City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2025-01302 7/22/2025
Resolution Establishing Annual Limits for Mills Act Contracts (M25-016) File ID: 2025-01302
Location: Citywide
Recommendation: Adopt a Resolution limiting the number of Mills Act contracts the City may enter in any calendar year to 50.
Contact: Henry Feuss, Preservation Planner, (916) 808-5880, [email protected], Community Development Department
Presenter: None
Attachments:
1-Description/Analysis
2-Resolution Establishing Annual Limits for Mills Act Contracts Description/Analysis
Issue/Detail: Enacted in 1972, the California Mills Act legislation grants participating local governments (cities and counties) authority to enter into contracts with owners of qualified historic properties. Property owners agree to maintain, and in some cases restore, their historic property in exchange for a tax reduction. The Mills Act statute requires tax assessors to evaluate properties under a Mills Act agreement using an alternative method that typically, but not always, results in a tax reduction for the property owner.
The city council amended the provisions of the city code related to the Mills Act (City Code, §
17.604.720) in 2018 to clarify and streamline the process of applying for and obtaining a Mills Act contract. The city council at the time adopted a resolution limiting the number of contracts awarded per year to 12. The popularity of the program has increased since 2018, and as intended, has led to an increase the number of properties being listed to the Sacramento register of historic and cultural resources (Sacramento register). City code section 17.604.720.C provides that the city council may by resolution limit the number of Mills Act contracts the city enters in any calendar year. As one of the principal incentives supporting the continued use of historic properties in the city of Sacramento, staff is recommending the city council adopt a resolution increasing the limit on the number of Mills Act contracts that the city may enter into per year from 12 to 50.
File ID: 2025-01302 7/22/2025
Policy Considerations: The city council has found “that significant aspects of the city’s rich and diverse historic resources deserve recognition and preservation to foster an understanding of our heritage, and to promote the public health and safety and the economic and general welfare of the people of the city. The preservation and continued use of historic resources are effective tools to sustain and revitalize neighborhoods and business districts within the city, enhance the city’s economic, cultural and aesthetic standing, its identity, its livability, marketability and urban character.” (City Code, § 17.604.100.A.).
The 2040 General Plan section relating to Historic and Cultural Resources includes Goal HCR-1.12, which states:
The City shall continue to encourage and support restoration and adaptive reuse through implementation of Mills Act contracts, grant programs, and other preservation incentive programs.
Additionally, the following 2040 General Plan policies are directly applicable to developing incentive programs, including the Mills Act program:
· Policy HCR-1.2: The City will continue to encourage maintenance and preservation of historic and cultural resources to promote the continued vitality of its neighborhoods. · Policy HCR-1.8: The City shall support the maintenance and safety of historic properties and resources through a combination of education and incentives. · Policy HCR-A.6: The City shall continue to incentivize the use and maintenance of historic properties through the following:
o Examples may include the Historic Places Grant Program, the Bronze Plaque Program, and Mills Act Program
City Code section 17.604.720 directs the preservation director to make Mills Act contracts available to owners of qualified historical properties and to make recommendations to city council.
Economic Impacts: The city council has found that preservation of the city’s historic resources helps to promote the economic and general welfare of the people of the city. Moreover, historic preservation is an effective tool to sustain and revitalize neighborhoods and enhance the city’s economic standing, as well as identity, livability, and marketability (See City Code, § 17.604.100.A).
To this end, the long-term financial impacts of historic preservation are considered beneficial to the city. The Mills Act is one of the few financial incentives for property owners of qualified historic buildings. This incentive can help offset the cost of maintaining an older building and when acquired by a new owner can help encourage preservation of buildings subject to neglect.
Environmental Considerations: The Mills Act program is intended to promote the rehabilitation and maintenance of historic properties, thereby ensuring protection of the environment. Therefore, this
File ID: 2025-01302 7/22/2025
action is exempt from review under the California Environmental Quality Act (CEQA), consistent with the Class 8 categorical exemption, which includes actions taken by regulatory agencies, including local governments, to assure the maintenance, restoration, enhancement, or protection of the environment (CEQA Guidelines Section 15308).
Sustainability: Reuse of existing buildings and existing infrastructure is a sustainable land use principle. Expanding the Mills Act program is expected to increase the number of nominations to the Sacramento register and will help encourage the preservation and reuse of existing building materials.
