HomeMy WebLinkAbout05/03/2011, C6 - APPROVAL OF MILLS ACT CONTRACT FOR THE HISTORIC CHANNEL COMMERCIAL WHOLESALE COMPANY BUILDING (CHCM aqc 6a nep®n'll It.m Nu rte,
CITY OF SAN LUIS OBISPO /V
FROM: John Mandeville, Community Development Direct
]Prepared By: James David, Assistant Planner
SUBJECT: APPROVAL OF MILLS ACT CONTRACT FOR THE HISTORIC
CHANNEL COMMERCIAL WHOLESALE COMPANY BUILDING
(CHCMA 123-10).
RECOMMENDATION
As recommended by the Cultural Heritage Committee (CHC), adopt a resolution approving a
Mills Act contract for the historic Channel Commercial Wholesale Company building located at
1880 Santa Barbara Avenue.
(DISCUSSION
Background
In December 2000, the City Council approved
the Mills Act Program as an on-going historic
preservation program and allowed up to 10
additional historic properties to be included in
the program annually. No historic properties _J
have entered into Mills Act contracts this
calendar year, but three are pending Council
approval including this request. Originally
begun in 1996 as a pilot program, the Mills Act
Program allows the City to enter into
preservation contracts with the owners of - J
designated historic properties who promise to Channel Commercial Wholesale Co. Building, 2011
preserve, maintain and in some cases, improve
the properties in return for property tax savings. As of December 2010, 44 historic properties are
benefiting from the program and realizing property tax reductions of 50 percent or more
(Attachment 2, List of Historic Properties under Mills Act Contracts). The City recently received
a request by the owner of the historic Channel Commercial Wholesale Company building to be
included in the Mills Act program for tax savings required to continue restoration and
maintenance of the structure.
Advisory Body Recommendation
At its public hearing held February 28, 2011, the CHC voted 4-0 to recommend the City Council
approve a Mills Act contract for the historic Channel Commercial Wholesale Company building
as described in the draft Mills Act contract.
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Mills Act Contract for Channel Commercial Wholesale Company building
Page 2
Property Description
Address: 1880 Santa Barbara
Historic Name: Channel Commercial
Wholesale Company ,
Other Name: Railroad Square
Owners: Depot Square LP -
Current Use: Commercial
Zoning: C-R-S-H(Retail Commercial with
Special Considerations and Historic District
Overlay)
Status: Added to the Master List in August, ,,
1983 as a Category 4; locally significant and
eligible for the National Register. Historic Photo, 1915
Architectural/Historical Background
1880 Santa Barbara Avenue is located in the Railroad Historic District, between Santa Barbara
Avenue and the Railroad/Jennifer Street Bridge (Attachment 1, Vicinity Map). The historic
Channel Commercial building is a 23,427 square foot, three-story red brick building originally
constructed in 1912. This early 20`x' century commercial building contains elements of
Romanesque Revival style. It is a trapezoidal-shaped masonry structure with a flat roof and
decorative, variable height parapet terminating at vertical brick elements at the corners.
Decorative relief below the top of the parapet continues around the building. There are multiple
ground floor openings defined by segmented arches. Windows are generally single-hung wood
sash windows with segmented arches and a contrasting keystone. A string course at the base of
the third-floor windows further divides the building visually. The building is in excellent
condition due to extensive rehabilitation efforts after a building fire that occurred on November
11, 2002.
The Channel Commercial building is historically significant for its architecture as well as the role
it played in the community's history. According to the City's historic file, Railroad Square was
built as a wholesale grocery outlet for the Channel Commercial Company. The close proximity of
this grocery warehouse to the railroad facilitated the delivery and shipping of goods. Historic
documentation indicates that the Channel Commercial Company was the leading wholesale
establishment of its kind between San Francisco and Los Angeles.
The structure maintains many original features despite the fire and modifications in years past.
The Channel Commercial building was converted into professional offices and has had multiple
additions. Those additions were not historic, and have since been demolished. Replacement
additions are being constructed in phases.
