Carmel-by-the-Sea City Council
December 5, 2023

CITYOF CARMEL-BY-THE-SEA

CITY COUNCIL AGENDA
Mayor Dave Potter, Councilmembers Jeff Baron,
Alissandra Dramov, Karen Ferlito, and Bobby
Richards
Contact: 831.620.2000 www.ci.carmel.ca.us
All meetings are held in the City Council Chambers
East Side of Monte Verde Street
Between Ocean and 7th Avenues

REGULAR MEETING
Tuesday, December 5, 2023

HYBRID MEETING ATTENDANCE OPTIONS
This meeting will be held in person and via teleconference ("hybrid"). The public is welcome to attend the meeting in person or remotely via Zoom, however, the meeting will proceed as normal even if there are technical difficulties accessing Zoom. The City will do its best to resolve any technical issues as quickly as possible. To view or listen to the meeting from home, you may also watch the live stream on the City's YouTube page at: https://www.youtube.com/@CityofCarmelbytheSea/streams. To participate in the meeting via Zoom, copy and paste the link below into your browser.
https://ci-carmel-ca-us.zoom.us/j/86721067021 Webinar ID: 867 2106 7021 Passcode:
022734 Dial in: 253 215 8782

HOW TO OFFER PUBLIC COMMENT
The public may give public comment at this meeting in person, or using the Zoom teleconference module, provided that there is access to Zoom during the meeting. Zoom comments will be taken after the in-person comments. The public can also email comments to [email protected]. Comments must be received at least 2 hours before the meeting in order to be provided to the legislative body. Comments received after that time and up to the beginning of the meeting will be made part of the record.

OPEN SESSION
4:30 PM

CALL TO ORDER AND ROLL CALL

PLEDGE OF ALLEGIANCE

EXTRAORDINARY BUSINESS
A. Annual Update from Monterey Salinas Transit
B. Carmel High School Report Out
PUBLIC APPEARANCES - Members of the public are entitled to speak on matters of municipal concern not on the agenda during Public Appearances. Each person's comments shall be limited to 3 minutes, or as otherwise established by the Chair.

Persons are not required to provide their names, however, it is helpful for speakers to state their names so they may be identified in the minutes of the meeting.

Under the Brown Act, public comment for matters on the agenda must relate to that agenda item and public comments for matters not on the agenda must relate to the subject matter jurisdiction of this legislative body. Hateful, violent, and threatening speech is impermissible public comment as it disrupts the conduct of the public meeting. This is a warning that if a member of the public attending this meeting remotely violates the Brown Act by failing to comply with these requirements of the Brown Act the meeting, then that speaker will be muted.

ANNOUNCEMENTS
A. City Administrator Announcements
B. City Attorney Announcements
C. Councilmember Announcements

ORDERS OF BUSINESS
Orders of Business are agenda items that require City Council, Board or Commission discussion, debate, direction to staff, and/or action.

1. Resolution 2023-107 approving Policy C2023-01 establishing Guidelines for Carmel Beach Cleanup Operations

2. Receive a Presentation regarding the 2023 Storm Drain Master Plan Update

3. Consider a recommendation from the City’s Traffic Safety Committee to convert a total of three (3) public street parking spaces to “no parking” zones in front of two (2) existing bus stops. The subject bus stops are on Junipero Avenue, northeast of 4th Avenue in front of the gas station (2 spaces) and on San Carlos Street, northeast of 10th Avenue in front of the Sunset Center (1 space).

PUBLIC HEARINGS

4. 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

5. 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

6. 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 - Recommended for Continuance to a future meeting

7. 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 - Recommended for Continuance to a future meeting

FUTURE AGENDA ITEMS

ADJOURNMENT
This agenda was posted at City Hall, Monte Verde Street between OceanAvenue and 7thAvenue, Harrison Memorial Library, located on the NE corner of Ocean Avenue and Lincoln Street, the Carmel-by-the-Sea Post Office, 5th Avenue between Dolores Street and San Carlos Street, and the City's webpage http://www.ci.carmel.ca.us in accordance with applicable legal requirements.

SUPPLEMENTAL MATERIAL RECEIVED AFTER THE POSTING OF THEAGENDA Any supplemental writings or documents distributed to a majority of the City Council regarding any item on this agenda, received after the posting of the agenda will be available for public review at City Hall located on Monte Verde Street between Ocean and Seventh Avenues during regular business hours.

SPECIAL NOTICES TO PUBLIC
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk's Office at 831-620-2000 at least 48 hours prior to the meeting to ensure that reasonable arrangements can be made to provide accessibility to the meeting (28CFR 35.102-35.104 ADA Title II).

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
December 5, 2023

EXTRAORDINARY BUSINESS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Chip Rerig, City Administrator
APPROVED BY: Chip Rerig, City Administrator
SUBJECT: Annual Update from Monterey Salinas Transit
RECOMMENDATION:

Receive an update presentation from Monterey Salinas Transit.

BACKGROUND/SUMMARY:

FISCAL IMPACT:

PRIOR CITY COUNCIL ACTION:

ATTACHMENTS:

Attachment 1) Presentation - MST Overview for Carmel-by-the-Sea Monterey-Salinas Transit
Update 2023
Presented to: City of Carmel-by-the-Sea
Presented by: Michelle Overmeyer, Director of Planning & Innovation Date: December 5, 2023
MST District Board of Directors
Jurisdiction Board member
Carmel-by-the Sea Jeff Baron
Del Rey Oaks Kim Shirley
Gonzales Lorraine Worthy
Greenfield Arianna Rodriguez
King City Mayor Mike LeBarre
Marina Liesbeth Visscher
Pacific Grove Joe Amelio
Monterey Ed Smith
Sand City Mayor Mary Anne Carbone, Vice Chair
Salinas Tony Barrera
Seaside David Pacheco
Soledad Mayor Anna Velazquez, Chair
County of Monterey Luis Alejo
MST Mission, Vision, and Values
➢ Mission: What do we do?
Advocating and delivering quality public transportation as a leader within our community and within our industry.
➢ Vision: Why do we exist?
Connecting communities. Creating opportunity. Being kind to our planet.
➢ Values: What do we believe?
➢ Safety: Caring for others, in all we do.
➢ Friendliness: Welcoming, helpful, and understanding.
➢ Dependability: Earning your trust, every day.
➢ Diversity: Valuing our differences.
➢ Achievement: Aspiring to be better.