Commission/Committee Action: Not applicable.
Rationale for Recommendation: Implementing an effective Mills Act incentive program has been a goal of the City since the year 2000. Since the program was updated in 2018, staff has seen a steady increase in interest in the program, and, as anticipated, a corresponding increase in interest in listing properties on the Sacramento register. To accommodate the increased interest in the program and align with the goals of the 2040 General Plan, staff is recommending the city council adopt a resolution increasing the number of Mills Act contracts that the city may enter into per year to 50. The Mills Act program will require staff time to review applications, meet with applicants, create work plans, develop contract language, bring recommendations to City Council, review annual reports, and conduct periodic inspections. Application and contract fees were established as part of the 2018 program update and staff intends to recommend fees be increased in the future to ensure the City is able to recover staff costs to administer the program.
Financial Considerations: This program would result in a reduction in property tax income for the city; however, the overall impact to the city budget would be relatively minor since the majority of property tax revenue is allocated to Sacramento County and special districts. The demonstrated economic benefits that the preservation of existing buildings provides is expected to outweigh any losses. The city council has found “that preservation and continued use of historic resources are effective tools to sustain and revitalize neighborhoods and business districts within the city, enhance the city’s economic, cultural and aesthetic standing, its identity, its livability, marketability and urban character.” This program is anticipated to be particularly beneficial to owners who recently purchased historic properties, since buildings recently purchased are reassessed for tax purposes at market rate. Likewise, property owners who have triggered reassessment through renovations or additions would also see significant tax benefits. Long-time owners who have not caused a reassessment under the terms of California Proposition 13, would likely not see a significant tax benefit.
Property Tax Implications
For properties subject to a Mills Act agreement, the City may collect less property tax revenue; however, the City will also experience secondary fiscal benefits community-wide through improved
File ID: 2025-01302 7/22/2025
and maintained historic properties. The following table provides estimates for property tax reduction to the city for properties under a Mills Act agreement. However, these are merely estimates and the real impacts would be subject to several factors that cannot be entirely predicted. Specifically, how long a property owner has owned their property would affect the amount of the tax reduction. In addition, it is ultimately up to the Sacramento County Assessor to assess the property under contract based on the valuation and tax assessment criteria provided within the California Revenue and Taxation Code, Article 1.9, Sections 439-439.4.
Estimated Tax Implications
Assessed
Property Value
Property Tax Paid
by Owner
(.0949% of
Assessed Value)
City’s Share of
Property Tax
(14%)
Property Tax
Paid by
Property
Owner under
Mills Act
Reduction of
City’s Share of
Property Taxes
after Mills Act
$300,000 $3,000 $420 $930 ($290)
$500,000 $4,750 $665 $1,425 ($465)
$750,000 $7,100 $994 $1,775 ($745)
Staff has estimated that if the city approved 50 Mills Act contracts per year with an average property value of $500,000 the city would lose approximately $23,250 of property tax per year. The overall effect of the program would be compounded based on the number of years and number of contracts the city maintains.
For context, the City currently has 12 Mills Act contracts, which results in an estimated annual loss of approximately $5,580 in property tax revenue. Therefore, the estimated $23,250 annual reduction associated with 50 contracts represents an increased loss of approximately $17,670 over current levels.
Local Business Enterprise (LBE): Not applicable.
RESOLUTION NO. 2025-
Adopted by the Sacramento City Council
XXXX XX, 2025
ESTABLISHING ANNUAL LIMIT FOR MILLS ACT
CONTRACTS PURSUANT TO SECTION 17.604.720 OF
THE SACRAMENTO CITY CODE
BACKGROUND
A. On August 14, 2018, the city council enacted Ordinance 2018-0039, which amended section 17.604.720 of the Sacramento City Code, relating to Mills Act contracts. The ordinance, in recognition of the significant administrative resources required to implement Mills Act contracts, allows the city council by resolution to limit the number of contracts the city enters in any calendar year.
B. The purpose of this resolution is to limit the number of Mills Act contracts the city enters in any calendar year.
BASED ON THE FACTS SET FORTH IN THE DESCRIPTION/ANALYSIS, THE CITY COUNCIL RESOLVES AS FOLLOWS:
Section 1. The number of Mills Act contracts the city enters in any calendar year is limited to 50.