STAFF REPORT
Meeting Date:
November 18, 2025
NOT APPEAL
22 SUBJECT: CONSIDERATION OF 2025 MILLS ACT CONTRACTS FOR FOUR (4) HISTORIC
RESOURCE PROPERTIES AND FINDING THE ACTIONS EXEMPT FROM THE
CALIFORNIA ENVIRONMENTAL QUALITY ACT UNDER CEQA GUIDELINES SECTION 15331
RECOMMENDATION: It is recommended that the City Council:
1. Adopt the attached Resolutions approving the Mills Act Preservation Agreements for 426 Holly Street, 501 Lombardy Lane, 503 Brooks Street, and 2646 Victoria Drive;
2. Authorize the City Manager to sign the contract agreements with the owners of the subject properties; and
3. Find the recommended actions exempt from the California Environmental Quality Act pursuant to state CEQA Guidelines section 15331 and direct staff to cause the notice of exemption to be filed with the County Clerk and State Clearinghouse.
SUMMARY OF THE MATTER
The Mills Act (Government Code sections 50280-50290) is a State program that was adopted in 1976 by the State Legislature to establish an alternative method for determining assessment values as an incentive for the preservation of historic properties. The Mills Act authorizes cities to enter into contracts for a minimum term of 10 years. Four (4) Mills Act contracts have been prepared for the City Council's consideration and approval, as recommended by the Heritage Committee, for the following historic properties:
1. 426 Holly Street (HCR 25-0954)1
2. 501 Lombardy Lane (HCR 25-0952)2
3. 503 Brooks Street (HCR 25-0535)3
4. 2646 Victoria Drive (HCR 25-0955)4
The Mills Act contract provides a property tax reduction incentive to owners of historic properties, with the intent that cost savings are re-invested into the historic property to restore, improve, and preserve their 1 On July 29, 2025, 426 Holly Street (HCR 25-0954) was designated on the Historic Register of the City of Laguna Beach pursuant to the requirements of Chapter 25.45 (Historic Preservation) of the Laguna Beach Municipal Code through the recordation of a Historic Preservation Agreement.
2 On September 7, 1999, 501 Lombardy (HCR 25-0952) was designated on the Historic Register of the City of Laguna Beach pursuant to the requirements of Chapter 25.45 (Historic Preservation) of the Laguna Beach Municipal Code through the recordation of a Historic Preservation Agreement through the recordation of a Historic Preservation Agreement. 3 On May 10, 2001, 503 Brooks Street (HCR 25-0535) was designated on the Historic Register of the City of Laguna Beach pursuant to the requirements of Chapter 25.45 (Historic Preservation) of the Laguna Beach Municipal Code through the recordation of a Historic Preservation Agreement.
4 On July 29, 2025, 2646 Victoria Drive (HCR 25-0535) was designated on the Historic Register of the City of Laguna Beach pursuant to the requirements of Chapter 25.45 (Historic Preservation) of the Laguna Beach Municipal Code.
Consideration of Approval for 2025 Historic Property Preservation Agreements (Mills Act) for Four (4) Properties
November 18, 2025
buildings and grounds, pursuant to a 10-year term workplan. If approved, the projected future property tax loss to the General Fund from the four (4) properties will be approximately $32,227 per year. This action is exempt from CEQA pursuant to section 15331 of the state CEQA Guidelines.
DISCUSSION
In September 1993, the City Council approved the use of the Mills Act as an incentive for the preservation of "E"-rated historic structures. In 2022, the Historic Preservation Ordinance went into effect making any property on the Historic Register eligible for a Historic Property Preservation Agreements, regardless of its rating. Since the adoption of this program, the City has entered into 138 contracts with the owners of qualified properties. Historic Property Preservation Agreements run for a ten-year term, with automatic yearly extensions. In effect, the term of the contract continues to extend unless and until the property owner or the City submits a notice of non-renewal. Owners of qualified historic structures must comply with specific restrictions that remain in effect even if the property is sold or transferred. It is estimated that the "lost" City property tax revenue for all contracts in 2025 is approximately $743,014.
