What is the Mills Act?
The Mills Act is a California law that allows cities to enter into contracts with the owners of historic structures. This contract provides a method of reducing property taxes in exchange for the continued preservation of the property.
Why is it important for Alhambra to adopt a Mills Act program?
The Mills Act contract is the single most effective tool Alhambra can utilize to encourage the preservation of its historic structures.
- It provides a direct financial benefit to property-owners.
- The reduction in property tax can be dramatic – as much as 50% or more.
- A Mills Act contract can be a huge selling point, encouraging buyers to purchase designated structures.
- The sale of a Mills Act home does not trigger a Proposition 13 reassessment and the contract remains with the property. The savings to a new owner can be significant.
- The Mills Act can provide for rehabilitation and permanent maintenance of Alhambra’s historic resources.
- Participation on the part of the property owner is completely voluntary, and the city has the option to choose which properties are suitable for the incentive on a case by case basis.
- The Mills Act contract can be used with private homes as well as income-producing properties.
How is a property deemed to be eligible for a Mills Act contract?
To qualify for a Mills Act contract, the property must be listed on a federal, state, county or city register – including the National Register of Historic places, the California Register of Historical Resources, California Historical Landmarks, State Points of Historical Interest, or a locally-designated landmark (including landmark districts).
California law permits the City Council to enter into 10-year contracts with the owners of designated historic properties, in which the owner agrees to maintain and, if necessary, rehabilitate the historic structure. The contract renews itself annually, which means that the owner is always ten years away from termination – unless there is a notice of non-renewal. Either party can decide not to renew the contract, in which case the agreement will terminate at the end of the current 10-year term.
What if the property owner does not perform on the terms of the contract?
If the contract conditions are breached by the owner (including the duty to prevent deterioration or to perform specified improvements), the city can bring legal action to enforce the contract or choose to cancel it. If the contract is cancelled, the owner is assessed a financial penalty (12.5% of market value).
What is the potential impact on local property tax revenue to the city?
There will be a reduction in property tax revenue if the Mills Act is implemented. In most cases the loss is negligible – and balanced by the benefits of increased property values as a result of neighborhood pride, tourism, etc. Generally, the County of Los Angeles absorbs the majority of the loss in revenue.
What are some ways that the financial loss to the city can be mitigated?
The city can include a number of conditions in its implementing resolution to manage or limit the financial impact, such as:
- The city can adopt a Mills Act application fee, to be paid by the property owner.
- The city can limit the Mills Act program to qualified single-family residential properties.
- The city can set a limit on the number of contracts it approves each year.
- The city can set a limit on the total loss in property tax assumed each year (i.e. not to exceed $20,000 per year).
The program can be adapted to meet the specific needs and priorities of each community. Here are just a few of the benefits of the Mills Act:
- There are economic and environmental benefits in conserving and reinvesting in local resources
- Rehabilitation and revitalization of neighborhoods benefits the whole community
- Seismic safety can be prioritized
- Contribution to affordable housing
- Promotion of civic pride and heritage tourism
- Enhanced property values in historic neighborhoods that are protected