HomeMy WebLinkAbout30-City Administrator
ORIGlNAL
CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
Dept: City Administrator's Office
Subject: PUBLIC HEARING TO CONSIDER A
RESOLUTION ESTABLISHING THE
APPLICA TION PROCESS, REVIEW
PROCEDURES, AND REQUIRED CONTRACT
PROVISIONS FOR THE IMPLEMENTATION OF
A MILLS ACT PROGRAM IN THE CITY OF SAN
BERNARDINO PURSUANT TO GOVERNMENT
CODE SECTION 50280, ET SEQ., AND SETTING
AN APPLICATION FEE AND AN ANNUAL
ADMINISTRA TIVE FEE
From: Lori Sassoon, Assistant City
Administrator
Date: October 24, 2005
MICC Meeting Date: November 7, 2005
Synopsis of Previous Council Action:
October 18, 2005 - Legislative Review Committee recommends implementation of a Mills Act program
Recommended Motion:
Adopt resolution
j~('j~
Signature
Contact person: Lori Sassoon
Phone:
5122
Supporting data attached: staff report resolution, Ward: all
form Preservation Agreement
FUNDING REQUIREMENTS:
Amount: None by this action; some nominal loss of property
tax revenue annually, depending upon the number of program
participants and resulting property tax reductions
Source: (Acct. No.)
(Acct. Description)
Finance:
/'.
Council Notes: {0,.:JO ;200S -3& ~
Agenda Item No. 30
1I/1/0S
STAFF REPORT
Subiect:
Resolution establishing the application process, review procedures, and required contract
provisions for the implementation of a Mills Act program
Backl?:round:
In late August, Councilmember Kelley provided the Legislative Review Committee with some
written information concerning the Mills Act, and asked that staff research the matter and bring it
back for discussion at a subsequent Committee meeting. At the Legislative Review Committee
meeting of September 7, the Committee discussed the Mills Act program, provided feedback
concerning the concept, and asked staff develop program details to be considered in 30 days. On
October 4, the Committee discussed the program further, and on October 18 the Committee
recommended adoption of the program.
The Mills Act is a state law designed to provide financial incentives for property owners that
restore and maintain historic residential and commercial properties. Because the Mills Act
contract requires the property to be assessed using a different assessment methodology, it results
in a reduction in property taxes paid by the property owner. Approximately 80 cities throughout
California have adopted Mills Act programs, including several in the County of San Bernardino.
Attached is the following information concerning the Mills Act:
. California Office of Historic Preservation's technical assistance bulletin concerning the
Mills Act Property Tax Abatement Program
. List of communities currently participating in the Mills Act program
. Board of Equalization's guidelines regarding assessment of Mills Act properties
The attached resolution establishes a Mills Act program for the city of San Bernardino. It would
authorize the City Administrator to develop an application process and make recommendations
to the Mayor and Council concerning approval of Mills Act preservation agreements. The
resolution also defines as "historic", for Mills Act eligibility purposes, approximately 8,000 pre-
1942 properties contained in the 1991 Historic Resources Reconnaissance Survey.
Following the application and selection process as outlined in the resolution, participating
property owners would enter into 10-year rolling preservation agreements through which they
would be required to reinvest their property tax savings into rehabilitation or maintenance of the
historic property. The number of Mills Act preservation agreements would be limited to a ten
(10) new agreements each year, so that the time involved to administer the program would be
manageable given current staff resources.
The resolution incorporates the form Preservation Agreement that would be used for this
program. Each proposed Preservation Agreement would require approval by the Mayor and
Common Council. In summary, the agreement requires the property owner to preserve and
maintain the historic significance of the property, and to carry out the rehabilitation and
maintenance projects specified in their application materials. In accordance with Government
Code Section 50286, if the City cancels an agreement due to breach by the property owner, or for
the owner's failure to restore or rehabilitate the property in accordance with the agreement, the
property owner must pay a penalty to the County Auditor. State law currently sets this penalty at
12.5% of the current fair market value of the property, which is a significant penalty in today's
real estate market. This penalty serves as a deterrent to property owners who are not truly
interested in historic preservation.
It is envisioned that this program would be implemented by the City Administrator's Office staff
with assistance as may be needed from Development Services. Office staff will develop program
brochures, process applications, prepare contracts for Council approval, conduct annual contract
compliance inspections, and maintain contract files. A historic resources consultant may also be
retained on an as-needed basis to assist with property inspections. The administration of the
program is anticipated to be fairly straightforward. As staff gains experience in handling a Mills
Act program, adjustments to the program can be made in the future to help make it more
effective.
Staff has already begun developing forms and other administrative materials that would be
distributed to applicants upon adoption of the program. The following is a proposed timeline for
program implementation:
November 7 - Mayor and Council adopt the resolution
November 8 - 30: Application period is open
Mid November/early December - Application review and property inspections by staff
December 19 - Preservation Agreement( s) brought forward for Council approval
Financial impact:
Property owners that have approved Mills Act contracts will see a reduction in their property tax
assessments, resulting in a corresponding reduction in property tax revenues. In San Bernardino,
the City receives an average of seventeen cents ($.17) of each dollar ($1) of property tax
generated, with the balance of revenues allocated to counties, school districts, and special
districts.
The actual amount of property tax revenue loss cannot be estimated, although it is anticipated to
be relatively nominal as compared to the City's total annual property tax revenue. The revenue
loss will vary with the number of participating property owners, and the savings realized by each
property owner. At this time, staff is aware of one property owner who is interested in
participating in the program. Once the program is in place, staff will be able to monitor the
revenue loss and update the Mayor and Council periodically.
An application fee of $200 is set by the resolution, which will partially offset the City's cost to
process each application, and is only paid if the Preservation Agreement is approved by the
Mayor and Council. Under the terms of the form Preservation Agreement, each property owner
entering into an agreement will pay a yearly administrative fee of $75 to offset costs of program
administration.
Recommendation:
Adopt resolution
Mills Act Property Tax Abatement Program
Technical Assistance Bulletin #12
CALIFORNIA OFFICE OF HISTORIC PRESERVATION
Department of Parks & Recreation
1416 9th Street Room 1442-7
Sacramento, CA 95814
PO Box 942896
Sacramento, CA 94296
916-653-6624
calshpo@ohp. parks. ca .qov
www.ohp.parks.ca.qov
This publication has been financed in part with Federal funds from the National Park Service, Department of the
Interior, under the National Historic Preservation Act of 1966, as amended, and administered by the California Office
of Historic Preservation. The contents and opinions do not necessarily reflect the views or policies of the Department
of the Interior, nor does the mention of trade names or commercial products constitute endorsement or
recommendation by the Department of the Interior. Under Title VI of the Civil Rights Act of 1964 and Section 504 of
the Rehabilitation Act of 1973, the U.S. Department of the Interior strictly prohibits unlawful discrimination on the
basis of race, color, national origin, age, or handicap in its federally- assisted programs. If you believe you have
been discriminated against in any program, activity, or facility as described above, or if you desire further information,
please write to Office for Equal Opportunity, U.S. Department of the Interior, National Park Service, Box 37127,
Washington DC 20013-7127.
December 2004
Table of Contents
Mills Act Property Tax Abatement Program .................................................................... 1
Purpose of the Mills Act Program ................................................................................1
Benefits to Local Governments.................................................................................... 1
Benefits to Owners...................................................................................................... 1
Qualified Historic Property ........................................................................................... 2
OHP's Role............................................................................................. .....................2
For Additional Information ............................................................................................ 2
California State Codes Relating to Mills Act Program .....................................................3
California Government Code, Article 12, Sections 50280 - 50290...............................3
California Revenue and Taxation Code, Article 1.9, Sections 439 - 439.4.................. 6
Mills Act Property Tax Abatement Program
Purpose of the Mills Act Program
Economic incentives foster the preservation of residential neighborhoods and the
revitalization of downtown commercial districts. The Mills Act is the single most
important economic incentive program in California for the restoration and preservation
of qualified historic buildings by private property owners.
Enacted in 1972, the Mills Act legislation grants participating local governments (cities
and counties) authority to enter into contracts with owners of qualified historic properties
who actively participate in the restoration and maintenance of their historic properties
while receiving property tax relief.
Benefits to Local Governments
The Mills Act allows local governments to design preservation programs to
accommodate specific community needs and priorities for rehabilitating entire
neighborhoods, encouraging seismic safety programs, contributing to affordable
housing, promoting heritage tourism, or fostering pride of ownership. Local governments
have adopted the Mills Act because they recognize the economic benefits of conserving
resources and reinvestment as well as the important role historic preservation can play
in revitalizing older areas, creating cultural tourism, building civic pride, and retaining the
sense of place and continuity with the community's past.
A formal agreement, generally known as a Mills Act or Historical Property Contract, is
executed between the local government and the property owner for a minimum ten-year
term. Contracts are automatically renewed each year and are transferred to new owners
when the property is sold. Property owners agree to restore, maintain, and protect the
property in accordance with specific historic preservation standards and conditions
identified in the contract. Periodic inspections by city or county officials ensure proper
maintenance of the property. Local authorities may impose penalties for breach of
contract or failure to protect the historic property. The contract is binding to all owners
during the contract period.
Benefits to Owners
Owners of historic buildings may qualify for property tax relief if they pledge to
rehabilitate and maintain the historical and architectural character of their properties for
at least a ten-year period. The Mills Act program is especially beneficial for recent
buyers of historic properties and for current owners of historic buildings who have made
major improvements to their properties.
Mills Act Property Tax Abatement Program
OHP Technical Assistance Bulletin #14
1
Mills Act participants may realize substantial property tax savings of between 40% and
60% each year for newly improved or purchased older properties because valuations of
Mills Act properties are determined by the Income Approach to Value rather than by the
standard Market Approach to Value. The income approach, divided by a capitalization
rate, determines the assessed value of the property. In general, the income of an
owner-occupied property is based on comparable rents for similar properties in the
area, while the income amount on a commercial property is based on actual rent.
received. Because rental values vary from area to area, actual property savings vary
from county to county. In addition, as County Assessors are required to assess all
properties annually, Mills Act properties may realize slight increases in property taxes
each year.
