City Council
Report
City Council Meeting: October 25, 2022
Agenda Item: 5.D
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To: Mayor and City Council
From: David Martin, Director, City Planning
Subject: Adoption of Resolutions Approving Historic Property Preservation Agreements (Mills Act Contracts) for Designated Historic Resources Located at 2602 Third Street, 227 Beach Street, 227 Broadway, 818 Grant Street and 174 Kinney Street
Recommended Action
Staff recommends that the City Council adopt the attached Resolutions authorizing the City Manager to execute Historic Property Preservation Agreements (Mills Act Contracts) between the City of Santa Monica and the owners of City-designated historic resources located at 2602 Third Street, 227 Beach Street, 227 Broadway, 818 Grant Street, and 174 Kinney Street.
Summary
The City has a longstanding commitment to historic preservation that includes educating property owners about and offering the benefits of the Landmarks program. One of those benefits is the Mills Act, California Government Code Sections 50280-50290, a State law that enables contracts between local governments and property owners of qualified historic properties authorizing a property tax reduction. The Mills Act is one of the most effective financial incentives available to owners of historic properties and is an important tool for implementing the City’s Historic Preservation Element goals promoting the designation and long-term preservation of historic resources. Currently, 95 properties in Santa Monica are protected with Mills Act contracts.
The City received five applications for consideration in 2022, three are residential multifamily properties, located at 227 Beach Street, 2602 Third Street and, 818 Grant Street, and two are commercial buildings, the former Enterprise Fish Company, located at 174 2 of 16
Kinney and the Keller Block building, located at 227 Broadway. On September 12, 2022, the Landmarks Commission reviewed and recommended approval of all five applications. Staff has determined that each application meets all applicable requirements of State law and the Santa Monica Municipal Code (SMMC). Therefore, staff recommends approval of all five Mills Act Contracts. Mills Act contracts are approved by Resolution of the City Council (Attachments F through J).
Background
In 1991, as part of a comprehensive revision to the City’s Landmarks Ordinance, the City Council authorized designated Structures of Merit, Landmarks, and contributing structures located in designated Historic Districts to be considered qualified historic properties eligible for historic property contracts submitted pursuant to the provisions of the Mills Act. As a result, property owners of designated historic properties may file a Mills Act Contract application. In 2014, the Council passed an Ordinance that revised the City’s Mills Act Program by amending SMMC Section 9.56.270(F) to narrow contract eligibility requirements and expand applicant submittal requirements.
Specifically, a Mills Act Contract may only be approved if:
1. The property has no outstanding violations of the Santa Monica Municipal Code, or any other applicable Federal, State, or local law, rule or regulation;
2. The property is not subject to a tax delinquency; and
3. All work that has been previously conducted on the property conforms to the Secretary of the Interior’s Standards for the Treatment of Historic Properties.
The City requires applicants for Mills Act Contracts to provide a report prepared by a qualified architect describing the condition of the structure and its rehabilitation and maintenance needs to ensure the resource’s historic integrity and structural stability and, therefore, continue the life and usefulness of the historic structure.
Recommendations in the architect's report are reflected in the proposed ten-year maintenance plan submitted to the County Tax Assessor's office which determines the value of the historic property based upon its current net operating income, rather than upon the traditional assessed valuation method. In most cases, the result is a reduction 3 of 16
in property tax. In exchange for a property tax reduction, the owner agrees to protect, maintain and, if necessary, restore the historic property.
The initial Mills Act contract term is a minimum 10-year period. Each year on the anniversary of the effective date of the agreement, also known as the renewal date, a year is automatically added to the initial 10-year term of the agreement. This effectively makes the term of the contract at least 10 years, but possibly indefinite unless the owner or City submits a notice of non-renewal. Alternatively, the owner may petition the City to initiate an immediate cancellation, which would result in payment of a penalty equal to 12.5% of the property’s assessed current fair market value, as determined by the County Assessor as though the property were free of the contractual restriction. The City may also cancel the contract in the event of a breach of contract conditions, whereby the property owner would be subject to pay the same 12.5% penalty.