Monterey-Salinas Transit in 2023
✓ 2.2 million passengers
✓ 19.4% increase over 2022
✓ 76% population historically underrepresented, non-white ✓ 77% annual household income under $40k
✓ 25% of trips start within a disadvantaged community
✓ 20% have a disability, dependent on others for mobility

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%
2016 2018 2023
Monterey-Salinas Transit in 2023

WHERE RIDERS GO
Monterey-Salinas Transit in 2023

WHY RIDERS USE TRANSIT

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%
No car
available
Avoid
traffic
Difficult
parking
Unable to
drive
Reduce
pollution
Reduce
traffic
Cost of
parking
Don't like
to drive
Cheaper
than
driving
2016 2018 2023
Monterey-Salinas Transit in 2023

A DAY WITHOUT TRANSIT

Carmel-by-the-Sea 2023 Ridership
January 1, 2023 – September 30, 2023
 Carmel-by-the-Sea ridership:
 FIXED ROUTE: 25,702 or 94 passenger boardings/day
 RIDES: 239 or 1 passengers/day
 6
th highest monthly ridership compared to all jurisdictions  <1% of residents take public transit to work
 100% of residents are within ½ mile of transit
 Top most frequented bus stops:

1. 6th/Mission #0006: 73 people/day board and 84 people/day alight

2. Junipero/ 4th & 5th (SB) #5257: 1 person/day board and 13 people/day alight

3. San Carlos/7th (NB) #5243: 8 people/day board and 3 people/day alight Top Boarding and Alighting Locations
January-September 2023
Stop Name Boardings Avg/Day
0006 - 6th / Mission Street 19,938 73
5243 - San Carlos / 7th 2,100 8
5204 - San Carlos / 7th 863 3
5259 - Junipero / 4th 597 2
5228 - Rio Road / Atherton 473 2
Stop Name Alightings Avg/Day
0006 - 6th / Mission Street 22,877 84
5257 - Junipero / 4th & 5th 3,664 13
5204 - San Carlos / 7th 2,034 7
5243 - San Carlos / 7th 836 3
5216 - Rio Road / Lasuen 685 3
Monterey-Salinas Transit in 2023
100% of heavy-duty
fleet are renewable
biofuel or renewable
electric
12 zero-emissions
electric buses
scheduled for order
Winter 2023/2024
MST services remove
equivalent of 110k
single occupancy
vehicle trips from
area roadways
monthly
MST reduces GHG
emissions by 220
annual acres of forest
sequestered monthly
74% of passengers
agree reducing GHG is
important

Monterey-Salinas Transit in 2023
159 square miles service area
33 transit lines
Bus Operator Driving - Good/Excellent
➢ MST – 91% National Avg. – 73%
MST Services - Good/Excellent
➢ MST – 87% National Avg. – 58%
Bus Cleanliness – Good/Excellent
➢ MST – 82% National Avg. – 38%
Monterey-Salinas Transit in 2023
Community Survey of 409 residents who don’t use transit:
➢ 95% of residents feel that MST’s services are valuable to the community
➢ 87% of residents think it’s important for the entire County to support and fund improved public transportation
➢ 83% of residents think there should be greater levels of funding for transit over the next 5 years
➢ 70% of residents are familiar with the services provided by MST Fares, $3,144,016, -
5%
Measure Q,
$12,800,000, -
22%
State Sales Tax,
$19,395,686, -
33%
State Fuel Tax,
$5,255,584, -
9%
Federal Fuel
Tax,
$12,270,350, -
21%
Reserves,
$4,500,000, -
Other, $1,011,000, - 8%
2%
FY 2024 Budget - $58M
Revenue By Source
Labor/Benefits,
$32,563,050, 56%
Outside Services,
$3,968,375, 7%
Fuel, Parts,
Supplies,
$6,184,310,
10%
Purchased
Transportation,
$11,522,000, 20%
Other Admin,
$4,208,705, 7%
FY 2024 Budget - $58M
Expenses by Category
MST Measure Q
 First county-wide sales tax for transportation to pass  November 2014 won with 72.6% overall voter support
 15-Year, 1/8 of one-percent retail sales tax
 Est. dollars raised over the life of the tax: $100 Million (2012 $)  100% of funds go to MST supporting services for veterans, seniors and persons with disabilities including:
✓ MST RIDES ADA Services
✓ Senior Shuttle Routes
✓ Taxi Vouchers
✓ Travel Training, Navigator Volunteers
✓ Travel Reimbursement Incentive Program
Transportation Agency for Monterey County
Measure X
• Second county-wide sales tax for transportation
• November 2016 won with 67.7% overall voter support
• 30-Year, 3/8 of one-percent sales tax
• Est. dollars raised over the life of the tax: $600 Million (2015 $) • Funding distribution:
– 60% for local streets and roads for Cities and County – 27% regional road safety and congestion projects
– 13% for pedestrian and bicycle safety and mobility projects • Approx. 7% to MST for Hwy 1 rapid bus corridor, Salinas Valley transit centers Recent Accomplishments
• Nationally Recognized COVID Response and Recovery
• New South County Operations and Maintenance facility in King City, fall 2021
• University and College Transit Pass Partnerships
• Contactless Credit/Debit/eWallet Fare Payment and Capping • Subsidized Vanpool Program
• Better Bus Network
MST Contactless Fare Payment
• First project in the State, in the Country, and in a Small Urban/Rural Area
• Daily/Weekly/Monthly Fare Capping
• First in the world to synch discount with a
Government-issued ID
• Cards available to those without a bank account or
credit card
• 95,000 contactless trips made to date
✓ Service location:
• 40% Monterey-Seaside
• 40% Greater Salinas
• 20% Regional
✓ Focus on high demand, high need areas
✓ More direct routes
✓ Avg. 30 min. decrease in travel time
✓ 20% increase in residents and jobs near
service with 30 min. frequency or better
✓ Lower fares ($2/2 hours)
✓ Subsidized vanpools
The Future of MST……..

MST Major Projects
 SURF! Busway and Bus Rapid Transit, $77M
 Salinas Operations and Maintenance Facilities, $25M
 Salinas Alisal Bus Rapid Transit (BRT) and Transit Center Study, $500K
 100% Zero-Emissions Fleet Rollout, $100M
 Battery Electric and Fuel Cell Infrastructure, $20M
Busway and Bus
Rapid Transit Project
SURF! Project Benefits
✓ Congestion relief and
better connectivity
✓ Frequent, reliable transit
✓ Zero-emissions vehicles only
✓ New Transit Station at 5th
Street
✓ Preserves rail corridor for
future generations and train
service
SURF! Project Rendering
MST Major Challenges and Opportunities
 Restoration of local economy and employee recruitment  Coach operator shortage
 Federal government dysfunction, ongoing
 Zero-emissions bus regulations, workforce development  Land use decisions – TOD Planning Study, bus stops
 Changing demographics of region
 SB 125 challenge
Questions?

