The Mills Act

WHAT IS THE MILLS ACT?

The Mills Act is a California State law that enables cities to enter into contracts with property owners of qualified historic structures.  The owner of any building that is either a designated local landmark or a contributing building in a designated historic district may file a Mills Act Contract Application.  Once approved, a Mills Act contract requires the County Tax Assessor's office to determine the value of the historic property based upon its current income, rather than the Proposition 13 formula generally applied.  In exchange for this reduction in property taxes, the contract requires the property owner to undertake specific restoration tasks, if necessary, and to properly maintain the historic structure. The proposed restoration and maintenance items are included in a work plan that is submitted by the applicant and, if approved, becomes attached to the contract as an exhibit.

Mills Act contracts can provide tax benefits for both owner-occupied and income producing properties.  In the case of owner-occupied property, the income projection is based on comparable rents for similar property in the area or, if insufficient rental information is available, the income that it could reasonably be expected to produce.  For income producing property, the income amount is based on rent actually received and on typical rents received for similar property in similar use.

In 1991, the City of Santa Monica revised the Landmarks Ordinance to enable the City to enter into Mills Act Contracts with the owners of designated Landmark properties, Structures of Merit and contributors to designated Historic Districts.  Current to 2005, the City has approved contracts with owners of 37 historic properties.

CONTRACT TERM

Mills Act contracts are for a ten-year term and are renewed automatically each year on the contract's anniversary.  As a result, unless either the property owner or the City submits a notice of non-renewal, the owner is always ten years away from the contract termination.  The effect of a non-renewal notice is contract termination at the end of the then current ten-year term.  The owner may also petition the City to initiate an immediate cancellation.  If cancelled, a penalty equal to 12 1/2 percent of the property's assessed market value is imposed.  The City may also cancel the contract in the case of breach of the contract conditions.  The rights and obligations to the contract are also binding upon successive property owners during the contract term.  Although new contracts can take place at any time, new valuations will not be effective until March of any given year.

 APPLICATION & PROCESSING

Click here for a Mills Act application

Click here for the Financial Analysis attachment

DEADLINE: Applications must be received by July 1st in order to be processed and recorded for reassessment in the following year’s tax bill. Tax assessments are not retroactively revised.  Applications are available at the Planning Division Counter and must be submitted at the Planning Counter (City Hall, 1685 Main Street).

The application is reviewed by staff and then presented to the Landmarks Commission for their recommendation.  It is then taken to the City Council for their review and approval.  Once City Council approves the contract, notarized signatures of both the property owner and City officials are obtained, and the City submits the document to the Los Angeles County Recorder to be recorded.  The City will then forward a conformed copy of the document to the Los Angeles County Tax Assessor, who will recalculate the property owner's tax payment.