Qualified Historic Property
A qualified historic property is a property listed on any federal, state, county, or city
register, including the National Register of Historic Places, California Register of
Historical Resources, California Historical Landmarks, State Points of Historical Interest,
and locally designated landmarks. Owner-occupied family residences and income-
producing commercial properties may qualify for the Mills Act program.
OHP's Role
OHP provides technical assistance and guidance to local governments and property
owners. OHP maintains a current list of communities participating in the Mills Act
program and copies of Mills Act ordinances, resolutions, and contracts that have been
adopted. OHP does not participate in the negations of the agreement and is not a
signatory to the contract.
For Additional Information
Contact the planning department of the city or county within which the historic property
is located.
California's four largest cities (Los Angeles, San Diego, San Francisco, and San Jose)
as well as more than 75 other city and county governments have instituted Mills Act
programs. A list of communities participating in the Mills Act Program is available online
at http://www.ohp.parks.ca.qov/default.asp?paqe id=21412.
For additional information on the Mills Act, please contact Maryln Lortie in the Office of
Historic Preservation, PO Box 942896, Sacramento CA 94296-0001, (916) 653-8911,
mlort@ohp.parks.ca.qov.
Mills Act Property Tax Abatement Program
OHP Technical Assistance Bulletin #14
2
California State Codes Relating to Mills Act Program
California Government Code, Article 12, Sections 50280 - 50290
50280. Restriction of property use.
Upon the application of an owner or the agent of an owner of any qualified historical
property, as defined in Section 50280.1, the legislative body of a city, county, or city and
county may contract with the owner or agent to restrict the use of the property in a
manner which the legislative body deems reasonable to carry out the purposes of this
article and of Article 1.9 (commencing with Section 439) of Chapter 3 of Part 2 of
Division 1 of the Revenue and Taxation Code. The contract shall meet the
requirements of Sections 50281 and 50282.
50280.1. Qualified historic property.
"Qualified historical property" for purposes of this article, means privately owned
property which is not exempt from property taxation and which meets either of the
following:
(a) Listed in the National Register of Historic Places or located in a registered historic
district, as defined in Section 1.191-2(b) of Title 26 of the Code of Federal Regulations.
(b) Listed in any state, city, county, or city and county official register of historical or
architecturally significant sites, places, or landmarks.
50281. Required contract provision.
Any contract entered into under this article shall contain the following provisions:
(a) The term of the contract shall be for a minimum period of 10 years.
(b) Where applicable, the contract shall provide the following:
(1) For the preservation of the qualified historical property and, when necessary, to
restore and rehabilitate the property to conform to the rules and regulations of the Office
of Historic Preservation of the Department of Parks and Recreation, the United States
Secretary of the Interior's Standards for Rehabilitation, and the State Historical Building
Code.
(2) For the periodic examinations of the interior and exterior of the premises by the
assessor, the Department of Parks and Recreation, and the State Board of Equalization
as may be necessary to determine the owner's compliance with the contract.
(3) For it to be binding upon, and inure to the benefit of, all successors in interest of
the owner. A successor in interest shall have the same rights and obligations under the
contract as the original owner who entered into the contract.
(c) The owner or agent of an owner shall provide written notice of the contract to the
Office of Historic Preservation within six months of entering into the contract.
Mills Act Property Tax Abatement Program
OHP Technical Assistance Bulletin #14
3
50281.1. Fees.
The legislative body entering into a contract described in this article may require that the
property owner, as a condition to entering into the contract, pay a fee not to exceed the
reasonable cost of administering this program.
50282. Renewal.
(a) Each contract shall provide that on the anniversary date of the contract or such
other annual date as is specified in the contract, a year shall be added automatically to
the initial term of the contract unless notice of nonrenewal is given as provided in this
section. If the property owner or the legislative body desires in any year not to renew
the contract, that party shall serve written notice of nonrenewal of the contract on the
other party in advance of the annual renewal date of the contract. Unless the notice is
served by the owner at least 90 days prior to the renewal date or by the legislative body
at least 60 days prior to the renewal date, one year shall automatically be added to the
term of the contract.
(b) Upon receipt by the owner of a notice from the legislative body of nonrenewal, the
owner may make a written protest of the notice of nonrenewal. The legislative body
may, at any time prior to the renewal date, withdraw the notice of nonrenewal.
(c) If the legislative body or the owner serves notice of intent in any year not to renew
the contract, the existing contract shall remain in effect for the balance of the period
remaining since the original execution or the last renewal of the contract, as the case
may be.
(d) The owner shall furnish the legislative body with any information the legislative
body shall require in order to enable it to determine the eligibility of the property
involved.
(e) No later than 20 days after a city or county enters into a contract with an owner
pursuant to this article, the clerk of the legislative body shall record with the county
recorder a copy of the contract, which shall describe the property subject thereto. From
and after the time of the recordation, this contract shall impart a notice thereof to all
persons as is afforded by the recording laws of this state.
50284. Cancellation.
The legislative body may cancel a contract if it determines that the owner has breached
any of the conditions of the contract provided for in this article or has allowed the
property to deteriorate to the point that it no longer meets the standards for a qualified
historical property. The legislative body may also cancel a contract if it determines that
the owner has failed to restore or rehabilitate the property in the manner specified in the
contract.
50285. Consultation with state commission.
No contract shall be canceled under Section 50284 until after the legislative body has
given notice of, and has held, a public hearing on the matter. Notice of the hearing shall
be mailed to the last known address of each owner of property within the historic zone
and shall be published pursuant to Section 6061.
50286. Cancellation.
Mills Act Property Tax Abatement Program
OHP Technical Assistance Bulletin #14
4
(a) If a contract is canceled under Section 50284, the owner shall pay a cancellation
fee equal to 121/2 percent of the current fair market value of the property, as
determined by the county assessor as though the property were free of the contractual
restriction.
(b) The cancellation fee shall be paid to the county auditor, at the time and in the
manner that the county auditor shall prescribe, and shall be allocated by the county
auditor to each jurisdiction in the tax rate area in which the property is located in the
same manner as the auditor allocates the annual tax increment in that tax rate area in
that fiscal year.
(c) Notwithstanding any other provision of law, revenue received by a school district
pursuant to this section shall be considered property tax revenue for the purposes of
Section 42238 of the Education Code, and revenue received by a county
superintendent of schools pursuant to this section shall be considered property tax
revenue for the purposes of Article 3 (commencing with Section 2550) of Chapter 12 of
Part 2 of Division 1 of Title 1 of the Education Code.
50287. Action to enforce contract.
As an alternative to cancellation of the contract for breach of any condition, the county,
city, or any landowner may bring any action in court necessary to enforce a contract
including, but not limited to, an action to enforce the contract by specific performance or
injunction.
50288. Eminent domain.
In the event that property subject to contract under this article is acquired in whole or in
part by eminent domain or other acquisition by any entity authorized to exercise the
power of eminent domain, and the acquisition is determined by the legislative body to
frustrate the purpose of the contract, such contract shall be canceled and no fee shall
be imposed under Section 50286. Such contract shall be deemed null and void for all
purposes of determining the value of the property so acquired.
50289. Annexation by city.
In the event that property restricted by a contract with a county under this article is
annexed to a city, the city shall succeed to all rights, duties, and powers of the county
under such contract.
50290. Consultation with state commission.
Local agencies and owners of qualified historical properties may consult with the State
Historical Resources Commission for its advice and counsel on matters relevant to
historical property contracts.
Mills Act Property Tax Abatement Program
OHP Technical Assistance Bulletin #14
5
California Revenue and Taxation Code, Article 1.9, Sections 439 - 439.4
439. Historical Property Restrictions; enforceably restricted property.
For the purposes of this article and within the meaning of Section 8 of Article XIII of the
Constitution, property is "enforceably restricted" if it is subject to an historical property
contract executed pursuant to Article 12 (commencing with Section 50280) of Chapter 1
of Part 1 of Division 1 of Title 5 of the Government Code.
439.1. Historical Property; definitions.
For purposes of this article "restricted historical property" means qualified historical
property, as defined in Section 50280.1 of the Government Code, that is subject to a
historical property contract executed pursuant to Article 12 (commencing with Section
50280) of Chapter 1 of Part 1 of Division 1 of Title 5 of the Government Code. For
purposes of this section, "qualified historical property" includes qualified historical
improvements and any land on which the qualified historical improvements are situated,
as specified in the historical property contract. If the historical property contract does
not specify the land that is to be included, "qualified historical property" includes only
that area of reasonable size that is used as a site for the historical improvements.
439.2. Historical Property; valuation.
When valuing enforceably restricted historical property, the county assessor shall not
consider sales data on similar property, whether or not enforceably restricted, and shall
value that restricted historical property by the capitalization of income method in the
following manner:
(a) The annual income to be capitalized shall be determined as follows:
(1) Where sufficient rental information is available, the income shall be the fair rent
that can be imputed to the restricted historical property being valued based upon rent
actually received for the property by the owner and upon typical rentals received in the
area for similar property in similar use where the owner pays the property tax. When
the restricted historical property being valued is actually encumbered by a lease, any
cash rent or its equivalent considered in determining the fair rent of the property shall be
the amount for which the property would be expected to rent were the rental payment to
be renegotiated in the light of current conditions, including applicable provisions under
which the property is enforceably restricted.
(2) Where sufficient rental information is not available, the income shall be that which
the restricted historical property being valued reasonably can be expected to yield under
prudent management and subject to applicable provisions under which the property is
enforceably restricted.
(3) If the parties to an instrument that enforceably restricts the property stipulate
therein an amount that constitutes the minimum annual income to be capitalized, then
the income to be capitalized shall not be less than the amount so stipulated. For
purposes of this section, income shall be determined in accordance with rules and
Mills Act Property Tax Abatement Program
OHP Technical Assistance Bulletin #14
6
regulations issued by the board and with this section and shall be the difference
between revenue and expenditures. Revenue shall be the amount of money or money's
worth, including any cash rent or its equivalent, that the property can be expected to
yield to an owner-operator annually on the average from any use of the property
permitted under the terms by which the property is enforceably restricted. Expenditures
shall be any outlay or average annual allocation of money or money's worth that can be
fairly charged against the revenue expected to be received during the period used in
computing the revenue. Those expenditures to be charged against revenue shall be
only those which are ordinary and necessary in the production and maintenance of the
revenue for that period. Expenditures shall not include depletion charges, debt
retirement, interest on funds invested in the property, property taxes, corporation
income taxes, or corporation franchise taxes based on income.
