE. Any notice required to be given by the terms of this Agreement shall be provided at the address of the respective parties as specified below, by personal delivery or United States mail, postage prepaid, addressed as follows:

City: Carmel-By-The-Sea
Community Planning & Building Department
Attn: Community Planning & Building Director
P.O. Box CC
Carmel-By-The-Sea, CA 93921
Attachment 1
Owner: Sentimental Journey LLC
PO Box Y
Carmel, CA, 93921
Notice to successors in interest to either party shall be sent to the appropriate address.

In the case of future Owner(s) of the Historic Property, notice shall be sent to the address on file with the county property tax office in power at the time.

18. RECORDATION. No later than twenty (20) days after the parties execute and enter into this Agreement, the City shall cause this Agreement to be recorded in the Office of the County Recorder of the County of Monterey. From and after the time of the recordation, this Agreement shall impart a notice thereof to all persons as is afforded under state law.

19. STATE LAW. The Owner or agent of Owner shall provide written notice of this Agreement to the State Office of Historic Preservation within six (6) months of the date of this Agreement.

20. GOVERNING LAW; VENUE. This Agreement shall be constructed and governed in accordance with the laws of the State of California. Should either party to this agreement bring legal action against the other, the case shall be handled in Monterey County, California and the party prevailing in such action shall be entitled to a reasonable attorney fee which shall be fixed by the judge hearing the case and such fee shall be included in the judgment together with all costs.

21. AMENDMENTS. This agreement may be amended in whole or in part, only by a writtenrecorded instrument executed by the parties hereto.

22. DESTRUCTION OF PROPERTY; EMINENT DOMAIN; CANCELLATION. If the Historic Property is destroyed by earthquake, fire, flood, or other natural disaster such that in the opinion of the City Building Official more than sixty percent (60%) of the original fabric of the structure must be preplaced, this Agreement shall be cancelled because the historic value of the structure will have been destroyed. If the Historic Property is acquired in whole or in part by eminent domain or other acquisition by any entity authorized to exercise the power of eminent domain, and the acquisition is determined by the City Council to frustrate the purpose of this Agreement, this Agreement shall be cancelled.

No cancellation fee pursuant to Government Code Section 50286 shall be imposed if the Agreement is cancelled pursuant to this paragraph. Such Agreement shall be null and void for all purposes of determining the value of the property so acquired.

23. INDEMNIFICATION. Owner shall defend, indemnify, and hold harmless City and its elected officials, officers, agents and employees from any actual or alleged claims, demands, causes of action, liability, loss, damage, or injury to property or persons, including wrongful death, whether imposed by a court of law or by administrative action of any Attachment 1
federal, state or local government agency, arising out of or incident to the direct or indirect use, operation, or maintenance of the Historic Property by Owner or any contractor, subcontractor, employee, agent, lessee, licensee, invitee, or any other person; (ii) Owner’s activities in connection with the Historic Property; and (iii) any restriction on the use of development of the Historic Property, from application or enforcement of the City’s Municipal Code, or from the enforcement of this Agreement.

This indemnification includes, without limitation, the payment of all penalties, fines, judgments, awards, decrees, attorneys’ fees, and related costs or expenses, and the reimbursement of the City, its elected officials, employees, and/or agents for all legal expenses and costs incurred by each of them. Owner’s obligation to indemnify shall survive the termination, cancellation, or expiration of this Agreement and shall not be restricted to insurance proceeds, if any, received by City, its elected officials, employees, or agents.

24. SEVERABILITY. In the event that any of the provisions of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, or by subsequent preemptive legislation, the validity and enforceability of the remaining provisions, or portions thereof, shall not be affected thereby.

IN WITNESS THEREOF, the City and Owners have executed this Agreement on the day and year written above.

CITY OF CARMEL-BY-THE-SEA:

By: _______________________ Date: __________________
Name: Richard L. Rerig (“Chip”)
Title: City Administrator

PROPERTY OWNER:

By: __________________________ Date: ___________________ Name: Gerard A. Rose, on behalf of Sentimental Journey, LLC Title: Attorney
Attachment 1

EXHIBIT A

LEGAL DESCRIPTION

EXHIBIT B
DPR 523 FORM

EXHIBIT C

REHABILITATION AND MAINTENANCE PLAN
Attachment 1
The land referred to is situated in the County of Monterey, City of Carmel, State of California, and is described as follows:

Lots 18, 20 and 22 in Block 75, as said Lots and Block are shown on that certain map entitled, Map of “Carmel-by-the-Sea, Monterey County, California”, filed for record March 7, 1907 in the Office of the County Recorder of the County of Monterey, State of California, in Volume 1 of Maps, “Cities and Towns”, at Page 2.

Attachment 2
Attachment 3
Attachment 3
Attachment 3
Property Address: Lincoln St. at Seventh Ave.