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
December 5, 2023

ORDERS OF BUSINESS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Mary Bilse, Environmental Programs Manager APPROVED BY: Chip Rerig, City Administrator
SUBJECT:

Resolution 2023-107 approving Policy C2023-01 establishing Guidelines for Carmel Beach Cleanup Operations
RECOMMENDATION:

Adopt Resolution 2023-107 approving Policy C2023-01 establishing Guidelines for Carmel Beach Cleanup Operations to remove all human-sourced waste and to protect natural resources and wildlife.

BACKGROUND/SUMMARY:

The purpose of establishing beach cleanup guidelines is to increase public awareness on the important role that Carmel Beach and its natural resources serve, and to promote consistency in how beach cleanups are conducted while ensuring its environmental integrity is protected. The purpose of this report is to create a Policy to incorporate the Guidelines for Carmel Beach Cleanup Operations.

The Monterey Bay National Marine Sanctuary (MBNMS) covers over 6,000 square miles, stretching from Marin to Cambria, and includes the average high tide on the shore and as far as 53 miles offshore. This federal and state protected area contains rich species and ecosystem diversity which offers many cultural, economic, ecological, and recreational benefits.

Regulations
Carmel Beach lies entirely within the MBNMS as well as the Carmel Bay State Marine Conservation Area (SMCA) and the Carmel Bay Area of Special Biological Significance (ASBS) where it is unlawful to injure, damage, take, or possess any living, geological, or cultural marine resource (except finfish) (California Code of Regulations Title 14 Section 632). Marine living resources are defined in the California Fish and Game Code Chapter 2 Section 96 and includes all wild mammals, birds, reptiles, fish, and plants that normally occur in or are associated with salt water, and the marine habitats upon which they depend. The Code of Federal Regulations CFR15 section 922.11 defines a Sanctuary resource as “any living or non-living resource of a national marine sanctuary that contributes to the conservation, recreational, ecological, historical, educational, cultural, archeological, scientific, or aesthetic value of the national marine sanctuary.” (CFR 15 section 922.11). These designations further protect these natural areas with federal and state regulations enforced by the National Oceanic and Atmospheric Administration (NOAA), California Department of Fish and Wildlife (CDFW), and the State Water Resources Control Board (SWRCB).

Therefore, proper care and maintenance of Carmel Beach is critical to its long-term health and viability, and directly affects the many benefits it provides.

The California Coastal Act (CCA) finds and declares that the beach, as part of the coastal zone: “is a distinct and valuable natural resource of vital and enduring interest to all the people and exists as a delicately balanced ecosystem” (CCA 30001 a). To do so, the legislature finds and declares that the basic goals of the State for the coastal zone, which Carmel Beach lies within, are to “protect, maintain and where feasible, enhance and restore the overall quality of the coastal zone environment and its natural and artificial resources (CCA 30001.5, a), and “assure orderly, balanced utilization and conservation of coastal zone resources taking into account the social and economic needs of the people of the state” (CCA 30001.5, b).

The City’s Coastal Access and Recreation Element of its General Plan has a Policy (4-23) that restricts the removal of driftwood logs that can provide seating, stating “Do not install formal picnic tables or benches.

Rather, provide driftwood logs for seating. Picnicking on the beach should be conducted in a traditional manner with blankets, etc.” The General Plan does not address smaller-sized driftwood. The City’s Zoning Code (17.20.200.l.) includes a rule on the Disturbance of Natural Resources. This Code prohibits digging and removing beach sand (with the exception of recreational activities such as sand castle building or similar sand structures utilizing natural resources found on the beach, as well as maintenance activities related to the City’s sand movement program described in the Shoreline Management Plan).

Beach Wrack
Beach wrack is the scientific term for washed up kelp, seaweed, seagrasses, driftwood, and other organic coastal materials provides important food, habitat, and shelter for various insects and crustaceans like kelp flies and beach hoppers, which in turn provides food for several shorebirds that feed on them (i.e., the endangered Western snowy plover). Marine microorganisms live among beach wrack and are too small to see with the unaided human eye without magnification. Local and migrating birds feed on the creatures found in wrack that depend on this food source to fuel their long-distance journeys. The subject of leaving beach wrack on the beach has come up in recent discussions with residents and support groups in the City similar to many other California coastal communities.

Beach Grooming
Beach grooming typically refers to the practice of removing trash and beach wrack from sandy beaches.

Beach grooming may improve aesthetics for beachgoers; however, recent studies have shown that beach grooming activities like wrack removal can have a negative impact on beach and shoreline ecology by reducing biodiversity and biomass found on sandy beaches. California State Parks does not remove beach wrack because of its ecological value and because it provides a base for sand dune formation which is needed to protect coasts from strong storm events. Piles of wrack collect windblown sand, providing nutrients and a more stable place for beach plants to grow. Leaving wrack leads to a healthier beach for native animals and plants. These ecological services are proof of how essential beach wrack is for the biodiversity, health, and services of Carmel Beach.

Concern has been expressed that large driftwood logs have the potential to create dangerous situations and damage the beach’s infrastructure (stairs and seawalls), and that small driftwood may be sharp and dangerous. Public education and outreach on the aforementioned health hazard concerns is also prudent.

Kelp flies, beach hoppers, isopods, and most other macrofauna found within wrack do not pose health risks to humans, while other anthropogenic items that can be found on a beach, like dog waste, litter, and cigarette butts do.

Mean High Tide Line (MHTL)
The MHTL is the average of all high tides observed over a nineteen-year period. NOAA determines the elevation of the MHTL on Carmel Beach by using the mean high-water elevation from published tide station datum in Monterey Bay. Beach elevations change seasonally and the MHTL migrates inland in winter (with the loss of sand) due to storms, strong waves, and winds. Powerful waves erode the beach face and the backshore, picking up sand and sediment from the beach. The sediment is transported off the beach as the waves carry it away from the shore and onto nearshore sand bars. In the spring, weather patterns become milder with reduced storm activity. As wave energy decreases, sediment that was transported offshore during the winter begins to move back toward the shore in spring/summer during the recovery process.

Below is an example of a cross-shore profile showing seasonal change for Carmel Beach. Sediment transport will also be influenced by long-term factors, such as sea level rise, increased storminess, and changes in the underlying geology (Source: Integral, Seasonal and Long-Term Beach and Shoreline Change Analysis, Nov 2023).

In the exhibit below, the solid black bold line represents a typical summer profile, with a beach berm forming in spring and summer and a widening of the dry sand beach by as much as 200 ft. The hatched line represents a typical winter profile, with the beach face retreating and a longshore bar developing in the nearshore.