(b) The capitalization rate to be used in valuing owner-occupied single family
dwellings pursuant to this article shall not be derived from sales data and shall be the
sum of the following components:
(1) An interest component to be determined by the board and announced no later than
September 1 of the year preceding the assessment year and that was the yield rate
equal to the effective rate on conventional mortgages as determined by the Federal
Housing Finance Board, rounded to the nearest 1/4 percent.
(2) A historical property risk component of 4 percent.
(3) A component for property taxes that shall be a percentage equal to the estimated
total tax rate applicable to the property for the assessment year times the assessment
ratio.
(4) A component for amortization of the improvements that shall be a percentage
equivalent to the reciprocal of the remaining life.
(c) The capitalization rate to be used in valuing all other restricted historical property
pursuant to this article shall not be derived from sales data and shall be the sum of the
following components:
(1) An interest component to be determined by the board and announced no later than
September 1 of the year preceding the assessment year and that was the yield rate
equal to the effective rate on conventional mortgages as determined by the Federal
Housing Finance Board, rounded to the nearest 1/4 percent.
(2) A historical property risk component of 2 percent.
(3) A component for property taxes that shall be a percentage equal to the estimated
total tax rate applicable to the property for the assessment year times the assessment
ratio.
(4) A component for amortization of the improvements that shall be a percentage
equivalent to the reciprocal of the remaining life.
(d) Unless a party to an instrument that creates an enforceable restriction expressly
prohibits the valuation, the valuation resulting from the capitalization of income method
described in this section shall not exceed the lesser of either the valuation that would
have resulted by calculation under Section 110, or the valuation that would have
resulted by calculation under Section 110.1, as though the property was not subject to
an enforceable restriction in the base year.
Mills Act Property Tax Abatement Program
OHP Technical Assistance Bulletin #14
7
(e) The value of the restricted historical property shall be the quotient of the income
determined as provided in subdivision (a) divided by the capitalization rate determined
as provided in subdivision (b) or (c).
(f) The ratio prescribed in Section 401 shall be applied to the value of the property
determined in subdivision (d) to obtain its assessed value.
439.3. Historical Property; notice of nonrenewal.
Notwithstanding any provision of Section 439.2 to the contrary, if either the county or
city or the owner of restricted historical property subject to contract has served notice of
nonrenewal as provided in Section 50282 of the Government Code, the county
assessor shall value that restricted historical property as provided in this section.
(a) Following the hearing conducted pursuant to Section 50285 of the Government
Code, subdivision (b) shall apply until the termination of the period for which the
restricted historical property is enforceably restricted.
(b) The board or assessor in each year until the termination of the period for which the
property is enforceably restricted shall do all of the following:
(1) Determine the full cash value of the property pursuant to Section 110.1. If the
property is not subject to Section 110.1 when the restriction expires, the value shall be
determined pursuant to Section 110 as if the property were free of contractual
restriction. If the property will be subject to a use for which this chapter provides a
special restricted assessment, the value of the property shall be determined as if it were
subject to the new restriction.
(2) Determine the value of the property by the capitalization of income method as
provided in Section 439.2 and without regard to the fact that a notice of non renewal or
cancellation has occurred.
(3) Subtract the value determined in paragraph (2) of this subdivision by capitalization
of income from the full cash value determined in paragraph (1).
(4) Using the rate announced by the board pursuant to paragraph (1) of subdivision
(b) of Section 439.2, discount the amount obtained in paragraph (3) for the number of
years remaining until the termination of the period for which the property is enforceably
restricted.
(5) Determine the value of the property by adding the value determined by the
capitalization of income method as provided in paragraph (2) and the value obtained in
paragraph (4).
(6) Apply the ratios prescribed in Section 401 to the value of the property determined
in paragraph (5) to obtain its assessed value.
439.4. Historical Property; recordation.
No property shall be valued pursuant to this article unless an enforceable restriction
meeting the requirements of Section 439 is signed, accepted and recorded on or before
the lien date for the fiscal year in which the valuation would apply.
Mills Act Property Tax Abatement Program
OHP Technical Assistance Bulletin #14
8
COMMUNITIES PARTICIPATING IN MILLS ACT PROGRAM
Jurisdiction County # of Contract Ordinance Certified Local Government
Berkeley Alameda 1 YES YES
Fremont Alameda 2 YES NO
Chico Butte 2 NO NO
Danville Contra Costa 4 YES YES
Orinda Contra Costa NO
Claremont Los Anoeles 1 NO NO
Covina Los Angeles 0 YES NO
Glendale Los AnQeles 6 YES YES
Glendora Los Anoeles 5 YES NO
La Verne Los Angeles 6 NO NO
Lono Beach Los Anoeles 22 YES YES
Los Anegles (county) Los Angeles 2 NO NO
Los AnQeles (citv) Los AnQeles 185 YES NO
Monrovia Los Angeles 63 YES NO
Norwalk (pending) Los Angeles
Pasadena Los Anoeles 12 YES YES
Pomona Los Angeles 0 YES NO
Redondo Beach Los Anoeles 43 YES YES
San Gabriel Los Angeles 1 YES NO
Santa Monica Los AnQeles 18 YES YES
Sierra Madre Los Angeles 14 YES NO
South Pasadena Los AnQeles 3 YES
West Hollywood Los Angeles 68 YES YES
Whittier Los AnQeles 24 YES NO
Belvedere Marin 1 YES NO
Larkspur Marin 1 YES NO
Monterev (city) Monterev 5 YES YES
Monterey (county) (pending) Monterey YES
Napa (city) Napa 0 NO YES
SI. Helena Napa 0 YES NO
Anaheim Orange 97 YES NO
Brea Oranoe 5 NO NO
Dana Point Orange 5 YES NO
Irvine OranQe 1 NO
Laouna Beach Orange 5 YES NO
La Mesa Orange 0 NO
Oranoe (city) Oranoe 74 YES NO
San Clemente Oranoe 16 YES YES
San Juan Capistrano Orange 1 NO
Santa Ana OranQe 10 YES YES
Tustin OranQe 6 YES YES
Placer (county) Placer 0 YES NO
Corona Riverside 5 YES NO
Palm Sprinos Riverside 1 YES NO
Sacramento (city) Sacramento 29 YES YES
Colton San Bernardino 12 YES YES
Highland San Bernardino 2 NO YES
Ontario San Bernardino 11 NO YES
Rancho Cucamonga San Bernardino 22 YES NO
Upland San Bernardino 28 NO NO
COMMUNITIES PARTICIPATING IN MILLS ACT PROGRAM
Jurisdiction County # of Contract Ordinance Certified Local Government
Chula Vista San Diego 29 NO
Coronado San Diego 0 YES NO
Escondido San DieQo 54 YES YES
La Mesa San Dieao 7 YES NO
National City San Diego 3 YES NO
San DieQo (city) San DieQo 473 YES YES
San Diego (county) San DieQo 13 YES YES
San Francisco (city and county) San Francisco 1 YES YES
Paso Robles San Luis Obispo YES NO
San Luis Obispo (city) San Luis Obispo 19 YES NO
Redwood City San Mateo 5 YES YES
San Mateo (city) San Mateo 1 YES NO
South San Francisco San Mateo 6 YES NO
Gilroy Santa Clara
Los Altos Santa Clara 5 YES YES
Morgan Hill Santa Clara 1 YES NO
Palo Alto Santa Clara 2 YES YES
San Jose Santa Clara 3 YES YES
Santa Clara (county) Santa Clara 4 NO NO
Saratoga Santa Clara 0 YES YES
Sunnyvale Santa Clara 3 YES YES
Benicia Solano 12 YES NO
Vallejo Solano 2 YES YES
Modesto Stanislaus 12 YES NO
Jamestown (unicoroorated) Tuolomne 1 YES YES
Soulsbvville (unincorporated) Tuolomne 1 YES YES
Tuolomne (unicorporated) Tuolomne 1 YES YES
Tuttletown (unincorporated) Tuolomne 1 YES YES
Ojai Ventura 1 YES NO
Ventura (City) Ventura 0 YES NO
Ventura (county) Ventura 1 YES YES
.
STATE OF CALIFORNIA
-"~-~--~.-------
STATE BOARD OF EQUALIZATION
PROPERTY AND SPECIAL TAXES DEPARTMENT
450 N STREET. SACRAMENTO. CALIFORNIA
PO BOX 942879. SACRAMENTO. CALIFORNIA 94279-0064
916445-4982 . FAX 916 323-8765
www.boe.ca.gov
BETTY T. YEE
Acting Member
First District, San Francisco
BILL LEONARD
Second District, Sacramento/Ontario
CLAUDE PARRISH
Third District, long Beach
June 2, 2005
JOHN CHIANG
Fourth District, Los Angeles
STEVE WESTL Y
Stale Controller, Sacramento
RAMON J HIRSIG
Executive Director
No. 2005/035
TO COUNTY ASSESSORS AND INTERESTED PARTIES:
NOTICE OF BOARD ACTION
GUIDELINES FOR THE ASSESSMENT OF
ENFORCEABL Y RESTRICTED HISTORICAL PROPERTY
On May 25, 2005, the Board of Equalization approved the following guidelines pertaining to the
assessment of enforceably restricted historical property. These guidelines supersede Letter To
Assessors No. 7711 74 (dated December 19, 1977).
On June 8, 1976, the voters of California approved Proposition 7 which amended section 8 of
article XIII of the California Constitution. This amendment requires that enforceably restricted
historical property be valued on a basis that is consistent with its restrictions and uses. Sections
439 through 439.4 were added to the Revenue and Taxation Code to implement Proposition 7.
