City Council
Report
City Council Meeting: October 22, 2024
Agenda Item: 5.A
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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)
Recommended Action
Staff recommends that the City Council
1. Adopt a finding of categorical exemption pursuant to Section 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: 518 Adelaide Drive, 1401 Palisades Beach Road, 1132 Princeton Street, and 1138 Princeton 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, 100 properties in Santa Monica are protected with Mills Act contracts.
The City received four applications for consideration in 2024 and all are residential properties – one single-unit dwelling and three multi-unit developments. On August 12, 2 of 13
2024, the Landmarks Commission reviewed and recommended approval for three of the proposed Mills Act Contract requests (1401 Palisades Beach Road, 1132 Princeton Street, and 1138 Princeton Street) and directed staff to forward recommendations to the Council in support of these new applications. The remaining Mills Act application for 518 Adelaide Drive was not able to be considered or recommended by the Landmarks Commission due to a Commission conflict that precluded the Commission from reviewing and making a recommendation. However, the Municipal Code does not require that the Landmarks Commission act on Mills Act contracts before Council approval and therefore, City Council has the authority to approve a Mills Act contract without a recommendation from the Landmarks Commission.
Staff has determined that each application meets all applicable requirements of State law and the Santa Monica Municipal Code. Therefore, staff recommends approval of all four Mills Act Contracts. Mills Act contracts are approved by Resolution of the City Council (Attachments E through H).
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Discussion
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 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 in property tax. In exchange for a property tax reduction, the owner agrees to protect, maintain and, if necessary, restore/rehabilitate 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 4 of 13
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), and as subsequently amended from time to time. Property owners are also required to submit a report to the City on an annual 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.
There are one single-unit dwelling and three multi-unit applications for consideration for this calendar year; 518 Adelaide Drive; 1401 Palisades Beach Road; 1432 Princeton Street and 1438 Princeton Street. 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 work that had been previously conducted was done in a manner that is consistent with the Secretary of the Interior’s Standards.
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518 Adelaide Drive
Figure 1: Photo of 518 Adelaide Drive
A Mills Act Contract is proposed for the French Revival style single-unit dwelling constructed in 1925 and designed by the architects of Ruoff & Munson per the Los Angeles County Assessor’s Office. The parcel was designated a Santa Monica Landmark on February 10, 2020, by the Landmarks Commission.
The main two-story structure is offset to the west. Central to the design is a large twostory rotunda with the primary entry in front of the wing at the center of the site. This is nestled by the short wing with a stair on the east that projects towards the front and connects with the living room space on the east.
The building’s character defining features include its overall visual effect, complex massing, large chimney, rounded entrance tower and exterior porches. The specific details of the style include: steeply pitched gabled and conical roof forms, French doors, single-light wood and casement windows with shutters, wrought iron balconettes, troweled and textured stucco cladding, clay tile attic vents, and terra cotta chimney caps.
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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 A) along with a general schedule for completion of work. As discussed more fully in Attachment A, the property appears to be in fair/good condition. The contract would specify landscape work including removal or significant trimming of existing plantings adjacent to the building. The front lawn is the primary feature of landscape as viewed from the street and should have regular fertilization and seeding maintenance for upkeep.