Owner Name: Sentimental Journey LLC
Owner Telephone No.: (831) 624-3871
Plan Prepared by: Christopher Barlow AIA, LEED AP, NCARB 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
$80,000
$95,000
$20,000
$60,000
$50,000
$24,000
$90,000
$80,000
$80,000 $80,000
$110,000
$50,000
$75,000
$10,000 $10,000 $10,000 $10,000
$180,000
$60,000 $130,000 $275,000 $184,000 $90,000 $60,000 $60,000 $85,000 $90,000 $80,000 $60,000 $190,000 $465,000 $649,000 $739,000 $799,000 $859,000 $944,000 $1,034,000 $1,114,000 Major infrastructure upgrade: $80,000
ADA upgrades for public $24,000
Major infrastructure replacemnt: $90,000
Boiler & H2O Softener (Rehab.)
for ADA (Rehabilitation)
$60,000
(Maintenance)
replacement (Rehabilitation)
Mills Act Rehabilitation and Maintenance Plan
Cypress Inn (a.k.a. Hotel La Ribera) Lincoln St. at Seventh Avenue, Carmel CA

STRUCTURAL UPGRADES
Paint all Exterior of all walls $160,000
Investigate plaster cracking
Work Item
(Maintenance/Rehabilitation)

EXTERIOR FEATURES, MATERIALS, AND FINISHES
Plumbing repairs: Replace old
galvanized H2O pipes (Rehab.)
Anticipated Year of Completion
$80,000
Required Fire Alarm upgrades
Termite testing and repairs

ANNUAL TOTAL
Exterior gate, stair, walkway &
Resolve waterproofing issues
(Maintenance)
at existing courtyard planter
door landings ADA work (Rehab.)

HARDSCAPE AND LANDSCAPE

RUNNING TOTAL
Notes: Frequency of repairs continues beyond 2032 based on interval proposed. Dollar amounts will be reviewed at 10 year intervals and adjusted for inflation as appropriate $1,114,000

CUMULATIVE TOTAL
$180,000
City of Carmel
Mills Act Rehabilitation and Maintenance Plan
at tower & repair (Maintenance)
$40,000
$75,000
Electrical distribution (Rehab.)
Cost Estimate
(net per item)
In kind' Roofing repairs and $50,000
$95,000

BUILDING SYSTEM UPGRADES
every 6 years (Maintenance)
Repair/Rehabilitate windows for
egress and acoustics (Rehab.)
$110,000
restrooms (Rehabilitation)
Plumbing repairs: Replace aged $20,000
sewer pipe sections (Rehab.)
Required elevator upgrades $50,000

CYPRESS INN
Lincoln Street at Seventh Avenue
Photos by Julie Barlow for Wald, Ruhnke and Dost Architects (June 29, 2023) Photo #1, Overall main façade looking East from Lincoln Street

Photo #2, Detail: Tilework and Tower looking East from Lincoln Street Attachment 4
Photos #3-4, Plaster/paint damage at Lincoln Street service entrance Photo #5, Typical deterioration of exposed wood at underside of eave (viewed from Lincoln Street)
Attachment 4
Photo #6, Patch over cracking plaster at Lincoln Street façade Photo #7, View of main entry from Lincoln Street (ADA entry is off 7th) Attachment 4
Photo #8, Overall side façade looking North from Seventh Avenue Photo #9, View of tower near courtyard entry at Seventh Avenue Attachment 4
Photo #11 View of rear facade (North side of building is inaccessible) Photo #12, Typical deterioration of single pane metal window (View from 7th Ave) Attachment 4
Photo #13, Concrete and plaster cracking as seen from Seventh Avenue courtyard Attachment 4

CITY OF CARMEL-BY-THE-SEA

HISTORIC RESOURCES BOARD
HISTORIC RESOURCES BOARD RESOLUTION NO. 2023-010-HRB

A RESOLUTION OF THE HISTORIC RESOURCES BOARD OF THE CITY OF CARMEL-BY-THE-SEA

RECOMMENDING THAT THE CITY COUNCIL ENTER INTO A MILLS ACT CONTRACT WITH SENTIMENTAL JOURNEY LLC FOR THE HISTORIC “LA RIBERA HOTEL” LOCATED ON THE NORTHEAST CORNER OF LINCOLN STREET AND 7TH AVENUE (APN 010-147-008).

WHEREAS, on April 14, 2023, Gerard A. Rose, Attorney (“Applicant”) submitted an application on behalf of Sentimental Journey LLC (“Owner”) requesting to enter into a Mills Act contract (MA 23-103, Cypress Inn) described herein as (“Application”) for the historic “La Ribera Hotel” also known as the Cypress Inn; and
WHEREAS, the Application has been submitted for the property located on the northeast corner of Lincoln Street and 7
th Avenue, in the Residential-Commercial (R-C) District (Block 75, Lots 18, 20, 22); and
WHEREAS, the historic “La Ribera Hotel” is already listed on the Carmel Inventory (May 25, 2005) and Carmel Register of Historic Resources (June 6, 1999); and WHEREAS, one of the benefits of being included on the Register is the ability to enter into a Mills Act Historical Property Contract with the City; and WHEREAS, the Applicant is also requesting to enter into a Mills Act contract with the City and in accordance with Carmel Municipal Code (CMC) Section 17.32.100.B.6 (Review Process), the Historic Resources Board shall consider the application and make a recommendation to the City Council to approve, approve with conditions, or deny the application; and WHEREAS, on August 11, 2023 notice of the August 21, 2023 public hearing was published in the Carmel Pine Cone in compliance with State law (California Government Code 65091) and mailed to owners of real property within a 300-foot radius of the project indicating the date and time of the public hearing; and
WHEREAS, on or before August 11, 2023 the Applicant posted the public notice on the project site and hand-delivered a copy of the public notice to each property within a 100-foot radius of the project site indicating the date and time of the public hearing; and WHEREAS, on or before August 18, 2023 the meeting agenda was posted in three locations in compliance with State law indicating the date and time of the public hearing; and DocuSign Envelope ID: 6E909D58-BD94-41B7-AF48-8DBFEEFA590D Attachment 5
Resolution No. 2023-010-HRB