House of Rock (Photo by Daniel Archuleta)

CITY HALL — The City Council refused to grant a major tax break to the owners of the infamous “House of Rock” Tuesday night, instead deferring the matter until outstanding issues regarding the home’s renovations could be resolved.

Elaine Culotti, who has owned the home with business partner Greg Briles since 2010, applied for a decrease in her property tax with City Hall under the Mills Act, a state law created to encourage people to take on the burden of owning historic properties.

If approved, the agreement would have lowered the property taxes on the $8 million house by 86.6 percent from over $90,000 to roughly $12,127, according to a city staff report, resulting in a loss of roughly $12,500 in tax revenue.

The house, however, is up for sale again for $22 million, so the disparity between the new owner’s tax bill and the home’s assessed value would likely have grown.

In its report, staff referred to the reduction as “a significant marketing feature” for the property.

Councilmembers choked on the idea of granting the steep tax break, which Councilmember Bobby Shriver estimated at almost $2 million over the course of the 10-year Mills Act contract.

“We are spending $2 million if we approve this,” Shriver said, describing it as a “budget decision.”

The City Council seemed to think it was a bad investment, in part based on the flags raised about a potentially illegal addition to the home and also because of the testimony of Ruthann Lehrer, a member of the Landmarks Commission.

That body refused to recommend the home on La Mesa Drive for the contract in a “truly unprecedented” vote, Lehrer said.

“The reason for this is because the project and the property was not a historic renovation project,” Lehrer said. “In her own words, it’s a design house. The intent is to support, encourage and compensate the owners.”

Her words dug at the crux of an ongoing saga between Culotti, her neighbors and City Hall, which has held multiple hearings on Culotti’s efforts to market the home using lavish parties that raise money for charities.

It prompted the City Council to pass an ordinance banning the use of homes as “event venues,” although the new law will not take effect until after the last of Culotti’s events is expected to run its course.

Past disagreements over the use of the house should not impact whether or not City Hall grants the contract, argued Alex DeGood, an attorney representing the House of Rock owners.

The owners followed the local landmarks process, and the Landmarks Commission signed off on every renovation of the historic house, DeGood said.

“It would be kind of an interesting position for the city to be in to say we approved the restoration all the way through, but when it comes to giving the only financial incentive for restoring a property that state law provides, we’re not going to give it to you because we don’t approve,” DeGood said.

Cities do have the right to deny applications, and many include caps on the number of Mills Act contracts permitted each year, said Shannon Lauchner of the state Office of Historic Preservation.

“It’s a loose framework, and within the framework set up, local governments can establish the program in any means they see fit,” Lauchner said.

Santa Monica’s ordinance is very loose, putting no restrictions on the application other than that it be granted to the owner of a designated landmark or certain other kinds of structures.

Under those criteria, the City Council should approve the application when it comes back on Dec. 11, said Ben Reznik, an attorney representing the House of Rock owners.

“If they don’t, it will be the first denial of the Mills Act contract in the city’s history, and they’d be doing it without standards, criteria. It’d be pretty much arbitrary. That would open the city up to a substantial amount of liability in a lawsuit,” Reznik said.

The City Council voted to take the matter up at its next meeting, at which point staff is expected to have resolved a question about a stairwell leading to an attic space that has been transformed into a professional sound studio.

They’ll also learn if Culotti’s parties really ended on Dec. 6 as promised.

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