[Calclg-l] Fiscal Impacts of mills Act

[Jay Petrek]

The City of Escondido has a approximately 65 Mills Acts and concurs with
the City of Ontario's findings.  We inform property owners up-front that
if their home is taxed under pre-Prop 13 provisions there will not be a
significant tax savings.  Many owners choose to still move forward as
the Mills Act has proven to be an effective feature in selling the
home.
 
Check with your local Tax Assessor and see exactly how much of the
property tax split actually ends up in your jurisdiction's coffers.  In
Escondido's case, our City receives only 11% of the property tax
collected by the County, so the annual loss for all our Mills Acts is
less than $30,000.  Most of the property tax collected here goes to the
School Districts and County of San Diego, so we are not significantly
affected by the Mills Act.  Our City Council encourages Mills Acts
because they have seen improved maintenance and upkeep due to the way we
approve the requests.
 
A couple of ways your jurisdiction can limit the financial "hit"
generated by Mills Acts:
 
1) Limit the number of applications.
2) Limit the total dollar of tax loss to a specific amount per year. 
Based on the property value of each request this would allow the number
of requests to vary.  Once the ceiling of tax loss is reached your
jurisdiction can place others on a waiting list for future year(s).
3) Limit the type of land use eligible for Mills Acts.  In Escondido,
we limit the requests to single family residential since commercial
properties are significantly more valuable.  Our whole downtown is
considered historic and would probably be eligible if property owners
pursued Mills Act status.  Another thing to consider is whether the
Mills Act property(ies) are in a Redevelopment Area and how their tax
adjustment might affect the repayment of redevelopment
features/amenities. 
 
Something to consider in ensuring an effective Mills Act program:
 
1) As part of the Mills Act application we get a detailed list of
improvements from the property owner of what they plan on doing to their
property over the next ten years.  We focus on street visible exterior
improvements (i.e. painting, re-roofing, etc.) but also encourage
interior improvements that will enhance the property value and longevity
of the resource (i.e. new wiring, plumbing, foundations, etc.).
 
2) If, over the years, owners want to change the improvements on their
list (or the order in which to perform those improvements) we are
flexible.  This lets staff know the general condition of the property
based on the improvements listed.  It also allows staff to confer with
the property owner regarding the list and make necessary adjustments. 
For example, if in talking with the property owner, we find out that the
roof is 30 years old and the improvement list doesn't identify
replacement within the 10-year period we remind the property owner that
they need to include that improvement in their list.  
 
3) We drill into applicants' heads that ALL IMPROVEMENTS MUST BE
CONSISTENT WITH SECRETARY OF INTERIOR STANDARDS. This is the biggest
issue we are facing as we've suffered through good intentioned
"improvements" that were anything but... (replacing historic window
frames with vinyl is the most prevalent).
 
4) When properties are sold, make sure the new owner is clear that the
Mills Act list is binding.  I can't tell you how many times we've heard
"Oh, the real estate agent didn't tell me that..." If you have strong
historic districts many times they will be able serve as your first line
of defense in ensuring that new owners follow the rules.  
 
5) Follow up with a good monitoring program.  This can be a significant
staff commitment (can you imagine visiting 65 properties every couple of
years to assess their compliance?)  We've enlisted the help of our
Historic Preservation Commissioners to visit Mills Act properties with
staff, but this is still an area we could improve on as the sheer number
of visits is daunting.
 
Jay Petrek
Principal Planner
City of Escondido 
                   

>>> "Melanie Mullis" <mmullis at ci.ontario.ca.us> 12/19/2007 5:57 PM >>>

The City of Ontario has approx. 50 Mills Act contracts.  The City began
entering into Mills Act contracts in the late 1990’s.  Last year we went
back and analyzed the property tax reductions that the homeowners
received and found that we had over estimated the amount of taxes the
property owners would save (and over exaggerated the amount of impact to
the City).  We also found that long time homeowners (with Prop 13
benefits did not experience really any savings (since the property taxes
are determined by a three way analysis).  Since there was a rapid
increase in housing costs during this timeframe and that housing is
tight, the property taxes appear to only be reduced for about 5 years at
which time they “catch” up with what would have been paid in property
taxes for new homeowners.  We do find the Mills Act a benefit to
increasing the number of owners wanting their property historically
designated since having a Mills Act contract continues to be a benefit
to selling a house.  
 
Two things I would suggest (that we are now implementing) are a signed
disclosure form stating that the reductions from a Mills Act contract
are only estimates and are subject to calculation by the Assessors
office.  Second, we are beginning a monitoring program to ensure the
improvements are being done.  I would suggest you build this into your
program from day one – so homeowners expect that they will be asked to
submit photos and receipts of the work done to comply with the
contract.
 
 
 

Melanie Mullis, Senior Planner
City of Ontario
303 East "B" Street
Ontario, CA 91764
Phone:  (909) 395-2430
Fax:  (909) 395-2420
Email:  MMullis at ci.ontario.ca.us


From:calclg-l-bounces at ohp.parks.ca.gov
[mailto:calclg-l-bounces at ohp.parks.ca.gov] On Behalf Of Clovis, Meg
x4913
Sent: Wednesday, December 19, 2007 2:42 PM
To: calclg-l at ohp.parks.ca.gov 
Subject: [Calclg-l] Fiscal Impacts of mills Act

 
The County of Monterey is considering implementing the Mills Act but
would like input from other jurisdictions re: adverse affects due to
reduced property tax revenues. In addition, any advice about pitfalls to
avoid would be appreciated.
Thanks for your assistance - 
Meg Clovis 
Cultural Affairs Manager 
Monterey County Parks 
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