Mills Act

What is the Mills Act?

The Mills Act is State-sponsored legislation that grants the City of Eureka the ability to directly participate in a local historic preservation incentive program; it supports rehabilitating historic property including seismic safety retrofitting, contributing to affordable housing, promoting heritage tourism, and fostering pride of historic property ownership. A Mills Act Contract under State law is an agreement between the City of Eureka and the property owner of a qualified historic property. The property owner benefits by a reduction in property taxes and the City is ensured that the historic property is maintained and improved.

 

What is a Qualified Historic Property?

Qualified historic property meets the following criteria:

a)     The property is located entirely within the City of Eureka;

b)     The property is privately owned;

c)      The property is not exempt from property taxation;

d)     The property is taxed as residential property; and

e)     The property is individually listed on the City of Eureka’s Local Register of Historic Places.

 

What are my obligations under a Mills Act Historic Property Contract?

In exchange for the reduction in property taxes, the Contract requires the property owner to agree to use the tax savings to finance certain property improvements. The improvements are intended to protect and preserve the Historic Property’s character defining features which qualified it as property of historical significance. The improvements are unique to each property and are listed in the “Schedule and Plan for Maintenance and Treatment of the Historic Property” that is made a part of the recorded Mills Act Contract. The property owner is very much involved in determining the type and timing of the required improvements.

 

How are my property taxes reduced?

Once a Mills Act Historic Property Contract has been recorded, the County Assessor recalculates the property taxes. Rather than using the market value of the property, the Assessor uses the property's potential income to determine the property tax; which generally results in a lower property tax. Although the process for recalculation can be very confusing, the procedure is not arbitrary but is clearly specified in the California Taxation and Revenue Code.  While under a Mills Act Contract if for some reason the property tax calculated using the market value (Proposition 13) yields a lower property tax than by using the property’s potential income (Mills Act), the Assessor will use the lower of the property taxes for assessment purposes.

 

What types of properties are likely to benefit?

The property tax savings can be substantial and will vary from property to property. Generally, owners of recently purchased historic properties are most likely to benefit from entering into a Mills Act Contract. Owners of properties with comparatively low property taxes (because of Proposition 13) may not receive a property tax reduction. Unfortunately neither the City nor the County Assessor can guarantee a specific or fixed tax reduction. You may wish to consult your own tax advisor to determine your potential benefits.

 

What are the terms of a Mills Act Historic Property Contract?

The Mills Act Historic Property Tax Incentive Program is not a “quick fix”; it is intended to be a long term property tax savings program. The contract is similar to contracts for other property tax savings programs such as the Williamson Act and the Forest Taxation Reform Act (TPZ) in that it is a perpetual ten year contract. It will remain in place ad infinitum until cancelled, and once cancelled there is a ten year phase out of the contract. Because of the ten year phase out, during which time the property taxes are rising to eventually equal ‘normal’ property taxes, entering into a Mills Act Contract is a long term commitment.

 

If my property is located in the Redevelopment area may I still apply for a Mills Act Historic Property Contract?

Yes. The Eureka Redevelopment Agency primarily receives its funding from tax increment revenues, consequently properties in the Redevelopment area that are subject to a Mills Act Historic Property Contract could have an impact on the overall revenues available to the Redevelopment Agency. Therefore, the City Council will seek the recommendation of the Eureka Redevelopment Advisory Board prior to taking action to enter into a Contract on property within the Redevelopment area.

If I own a qualified historic property, am I obligated to participate in the Mills Act Historic Property Tax Incentive Program?

No. Participation in the Mills Act Historic Property Tax Incentive Program is voluntary. It is an incentive program for private property owners who have a strong commitment to preservation.

 

If I apply for a Mills Act Historic Property Contract, is the City obligated to enter into the Contract?

No. The City will evaluate each individual Contract application alongside a set of priority criteria and determine which applications are most likely to yield the greatest public benefit.

 

What happens if I want to sell a historic property that is already under a Mills Act Contract?

Although the Contract is initially made between the City and the property owner requesting the Contract, the Contract vests with the property and it transfers to the new owner after the sale of the property. This can, in many cases, dramatically enhance the marketability of the historic property. The property tax reduction extends to subsequent owners as long as the Mills Act Contract is not cancelled.

 

Is there a possibility of penalty on a Contracted property?

Yes. Penalties are imposed for breach of Contract or early cancellation. A breach of Contract may occur if the owner fails to complete the property improvements specified in the Contract; or fails to complete them in the time frame specified in the Contract. Early cancellation means that a Contract ends prior to its full ten year term, and it does result in the property owner being assessed a cancellation fee as set forth in State law.

 

If I apply for a Mills Act Historic Property Contract, when may I expect to see a reduction in my property taxes?

It takes approximately 16 months from the application date to see any property tax reduction on your property tax bill.

 

Am I required to open my property to the public?

No. The Mills Act Historic Property Tax Incentive Program does not require the property owner to grant public access to the property. The Contract does specify that by prior appointment an inspection of the property may be made by representatives of the Humboldt County Assessor, State Department of Parks and Recreation, State Board of Equalization, and/or the City, as may be necessary to determine compliance with the terms and provisions of the Contract.

Is there a fee to apply for a Mills Act Historic Property Contract?

No, and yes. There is no fee to file the application for consideration for a Mills Act Historic Property Contract. Please note, however, that assistance in preparing the application may require the use of a qualified professional consultant. If your Mills Act Contract application is chosen by the Selection Committee for processing there may be several fees that you should be aware of which could include: a) an application fee for review by the Historic Preservation Commission of the alterations described in the “Schedule and Plan for Maintenance and Treatment of the Historic Property”; and/or b) a processing fee equal to the cost of processing the Mills Act Historic Property Contract application; and/or c) recording fees for recording the executed contract with the Humboldt County Recorder; and/or d) a nominal annual Mills Act Contract monitoring fee.

 

Where can I learn more about the Mills Act?

The California State Office of Historic Preservation (OHP) is responsible for administration of federally and state mandated historic preservation programs in California. The OHP website offers information on a wide range of historic preservation topics including the Mills Act. The link to the OHP website is www.ohp.parks.ca.gov the direct link to the Mills Act program is found at www.ohp.parks.ca.gov/default.asp?page_id=21412.

 

The Mills Act statute is codified in the California Government Code commencing with Section 50280, and the Revenue & Tax Code commencing with Section 439. The California Codes can be accessed online at www.leginfo.ca.gov/calaw.html.

 

In addition, searching “Mills Act” on the internet will yield a wide range of information and web sites discussing the Mills Act. There are also a great many other interesting and informative historic preservation related webs sites, including:

 

Eureka Heritage Society Home Page 

http://www.eurekaheritage.org/index.htm

 

Humboldt County Historical Society

http://www.humboldthistory.org/

 

California Preservation Foundation

http://www.californiapreservation.org/

 

National Park Service, National Register of Historic Places

http://www.cr.nps.gov/nr/index.htm

Resolution 2005-12 Adopting Mills Act
Effect of Adoption of Mills Act on Public Agencies
Tax Savings Estimate Example
Sample Resolution Approving Property
Sample Property Contract
Application Requirements
Application Checklist
Application Form
Notary Acknowledgement of Property Owner's Signature
Priority Consideration Worksheet
Schedule & Plan for Maintenance
Property Tax Adjustment Worksheet
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