Source: Image adapted from Waves and Beaches by Willard Bascom, 1964 (updated in 2020 by Kim McCoy).

The subject of having two beach cleanup policies was suggested during public comment at the Forest and Beach Commission meeting: one Policy for above the MHTL which has less regulatory restrictions, and one Policy for below the MHTL which is clearly under state and federal regulations. Having two policies will only lead to further inconsistencies in beach cleanups and taking of beach wrack above a theoretical moving line that cannot be accurately identified on the beach. Therefore, staff recommends adopting one consistent Policy because changes to the beach elevation is a dynamic and ongoing process, and it is difficult to determine the exact location of the MHTL.

Beach Cleanup Policy
The purpose of establishing a new Policy is to identify what can be removed from the beach and what natural resources and wildlife need to remain on Carmel Beach. The Policy as drafted prohibits the removal of kelp, seaweed, driftwood of all sizes, and more. The draft Policy also clarifies that the City’s Public Works Department, Police Department and Fire Department are responsible for responding to public safety hazards (including hazardous logs) and the removal of hazardous materials from Carmel Beach.

Furthermore, the new Policy will support the City’s Climate Action and Adaptation Plans by addressing Adaptation Goal Number 2: “a natural environment resilient to climate hazards.” The Vulnerability Assessment that was conducted to support these plans identifies Carmel Beach as a Priority Natural Asset that is already experiencing observable impacts from stronger storms and is threatened by sea level rise.

Enforcing protections on natural resources found within these identified natural assets, such as Carmel Beach, is therefore of utmost importance.

Staff has proposed a Beach Cleanup Policy with supporting guidelines on what should be removed and what must be left alone on Carmel Beach, as exhibited in Attachment 2. This attachment was designed to be a user-friendly, color coded handout that can be easily distributed to all contractors, support groups, and city staff who clean up the beach. These guidelines were also reviewed by the Community Planning and Building Department.

At the September 14, 2023 Forest and Beach Commission meeting, staff introduced guidelines for the proposed Carmel Beach Cleanup Policy to establish a consistent set up guidelines for cleaning up Carmel Beach. The item was continued to the October 12, 2023 Forest and Beach Commission meeting to allow staff to conduct additional research on beach wrack and driftwood. At the October 12, 2023 meeting, the Commission approved a motion to recommend Council’s approval of the proposed Policy, and recommended that the staff continue to seek out additional research on driftwood, bringing in constituents and governing bodies, before taking the final Policy to the City Council.

Concern has been expressed regarding health hazards that wrack poses. Kelp flies, beach hoppers, isopods, and most other macrofauna found within wrack do not pose health risks to humans, while other anthropogenic items that can be found on a beach, like dog waste, litter, and cigarette butts do. This Policy outlines items that should or should not be removed during a Carmel Beach cleanup with consideration of health hazards and conserving beach health. Upon City Council approval of this Policy, outreach will likely include posting on the City website, sharing in Friday Letters, and publishing in the Carmel Pine Cone.

Public education and outreach on the expressed health concerns is also prudent.

The City’s Environmental Programs staff researched the rules and regulations governing Carmel Beach and contacted numerous federal and state regulatory agencies in preparation of drafting up the Carmel Beach Cleanup Policy. Regulatory staff at the CDFW, CCC, and the MBNMS reviewed the draft Carmel Beach Cleanup Policy and verified it follows their regulations. Regulatory agency staff confirmed that nothing natural, including driftwood and beach wrack (seaweed, rocks, shells), can be removed below the MHTL. Coastal staff stated that removal of large driftwood logs with a bulldozer would require Coastal Act authorization via a Coastal Development Permit. Relevant correspondence with regulatory staff is attached in Attachment 3. Again, staff recommends the City adopt one Policy to promote consistency in how beach cleanups are conducted while ensuring its environmental integrity is protected. Commission and public comments have been considered in the Carmel Beach Cleanup Policy that is before the City Council.

Unless or until the City-adopted Policy becomes part of the Carmel Municipal Code, enforcement will be in the form of warnings. However, City contractors, volunteer support groups, and City staff must abide by all City policies.

At the December 5, 2023 City Council Meeting, staff will present the proposed Policy and a video regarding the importance of beach wrack.

Environmental Evaluation
This action does not constitute a project within the meaning of the California Environmental Quality Act under Public Resources Code Section 21065. It has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment and, therefore, does not require environmental review.

FISCAL IMPACT:

No direct fiscal impact for this action.

PRIOR CITY COUNCIL ACTION:

No prior City Council Actions have been taken on this Policy.

ATTACHMENTS:

Attachment 1) Resolution 2023-107
Attachment 2) Carmel Beach Cleanup Policy and Guidelines Attachment 3) Correspondence with Resource Agencies

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
RESOLUTION NO. 2023-107

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA APPROVING POLICY C2023-01 ESTABLISHING GUIDELINES FOR CARMEL BEACH CLEANUP OPERATIONS WHEREAS, Carmel Beach lies entirely within the Monterey Bay National Marine Sanctuary as well as the Carmel Bay State Marine Conservation Area (SMCA) and the Carmel Bay Area of Special Biological Significance (ASBS) where it is unlawful to injure, damage, take, or possess any living, geological, or cultural marine resource (except finfish) below the mean high tide line; and WHEREAS, beach grooming activities like wrack removal can have a negative impact on beach and shoreline ecology by reducing biodiversity and biomass found on sandy beaches; and WHEREAS, the beach elevation is a dynamic and ongoing process, and it is difficult to determine the exact location of the Mean High Tide Line; and
WHEREAS, the City’s volunteer groups, contractors, and staff have been cleaning up Carmel Beach in an inconsistent manner; and
WHEREAS, the California Department of Fish and Wildlife, California Coastal Commission, and Monterey Bay National Marine Sanctuary reviewed the draft Carmel Beach Cleanup Policy and verified it follows their regulations; and
WHEREAS, at the September 2023 Forest and Beach Commission meeting, the proposed guidelines for Carmel Beach cleanups were introduced to remove all human-sourced waste and to protect natural resources and wildlife; and
WHEREAS, on October 12, 2023, the Forest and Beach Commission approved a motion to recommend Council’s approved of the Policy, and recommended that the staff continue to seek out additional research on driftwood, bringing in constituents and governing bodies; and WHEREAS, with all research completed, Policy No C2023-01 provides guidance on beach cleanups in accordance with the regulatory agencies.

NOW THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THESEA DOES HEREBY:

Approve Policy C2023-01 establishing Guidelines for the Carmel Beach Cleanup Operations.

PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF CARMEL-BY-THE-SEA this 5th day of December, 2023, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

APPROVED: ATTEST:
_________________________ _______________________
Dave Potter Nova Romero, MMC
Mayor City Clerk
Attachment 1

Policy C2023-01

CITY OF CARMEL-BY-THE-SEA

POLICY AND PROCEDURE
Subject: Guidelines for Carmel Beach Cleanup
Operations
Policy/Procedure No: C2023-01
Effective Date: December 6, 2023 Authority: Resolution No. 2023-109 Purpose:

To provide guidelines for Carmel Beach cleanups in order to remove all human-sourced waste and to protect natural resources and wildlife.

Policy/Procedure:

Carmel Beach lies within the Monterey Bay National Marine Sanctuary (MBNMS), a federallyprotected area that contains rich species and ecosystem diversity that offers many cultural, economic, ecological, and recreational benefits. Carmel Beach is also within the Carmel Bay State Marine Conservation Area and the Carmel Bay Area of Special Biological Significance. These designations further protect these natural areas with regulations enforced by the National Oceanic and Atmospheric Administration, the California Department of Fish and Wildlife, the State Water Resources Control Board, and the City of Carmel.

Attached is a list of materials that should be removed from Carmel Beach, which further specifies items that should be recycled, disposed of in the trash, or treated as hazardous waste. In addition, this list specifies natural items that must be left alone. In the event any natural material poses a safety concern, such as large logs during a storm event, the Public Works, Police, and Fire Departments may remove the material. The attachment also provides the steps to follow if you come across a live or deceased wild animal. Finally, the table identifies examples of valuables for lost and found items to be provided to the Police Department.

Responsible Party:

Public Works Director
Department of Origin:

Public Works
Revision Dates:

Rescinded Date:

Attachment 2
Carmel Beach Cleanup Guidelines
Balloons Algae
Burned firewood and charcoal Coral, reef
Cigarette butts Clean paper and cardboard
Construction debris, wood, and nails Glass bottles and jars Dog waste/dog waste bags Natural driftwood of ALL sizes**** Old clothes, shoes, and other textiles Feathers
Fishing items (lines, nets, hooks, etc.) Ocean water
Rocks*
Batteries Sand*
Food wrappers and packaging Electronic waste Seeweed/Kelp/Eelgrass* Pressure treated wood Shells
Propane tanks
Rope Syringes
Styrofoam Aerosol cans
Toys (buckets, shovels, balls, etc.) Drugs or other medical substances The Monterey Bay National Marine Sanctuary (MBNMS) is a federally-protected area that contains rich species and ecosystem diversity that offers many cultural, economic, ecological, and recreational benefits. Carmel Beach lies within the MBNMS as well as the Carmel Bay State Marine Conservation Area and the Carmel Bay Area of Special Biological Significance. These designations further protect these natural areas with regulations enforced by the National Oceanic and Atmospheric Administration, California Department of Fish and Wildlife, the State Water Resources Control Board, and the City of Carmel. Below is a list of materials that should be removed from Carmel Beach, as well as items that must be left alone.

TRASH
Aluminum and metal cans and
containers

RECYCLING

NATURAL

MATERIALS
Plastic bags, straws, and foodware
(Plastic # 3, 4, 6, 7)
Plastic bottles, caps, containers
(Plastic # 1, 2, 5)
Food
(discard in organics bin if available)

REMOVE LEAVE
Carmel Beach List of Items to Remove/Leave on the Beach Remove all human-sourced waste, including but not limited to: Leave all naturally occurring material on the beach, including but not limited to:

Wildlife including sand crabs, hermit
crabs, and other invertebrates;
mammals; birds, nests, and eggs; fish;
amphibians; and reptiles**
Cultural, archaeological, and historical
items

HAZARDOUS
WASTE***
* Unless authorized permits are granted for scientific collecting. ** Do not remove any wildlife, including terrestrial and marine plants and macroalgae (kelp), and living or non-living animals such as fish, marine mammals, invertebrates, reptiles, sea turtles, or birds.
*** Hazardous waste can be dropped off at ReGen Monterey in Marina; Call 831-264-6386 **** In the event any natural material poses a safety concern,such as large logs during a storm event, the Public Works, Police, and Fire Departments may remove the material.

Attachment 2
Carmel Beach Cleanup Guidelines
a.
b.
c.
d.
e.
f.
g.
a.
b.
c.
d.
e.

Jewelry
Wallets
415-289-7325
831-620-2070;
831-771-4422
831-648-4840
Other valuable lost items
Cetacean – Deceased Moss Landing Marine Laboratories 831-771-4422 Lost and Found Items Should Be Delivered to the Carmel Police Department Phone Number: 831-624-6403
Location: SE Junipero Street and Fourth Avenue
Marine Mammal Center
City of Carmel-by-the-Sea Public Works, or
Moss Landing Marine Laboratories
Sea Otter – Alive or Deceased Monterey Bay Aquarium
Pinniped – Deceased
Keys
Pinniped (Seal, Sea Lion) – Alive
Examples of items to be turned in to the Lost and Found:

Cell phones
Animal Organization Contact
Bird – Alive
Cetacean (Whale, Dolphin) – Alive
SPCA Monterey County
Marine Mammal Center, or
Marine Life Studies
831-373-2631
Bird – Deceased, banded/tagged US Fish and Wildlife Service www.reportband.gov Bird – Deceased, not banded/tagged City of Carmel-by-the-Sea Public Works 831-620-2070 415-289-7325;
831-901-3833
Ensure you and others around you (including dogs) stay at least 150 feet away from the animal, and that all bystanders remain as quiet as possible.

Steps to Follow if You Come Across a Live or Deceased Bird, Seal, Sea Lion, Sea Otter, Dolphin, or Whale Determine if the animal is truly stranded while maintaining a distance of at least 150 feet away from the animal.

Call the respective organization according to the table. Provide them with the following information to the best of your knowledge:

Species or description of the animal
Location (GPS, regional descriptions, landmarks, etc.)
Date and time the animal was last seen
Approximate size of the animal
Condition of the animal (alive, dead, wounded, entangled, etc.) Human interactions? (evidence of ship strike, entanglement, shooting, etc.) Your name and contact information
Attachment 2
Highlighted Correspondence with Resource Agencies:

From: Calla Allison <[email protected]>
Date: Tue, Sep 12, 2023 at 10:05 AM
Subject: Re: Written Landowner Approval Needed for Sign Installation To: Mary Bilse <[email protected]>, Katelyn Sprofera <[email protected]>
Cc: Nicole Palma <[email protected]>, Jessica Juico <[email protected]>
HI Mary,
Happy to weigh in here. Within the Carmel Bay SMCA, nothing can be taken below the mean high tide except for finfish as Katelyn states below. That means all driftwood and beach wrack below the mean high tide cannot be taken. Anything above the mean high tide is the jurisdiction of the City. Monterey Bay National Marine Sanctuary does not regulate this type of take so best to reference the MPA regulations to support your beach wrack policy.