Property owners are required to obtain all applicable entitlements such as a Certificate of Appropriateness, and all associated building permits, for work proposed in the 10- year maintenance plan. Furthermore, all work proposed in the 10-year maintenance plan must comply with “The Secretary of the Interior’s Standards for the Treatment of Historic Properties with Guidelines for Preserving, Rehabilitating, Restoring & Reconstructing Historic Buildings” (Weeks & Grimmer, 1995; revised 2017), as subsequently amended from time to time. Property owners are also required to submit a report to the City on a biennial basis to demonstrate compliance with contract terms.
Staff reviews the reports received and may conduct site inspections to confirm the completion of work tasks as part of its assessment.
Discussion
There are three multi-family applications for consideration for this calendar year; 2602 Third Street, 227 Beach Street, and 818 Grant Street. The applications for 227 Broadway and 174 Kinney Street are commercial buildings. Staff has determined that each property qualifies under SMMC 9.56.270(F), as there are no confirmed or outstanding Code violations; the properties are current in property tax payments; and all 4 of 16
work that had been previously conducted, was done in a manner that is consistent with the Secretary of the Interior’s Standards.
The specific details of each property are discussed below as well as the background of the Third Street Neighborhood Historic District of which two of the three residential properties are included as contributing structures.
Third Street Neighborhood Historic District
The Third Street Neighborhood Historic District is the City’s first Historic District and was designated on July 1, 1990. It consists of 38 contributing buildings constructed between 1875 and 1930, on Third Street between Ocean Park Boulevard and Hill Street. This small Ocean Park neighborhood illustrates many of the historical and architectural patterns that characterized the larger community. Historically, the neighborhood has ties to some of the Santa Monica’s most prominent early residents. Architecturally, the buildings chronicle the evolution of the design from the Victorian era through the revival styles of the 1920’s and 1930’s, with an emphasis on hipped roof, turn-of-the-century cottages, and Craftsman bungalows.
2602 Third Street and the parcel commonly known as 227 Beach are contributing structures located in The Third Street Neighborhood Historic District. The district is notable for its representation of a variety of late 19th century and early 20th century residential architectural styles as well as for its lack of substantial infill structures. The neighborhood’s architectural consistency is also particularly memorable in Ocean Park, where wood frame California bungalows and low scale Spanish Revival structures frequently exist adjacent to large apartment buildings. 5 of 16
2602 Third Street
Figure 1: Photo of 2602 Third Street (three structures) A Mills Act Contract is proposed for the Craftsman style buildings that were constructed in 1910 per the Los Angeles County Assessor’s Office. Three residential buildings comprised of four residential units are all contributing structures to the Third Street Neighborhood Historic District. The character defining features include wood shingle siding and wide eaves with rafter tails. The application photos serve to detail the scope of work and character defining features.
As part of the Mills Act application, a Historic Structure Condition Assessment and Maintenance Plan was prepared by Robert J Chattel. The report assesses the existing condition of the residential building and identifies repair, restoration/rehabilitation, and maintenance needs (Attachment A) along with a general schedule for completion of 6 of 16
work. As discussed more fully in Attachment A, the property appears to be in fair/good condition. The contract would specify a landscape architect be engaged to create a landscape plan, design/install drip irrigation and remove overgrown planting by creating a 12-inch buffer surrounding the building thus protecting the historic features.
The largest rehabilitation costs specify hiring a structural engineer to evaluate and prepare plans for seismic upgrades to the building(s) foundations as well as replacement of the existing sewer lines and laterals by a licensed plumber. The texture coat on siding, eaves and rafter tails shall be removed using the gentlest means possible. Work proposed such as window rehabilitation and replacement of those windows that have been altered, contracting with a licensed contractor for a building inspection report on electrical, plumbing and heating systems (building system upgrades), and following recommendations on verifying the existing roof conditions and installing insulation have been included in the rehabilitation priorities and will prolong the life and use of the building. Rehabilitation work described will be done in the immediate/near future.