These statutes, in particular section 439.2, prohibit a valuation of enforce ably restricted historical
property based on sales data and instead require that such property be valued by a prescribed
income capitalization method.
Staff drafted these guidelines in consultation with interested parties and, after discussions, no
issues remained unresolved. The guidelines discuss the enforceably restricted historical property
requirements, the income to be capitalized, the capitalization rate, the effect of Proposition 13
upon enforceably restricted historical properties that undergo change in ownership or new
construction, and the valuation of property under notice of nonrenewal.
The guidelines are posted on the Board's website at www.boe.ca.gov/proptaxes/guideproc.htm.
We hope this information proves useful and promotes uniformity of assessment for these
properties. If you have any questions, please contact our Real Property Technical Services Unit
at 916-445-4982.
Sincerely,
/s/ David J. Gau
David 1. Gau
Deputy Director
Property and Special Taxes Department
DJG:grs
Enclosure
GUIDELINES FOR THE ASSESSMENT OF
ENFORCEABL Y RESTRICTED HISTORICAL PROPERTY
HISTORY
Effective March 7, 1973, Chapter 1442 of the Statutes of 1972 (also known as the Mills Act)
added sections 50280 through 50289 to the Government Code to allow an owner of qualified
historical property to enter into a preservation contract with local government. When property is
placed under such a contract, the owner agrees to restore the property if necessary, maintain its
historic character, and use it in a manner compatible with its historic characteristics.
Prior to the passage of Proposition 7 in 1976, these agreements (i.e., Mills Act contracts)
constituted enforceable restrictions on the use of land within the meaning of Revenue and
Taxation Code section 402.11 (Property Tax Rule 60, repealed January 10, 1978). However,
Proposition 7 added the second paragraph to section 8 of article XIII of the California
Constitution:
To promote the preservation of property of historical significance, the Legislature
may define such property and shall provide that when it is enforceably restricted,
in a manner specified by the Legislature, it shall be valued for property tax
purposes only on a basis that is consistent with its restrictions and uses.
To implement Proposition 7, Chapter 1040 of the Statutes of 1977 (Senate Bill 380) added
sections 439 through 439.4 to the Revenue and Taxation Code. These statutes, in particular
section 439.2, prohibit a valuation of enforceably restricted historical property based on sales
data and instead require that such property be valued by a prescribed income capitalization
method.
ENFORCEABL Y RESTRICTED HISTORICAL PROPERTY
Under section 439, historical property is "enforceably restricted" if it meets the definition of a
"qualified historical property" as defined in Government Code section 50280.1 and is subject to a
historical property contract executed pursuant to Government Code section 50280 and following.
A qualified historical property includes qualified historical improvements and the land on which
the improvements are situated, as specified in the historical property contract. If the contract
does not specify the land to be included, the qualified historical property includes only a land
area of reasonable size to situate the improvements.
A qualified historical property is privately-owned property that is not exempt from property
taxation and that also meets either of the following criteria:
. The property is listed in the National Register of Historic Places, or is located within a
registered historic district; or
I Unless otherwise noted, all statutory references are to the Revenue and Taxation Code.
. The property is listed in any official state, county, city, or city and county official register of
historical or architecturally significant sites, places or landmarks, including the California
Register of Historical Resources, California Historical Landmarks, State Points of Historical
Interest, local landmarks, and local survey listings of historical properties.
The historical property contract must have a minimum term often years, and, as applicable, must
contain certain other elements, including the following:
. A provision relating to the preservation of the qualified historical property and, when
necessary, the restoration and rehabilitation of the property in conformance with state historic
preservation guidelines;
. A requirement for the periodic examination of the property to ensure compliance with the
agreement;
. A requirement that the historical property agreement be binding upon successor owners of
the qualified historical property; and
. A provision for an automatic one-year extension of the contract, with an additional year
added to the initial contract term on each anniversary of the contract, unless either party
provides notice of nonrenewal. If a notice of nonrenewal is given, the contract runs for its
remaining tenn.
Once a contract is signed, accepted, and recorded, the property subject to the contract must be
assessed under section 439.2 on the ensuing lien date. For example, if a contract were recorded
in August 2004, the property should have been valued pursuant to section 439.2 for lien date
January I, 2005.
Local authorities may cancel a historical property agreement for breach of contract or failure to
protect the historical property. Alternatively, the local entity may take legal action to enforce the
contract.
ASSESSMENT
The assessment of an enforceably restricted historical property involves the following aspects:
(I) valuing the restricted historical property; (2) properly applying certain assessment provisions
relating to article XIII A of the California Constitution (Prop 13); (3) valuing the restricted
historical property following a notice of nonrenewal; and (4) valuing the restricted historical
property following cancellation of the contract.
Valuing the Restricted Historical Property
Section 439.2 prohibits the assessor from using sales data relating to similar properties, whether
or not enforceably restricted, to value an enforceably restricted historical property. Instead, the
assessor must annually value a restricted historical property using an income approach that
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follows the specific provisions of section 439.2. These provisions explicitly address (I) the
determination of the income to be capitalized, (2) the development of the capitalization rate, (3)
the capitalization technique to be used, and (4) the determination of the restricted historical
property's taxable value on each lien date.
Income to be Capitalized
As provided in section 439.2(a), the income to be capitalized when valuing a restricted historical
property is the property's fair rent less allowed expenditures, or allowed expenses. In general,
section 439.2(a) follows Property Tax Rule 8(c), with fair rent in section 439.2 corresponding to
gross return in Rule 8(c); allowed expenditures, or allowed expenses, in section 439.2
corresponding to gross outgo in Rule 8(c); and the income to be capitalized in section 439.2
corresponding to net return in Rule 8(c). In addition, for the purposes here, "gross income" is
synonymous with fair rent, and "net operating income" is synonymous with the income to be
capitalized.
The parties to a historical property agreement may stipulate a minimum annual income to be
capitalized, in which case the income to be capitalized may not be less than the stipulated
amount.
Fair rent, or gross income. The gross income of a restricted historical property is the fair rent
for the property considering the restrictions on the property's use. When establishing the fair rent
for a restricted historical property, the appraiser should consider the actual rent and typical rents
in the area for similar properties in similar use, where the owner pays the property taxes.
The actual rent received by the owner of the subject restricted historical property is relevant to an
estimate of fair market rent only if the actual rent is the same rent that would be expected if the
existing lease were renegotiated in light of current market conditions, including the subject
property's enforceable restrictions on use. With respect to rents from similar, or comparable,
properties, if such rents are from properties outside the geographic or market area of the subject
property, or from properties that are otherwise dissimilar to the subject property, the rents may
not be relevant to an estimate of the subject property's fair rent.
Comparable rental data for single-family residences can be obtained from real estate brokers,
rental agencies, and newspaper ads. Many assessors offices maintain rental data for commercial
properties, and this data may be helpful when establishing the fair rent for restricted historical
property when the contract allows a commercial use. Rental data for commercial property also
can be obtained from commercial real estate brokers. For the purpose of estimating anticipated
market fair rent and expenditures for use in calculating the subject property's value, rental and
expense data for existing restricted historical properties, including the subject historical property,
can be obtained through an annual questionnaire sent to property owners.
If sufficient rental data are not available, or such data are unreliable, the appraiser must impute a
gross income for the subject restricted historical property. The imputed income should be based
on what an informed investor would reasonably expect the property to yield under prudent
management, given the provisions under which the property is enforceably restricted.
3
Allowed expenditures. Section 439.2(a)(3) defines allowed expenditures, or allowed expenses,
as expenses necessary for the maintenance of the property's income. Allowed expenses are the
same as those permitted in Property Tax Rule S(c).
Typical expenses include the cost of utilities, maintenance and repair, insurance and property
management. Allowed expenses also may include amounts owing for special assessments and
special taxes. Expenses related to debt service, general property taxes, and depreciation should
not be deducted.
In general, to arrive at the net income to be capitalized, allowed expenses are subtracted from the
estimated rental income. However, in order to properly process the income, the appraiser must
be aware of the structure of the lease with regard to how expenses are shared between the
landlord-owner and the tenant.
The proper perspective from which to view the processing of income and expenses is that of the
landlord-owner. The objective is to estimate the net income to the landlord-owner-this is the
amount that should be capitalized-and the correct question to ask is the following: What, if
any, allowed expenses must the landlord-owner payout of the rental income that he or she
receives?
In a gross lease, almost all of the allowed expenses must be paid out of the gross rent and,
therefore, must be subtracted from the gross rent to arrive at the net income to be capitalized. In
a net lease, relatively few allowed expenses must be paid by the landlord-owner out of the net
rent (because the tenant pays most expenses) and only these expenses should be subtracted from
the net rent to arrive at the net income to be capitalized. Frequently, there is a hybrid
arrangement-some expenses are paid by the landlord-owner and some by the tenant. How
expenses are shared often depends upon the property type together with local conventions.
Income to be capitalized, or net operating income. The income to be capitalized, or net
operating income, is simply the fair rent, or gross income, described above less the allowed
expenditures described above.
Capitalization Rate
The method of developing the capitalization rate to be used when valuing restricted historical
property is prescribed by statute; a capitalization rate derived from sales data or the band of
investment is not permitted.
Section 439.2 prescribes two types of capitalization rates for restricted historical property: (I) a
capitalization rate to be used when valuing restricted historical property that is an owner-
occupied single-family residence and (2) a capitalization rate to be used when valuing all other
restricted historical property. Both types of capitalization rates include components for interest
(i.e., yield), risk, property taxes, and amortization of improvements; in fact, the two rates are
identical except for the amount of the risk component. The capitalization rate contains the
following components:
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. An interest component annually determined by the State Board of Equalization and based on
the effective rate on conventional mortgages as determined by the Federal Housing Finance
Board. The interest component is announced annually, in a Letter To Assessors, by
October I of the preceding assessment year.
. A historical property risk component determined by property type. For owner-occupied
single-family residences, the rate is 4 percent; for all other types of restricted historical
property, the rate is 2 percent.