The largest rehabilitation costs specify a structural engineer to calculate, evaluate and prepare plans for seismic upgrades to the building(s) specifically shoring the foundations that have settled, updating the building’s seismic readiness as well as well as replacement of the entire roof. Stucco repair will likely be needed following the building stabilization. The repairs should be carefully crafted to maintain the texture, color and facade finish. Work proposed such as window rehabilitation and replacement of those windows that have been altered or are fully damaged, contracting with a licensed contractor for a building inspection report on electrical (likely in need of an upgrade), plumbing and heating systems (building system upgrades) and following recommendations on verifying the existing roof conditions has 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 which include a thorough assessment of the existing conditions and worked permitted under an existing building permit. 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 house is undergoing a thorough renovation and maintenance assessment for the first year as well as construction upgrades (24BLD-0148) which are estimated to have a total cost of approximately $420,000 with all identified exterior restoration/rehabilitation projected to cost $530,000 over the initial 10-year contract period. 1401 Palisades Beach Road
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Figure 2: Photo of 1401 Palisades Beach Road
The subject property consists of two, two-story buildings – a main beach-facing dwelling and a rear (east) street-facing residence. The subject property is situated on the west side of Palisades Beach Road (Pacific Coast Highway) on Lots 12 and 13 of the Sunset Beach Tract in the City of Santa Monica. The subject property fronts west and is located along The Promenade (Ocean Front Walk) and the Pacific Ocean. The property consists of a total of 8 units constructed in the designated structure and three located adjacent to Palisades Beach Road building for a total of 11 units on-site. A Mills Act Contract is proposed for the 8-unit residential building and parcel with the west facing building designated on August 14, 2006, and not including the Palisades Beach Road adjacent building as it is not included in the designation.
The beach residences, while primarily vernacular in design, reflect elements of Shingle Style associated with seaside resorts of the northeastern states in the years between 1880 and early 1910’s. The character defining features of the designation, a 1909 Turnof-the-Century vernacular beach cottage with eclectic architectural influences, include the primary, beach-facing residence with its simple gabled roof form, rectangular massing, wood frame construction, wood shingles and other wood material sheathing, 8 of 13
wood frame multipaned-over-one sash fenestration and simple wood surrounds and the early conversion of the open porches to create a band of windows on the primary elevation.
As part of the Mills Act application, an architect’s report was prepared by Michele McDonough. The report details the extensive interior renovation work and exterior work, and annual maintenance needs (Attachment B). As discussed more fully in Attachment B, the building is undergoing substantial renovation, and a Certificate of Appropriateness has been submitted for the exterior work. Rehabilitation improvements included systems (plumbing, electrical, mechanical), roofing and door, window, sash replacement of missing casings with mitered edges, and cedar shingle replacement for badly damaged shingles. Some wood windows will be replaced in-kind and divided lights that are missing or previously incorrectly renovated. The doors are non-original and will be replaced.
The estimated cost for these completed rehabilitation improvements, inclusive of interior work is $898,364. Future maintenance/rehabilitation work associated with the Mills Act contract includes rehabilitation of window moldings and casings, painting, and annual landscape and irrigation maintenance and care. 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 $239,725 over the ten-year contract period.
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1132 Princeton Street
Figure 3: Photo of 1132 Princeton Street
A Mills Act Contract is proposed for two-story garden apartment buildings located at 1132 Princeton Street and 1138 Princeton Street, two courtyard buildings developed as separate parcels in 1947, and designated a Structure(s) of Merit by the Landmark Commission on June 10, 2024. The building’s feature elements of the Late American Colonial Revival style and were designed by Martin Stern, master architect.
As part of the Mills Act application, an architect’s report was prepared by Chattel, Inc.
The Structure of Merit designation and architectural report notes the following character defining features: two-story building height, L-shaped building oriented around a courtyard, symmetrical construction with the central entrance at the east elevation, stucco cladding at the first floor and wide clapboard siding at the second floor, open entries with fluted pilasters, broken pediment door surrounds with a single octagonal multi-light window above, low sloping, cross-hipped roof, paired four-over-four, double hung windows, shutters, three breezeways connecting two units on the first floor and two units on the second floor, tinted concrete paving, decorative handrails and magnesite paving along the breezeways.
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. Some of the building’s system upgrades have been completed in 10 of 13
anticipation of the Mills Act contract. They include an upgraded electrical system, a new sewer line, and painting.
Major expenditures include assessing windows, doors, roof, and siding material integrity. The contract specifies the HVAC systems for individual units will be upgraded as unit vacancies occur. The highest anticipated expenditure is the building’s structural evaluation and seismic upgrade valued at $100,000 with anticipated work scheduled for 2026. In total, the applicant has identified that the amount of $459,000 be invested into the rehabilitation of these systems. In addition to the rehabilitation plan, 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 also been included in the application. The existing building condition is listed as good/ excellent and in need of standard regular maintenance. The upgrades and repairs described in systems upgrades. The identified maintenance tasks over 10 years are estimated to have a total cost of $27,500.
1138 Princeton Street
Figure 4: Photo of 1138 Princeton Street
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As mentioned in the section above for 1132 Princeton Street, a separate Mills Act Contract is proposed for the multi-unit residential building at 1138 Princeton Street.
Both properties are situated on the west side of Princeton Street, north of Wilshire Boulevard. The Late American Colonial Revival style is featured in the two-story tall, L shaped building, with long leg perpendicular to the street and the short leg parallel to Princeton Street. The building is a wood-framed construction with exterior walls clad in stucco at the first floor and wide horizontal siding at the second floor.
This property, along with 1132 Princeton Street was designated a Structure of Merit on June 10, 2024, and has an architect’s report prepared by Chattel, Inc. Since the two sites mirror each other the character defining features are the same and include: twostory building height, L-shaped building oriented around a courtyard, symmetrical construction with the central entrance at the east elevation, stucco cladding at the first floor and wide clapboard siding at the second floor, open entries with fluted pilasters, broken pediment door surrounds with a single octagonal multi-light window above, low sloping, cross-hipped roof, paired four-over-four, double hung windows, shutters, three breezeways connecting two units on the first floor and two units on the second floor, tinted concrete paving, decorative handrails and magnesite paving along the breezeways.
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 overall is in good condition with some specific elements identified in fair condition. The electrical system has been upgraded, the main sewer line replaced, and the building has been painted. The rehabilitation work for the current year includes rehabilitation improvements to the hardscape, landscape, painting, light fixture and vent replacement. Major expenditures include assessing windows, doors, roof, and siding material integrity. The contract specifies the HVAC systems for individual units will be upgraded as unit vacancies occur. The highest anticipated expenditure is the building’s structural evaluation and seismic upgrade valued at $100,000 with anticipated work scheduled for 2026.
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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 an annual loss of approximately $27,500 with all identified rehabilitation and restoration work including system upgrades, exterior, and site work totaling $459,000 having been completed over the initial 10-year contract period.
Environmental Review
Execution of the Mills Act contracts are categorically exempt from CEQA pursuant to Section 15331 of the CEQA Guidelines. Section 15331 (Class 31) exempts projects limited to maintenance, repair, stabilization, rehabilitation, restoration, preservation, conservation or reconstruction of historical resources in a manner consistent with the Secretary of the Interior's Standards for the Treatment of Historic Properties with Guidelines for Preserving, Rehabilitating, Restoring, and Reconstructing Historic Buildings. The contracts provide financial incentives for preservation of historic properties and all work previously conducted on the property conforms to the Secretary of the Interior’s Standards for the Treatment of Historic Properties. Therefore, the contracts are exempt pursuant to Section 15331 of the CEQA Guidelines.
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 $14,479 for FY 2024-25 and subsequent years thereafter. A summary financial analysis table is included as Attachment I.
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Prepared By: Regina Szilak, Associate Planner
Approved Forwarded to Council
Attachments:
A. 24ENT-0066 (518 Adelaide Dr) attachment A
B. 24ENT-0156 (1401 Palisades Beach Road) attachment B
C. 24ENT-0090 (1132 Princeton) attachment C
D. 24ENT-0092 (1138 Princeton St) attachment D
E. Resolution Mills Act Contract 518 Adelaide Drive
F. Resolution Mills Act Contract 1401 Palisades Beach Road G. Resolution Mills Act Contract 1132 Princeton
H. Resolution Mills Act Contract 1138 Princeton
I. 2024 Mills Act Financial Analysis
J. 518 Adelaide Oaks
K. 1401 PBR Oaks
L. 1132-36 Princeton Oaks
M. 1138-42 Princeton Oaks Disclosure signed
N. 518 Adelaide Levine
O. 1401 PBR Levine
P. 1132-36 Princeton Levine
Q. 1138-42 Princeton Levine Disclosure signed