Local historians and preservationists oppose Mills Act revisions

Mayor Jerry Sanders has proposed changes to the Mills Act, which provides tax incentives for those who own historic homes, but the changes are not getting a warm reception from local historians. They say they are wary, in particular, of two suggestions that would increase fees for Mills Act applications while imposing a limit on the number of Mills Act contracts awarded annually.

In an effort to tighten city policies around Mills Act compliance while balancing the need to preserve historic structures, Sanders introduced a set of measures in January as part of a public process aimed at reforming how Mills Act contracts are awarded.

Under the Mills Act, a state law, the owner of a property that has been designated as historic may apply for a property tax reassessment which allows for property tax breaks in accordance with a formula prescribed in the Act. The city of San Diego has more Mills Act properties - 822 - than any other state municipality. More than 25 percent of all Mills Act contracts in California are in San Diego.

Speaking on behalf of the La Jolla Historical Society, Don Schmidt said: “Our position on the Mills Act is we want to keep it as it is.”

“I don’t think they should limit the number (of Mills Act contracts) they select per year,” said Pat Dahlberg, past executive director of La Jolla Historical Society and current Society board member. “It would be better to actually charge (more) to make sure people do follow-through with what they say they are going to do (historical preservation). They also should have some money for paying for enforcement of the Mills Act.”

However, the net result of the large number of Mills Act properties in the city has been a reduction in property taxes paid to the San Diego County Tax Assessor’s Office. According to a report issued recently by the county of San Diego Grand Jury, using figures available as of September 2007, this resulted in an annual loss of $607,571 to the City’s general fund, and $1,486,317 to the San Diego Unified School District.

Sanders’ proposed revisions to the Mills Act also include requiring a 10-year agreement tailored to each property to ensure tax savings are reinvested into the rehabilitation or restoration of the historic property, and continuing to require that the exterior of the structure covered by the agreement be visible from the public right-of-way.

Under Sanders’ plan, (one-time) fees would also be increased to $590 for each Mills Act agreement, along with adding a $492 monitoring fee paid at time of agreement and every five years prior to the renewal date. Additionally, a $949 enforcement fee could be assessed to cover staff costs if violations of the agreement are not easily remedied.

These fees are intended to provide full cost-recovery for the processing and monitoring of Mills Act contracts.

Such fees may be increased over time to keep pace with anticipated rising costs. Currently, the fee is just $100 for every $100,000 of assessed value, up to a maximum of $400.

Linda Marrone, a La Jolla Realtor specializing in historical homes and a La Jolla Historical Society member, believes many of Sanders’ proposed changes to the Mills Act would strike at the character, spirit and purpose of the Mills Act.

“While I agree with the strategy of looking closer at the homes that qualify for the Mills act,” said Marrone, “I do not agree with anything else. By giving people the benefit of the Mills Act, we are seeing older structures saved and restored that may have been demolished. The Mills Act is giving older, historic homes the opportunity to be saved instead of falling into the hands of developers for ‘lot value’ only.

“I disagree that the Mills Act is only a tool to provide a higher return when the home is sold. While it may increase value on a smaller home, it is necessary to have this incentive, since historic homes may have some constraints, due to size, etc., and the tax benefit can help equalize it. What I have seen is that people are looking a little closer at the time, expense and effort it takes to restore a historic home: If it has Mills Act potential - this creates a balance. But, not an even balance, there are far too many homes that are being torn down.”

Marrone added that in La Jolla, where land values are often much higher then the structure’s value, the Mills Act has helped to save many homes that may have been torn down to make way for oversized homes that take up nearly all of the lot.

Angeles Leira, a retired city employee who twice in the past has headed up the city department which deals with the Mills Act, concurs with the view that the system isn’t broke, so it doesn’t require fixing. “Look at the benefits we are getting out of it (Mills Act),” said Leira, “effective conservation of historical neighborhoods that otherwise would not be preserved.”

Leira said tax breaks embodied in the Mills Act provide tangible incentives for people to buy and invest in historic homes, when otherwise they wouldn’t because property taxes would be too expensive. Why the Mills Act is has been so successful, contends Leira, is that tax breaks emodied in the Act allow people, who are of means but are not rich, the opportunity to invest in these homes when they otherwise would not.

City staff will continue the Mills Act revision process with a series of public workshops hosted by the full Historical Resources Board. The first workshop is scheduled for Friday, April 18, at 2 p.m., in the Council Committee Room on the 12th floor of the City Administration Building, 202 C Street, downtown.

The workshops are expected to conclude by the end of the fall, with recommendations for changes to the adopted City Council Policy (700-46) going to the Council’s Land Use and Housing Committee and then the full Council by the end of the calendar year.