. An amortization component for improvements defined as a percentage equal to the reciprocal
of the remaining life of the improvements (e.g., if the remaining economic life of the
improvements were 20 years, the amortization component would be 5 percent). Since the
amortization component applies only to improvements, not to land, which is a non-
depreciating asset, it is necessary to adjust the amortization component described in the
statute. We recommend the following method of adjustment:
I. Based upon market data, estimate the percentage of total property value attributable
to improvements.
2. Multiply this percentage by the amortization component described in the statute (i.e.,
by the reciprocal of the remaining life of the improvements). For example, if the
remaining life of the improvements was 20 years, yielding a reciprocal percentage of
5 percent, and if 70 percent of the total property value was attributable to the
improvements, the adjusted amortization factor would be 3.5 percent (0.05 x 0.70 ==
0.035).
3. Add the adjusted amortization component to the other capitalization rate components
to arrive at the total capitalization rate.
. A property taxes component equal to the percentage of the estimated total tax rate applicable
to the property for the assessment year multiplied by the assessment ratio. Typically, the
property tax component includes the basic tax rate of I percent plus an additional ad valorem
rate related to any bonded indebtedness pertaining to the tax rate area in which the property is
located. Special district assessments and special taxes are not included in the property tax
component. As noted above, they should be treated as allowed expenses.
Capitalization Technique
The capitalization technique to be used when valuing a restricted historical property is prescribed
by statute and is formulaic. Section 439.2(e) provides that the restricted value shall be the
income to be capitalized, or net operating income, developed as prescribed by statute, divided by
one of the two types of capitalization rates prescribed by statute. In other words, the restricted
value is the simple quotient of the prescribed income to be capitalized and the prescribed
capitalization rate.
5
Determination of Taxable Value on Each Lien Date
Section 439.2(d) provides that a historical property's restricted value may not be enrolled if it
exceeds either (I) the value of the subject property as determined under section 110 (i.e., current
market value) or (2) the value of the subject property as determined under section 110.1 (i.e.,
factored base year value). In other words, section 439.2 states that the taxable value of a
restricted historical property on each lien date shall be the lowest of its restricted value, current
market value, or factored base year value. The factored base year value for an enforceably
restricted historical property is the value that was established for the 1975 lien date2 or as of the
date of the most recent change in ownership, whichever is later, adjusted by the annual inflation
factor.
Article XIII A (Prop 13) Considerations
This section discusses how three important elements relating to implementation of article
XIII A-change in ownership, new construction, and supplemental assessment-relate to the
assessment of restricted historical property. Also discussed is the case in which only a portion of
a property is subject to the historical property agreement-that is, the case in which a single
property unit contains both restricted and unrestricted portions.
Change in Ownership
When a property subject to a historical property contract undergoes a change in ownership, a
new base year value should be established for the property as of the date of change in ownership,
as provided in section 110.1. Typically, a restricted historical property's base year value will be
greater than its restricted value determined under section 439.2 and hence will not be enrolled as
the property's taxable value. However, the establishment of a new base year value enables the
assessor to perform the three-way value comparison prescribed by section 439.2(d) and
described above. The establishment of a base year value is also necessary in order to calculate
the assessed values of historical property should the historical property agreement enter
nonrenewal status.
New Construction
Section IV of National Register Bulletin # IS defines a "building" as follows:
A building, such as a house, barn, church, hotel, or similar construction, is created
principally to shelter any form of human activity. "Building" may also be used to
refer to a historically and functionally related unit, such as a courthouse and jailor
a house and barn.
Section IV further specifies that "[b]uildings eligible for the National Register must include all of
their basic structural elements. Parts of buildings, such as interiors, facades, or wings, are not
eligible independent of the rest of the existing building. The whole building must be considered,
2 Sections 110.I(d) and 405.5 do not apply to historical properties under contract as of lien date 1975 because the
constitutional amendment which placed the valuation of historical property under article XIII rather than article
Xlll A had not yet been passed and, thus, was not in effect for the 1975 lien date.
6
and its significant features must be identified." Thus, eligibility for the National Register is
determined by the extent to which the basic structural elements of an existing building are intact.
In general, a newly constructed building would not be eligible because it is not an existing
building with basic structural elements.3
Also, a newly constructed building is not a historic resource, and, thus, is not a qualified
historical property within the meaning of Government Code section 50280.1. For example, a
newly constructed detached garage (assuming it is not a reconstruction of a historical garage)
clearly would not be eligible because it has no significance in American history or architecture,
nor does it meet any of the other requisite criteria.
Bulletin 15, however, does list one type of newly constructed property that may be eligible for
inclusion under the Mills Act. A reconstructed historic building is eligible for the National
Register if the reconstruction is "accurately executed in a suitable environment and presented in
a dignified manner as part of a restoration master plan, and when no other building or structure
with the same association has survived."
The historical property contract typically specifies the scope and type of any work to be
performed on the historical improvements. Improvements existing as of the date of the contract
would be subject to the provisions of section 439.2 unless specifically excluded by the contract.
Any new construction made to the historical structure after the issuing date of the contract would
not be subject to the provisions of section 439.2 unless specifically included in the contract or an
amendment to the contract. Any questions regarding new construction to enforceably restricted
historical structures should be directed to the counsel of the legislative body of the city, county,
or city and county that contracted with the property owner.
Assuming that the newly constructed property is subject to the historical property contract, a
base year value should be established for the newly constructed portion and this value added to
the factored base year value of the existing restricted property.
In some cases, an existing historical property may include a portion that is restricted (i.e., subject
to a historical property contract) and a portion that is unrestricted. In this case, separate factored
base year values should be maintained for the restricted and unrestricted portions and the base
year value of any newly constructed property added to the appropriate portion. The assessment
treatment of this type of property is discussed further below.
Supplemental Assessment
Although the assessor is required to establish a new base year value upon a change in ownership
or completed new construction involving restricted historical property, such property is not
subject to supplemental assessment. As provided in Revenue and Taxation Code section 75.14:
Supplemental assessment; limitation. A supplemental assessment pursuant to
this chapter shall not be made for any property not subject to the assessment
3 National Register Bulletin 15, "How to Apply the National Register Criteria for Evaluation," U.S. Department of
the Interior, National Park Service (www.cr.nps.gov/nr/publications/).
7
limitations of Article XIII A of the California Constitution. All property subject
to the assessment limitations of Article XIII A of the California Constitution shall
be subject to the provisions of this chapter, except as otherwise provided in this
article.
As discussed above, the assessment of enforceably restricted historical property is subject to the
provisions of article XIII, section 8 of the California Constitution, not article XIII A. Thus,
section 75.14 precludes the assessor from enrolling supplemental assessments for enforceably
restricted historical property.
Historical property not yet under contract that undergoes a change in ownership or new
construction is subject to supplemental assessment, even if the property owner later executes a
historical property contract in the same fiscal year. Also, any new construction involving a
historical property that does not come under the existing historical property contract (e.g., a
detached garage added to a restricted historical property) would be subject to supplemental
assessment.
When a Property Contains Both Restricted and Unrestricted Portions
When only a portion of a property that would normally be considered a single appraisal unit is
restricted by a historical property contract, the assessed value should be determined by making a
comparison of three values, determined as follows. First, the portion under contract should be
valued using the capitalization method prescribed by section 439.2. Added to this figure should
be the lower of the unrestricted portion's fair market value or factored base year value. The
resulting sum should be compared to both the fair market value and the factored base year value
of the entire property (i.e., both restricted and unrestricted portions) and the lowest of the three
figures should be enrolled.
Valuing Property Under Notice of Nonrenewal
As provided in Government Code section 50282, either the owner of a restricted historical
property or the local government entity may serve notice that it does not intend to renew the
historical property contract. If such notice is not given, another year is automatically added to
the term of the initial contract, thus creating a "rolling" contract term that is always equal to the
initial contract term.
Section 439.3 prescribes the valuation method for a restricted historical property in nonrenewal
status; this valuation method applies until the end of the restricted period (i.e., until the existing
contract expires). In essence, the method results in a restricted value that gradually approaches
the historical property's factored base year value as the remaining term under the contract
decreases. For a property in nonrenewal status, the assessor must annually value the property as
follows:
1. Determine the full cash value (i.e., factored base year value) of the property in accordance
with section 110.1. (Alternatively, if the property will not be subject to section 110.1 when
the historical property agreement expires, determine its fair market value in accordance with
8
section 110, as if the property were free of the agreement's restrictions; or, if the property
will be subject to another type of restricted value standard when the historical property
agreement expires, determine the property's value as if it were subject to the new
restrictions.)
2. Determine the restricted value of the property by the capitalization of income method
provided in section 439.2.
3. Subtract the restricted value determined in Step 2 from the factored base year (or other) value
determined in Step I.
4. Using the amount for the interest rate component (section 439.2(b)(1)) announced by the
Board, discount the amount obtained in Step 3 for the number of years remaining until the
termination of the contract.
5. Determine the restricted value of the property in nonrenewal status by adding the value
determined in Step 2 to the amount obtained in Step 4.
The historical property's restricted value in nonrenewal status-that is, the value determined
above, in accordance with section 439.3-should be compared with the historical property's
factor base year and current market values, and the lowest of these three values should be
enrolled as the property's taxable value.
Cancellation of Contract
The government entity party to a historical property contract may cancel the contract, after notice
and a public hearing, if it determines that either the owner has breached the agreement or the
property has deteriorated to the extent that it no longer meets the standards of a historical
property. If the contract is cancelled, the property owner must pay a cancellation fee equal to
12 Y2 percent of the property's current fair market value as though free of the contractual
restriction, such value to be determined by the county assessor. After a contract is cancelled, the
lower of the property's factored base year value or current market value should be enrolled for
the ensuing lien date.
SUMMARY
The key points contained in these guidelines can be summarized as follows:
\. An owner of qualified historical property may enter into a preservation contract with local
government. When property is placed under such a contract, the owner agrees to restore the
property if necessary, maintain its historic character, and use it in a manner compatible with
its historic characteristics. Such property receives the special valuation treatment prescribed
under Revenue and Taxation Code sections 439 through 439.4.