The applicant has developed a 10-year rehabilitation/maintenance plan describing tasks that will be undertaken to address the identified concerns and ensure on-going maintenance that is expected to be realized through the projected tax savings. The maintenance tasks are estimated to have an annual total cost of approximately $7,000 with all identified exterior restoration/rehabilitation projected to cost $291,000 over the initial 10-year contract period.
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227 Beach Street
Figure 2: Photo of 227 Beach Street
A Mills Act Contract is proposed for the multi-unit residential building and parcel designated as a contributor to the Third Street Neighborhood Historic District on July 1, 1990 (District described above). The property consists of thirteen units sited south of Ocean Park Boulevard and along the north side of Beach Street comprised of four structures. The Mediterranean Revival residences predate the Spanish Colonial revival style but share some of its materials and characteristics. Four attached bungalows constituted within three rows and a solo building were constructed in 1924. Addresses associated with the site include: 227, 229, 231, 233, Beach Street and 2543 and 2545 2 nd Street.
The vernacular mode of these Mediterranean Revival residences is characterized by flat roofs with parapets, capped in clay tile that step up in the center and at the ends of each unit. With the downward grade toward Second Street, each unit is slightly offset in the elevation from the next, with the line of the parapet reflecting the downward step of each unit. A tile-clad linear hood lines the base of base of each parapet. Additional clay tiled 8 of 16
hoods with simple wood stick-work framing provide shelter for each front door. The exterior walls are finished with a lightly sand-textured stucco.
As part of the Mills Act application, an architect’s report was prepared by Isabelle Duvivier. The report details the extensive renovation work that has received a Certificate of Occupancy, and annual maintenance needs (Attachment B). Three Certificate of Appropriateness were issued, and the exterior building was issued a final inspection on April 2, 2022. As discussed more fully in Attachment B, the building has been substantially renovated and the work has been completed. Rehabilitation improvements included significant foundation, concrete site work, plumbing, electrical, mechanical, roofing and landscape/irrigation improvements. All wood windows were replaced inkind including “horn details” on the upper portion of the double hung windows. Doors were replaced or rehabilitated with flat casing trim surrounds and paint was removed from original hardware. All roof and subfloor vents were replaced, new gutters and downspouts were installed and 85% of the original Spanish ceramic roof tiles were reused in the complete roof restoration. The estimated cost for these completed rehabilitation improvements, inclusive of interior work is $3,248,892.
Future work associated with the Mills Act contract includes rehabilitation involving cosmetic tasks addressing maintenance and cleaning of building systems, including mechanical, plumbing, gutters, exterior lighting and wood window repairs, painting; improvements to building wood decorative features and landscape improvements have been prioritized by the architect’s report. Included in the application is a 10-year rehabilitation/maintenance plan describing tasks that will be undertaken to ensure ongoing maintenance that is expected to be realized through the projected tax savings.
The identified maintenance tasks are estimated to have a total cost of approximately $261,500 over the ten-year contract period.
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227 Broadway
Figure 3: Photo of 227 Broadway Street
A Mills Act Contract is proposed for 227 Broadway, the building, commonly known as the Keller Block, is located on southwest corner of the Third Street Promenade in the City’s downtown. The commercial building was designated as a City Landmark on October 13, 2008.
The Keller Block is a rare example of a large, architecturally distinctive, 1890’s masonry multi-use commercial building in Santa Monica. The subject property retains the majority of its primary character defining features on the exterior including the brickwork, arched openings, rectangular openings with contrasting stone lintels and sills, and castiron storefronts by the Llewellyn Ironworks of Los Angeles. As one of the earliest and the most prominent commercial buildings in this immediate area of downtown, the structure manifests the feeling of early commercial life in the central business district. It 10 of 16
is an excellent and rare local example of the Richardsonian Romanesque Revival style as applied to a commercial structure exhibiting distinguished architectural characteristics of the style including the massing, roof form, parapets, turret, brick and ashalar brownstone (denoting that the materials are closely laid with very little mortar between them), as well as other signature trademarks of the idiom in its overall design.
