City Council
Report
City Council Meeting: October 24, 2023
Agenda Item: 5.G
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To: Mayor and City Council
From: David Martin, Director, City Planning
Subject: Adoption of a Resolution approving Historic Property Preservation Agreement (Mills Act Contract)
Recommended Action
Staff recommends that the City Council:
1. Adopt a finding of categorical exemptions pursuant to Sections 15308 and 15331 of the California Environmental Quality Act (CEQA) Guidelines.
2. Adopt the attached Resolution authorizing the City Manager to execute Historic Property Preservation Agreement (Mills Act Contract) between the City of Santa Monica and the owners of City-designated historic resources located at 3014 4th 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, onehundred properties in Santa Monica are protected with Mills Act contracts.
The City received one application for consideration in 2023, a multifamily residential property. On September 11, 2023, the Landmarks Commission reviewed and recommended approval of the contract. Staff has determined that the application meets 2 of 8
all applicable requirements of State law and the Santa Monica Municipal Code.
Therefore, staff recommends approval of the Mills Act Contract for 3014 Fourth Street.
Mills Act contracts are approved by Resolution of the City Council (Attachment B).
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 such 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 Santa Monica Municipal Code 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 10-year maintenance plan submitted to the County Tax Assessor's office which determines the value of the historic property 3 of 8
based upon its current net operating income, rather than upon the traditional assessed valuation method. In most cases, the result is a reduction 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 is one multi-family application for consideration for this calendar year; 3014 Fourth Street. Staff has determined that the property qualifies under SMMC
9.56.270(F), as there are no confirmed or outstanding Code violations; the property is current in property tax payments; and all 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 this property are discussed below.
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Figure 1: Photo of 3014 Fourth Street (central drive aisle) A Mills Act Contract is proposed for the 21-unit property constructed over a twenty-two year period with periods of significance including the years 1922, 1925 and 1944. The initial structure was constructed in 1922. The residential building and parcel were designated as a City Landmark on November 11, 2022.
The character defining features include:
• Two-lot assembled parcel, bisected by a central driveway, containing an H shaped residential building complex and a formal garden;
• Asymmetrical massing of one to three stories, accommodating the slope of the property, bridging the driveway, and reflecting growth by accretion over time; • Eclectic architectural character consisting of Spanish Colonial Revival styling combined with Streamline Moderne and Hollywood Regency elements; • Complex roof configuration, with gabled and flat portions and a truncated turret; 5 of 8
• Primary exterior materials of textured stucco, with partial clay tile roofing and coping;
• Varied fenestration, incorporating flat-headed and arched openings, fixed, doublehung, and casement windows; single- and multi- light windows in varying patterns.
As part of the Mills Act application, an 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 work. As discussed more fully in Attachment A, the property appears, given the current repairs, to be in excellent condition.
One Certificate of Appropriateness was issued for the replacement of the rear retaining wall on March 13, 2023. As discussed more fully in Attachment A the property has been brought up to excellent condition. A substantial amount of site work was completed during the 2022-2023 year period. The scope of this work includes a re-roof, rebuild of the west retaining wall, hardscape and paving, landscape and irrigation, painting, window and door rehabilitation. Major systems repair or replacement include foundation and structural work, mechanical HVAC systems, plumbing, electrical, and installation of a fire sprinkler system. A portion of the work was approved with Certificate of Appropriateness 22ENT-0316, however, the majority of the work was undertaken prior to the Landmark designation, approved under 17BLD-2756 issued in 2018.
The remaining rehabilitation costs specify hiring a conservator to evaluate and restore the tile work along the walkways, stoops and patios. The restoration of the rear garden fountain requires a conservator to salvage and restore existing tiles, construct new tiles and repair the fountain’s functionality. The remaining restoration work includes rebuilding the south retaining wall, a seismic upgrade, rehabilitation of doors and window as well as repair and replacement where necessary of existing hardware by a licensed contractor. As noted in the Rehabilitation/ Restoration plan, work described will be done in the immediate/near future. The applicant has developed a 10-year 6 of 8
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 $47,000 with all identified exterior restoration/rehabilitation projected to cost $2,989,636 over the initial 10-year contract period.
Environmental Review
Approval of the Mills Act contract is categorically exempt from the California Environmental Quality Act pursuant to Sections 15308 and 15331 of the CEQA Guidelines. Section 15308 exempts actions taken by regulatory agencies to assure the maintenance, restoration, enhancement, or protection of the environment where the regulatory process involves procedures for protection of the environment. Approval of Section 15331 exempts projects that are limited to the maintenance, repair, stabilization, rehabilitation, restoration, preservation, conservation or reconstruction of historical resources in a manner consistent with the Secretary of the Interior’s Standards. Approval of the Mills Act contract would ensure protection of the historic environment and conservation of the historic Landmark property, and therefore is categorically exempt from CEQA.
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Figure 2: Photo of 3014 Fourth Street rear elevation
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 $4,804 for FY 2024- 25 and subsequent years thereafter. A summary financial analysis table is included as Attachment C.
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Prepared By: Regina Szilak, Associate Planner
Approved Forwarded to Council
Attachments:
A. 3014 4th Street application materials
B. Resolution Mills Act Contract 3014 4th Street
C. 2023 Mills Act Financial Analysis
D. 3014 4th_oaks initiative form
E. PowerPoint Presentation