Let me know if you have any other questions.

Best,
Calla
Calla Allison
Director, MPA Collaborative Network
(858) 735-5945
[email protected]
www.mpacollaborative.org
From: Van Diggelen, Amanda@Wildlife <[email protected]> Date: Tue, Oct 3, 2023 at 4:33 PM
Subject: Questions on beach wrack
To: [email protected] <[email protected]> Cc: Wildlife Ask Marine <[email protected]>

Hi Kelly,
Attachment 3
Great talking to you, and please continue to reach out with any further questions you may have. As I mentioned on the call I can only provide guidance regarding CDFW authority.

Depending upon your location, which I believe is the Carmel area, there are marine protected areas (MPAs) to be aware of, specifically the Carmel Bay State Marine Conservation Area. Within MPAs no take of living, geological, or cultural marine resources is allowed, unless specifically exempted in the individual MPA regulations. In Carmel Bay SMCA: the recreational take of finfish is allowed, and commercial take of giant kelp and bull kelp by hand is allowed. All MPA regulations can be found in California Code of Regulations Title 14 Section 632.

Marine living resources are defined in California Fish and Game Code Chapter 2 Section 96 and includes all wild mammals, birds, reptiles, fish, and plants that normally occur in or are associated with salt water, and the marine habitats upon which these animals and plants depend for their continued viability.

To be clear the item does not need to be alive at the time you find it to be considered a marine living resource. It simply needs to occur in or be associated with salt water. So kelp or algae washed up on a beach would be a marine living resource. Driftwood is not a living marine resource, however it may have living marine resources growing on or attached to it.

Again if you have any more questions please reach back out, always happy to help, Amanda

Amanda Van Diggelen
Senior Environmental Scientist, Supervisor
Marine Region Outreach Project
3030 Old Ranch Parkway, Suite 400
Seal Beach, CA 90740
Mobile: (562) 522-3901
[email protected]
><> ><> ><> ><> ><> ><> ><> ><> ><> ><>
From: Karen Grimmer - NOAA Federal <[email protected]> Sent: Tuesday, October 10, 2023 1:53 PM
To: Kelly Francis <[email protected]>
Cc: Wertz, Stephen@Wildlife <[email protected]> Subject: Re: Forwarded Email from Fish & Wildlife

Hi Kelly,

I’m following up on our conversation yesterday, and sending you the information we discussed. I’m copying Steve Wertz with CDFW as I understand you’ve been corresponding as well.

Attachment 3

CFR15 section 922.11 has definitions and a Sanctuary resource means any living or non-living resource of a national marine sanctuary, or the parts or products thereof, that contributes to the conservation, recreational, ecological, historical, educational, cultural, archeological, scientific, or aesthetic value of the national marine sanctuary, including, but not limited to, waters of the sanctuary, the seabed or submerged lands of the sanctuary, other submerged features and the surrounding seabed, carbonate rock, corals and other bottom formations, coralline algae and other marine plants and algae, marine invertebrates, brine-seep biota, phytoplankton, zooplankton, fish, birds, sea turtles and other marine reptiles, marine mammals, and maritime heritage, cultural, archeological, and historical resources.

Driftwood could be considered a sanctuary resource based on this definition. If it lies below Mean High Water, including in an intertidal zone, then it would be considered a sanctuary resource and potential habitat. MBNMS jurisdiction is from MHW and seaward to our offshore boundaries. Similar to empty sea shells or any other sanctuary resources below mean high water, we advise not collecting it. Amanda’s email also explains why, as the driftwood could be providing habitat to living marine resources. So, it appears that federal and state regulations are in alignment.

Can you pls forward a link or copy of the draft City ordinance to be discussed at Thursday’s meeting, assuming it’s available to the public as a meeting material?

Thank you. We can follow up on the dead marine mammal item when it’s discussed at a later time.

Best,
Karen

-----------------------
Karen Grimmer
Resource Protection/Emergency Response Coordinator
NOAA’s Monterey Bay National Marine Sanctuary
From: Karen Grimmer - NOAA Federal <[email protected]> Sent: Wednesday, October 11, 2023 2:46 PM
To: Mary Bilse <[email protected]>
Cc: Wertz, Stephen@Wildlife <[email protected]>; Jessica Juico <[email protected]>; Van Diggelen, Amanda@Wildlife <[email protected]>
Subject: Re: Beach: Driftwood Law & Policy, Fish & Game (Amanda)

Hi Mary,

Thanks for keeping us in the loop. I cannot attend thursday evening due to a prior commitment, yet I would say that you have successfully incorporated the regulatory information from both CDFW and MBNMS into your very clear and amended guidelines for Carmel Beach clean up. Thank you for taking the time for coordinate.

Attachment 3

Best,
Karen
-----------------------
Karen Grimmer
Resource Protection/Emergency Response Coordinator
NOAA’s Monterey Bay National Marine Sanctuary
From: Wertz, Stephen@Wildlife <[email protected]> Date: Thu, Oct 12, 2023 at 9:30 AM
Subject: RE: Beach: Driftwood Law & Policy, Fish & Game (Amanda) To: Karen Grimmer - NOAA Federal <[email protected]>, Mary Bilse <[email protected]>
Cc: Jessica Juico <[email protected]>, Van Diggelen, Amanda@Wildlife <[email protected]>
Hello Mary,

Yesterday afternoon I spoke with Kelly Francis about this issue. She seems to have a better understanding of the state and federal laws and regulations governing the Carmel Bay SMCA but is finding it hard to accept. At least that’s my perception. I let her know I was available today if she had follow-up questions.

CDFW staff are not available to attend the meeting tonight. I agree with Karen that over the last week, our correspondence has provided a clear description of the laws and regulations governing the collection of driftwood below the mean high tide line. Thank you for coordinating with us.

Regards,

Steve

><`;>-- ><`;>-- ><`;>-- ><`;>-- ><`;>-- ><`;>-- ><`;>-- ><`;>-- ><`;>-- Stephen Wertz
Senior Environmental Scientist (Supervisor)
Marine Protected Areas Management Project
California Department of Fish and Wildlife | Marine Region 3030 Old Ranch Parkway, Suite 400 | Seal Beach, CA 90740 From: Oliver, Ellie@Coastal <[email protected]> Date: Mon, Oct 16, 2023 at 10:13 AM
Subject: Re: Notice of Possible Future Violation at Carmel Beach To: Mary Bilse <[email protected]>, Karen Grimmer - NOAA Federal <[email protected]>
Cc: [email protected] <[email protected] Attachment 3
ov>, Robert Harary <[email protected]>, Butler, Katie@Coastal <[email protected]>, Filip, Mariana@Coastal <[email protected]> Hi Mary,
It sounds like this activity would require Coastal Act authorization via a Coastal Development Permit. Thank you for letting us know and for informing the group that they are not authorized to carry out that work at this time. Please let me know if more enforcement becomes necessary in the future.