As part of the Mills Act application, an architect’s report was prepared by Kaplan Chen Kaplan. The building was constructed in 1893. The report assesses the condition of the building and identifies repair, restoration/rehabilitation, and maintenance needs (Attachment C) along with a general schedule for completion of work. The suggested rehabilitation work includes a professional evaluation of foundation and structural building and parapet condition.
Major expenditures include assessing windows, surrounds and seals, roof replacement and upgrading mechanical systems. In total, the applicant has identified that the amount of $260,000 to be invested into the rehabilitation of these systems. In addition to the completed rehabilitation work, a 10-year maintenance plan describing tasks that will be undertaken to address the identified concerns that are expected to be realized through the projected tax savings has been included in the application. The existing building condition is listed as fair and in need of significant maintenance. The upgrades and repairs described specify repointing the brick and grout work, maintaining iron work, concealing exposed conduits, and investing in systems upgrades. The identified maintenance tasks over 10 years are estimated to have a total cost of $1,043,000. 11 of 16
818 Grant Street
Figure 4: Photo of 818 Grant Street
A Mills Act Contract is proposed for the multi-unit residential building constructed in 1929 as an apartment court building in the Spanish Colonial Revival style, consisting of 12units in one U-shaped building.
The property is significant for conveying early patterns of multi-family residential development that shaped Santa Monica and the east Santa Monica area in the early decades of the twentieth century, prior to the establishment of Sunset Park subdivision in 1936 from which the entire planning district has taken its name. Tract 5512, where the subject property is located, dates from 1922, and was initially owned and recorded by the California Trust Company of Los Angeles. By the time the subject property was built within the neighborhood in 1929, it was one of several dozen residences that were scattered throughout the many blocks of the east Santa Monica area. The subject property is considered a rare example of early twentieth century housing type built prior to 1936 and therefore, manifests early elements of the City’s architectural heritage. 12 of 16
The residential building and parcel were designated as a City Landmark on July 12, 2021. It incorporates many of the typical character-defining features of the style and period including horizonal massing, asymmetrical elevations, roof dorms and material, stucco finish, fenestration pattern, clay tile roof/trim accents, incorporation of simple tower features, rounded arched shaped openings, and courtyard. Besides general maintenance work, some modifications to the building have been made, including replacement of most of the original wood-frame windows (casement and sash) to metal framed sliders and alterations to the staircase at the south end of the complex for access to the second-story apartments.
As part of the Mills Act application, an architectural report was prepared by Kaplan Chen Kaplan. The report assesses the condition of the building and identifies maintenance needs (Attachment D) along with a general schedule for completion of work. As discussed more fully in Attachment D, the building is in fair/good condition.
Recommended rehabilitation improvements include in the first year include reroofing with assessment of parapet caps and porch overhangs, assessing condition and painting original doors, painting and inspection of window frame and sills and repair of stair handrails leading to the second floor. Priority replacement of non-original windows and replacement and garage door consistency/uniformity of appearance, which has been identified by the applicant to have a valuation of $5,000. Future work associated with the Mills Act contract includes a maintenance plan as the primary mechanism for general building repairs to the sitework/ drainage, maintenance of landscape with irrigation systems, inspection of plumbing systems, with repairs to be prioritized as detailed in the architect’s report. A 10-year maintenance plan has been developed as part of the application. The maintenance plan describes tasks that will be undertaken to address the identified concerns and ensure on-going upkeep that is expected to be realized through the projected tax savings. The identified maintenance tasks are estimated to have a total cost of approximately $305,000 with all identified rehabilitation tasks having been completed over the initial 10-year contract period. 13 of 16
174 Kinney Street
Figure 5: Photo of 174 Kinney Street/ 171-177 Pier Avenue The property at 174 Kinney and 171-177 Pier Avenue is associated with the early commercial and transportation history of Santa Monica, specifically the pivotal role of the Pacific Electric Railway in the development of Ocean Park during the first decades of the 20th century. The date of construction is 1913. The two-story vernacular commercial building with retail storefronts facing Pier Avenue and a large single-story truss-roof former automobile repair garage facing Kinney. The Pacific Electric Railway 14 of 16
maintained an office in the Pier Avenue portion of the building from at least 1933 to 1953, when the railway ceased operations in Santa Monica, and, as such, is likely the last extant structure associated with the Pacific Electric in Ocean Park, if not all of Santa Monica. While it appears that the garage itself was not utilized by the Pacific Electric Railway for its own purposes, the Kinney-facing garage operated separately and serviced the cars of locals and visitors at a time when automobiles came to eclipse public transportation. Designed by the in-house designers of the Pacific Electric, and built by Houghton and Anderson, a Los Angeles contracting firm, the property displays elements of commercial vernacular design of the period, including the Art Deco façade of the Kinney building, and Spanish Colonial Revival elements of the Pier building. The siting of the building also reflects its significance – its location along Trolleyway (now Neilson Way), the former right-of-way of the Pacific Electric-adjacent to the site of the train station at 3011 Trolleyway; and its location along Pier, the major west-east artery of Ocean Park and the hub of railway-related activities in the neighborhood. The building’s period of significance is 1926-1953.