2. Enforceably restricted historical property is to be annually valued by the income
capitalization method prescribed in section 439.2, which contains specific instructions with
9
regard to the income to be capitalized, the capitalization rate, and the capitalization technique
to be used. The restricted value must be compared to the property's current market value and
factored base year value, with the lowest of these three values enrolled as the property's
taxable value.
3. When assessing restricted historical property, the appraiser should consider how three
important elements of article XIII A--change in ownership, new construction, and
supplemental assessment-relate to the assessment. The appraiser should consider how a
property should be assessed when only a portion of it is subject to a historical property
agreement.
4. Restricted historical property under a notice of nonrenewal should be valued in accordance
with section 439.3.
5. The government entity party to a historical property contract may cancel the contract. The
cancellation fee is 12 Yz percent of the property's current fair market value as though free of
the contractual restriction, with such value to be determined by the local assessor.
Additional information about Mills Act contracts may be obtained from the state Office of
Historic Preservation, either by telephone at 916-653-6624, or from their website
( www.ohp.parks.ca.gov ).
(Note: Please see the assessment examples following.)
10
Historical Property Valuation Examples
Page I
EXAMPLE 1 (OWNER-OCCUPIED SINGLE-FAMILY RESIDENCE)
Subject Restricted Historical Property
Restored, I 05-year-old, Victorian single-family residence. Excellent condition. Under Mills Act
contract since 1985 and not in nonrenewal status. Owner-occupied.
Determination of Restricted Value (current lien date)
Gross income (Fair rent)
$1,500 per month x 12 months =
Less: Anticipated vacancy and collection loss
$18,000 x 5%
Effective gross income
Less: Anticipated operating expenses
Grounds maintenance
Fire insurance
Management Fee
Water and garbage
Building maintenance
Net Operating Income
$18,000
- 900
$1 7,100
$600
400
360
240
+ 500
- 2,1 00
$15,000
Restricted Capitalization Rate
Rate Components:
Interest rate .080
Risk (owner-occupied SFR) .040
Property tax (ad valorem) .015
Amortization (50-year remaining life; improvements
constitute 70% of total property market value;
0.02 x 0.70 - 0.014) + .014
.149
Restricted Value
$15,000 -:- .149
= $100,671
Taxable Value--Three-Way Value Comparison
Restricted value
Factored base year value (based on prior change in ownership)
Current market value (based on comparable sales)
$100,671
$357,000
$450,000
The lowest of the three possible values is the restricted value. Thus, the net taxable value would
be $93,671 ($100,671 restricted value less the homeowners' exemption of $7,000).
Note I: If this property had been a non-owner-occupied SFR, the only difference in the
determination of the restricted value would have been the use of a risk rate component of 2%
rather than 4% in the capitalization rate.
Note 2: In this and the following examples, the gross income, or fair rent, is presented on a gross
rent basis, that is, under the assumption that the landlord-owner pays all operating expenses out
of the gross income.
Historical Property Valuation Examples
Page 2
EXAMPLE 2 (OFFICE USE)
Subject Restricted Historical Property
Multi-tenant, restored historical office building in a downtown commercial district. Under Mills
Act contract since 1985 and not in nonrenewal status.
Determination of Restricted Value (current lien date)
Gross Income (Fair rent):
Offices 140,000 sf@ $1.75/sf= $245,000
x 12 months = $2,940,000
Less: Anticipated vacancy and collection loss
$2,940,000 x 5%
Effective gross income
Less: Anticipated operating expenses
Management
Maintenance
Insurance
Utilities
Janitorial
Net Operating Income
- 147,000
$2,793,000
$290,000
95,000
75,000
360,000
+ 140,000
- 960,000
$1,833,000
Restricted Capitalization Rate
Rate Components:
Interest component .08
~~ .m
Property tax (ad valorem) .011
Amortization (50-year remaining life; improvements
constitute 75% of total property market value
0.02 x 0.75 = 0.015) + .015
.126
Restricted Value
($ \,833,000 -7 .126)
= $14,547,619
Taxable Value--Three-Way Value Comparison
Restricted value
Factored base year value (based on prior change in ownership)
Current market value (based on comparable sales)
$14,547,619
$18,191,077
$21,000,000
The lowest of the three possible values is the restricted value. Thus, the taxable value would be
$14,547,619
Historical Property Valuation Examples
Page 3
EXAMPLE 3 (MIXED USE-RESIDENTIAL AND OFFICE)
Subject Restricted Historical Property
Two-story, restored historical property in a downtown district. Upper level is residential unit
occupied by owner. Lower level contains three office spaces subject to short-term rental
agreements. The income stream for the upstairs unit must be calculated separately from the
downstairs unit because the risk rate is different for the owner-occupied unit.
Determination of Restricted Value
Separate restricted values for the upper-level residence and the lower-level office space must be
determined, because the risk components are different for the two types of use. The total
restricted value is sum of these two values.
Upper-Level Unit
Gross income (Fair rent) based upon comparable rent data
$975 per month x 12 months =
$11,700
Less: Anticipated vacancy and collection loss
$11,700 x 5%
Effective gross income
Less: Anticipated operating expenses
Grounds maintenance
Fire insurance
Management Fee
Water and garbage
Building maintenance
Upper-Level Net Operating Income
Restricted Capitalization Rate (owner-occupied SFR)
Rate components:
Interest rate .080
Risk .040
Property tax .0 I 0
Amortization ( 50-year remaining life; improvements
constitute 70% of total property market value;
0.02 x 0.70 = 0.014)
Upper-level Restricted Value ($10,065 + .144)
- 585
$11,115
$300
200
180
120
+ 250
- 1.050
$10,065
+.014
.144
= $69,895
Lower-Level Offices
Gross income (Fair rent)
1000 sf @ $1.60/sf = $1,600 x 12 months
Less: Anticipated vacancy and collection loss
$19,200 x 5%
Effective gross income
$19,200
- 960
$18,240
Historical Property Valuation Examples
Page 4
Less: Anticipated operating expenses
Grounds maintenance
Fire insurance
Management Fee
Water and garbage
Building maintenance
Lower-Level Net Operating Income
$300
200
180
120
+ 250
- 1,050
$17,190
Restricted Capitalization Rate
Rate components:
Interest component .080
Risk .020
Property tax .0 I 0
Amortization (50-year remaining life; improvements
constitute 70% of total property market value;
0.02 x 0.70 = 0.014) + .014
Lower Level Restricted Value ($17,190 -:- .124)
Add: Upper Level Restricted Value
Total Restricted Value
.124
$138,629
+ $69,895
$208,524
Taxable Value---Three-Way Value Comparison
Restricted Value
Factored base year value (based upon prior change in ownership)
Current market value (based upon comparable sales data)
$208,524
$364,140
$400,000
The lowest of the three possible values is the restricted value. Thus, the net taxable value would
be $20 1,524 ($208,524 less the homeowners' exemption of $7,000).
Historical Property Valuation Examples
Page 5
EXAMPLE 4 (MIXED VALUATION-PART RESTRICTED AND PART UNRESTRICTED)
Description of Subject Property (Comprises Both Restricted and Unrestricted Portions)
The subject property is a 10-acre parcel with a farmhouse and barn situated on 2 acres; the
remaining 8 acres are farmland. The farmhouse and barn are used as an owner-occupied single-
family residence; this portion of the property is restricted under a Mills Act contract. The
remaining 8 acres of farmland are unrestricted.
Value of Restricted Portion (current lien date)
Gross income (Fair rent) for farmhouse and barn
$2,000 per month x 12 months =
Less: Anticipated vacancy and collection loss
$24,000 x 5%
Effective gross income
Less: Anticipated operating expenses
Grounds maintenance
Fire insurance
Management Fee
Water and garbage
Building maintenance
Net Operating Income
$24,000
- 1,200
$22,800
$600
400
360
240
+ 500
- 2.1 00
= $20,700
Restricted Capitalization Rate
Rate components:
Interest component .080
Risk (owner-occupied) .040
Property tax (ad valorem) .010
Amortization (50-year remaining life; improvements
constitute 70% of total property market value
0.02 x 0.70 = 0.014) + .014
Restricted Value ($20,700 -:- .144)
.144
= $143,750
Taxable Value--Three-Way Comparison
Total Property Restricted Value (sum of restricted value above and lower of FBYV or current
market value of unrestricted portion)
Restricted Value (portion under contract)
FBYV (unrestricted portion)
Restricted Value (total property)
Factored base year values (based upon a prior change
allocated between restricted and unrestricted portions):
Farmhouse, barn, and 2 acres (restricted portion)
8 acres (unrestricted portion)
Total FBYV (total property)
$143,750
+ $102,000
$245,750
in ownership of the entire property,
$204,000
+ $102,000
$306,000
Historical Property Valuation Examples
Page 6
Current market values (based upon comparable sales data):
Farmhouse, barn, and 2 acres (restricted portion)
8 acres (unrestricted portion)
Total Current Market Value (total property)
$230,000
+ $120,000
$350,000
The lowest of the three values is the Restricted Value (total property), $245,750. Thus, the net
taxable value would be $238,750 ($245,750 less $7,000 homeowners' exemption).
Historical Property Valuation Examples
Page 7
EXAMPLE 5 (PROPERTY IN NONRENEWAL STATUS)
Description of Subject Restricted Historical Property
The same property as in Example 2, except the property owner has served notice of renewal.
The Mills Act contract covering the property was originally executed in September 1995, and the
owner served notice of nonrenewal in June 2004. Value the property for the 2005 lien date,
reflecting its nonrenewal status. Assume that the property's restricted, current market, and
factored base year values from Example 2, provided below, also refer to January 1, 2005.
Restricted value
Current market value
Factored base year value
$14,547,619
$21,000,000
$18,191,077
Restricted Value in Nonrenewal Status
Value as if unrestricted (factored base year value)
Restricted value
Difference
Present worth of difference
PWl @ 6.00 %, 9 years (interest component for lien date 2005)
$18,191,077
- 14.547,619
$ 3,643,458
Plus restricted value
Restricted value in nonrenewal status-lien date January I, 2005
x.591898
= $ 2,156,555
+ $14,547,619
$16,704,174
Taxable Value
Since the restricted value in nonrenewal status, $16,704,174, is less than either the
property's current market value or its factored base year value, this is the taxable value.