If the City would like to discuss Coastal Act permitting requirements regarding driftwood removal, please reach out to Katie Butler and Mariana Filip in our office (both of whom are cced here).

Thank you,
Ellie
Ellie Oliver (she/her)
Enforcement Officer, Central Coast District
California Coastal Commission
725 Front Street, Suite 300
Santa Cruz, CA 95060
(831) 427-4881
From: Karen Grimmer - NOAA Federal <[email protected]> Date: Fri, Oct 27, 2023 at 10:59 AM
Subject: Re: Notice of Possible Future Violation at Carmel Beach To: Mary Bilse <[email protected]>
Cc: Oliver, Ellie@Coastal
<[email protected]>, [email protected] <centralenforcementd [email protected]>, Robert Harary <[email protected]>, Butler, Katie@Coastal <[email protected]>, Mariana@Coastal Filip <[email protected]>, Stephen@Wildlife Wertz <[email protected]>
Hi Mary,
Thanks for the quick response and update!
It seems as if MBNMS, CDFW and Coastal Commission have provided pretty clear information on the variety of regulations and authorities around removal of driftwood or any “natural resource” below the mean high tide or mean high water to Carmel Cares. MBNMS and other agencies do have the ability to issue a permit for a prohibited activity (with lots of exceptions), and we could provide information on this potential pathway. For MBNMS permit information, you can click on this link.

Attachment 3
If the City deems a situation unsafe for the public and wants to take action, is there a process for approval and doing so? Is that included in the new Policy? Best,
Karen
-----------------------
Karen Grimmer
Resource Protection/Emergency Response Coordinator
NOAA’s Monterey Bay National Marine Sanctuary
Attachment 3

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
December 5, 2023

ORDERS OF BUSINESS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Robert Harary, P.E, Director of Public Works APPROVED BY: Chip Rerig, City Administrator
SUBJECT:

Receive a Presentation regarding the 2023 Storm Drain Master Plan Update RECOMMENDATION:

Receive a Presentation from the Public Works Director regarding the 2023 Storm Drain Master Plan Update.

BACKGROUND/SUMMARY:

In September 2019, the City Council adopted Resolution 2019-064 awarding a Professional Services Agreement (PSA) to Schaaf & Wheeler Consulting Civil Engineers to prepare the City’s first Storm Drain Master Plan (SDMP) for a not-to-exceed fee of $174,910. This Capital Improvement Project was successfully completed on budget in September 2020.

The Public Works Director presented the results of the SDMP to the Climate Committee in December 2020 and to the City Council in February 2021. The purpose of the SDMP was to provide an examination of flooding and drainage risks within the City limits and recommend actions necessary to accomplish appropriate level-of-service and reliability for the City’s storm drain system.

Those presentations reviewed the unknowns and concerns prior to development of the SDMP, provided examples of physical deficiencies found in the system during the Study's condition assessment survey, discussed the hydrology and hydraulic models performed to evaluate the existing drainage system, and identified high priority repairs and capacity improvement recommendations. The SDMP estimated that $7.5 million would be needed to complete the highest and moderate priority repairs to accommodate 10-year storm events.

As discussed at these meetings, a majority of the City’s existing storm drainage system was designed to handle a once in 10-year storm event, rather than a 20-year storm event that is more common in other municipalities. Coupled with increased storm events anticipated due to Climate Change, Council and the Climate Committee requested that future drainage upgrades and repairs be sized for 20-year storms while also recognizing that repairs and upgrades will require significant funding over a longer period of time to minimize the potential of flooding.

In June 2022, Council adopted Resolution 2022-048 approving 25 new Fiscal Year (FY) 2022/23 Capital Improvement Projects, including the Citywide Drainage System Repair Phase II Project. This project carried over $100,000 from the FY 2021/22 Phase I Project and allocated an additional $500,000 to continue the development of drainage system improvements to address the highest priority drainage projects. This combined $600,000 budget was programmed to: a) update the SDMP based on 20-year storm events, b) design several of the high priority repairs, and, c) as requested by Council, reallocate some of the budget for physical construction projects.

In October 2022, Council adopted Resolution 2022-088 awarding a new PSA to Schaaf & Wheeler to update the SDMP for a fee, including a supplemental services budget, of $50,000. In addition to modeling the City-wide drainage system for 20-year storm events, the scope of work for the SDMP Update included two additional special studies to potentially save millions of construction dollars in the long term.

The SDMP Update was completed in June 2023 and is available for review at https://ci.carmel.ca.us/sites/main/files/file-attachments/sdmp_report_update_051223_v3.pdf?1694451144 At the December 5, 2023 meeting, the Public Works Director will recap the key findings of the original SDMP and present the results of the SDMP Update. The presentation will include:
· As shown in Attachment 1 – Chapter 5, Evaluation of Storm Drain Systems o Capacity limitations for 20 year storms
o Nuisance areas and observed problem areas
o Existing condition deficiencies
o Prioritized capital projects
o Brief project descriptions
· As shown in Attachment 2 - Chapter 6, Capital Improvement Plan o Prioritized capital improvement projects with preliminary cost estimates · Findings of the two special studies
o Installing new, parallel pipes may be viable in under-capacity locations which may save cost versus removing existing pipes and replacing with larger pipes. o Discharging all flows from the northeast portion of the City, through the Mission Trail Nature Preserve creek, and through box culverts under Rio Road and ball fields, cannot be achieved for either 10 or 20 year storms. For 20 year events, a future retention pond near the south boundary of the MTNP may be the best approach to avoid flooding over Rio Road and up into the MTNP. o Installing an underground water storage tank below Devendorf Park, in conjunction with a major park renovation project, would reduce downstream drainage improvement costs.

FISCAL IMPACT:

There is no fiscal impact to receive this report.

The SDMP Update recommends investing $14.7 million for 23 priority projects to make repairs to the structural integrity of the drainage system and improve system capacity to appropriately convey 20-year storm events. These projects have been prioritized in the SDMP Update. Three of the highest priority projects, plus a high priority nuisance project, are currently in design as part of the FY 2023/24 Capital Improvement Program. The remaining 20 recommended projects will be included in future year Capital Improvement Programs as funding permits.