Character-defining architectural features are separated into three elevations of the Vernacular Commercial building and include a symmetrical arrangement divided into 3 bays, brick Art Deco pilasters with finials atop pilasters flanking the central bay, recessed entry and large painted fixed wood windows located in each outer bay.
As part of the Mills Act application, a Historic Structure Condition Assessment and Maintenance Plan was prepared by Kaplan Chen Kaplan. The report assesses the existing condition of the residential building and identifies repair, restoration/ rehabilitation, and maintenance needs (Attachment E) along with a general schedule for completion of work. As discussed more fully in Attachment E, the building is in fair condition. The Kinney building’s future work associated with the Mills Act contract includes improvements include cleaning, painting and repair of the metal windows and grills, masonry pointing/ grout work, and the roof replacement. The work programed for the Pier building includes site work, maintenance of the existing aluminum windows, upkeep of the plaster façade finish and landscape maintenance as well as removal of overgrown vines. Also included is the rehabilitation work involving the restoration of the 15 of 16
front door assembly, major heating, plumbing and structural systems, landscape maintenance and irrigation repair. A maintenance plan has also been prepared for general building repair. The applicant has developed a 10-year rehabilitation/ maintenance plan describing tasks that will be undertaken to address the identified concerns and ensure on-going maintenance that is expected to be realized through the projected tax savings. The identified maintenance tasks are estimated to have a total cost of approximately $240,000 (Pier) and $403,00 (Kinney) with all identified rehabilitation tasks projected to cost $643,500 over the initial 10-year contract period.
Financial Impacts and Budget Actions
There is no immediate financial impact or budget action necessary as a result of the recommended action. Staff will return to Council if specific budget actions are required in the future. Execution of these Mills Act Contracts would result in a reduction in annual property tax revenue to the City in the estimated amount of $21,700 for FY 2023-24 and subsequent years thereafter. A summary financial analysis table is included as Attachment P.
Prepared By: Regina Szilak, Associate Planner
Approved Forwarded to Council
Attachments:
A. 2602 3rd Street application materials
B. 227 Beach application materials
C. 227 Broadway application materials
D. 818 Grant Street application materials
E. 174 Kinney Street application materials
F. OAKS INITIATIVE FORM 2602 3rd Street
G. OAKS INIATIVE FORM 227 Beach Street
H. OAKS INITIATIVE FORM 227 Broadway
I. OAKS INITIATIVE FORM 174 Kinney 171-177 Pier
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J. OAKS INITIATIVE FORM 818 Grant Street
K. CDD - Reso - Mills Act (227 Beach) 102522
L. CDD - Reso - Mills Act (2602 3rd) 102522
M. CCD - Reso - Mills Act (227 Broadway) 102522
N. CDD - Reso - Mills Act (174 Kinney) 102522
O. CDD - Reso - Mills Act (818 Grant) 102522
P. Mills Act Financial Analysis