The Mills Act application process requires the Heritage Committee to review all Mills Act applications submitted for the year and make recommendations to the City Council. In 2025, the owners of the following properties submitted requests to enter into a contract with the City to further preserve and maintain the Historic Register properties: 426 Holly Street, 501 Lombardy Lane, 503 Brooks Street, and 2646 Victoria Drive. The draft contracts are provided as Exhibit 1 to Attachments 1, 3, 5, and 7, respectively.
The estimated total of $32,227 in property tax reductions for the City is based on a preliminary estimate by the County Tax Assessor’s office.9
Heritage Committee Summary and Recommendations
The City requires Historic Property Preservation Agreement applicants to submit a description of work, timeline, and cost estimates for the rehabilitation of the property during the first ten-year term of the contract. High-priority maintenance items, such as structural and historical components, are specified in the contract to be addressed within the first several years, while cosmetic improvements are scheduled toward the end of the ten-year term. The Heritage Committee reviewed all four applications on two meeting dates:
August 18, 2025 and September 15, 2025, as discussed in more detail below.
On August 18, 2025, the Heritage Committee reviewed the applications and historic assessments and proposed workplans for the following three (3) Historic Register properties: (1) 503 Brooks Street; (2) 426 Holly Street; and (3) 2646 Victoria Drive.
9 The Orange County Assessor’s Office evaluates the property tax-savings based on the income-producing potential of the property. Assessment values are conducted on January first of every year, meaning that a property must enter into a Mills Act contract by December 31st of the previous year to receive tax savings on the property by the following year. The exact amount of the reduction is calculated by the County Tax Assessor after the property is evaluated, based on the executed agreement.
Consideration of Approval for 2025 Historic Property Preservation Agreements (Mills Act) for Four (4) Properties
November 18, 2025
The Committee recommended approval of the application as proposed for 503 Brooks Street (Attachment 6) and recommended approval with modifications to the applications (specifically the workplans) for 426 Holly Street and 2646 Victoria Drive. Following the August 18, 2025 Heritage Committee meeting, City staff informed the property owners of the Committee’s recommendations for their properties, as neither owner attended the meeting. The owner of 426 Holly Street did not agree with all recommendations and requested reconsideration by the Committee at its September meeting. The owner of 2646 Victoria Drive agreed with all but one of the Committee’s recommendations: the addition of a requirement to replace a non-original window at the front of the residence, above the front door. In response, City staff spoke with the City’s historic consultant, who prepared the historic assessment for 2646 Victoria Drive, about the nonoriginal window. The historic consultant stated that the existing window is compatible with the residence and stated replacement is not required for the Historic Property Preservation Agreement approval. While the workplan for 2646 Victoria Drive does not include the Committee’s suggested window replacement, the City Council can deliberate regarding whether the window replacement should be added to the workplan for this Mills Act application (Attachment 8).
On September 15, 2025, the Heritage Committee reconsidered the workplan for 426 Holly Drive and recommended approval with modifications to their previously recommended changes. The owner is in agreement with the proposed workplan (Attachment 2). The Heritage Committee also recommended approval of the application for 501 Lombardy Street as proposed (Attachment 4). The updated historic assessments and workplans for each property are summarized below:
Property
Address
Property
Description
Maintenance
Plan Items
Estimated
Maintenance
Plan Cost
Projected Future
Annual Revenue
Cost
426 Holly Street
Single-family
residence with
semi-detached
garage.
15 $173,500 $7,934
501 Lombardy
Lane
Single-family
residence.
12 $100,750 $5,518
503 Brooks Street Single family
residence.
13 $192,250 $9,050
2646 Victoria
Drive
Single-family
residence above
garage.
17 $311,500 $9,725
Consideration of Approval for 2025 Historic Property Preservation Agreements (Mills Act) for Four (4) Properties
November 18, 2025
It is recommended that the City Council adopt the attached Resolutions approving Historic Property Preservation Agreements for 426 Holly Street, 501 Lombardy Lane, 503 Brooks Street, and 2646 Victoria Drive, and authorize the City Manager to sign the contract agreements with the owners of the subject properties.
Council Options:
The City Council has numerous options in consideration of this matter, which are as follows. Because there are four applications under consideration, the City Council may take different actions for some or all of the applications.
• Adopt resolutions authorizing the City Manager to execute the subject Historic Property Preservation Agreements, as proposed.
• Adopt resolutions authorizing the City Manager to execute the subject Historic Property Preservation Agreements, with modifications.
• Continue the City Council’s consideration of the proposed Historic Property Preservation Agreements and direct staff to provide additional information. A continuance to the December 9, 2025 City Council meeting would maintain the possibility that the Historic Property Preservation Agreements are entered into for the 2025 tax year, if City Council approval is granted on that date.
Deny the request for Historic Property Preservation Agreements.
FINANCIAL ANALYSIS
If approved, the projected future property tax loss to the General Fund from the four (4) properties will be approximately $32,227 per year.
ENVIRONMENTAL ANALYSIS
California Environmental Quality Act ("CEQA") Guidelines section 15331 exempts maintenance, repair, stabilization, rehabilitation, restoration, preservation, conservation, or reconstruction of historical resources. These activities must be consistent with the Secretary of the Interior's Standards for the Treatment of Historic Properties. Accordingly, the approval of the attached Resolutions and execution of the Historic Property Preservation Agreements is exempt from CEQA pursuant to CEQA Guidelines section 15331 as each the Historic Property Preservation Agreement requires that the owners "shall preserve, maintain, and, where necessary, restore or rehabilitate the [property] and its character-defining features, notably the general architectural form, style, materials, design, scale, proportions, organization of windows, doors and other openings, textures, details, mass, roof line, porch and other aspects of the appearance of the exterior to the satisfaction of the City", and further requires that all changes to the properties "conform to the rules and regulations of the Office of Historic Preservation of the State Department of Parks and Recreation, the United States Secretary of the Interior Standards and Guidelines for Historic Preservation Projects, including without limitation rehabilitation, and the State Historical Building Code." Consideration of Approval for 2025 Historic Property Preservation Agreements (Mills Act) for Four (4) Properties
November 18, 2025
ATTACHMENTS
1. 426 Holly Street (HCR 25-0954) - Resolution Authorizing Approval of the Mills Act Contract (Pgs. 6- 17)
2. 426 Holly Street (HCR 25-0954) - Mills Act Application, Assessment and Rehabilitation/Maintenance Plan (Pgs. 18-60)
3. 501 Lombardy Lane (HCR 25-0952) - Resolution Authorizing Approval of the Mills Act Contract (Pgs. 61-73)
4. 501 Lombardy Lane (HCR 25-0952) - Mills Act Application, Assessment and Rehabilitation/Maintenance Plan. (Pgs. 74-108)
5. 503 Brooks Street (HCR 25-0935) - Resolution Authorizing Approval of the Mills Act Contract (Pgs. 109-121)
6. 503 Brooks Street (HCR 25-0935) - Mills Act Application, Assessment and Rehabilitation/Maintenance Plan. (Pgs. 122-156)
7. 2646 Victoria Drive (HCR 25-0922) - Resolution Authorizing Approval of the Mills Act Contract (Pgs. 157-198)
8. 2646 Victoria Drive (HCR 25-0922) - Mills Act Application, Assessment and Rehabilitation/Maintenance Plan (Pgs. 199-211)
9. Minutes from the Heritage Committee Meeting of August 18, 2025 (Pgs. 212-215)
10. Draft Minutes from the Heritage Committee Meeting of September 15, 2025 (Pgs. 216-218) Submitted By: Matt Schneider Approved: .David A Kiff
Matthew Schneider, Director of
Community Development
Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Heather Steven, Senior Planner Anthony Viera, Deputy Director Jane Abzug, Assistant City Attorney
Erin Fabian, Administrative Analyst
Samantha Beier, Principal Planner