PRIOR CITY COUNCIL ACTION:

In September 2019, Council adopted Resolution 2019-064 awarding a PSA to Schaaf & Wheeler for the SDMP project. In February 2021, the Public Works Director presented an overview of the completed SDMP to the City Council. This presentation was also given to the Climate Committee at their December 2020 meeting.

In June 2022, Council adopted Resolution 2022-048 approving 25 new FY 2022/23 Capital Improvement Projects, including the Citywide Drainage System Repair Design, Phase II. In October 2022, Council adopted Resolution 2022-088, awarding a new PSA to Schaaf & Wheeler to update the SDMP to include modeling for 20-year storm events, as recommended by the Climate Committee.

ATTACHMENTS:

Attachment #1 - Evaluation of Storm Drain System
Attachment #2 - Capital Improvement Plan
Attachment 1
Attachment 1
Attachment 1
Attachment 1
Attachment 1
Attachment 1
Attachment 1
Attachment 1
Attachment 1
Attachment 1
Attachment 1
Attachment 1
Attachment 2
Attachment 2
Attachment 2

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
December 5, 2023

ORDERS OF BUSINESS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Brandon Swanson, Community Planning & Building Director APPROVED BY: Chip Rerig, City Administrator
SUBJECT:

Consider a recommendation from the City’s Traffic Safety Committee to convert a total of three (3) public street parking spaces to “no parking” zones in front of two (2) existing bus stops. The subject bus stops are on Junipero Avenue, northeast of 4th Avenue in front of the gas station (2 spaces) and on San Carlos Street, northeast of 10th Avenue in front of the Sunset Center (1 space).

RECOMMENDATION:

Approve a recommendation from the City’s Traffic Safety Committee to convert a total of three (3) public street parking spaces to “no parking” zones in front of two (2) existing Monterey Salinas Transit (MST) bus stops. The subject bus stops are on Junipero Avenue, northeast of 4th Avenue in front of the gas station (2 spaces) and on San Carlos Street, northeast of 10th Avenue in front of the Sunset Center (1 space) BACKGROUND/SUMMARY:

Earlier this year, the City of Carmel-by-the-Sea’s Public Works Department was approached by Monterey Salinas Transit (MST) with a request to convert existing parking spaces in front of two existing bus stops to “no parking zones”. MST’s request was to convert two (2) spaces on Junipero Avenue, northeast of 4th Avenue for the bus stop in front of the gas station, and two (2) spaces on San Carlos Street, northeast of 10th Avenue at the bus stop in front of the Sunset Center (Attachment 1). The reason for the request is to allow buses to fully leave the roadway when stopping to pick up passengers. Currently, buses have to double park alongside parked cars, which presents potential dangers for both motorists and pedestrians.

The City’s Traffic Safety Committee reviewed this request at two separate meetings, one of which included a site visit for MST to provide a demonstration with a 30-foot bus. The main reason for the bus demonstration was that both locations are immediately adjacent to driveways into the adjoining uses, which could be impacted by the bus stopping to pick up riders. Following the site visit and discussions at the public meeting, the Traffic Safety Committee recommended approval of converting the two (2) parking spaces on Junipero, but only one (1) parking space in front of the Sunset Center. The primary reason for not recommending the conversion of two (2) spaces in front of the Sunset Center, even though it may temporarily block part of the driveway, is a combination of three unique factors:

1. The short duration of stopping time for the bus;

2. The limited amount of traffic into the Sunset Center during the daytime;

3. The scarcity of street parking in this part of town.

City staff has confirmed with MST staff that there are no laws prohibiting a bus from temporarily blocking a driveway to pick up riders. However, MST staff did note that keeping buses fully outside of driveway entrances was a best practice, and was their reason for requesting two spaces in front of the Sunset Center.

If Council approves any spaces to be converted to “no parking”, they will be painted in-house by Public Works staff. Council has the option to approve all, none, or a mix of the spaced requested by MST. No resolution is required for this decision, only a simple majority vote.

FISCAL IMPACT:

Staff time associated with processing this request and any subsequent painting work, is covered in the City’s adopted FY 2023-24 budget.

PRIOR CITY COUNCIL ACTION:

None
ATTACHMENTS:

Attachment 1 - Bus Stop Locations

CITY OF CARMEL-BY-THE-SEA
City Council Report – MST Bus Stops
December 5, 2023
Attachment 1 – Bus Stop Locations
Fig 1.a – gas station Junipero Avenue
4th Avenue
Attachment 1
Fig 1.b – gas station
Fig 1.c – gas station
Attachment 1
Fig 2.a – Sunset Center
Fig 2.b – Sunset Center San Carlos Street
9th Avenue
Attachment 1
Fig 2.c – Sunset Center
Attachment 1

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
December 5, 2023

PUBLIC HEARINGS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Marnie R. Waffle, AICP, Principal 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 2, 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 3, 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 5), 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 6). After a Contract is approved, it is forwarded to the Monterey County Assessor who then determines the Mills Act value.

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 4, 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.

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.

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. On November 7, 2023, the City Council directed the City Attorney to prepare an Urgency Ordinance establishing a moratorium on accepting any new Mills Act contract applications until the policy could be reevaluated. The Urgency Ordinance in on the Council’s December 5 th agenda for action.

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
December 5, 2023

PUBLIC HEARINGS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Marnie R. Waffle, AICP, Principal 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 Revenue and Taxation Code sections 439 through 439.4. 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.

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

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.

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:

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. On November 7, 2023, the City Council directed the City Attorney to prepare an Urgency Ordinance establishing a moratorium on accepting any new Mills Act contract applications until the policy could be reevaluated. The Urgency Ordinance in on the Council’s December 5 th agenda for action.

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
December 5, 2023

PUBLIC HEARINGS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Marnie R. Waffle, AICP, Principal 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 - Recommended for Continuance to a future meeting RECOMMENDATION:

Staff recommends this item be continued to a future meeting.

BACKGROUND/SUMMARY:

FISCAL IMPACT:

PRIOR CITY COUNCIL ACTION:

ATTACHMENTS:

CITY OF CARMEL-BY-THE-SEA

CITY COUNCIL
Staff Report
December 5, 2023

PUBLIC HEARINGS
TO: Honorable Mayor and City Council Members
SUBMITTED BY: Marnie R. Waffle, AICP, Principal 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 - Recommended for Continuance to a future meeting RECOMMENDATION:

Staff recommends this item be continued to a future meeting.

BACKGROUND/SUMMARY:

FISCAL IMPACT:

PRIOR CITY COUNCIL ACTION:

ATTACHMENTS: