CITY HALL — City officials are contemplating restrictions on a program that offers discounts on property taxes to owners of historic homes in the face of a tight economic climate.
The deal, created under a 1972 state law called the Mills Act, offers a lower tax rate to provide an incentive to the owner to maintain the historic property rather than tear it down.
Many cities adopted the Mills Act, but put restrictions on the number of contracts that could be given out or how much property tax cities or counties could lose under the program.
Santa Monica did neither, and, with 54 active Mills Act contracts and the potential for another big one on the way, city officials are taking a second look at their relaxed approach to the historic preservation statute.
“We on staff agree that we should propose some limitations on tax relief available through a Mills Act contract in Santa Monica,” said City Manager Rod Gould. “No doubt there will be lots of discussion about this with the (Santa Monica) Conservancy, Landmarks Commission and Planning Commission.”
The conversation got rolling after the Nov. 27 City Council meeting at which the owner of the now-infamous “House of Rock” applied for a contract that would have taken her property taxes from $90,000 a year to about $14,000. The home was the site of several lavish fundraisers for nonprofits, a tactic the owner used to showcase the house before selling it.
Council members were concerned about the cost to the city over the course of the 10-year Mills Act contract, particularly in the context of the other 54 agreements, the oldest one of which has been active since 1998.
Individually, the contracts don’t add up to much.
According to a list compiled by city staff, the difference in the first year between what municipal coffers would have received without the contract and what came was between $1 and $10,749, depending on the property.
However, if you take that amount for each of the properties in their first year of the agreement, it totals $121,214, and the Mills Act contracts last 10 years and go with the property when sold.
That fact loomed large before the City Council, and now the Landmarks Commission will begin the discussion of what to do about the Mills Act at its meeting on Monday, said Scott Albright, a planner with City Hall and liaison to the Landmarks Commission.
Not all believe changes to the program are warranted.
Although Landmarks commissioners also winced when it came to the “House of Rock,” that was one bad actor out of dozens, and had nothing to do with the owner’s ability to afford or not afford the taxes, said Landmarks Commissioner Nina Fresco.
“I get scared when I hear council members and members of the public saying that the Mills Act is losing us money,” Fresco said.
The Landmarks Commission had recommended against awarding the contract because the members did not feel that the owner had turned in a complete application or offered any plan to maintain the house.
Other contract holders had detailed plans to check caulking, brickwork or otherwise keep the building intact, Fresco said.
“That’s why we have the Mills Act,” she said. “It costs more to keep an old house going.”
That’s an important point to make to the wealthy, who can afford to build their dream house, Fresco said.
“They need incentive as much as people who don’t have the deep pockets to keep the building and move forward,” she said.
Those incentives may become harder to come by, if the City Council chooses to change the rules on the Mills Act.
At present, anyone that owns a designated landmark, contributor to an historic district or a “structure of merit” can apply for a Mills Act contract, and there are no restrictions on the number that can be given out.
That’s different than in the adjacent city of Los Angeles, which caps the total amount of Mills Act “losses” at $1 million per year, Albright said.
“Once they’ve exceeded that million, only in extreme cases will they allow a Mills Act contract,” Albright said.
Other municipalities and jurisdictions require that the property be free and clear of code compliance violations, or, like Pasadena, put restrictions on the value of the home that can get a contract.
What route Santa Monica will take is very much in the air.