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RESOLUTION NO.--.t (Q) fV
RESOLUTION OF THE MAYOR AND COi\1MON COUNCIL OF THE CITY OF SAN
BERNARDINO ESTABLISHING THE APPLICATION PROCESS, REVIEW
PROCEDURES, AND REQUIRED CONTRACT PROVISIONS FOR THE
IMPLEMENTATION OF A MILLS ACT PROGRAM IN THE CITY OF SAN
BERNARDINO PURSUANT TO GOVERNMENT CODE SECTION 50280, ET SEQ.,
AND SETTING AN APPLICATION FEE
WHEREAS, California Government Code, Article 12, Section 50280, more commonly
known as the Mills Act, established legislation providing property tax relief for owners of
qualified historic properties who contract with a city to abide by reasonable preservation
requirements; and
WHEREAS, preservation agreements will have beneficial effects on residential
neighborhoods, businesses, community pride, and regional image;
BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE
CITY OF SAN BERNARDINO AS FOLLOWS:
13 SECTION 1. The program implementing California Government Code, Article 12,
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Section 50280 et seq. (knovvn as the Mills Act) for the purpose of preserving, rehabilitating,
and maintaining designated historic resources, shall be known as. the Mills Act.
SECTION 2. The Mayor and Common Council hereby directs the City Administrator
or his/her designee to develop and process applications for properties seeking qualification and
19 participation in the Mills Act. The City Administrator will also review and make a
recommendation to the Mayor and Council on any application submitted pursuant to the Mills
Act. The Mayor and Common Council is the final authority on the authorization and approval
of any application pursuant to the Mills Act.
SECTION 3. The form Preservation Agreement to be used in the Mills Act is attached
and incorporated herein as Exhibit "A". The Mayor and Council hereby directs the City
Administrator or his/her designee to amend and modify the form Preservation Agreement as
deemed necessary and appropriate, in consultation with the City Attorney. The terms of the
form Preservation Agreement shall always comply with California Government Code, Article
~D3D
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RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN
BERNARDINO ESTABLISHING THE APPLICATION PROCESS, REVIEW
PROCEDURES, AND REQUIRED CONTRACT PROVISIONS' FOR THE
IMPLEMENTATION OF A MILLS ACT PROGRAM IN THE CITY OF SAN
BERNARDINO PURSUANT TO GOVERNMENT CODE SECTION 50280, ET SEQ.,
AND SETTING AN APPLICATION FEE
12, Section 50280 et seq. (known as the Mills Act). The maintenance, repair, rehabilitation,
and/or restoration standards applicable to the subject property shall be set forth in the form
Preservation Agreement. In consideration for abiding with the terms of the Preservation
Agreement. the owner of the subject property shall be entitled to qualify for a reassessment of
the historic property. pursuant to Chapter 3, Part 2, of Division I of the California Revenue and
Taxation Code. Each Preservation Agreement shall be subject to the approval of the Mayor
and Common Council.
SECTION 4. To limit the fiscal impact of the Mills Act to the City of San Bernardino,
the City of San Bernardino shall not enter into or execute more than ten (10) Preservation
Agreements per calendar year. Applications shall be accepted during the month of November
only. during normal business hours. The ten (10) applicants will be randomly selected from all
eligible applications submitted.
SECTION 5. Eligibility for a Preservation Agreement shall be limited to the owners of
those properties identified in the San Bernardino Historic Resources Reconnaissance Survey,
Volume 2,.... Tabular List of All Surveyed Historic Resources, dated April 30, 1991. The Mayor
and Council hereby find that all properties contained in this list shall be considered Qualified
Historic Properties for purposes of the Mills Act, pursuant to California Government Code
Section 50280.1 (b)
SECTION 6. An application fee of $200 shall be paid by each property owner that has
a Preservation Agreement approved by the Mayor and Common Council.
//1
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RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN
BERJ"JARDINO ESTABLISHING THE APPLICATION PROCESS, REVIEW
PROCEDURES, AND REQUIRED CONTRACT PROVISIONS FOR THE
IMPLEMENTATION OF A MILLS ACT PROGRAM IN THE CITY OF SAN
BERNARDINO PURSUANT TO GOVERNMENT CODE SECTION 50280, ET SEQ.,
AND SETTING AN APPLICATION FEE
I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor
and Common Council of the City of San Bernardino at a meeting thereof, held on the
, 2005, by the following vote, to wit:
_ day of
Council Members:
AYES
NAYS
ABSTAIN
ABSENT
ESTRADA
LONGVILLE
MCGINNIS
DERRY
KELLEY
JOHNSON
MCCAMMACK
City Clerk
day of
The foregoing resolution is hereby approved this
2005.
Judith Valles, Mayor
City of San Bernardino
Approved as to
Form and legal content:
James F. Penman, City Attorney
./2
Exhibit" A"
HISTORIC PROPERTY PRESERVATION AGREEMENT
("MILLS ACT CONTRACT")
THIS AGREEMENT is made this
San Bernardino, a municipal corporation ("City") and
("Owner").
, by and between the City of
RECITALS
I. California Government Code Section 50280, et. seq. allows cities the discretion to
enter into contracts with the owners of qualified historic properties, as that term is defined in
Government Code Section 50280.1, for the purpose of providing for the use, maintenance,
protection, and restoration of such historic property so as to retain its characteristics as property
of historic significance.
2. Owner holds fee title in and to that certain real property, together with associated
structures and improvements thereon, general located at the street address
San Bernardino, California ("Historic Property"). A legal description of the Historic Property is
attached hereto as Exhibit "A" and incorporated herein by this reference.
3. By authorizing this agreement, the Common Council hereby designates the Historic
Property as a Qualified Historic Property as defined by Resolution 2005 - _, Section 5.
4. City and Owner desire to enter into this Agreement for the purpose of protecting and
preserving the characteristics of historical significance of the Historic Property that help provide
the community with its own unique civic identity and character.
5. Owner, in consideration for abiding by the terms of this Agreement, shall be entitled
to qualify for a reassessment of valuation of the Historic Property, pursuant to the provisions of
chapter 3, Part, 2; of Division I of the California Revenue and Taxation Code, and any
corresponding adjustment in property taxes resulting therefrom.
TERM
NOW, THEREFORE, the City and Owner in consideration of mutual covenants and
conditions set forth herein, do hereby agree as follows:
I. Effective Date and Term of Agreement. This Agreement shall be effective and
commence on 200_ ("Effective Date") and shall remain in effect for
a minimum initial term of ten (10) years thereafter unless canceled by the City pursuant to
Section 8 or 9 of this Agreement.
2. Renewal. Upon each anniversary date, beginning at the end of the initial ten year term
CRenewal Date"), an additional one (I) year shall automatically be added to the term of the
Agreement unless a notice of nonrenewal is delivered as provided in Section 3 of this
Agreement.
3. Nonrenewal. If either the Owner or City desires in any year not to renew this
Agreement. Owner or City shall serve a written notice ofnonrenewal upon the other party in
advance of the Renewal Date CNotice of Nonrenewal"). The Notice ofNonrenewal shall be
effective only if served by Owner upon City at least ninety (90) days prior to 'the Renewal Date,
or if served by City upon Owner, the Notice of Nonrenewal shall be effective only if served upon
Owner at least sixty (60) days prior to the Renewal Date. If either City or Owner serves a Notice
ofNonrenewal in any year, this Agreement shall remain in effect for the balance of the term then
remammg.
4. Owner Protest ofCitv Nonrenewal. Within fifteen (15) days of Owner's receipt of the
Notice of Nonrenewal from City, Owner may file with City a written protest of the Notice of
Nonrenewal. Upon receipt of the written protest, the Common Council shall set a hearing prior
2
to the expiration of the Renewal Date of this Agreement. Owner may furnish the Common
Council with any information which Owner deems relevant and shall furnish the Common
Council with any information it may require. The Common Council may, at any time prior to
the annual Renewal Date, withdraw its Notice of Nonrenewal.
5. Standards for Historical Property. During the term of this Agreement, the Historic
Property shall be subject to the following conditions, requirements, and restrictions:
A. Owner shall preserve and maintain the characteristics of the cultural and historical
significance of the Historic Property. Compliance or non-compliance with this section shall be
determined by the Director of Development Services or his/her designee. In addition, Owner
shall obtain any applicable permits necessary to protect, preserve, restore, and rehabilitate the
Historic Property so as to maintain its historical and cultural significance.
B. Owner. when necessary as determined by the City, shall restore and rehabilitate the Historic
Property to conform to the rules and regulations of the Office of Historic Preservation of the
California Department of Parks and Recreation, the United States Secretary of the Interior
Standards for Rehabilitation, and the State Historical Building Code. The condition of the
exterior of the Historic Property on the effective date of this Agreement is documented in
photographs attached as Exhibit "B" and incorporated herein by this reference. The Owner shall
continually maintain the exterior of the Historic Property in the same or better condition as
documented in Exhibit "B".
C. Owner shall carry out specific restoration, repair, maintenance, and/or rehabilitation projects
on the Historic Property, as outlined in the attached Exhibit "C", which is incorporated herein by
this reference. All such projects shall be undertaken and completed in keeping with the historic
nature of the property. Projects may be interior or exterior, but must utilize all property tax
savings.
3
D. Owner shall not be permitted to block the view corridor with any new structure, such as
walls, fences or shrubbery, so as to prevent the viewing of the Historic Property.
6. Periodic Examinations. Upon reasonable advance notice, Owner shall allow
reasonable periodic examinations of the interior and exterior of the Historic Property by
representatives of the County Assessor, the State Department of Parks and Recreation, the State
Board of Equalization and/or City, as may be necessary to determine Owner's compliance with
the terms and provisions of this Agreement.
7. Provision of Information of Compliance: Yearly Administrative Fee. Owner hereby
agrees to furnish City with any and all information requested by City, which City deems
necessary or advisable to determine eligibility of the Historic Property and compliance with the
terms and provisions of this Agreement. Requested information may include, but not be limited
to, required annual reports, as well as receipts documenting property maintenance and/or
improvement expenditures that equal or exceed annual estimated property. tax savings. Owner
shall also pay City a yearly administrative fee of seventy-five dollars ($75.00).
8. Breach of Agreement: Remedies.
A. Notice of Breach; Opportunity to Cure. If Owner breaches any provision of this Agreement,
City may give written notice to Owner by registered or certified mail detailing Owner's
violations. If such violation is not corrected to the reasonable satisfaction of City within thirty
(30) days after the date of notice of violation, or within such a reasonable time as may be
required to cure the violation (provided the acts to cure the violation are commenced within
thirty (30) days and thereafter diligently pursued to completion), the City may, without further
notice, declare Owner to be in breach of this Agreement. Upon City's declaration of Owner's
breach, City may pursue any remedy available under local, state, or federal law, including those
specifically provided for in this section.
4
B. Remedv - Cancellation. City may cancel this Agreement if City determines, following a
. .
duly noticed public hearing in accordance with Government Code section 50285, that Owner
breached any of the conditions of the Agreement, Owner allowed the Historic Property to
deteriorate to the point that it no longer meets the standards for a qualified historic property, or
Owner failed to restore or rehabilitate the Historic Property in accordance with the terms of this
Agreement. If this Agreement is cancelled, under this paragraph, Owner shall pay a cancellation
fee to the Office of the Auditor for the County of San Bernardino as required by Government
Code section 50286.
C. Alternative Remedies. As an alternative to cancellation of this Agreement for Owner's
breach of any condition, City may bring an action in court necessary to enforce this Agreement
including, but not limited to, an action to enforce this Agreement by specific performance,
injunction, or receivership.
9. Destruction of Property: Eminent Domain: Cancellation. If the Historic Property is
destroyed by earthquake, fire, flood, or other natural disaster such that in the opinion of the City
Building Official more than sixty percent (60%) of the original fabric of the structure must
replaced, this Agreement shall be cancelled because the historic value of the structure will have
been destroyed. If the Historic Property is acquired in whole or in part by eminent domain or
other acquisition by any entity authorized to exercise the power of eminent domain, and the
acquisition is determined by the Mayor and Common Council to frustrate the purpose of this
Agreement, this Agreement shall be cancelled. No cancellation fee pursuant to Government
Code Section 50286 shall be imposed if the Agreement is cancelled pursuant to this Section.
10. Waiver. City does not waive any claim of default by Owner if City does not enforce
or cancel this Agreement. All other remedies at law or in equity which are not otherwise
provided for in this Agreement or in City's regulations governing historic properties are
5
available to the City to pursue in the event that there is a breach of this Agreement. No waiver
by City of any breach or default under this Agreement shall be deemed to be a waiver of any
other subsequent breach thereof or default hereunder.
11. Binding, Effect of Agreement. Owner hereby subjects the Historic Property to the
covenants, conditions, and restrictions set forth in this Agreement. City and Owner hereby
declare their specific intent that the covenants, conditions, and restrictions set forth herein shall
be deemed covenants running with the land and shall inure to and be binding upon Owner's
successors and assigns in title or interest to the Historic Property. Each and every contract, deed
or other instrument hereinafter executed, covering or conveying the Historic Property, or any
portion thereof, shall conclusively be held to have been executed, delivered and accepted subject
to the covenants, reservations and restrictions set forth herein.
12. Covenants Run with the Land. City and Owner hereby declare their understanding
and intent that the burden of the covenants, reservations and restrictions set forth herein touch
and concern the land in that they restrict development of the Historic Property. City and Owner
hereby further declare their understanding and intent that the benefit of such covenants,
reservations and restrictions touch and concern the land by enhancing and maintaining the
cultural and historical characteristics and significance of the Historic Property for the benefit of
the public and the Owner.
13. Notice. Any notice required to be given by the terms of this Agreement shall be
provided at the address of the respective parties as specified below or at any other address as
may be later specified by the parties hereto:
City: City of San Bernardino
City Administrator's Office
300 North D Street
San Bernardino, CA 92418-0001
6
Owner:
14. Effect of Agreement. None of the terms, provisions or conditions of this Agreement
shall be deemed to create a partnership between the parties hereto and any of their heirs,
successors or assigns; nor shall such terms, provisions or conditions cause the parties to be
considered joint venturers or members of any joint enterprise.
15. Indemnity of Citv. Owner shall defend, indemnify, and hold harmless City and its
elected officials, officers, agents and employees from any actual or alleged claims, demands
causes of action, liability, loss, damage, or injury to property or persons, including wrongful
death, whether imposed by a court of law or by administrative action of any federal, state or local
governmental agency, arising out of or incident to (i) the direct or indirect use, operation, or
maintenance of the Historic Property by Owner or any contractor, subcontractor, employee,
agent, lessee, licensee, invitee, or any other person; (ii) Owner's activities in connection with the
Historic Property, or from the enforcement of this Agreement. This indemnification includes,
without limitation, the payment of all penalties, fines, judgments, awards, decrees, attorneys'
fees and related costs or expenses, and the reimbursement of City, its elected officials,
employees, and/or agents for all attorney's fees, legal expenses and costs incurred by each of
them. The costs, salaries and expenses of the City Attorney and members of his/her office in
enforcing this Agreement on behalf of the City shall be considered as "attorneys' fees" for the
purposes of this paragraph. Owner's obligation to indemnify shall survive the termination,
cancellation, or expiration of this Agreement and shall not be restricted to insurance proceeds, if
any received by City, its elected officials, employees, or agents.
16. Binding Upon Successors. All of the agreements, rights, obligations, covenants,
reservations, and restrictions contained in this Agreement shall be binding upon and shall inure
7
to the benefit of the parties herein, their heirs, successors, legal representatives, assigns and all
persons acquiring any part or portion of the Historic Property, whether by operation of law or in
any manner whatsoever.
17. Legal Costs. In the event legal proceedings are brought by any party or parties to
enforce or restrain a violation of anv of the covenants, conditions or restrictions contained herein,
or to determine the rights and duties of any party hereunder, the prevailing parting in such
proceeding may recover all reasonable attorneys' fees to be fixed by the court, in addition to
court costs and other relief ordered by the court. The costs, salaries and expenses of the City
Attorney and members of his/her office in enforcing this Agreement on behalf of the City shall
be considered as "attorneys' fees" for the purposes of this paragraph.
18. Severability. In the event that any of the provisions of this Agreement are held to be
unenforceable or invalid by any court of competent jurisdiction, or by subsequent preemptive
legislation, the validity and enforceability of the remaining provisions, or portions thereof, shall
not be effected thereby.
19. Recordation. No later than twenty (20) days after the Effective Date, City shall
cause this Agreement to be recorded in the office of the County Recorder of the County of San
Bernardino. Owner shall provide written notice of the contract to the State Office of Historic
Preservation within six (6) months of entering into the contract.
20. Amendments. This Agreement may be amended, in whole or in part, only by written
recorded instrument executed by the parties hereto.
21. Governing Law and Venue. This Agreement shall be construed and governed in
accordance with the laws of the State of California. Any action at law or in equity brought by
either of the parties hereto for the purpose of enforcing a right or rights provided for by this
Agreement shall be tried in a court of competent jurisdiction in the County of San Bernardino
8
HISTORIC PROPERTY PRESERV A nON AGREEMENT
("MILLS ACT CONTRACT")
State of California, and the parties hereby waive all provisions of law providing for a change of
venue in such proceedings to any other county.
IN WITNESS WHEREOF, City and Owner have executed this Agreement on the day
and year first above written.
Dated:
CITY OF SAN BERNARDINO
By:
ATTESTED TO:
By:
Dated:
Owner
Owner
Approved as to form
and legal content
JAMES F. PENMAN
City Attorney
By:
9
Exhibit "C"
Mills Act Program Ten-Year Rehabilitation Plan
City of San Bernardino
Year Proposed Project* Estimated
Cost
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
To be attached to the Historic Property Preservation Agreement (Mills Act Contract~
*See attached list of potential projects. Use additional sheets if necessary
Projects may be interior or exterior, but must utilize all of your tax savings. Retain
copies of all receipts and permits for submittal with the required annual reports.
** FOR OFFICE USE ONLY - NOT A PUBLIC DOCUMENT **
RESOLUTION AGENDA ITEM TRACKING FORM
Mooting D'" (o,t, A~jt"'), J \r~11 0 ~
Vote: Ayes Nays
Change to motion to amend original documents 0
Item# ~O
Resolution #
)ODS- 3~'-~
Abstain
Absent
Companion Resolutions
NulI/Void After: days /
Resolution # On Attachments: 0
Note on Resolution of attachment stored separately: 0
PUBLISH 0 POST 0 RECORD W/COUNTY 0
/
Date Sent to Mayor: I \r ~ " 0 ~ /
Date of Mayor's Signature: II,.. I C' / CS ...-/
Date ofClerklCDC Signature: -.D' 10/0-(
By:
Reso, Log Updated: ~.
Seal Impressed: ~/
Reso, # on Staff Report D
Date Memo/Letter Sent for Signature:
1 st Reminder Letter Sent:
Date Returned:
2nd Reminder Letter Sent:
Not Returned: 0
Request for Council Action & Staff Report Attached:
Updated Prior Resolutions (Other Than Below):
Updated CITY Personnel Folders (6413, 6429, 6433,10584,10585,12634):
Updated CDC Personnel Folders (5557):
Updated Traffic Folders (3985, 8234, 655, 92-389):
/'
No By_
r--
No_ By_
No /' By
No ~-jW =
No:L'By_
Yes
Yes
Yes
Yes
Yes
Copies Distributed to:
Animal Control ~ EDA 0
City Administrator Facilities 0
City Attorney Finance 0
Code Compliance 0 Fire Department 0
Development Services 0 Human Resources 0
Others:
Information Services 0
Parks & Recreation 0
Police Department 0
Public Services 0
Water Department 0
Notes:
(/, ((/);O(
Date: I
Ready to File: _
Revised 12/18/03