Proposed Improvements
The applicant has demonstrated commitment to maintaining the historic building throughout its
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Mills Act Contract for Channel Commercial Wholesale Company building
Page 3
rehabilitation, and plans to undertake the following projects in the interest of ongoing
maintenance and preservation (Attachment 3, Applicant's Letter):
1. Annual window painting
2. Periodic inspection of brick and mortar(repointing of mortar joints when necessary)
3. General maintenance and aesthetic upkeep of building
4. Plantings consistent with approved landscape plan
5. Installation of antique railroad car
6. Creation and display of historical art and objects on site
Staff conducted a field visit and confirmed that the above mentioned items will help maintain
and enhance the historic character of the building. The 100-year old masonry structure will
continue to present costly maintenance challenges as mortar joints erode and original bricks
deteriorate and need replacing. There are around 50 wood windows on the building, and all will
need regular painting to prolong their lifespan. Occasional moisture leaks have crept in after the
rehabilitation efforts that require monitoring and repair. The attached draft Mills Act Contract
describes agreed upon improvements that address these items as well as other projects that will
enhance or maintain the building's historic character in an exemplary fashion. Staff supports the
applicant's request to be part of the Mills Act Program and recommends the Council approve the
attached draft Mills Act contract.
The Mills Act contract should be limited to the historic Channel Commercial building only and
not incorporate any recent or proposed non-historic additions. The property owner has requested
that the Mills Act contract for the Channel Commercial Building be based on the property value
of the entire underlying property including the new buildings proposed on either side of the
historic building. The CHC considered this request and recommended that the approval of the
Mills Act contract for 1880 Santa Barbara Street apply only to the original historic Channel
Commercial building. The historic building includes floor area of approximately 23,427 square
feet while the new buildings proposed for the property will comprise a combined floor area of
26,670 square feet.
The new buildings will significantly alter the assessed value of the property. Therefore, if the
new buildings are included in the Mills Act, the fiscal impact to the City in reduced property tax
income would be much greater. The actual difference in the assessed value or tax base of the
property has not'yet been calculated by the Assessor since the new additions have not been
completed.
The Mills Act provisions are meant to provide an incentive for historic preservation and to
recognize that historic structures can be more costly to maintain by allowing a reduction of
property tax in exchange for an agreement to conduct certain maintenance projects. Including
new buildings in the Mills Act would not be consistent with the intent of the program.
Mills Act Contracts
Historic Preservation is an important goal of the City's General Plan, as described in
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Mills Act Contract for Channel Commercial Wholesale Company building
Page 4
Conservation and Open Space Element policies 3.21.1, 3.21.4, 3.30.2 and Land Use Element
policy 4.12. By providing a financial incentive, the Mills Act Program is one of the most
effective preservation tools available to achieve these goals and encourage the preservation of
historic buildings. At this time, it is the only significant financial incentive available for the
restoration and preservation of historic properties in the City. Commercial and residential
properties on the Master List of Historic Resources are eligible for the program. Mills Act
contracts are prepared using standard language provided by the State Historic Preservation
Office. Standard features of the contracts include:
1. The County Tax Assessor assesses the historic property's value using a "Capitalization of
Income" method. This assessment method can often result in significant property tax
savings, particularly for properties acquired after the 1990s. If the contract is canceled, the
assessment is gradually increased to market value basis over the remaining contract term.
2. The property owner must promise to preserve the building and to use the tax savings to
maintain and/or improve the historic building to enhance its historical value, exterior
appearance, structural condition, or longevity. Each contract includes an exhibit which lists
the maintenance and improvement measures for which tax savings will be used.
3. The contract is recorded, and is binding on subsequent owners, heirs, or assigns until the
agreement is canceled. There is a significant financial penalty for breach of contract.
4. Mills Act Contracts have a minimum 10-year term. The agreement is self-renewing annually
for additional one-year terms, so there is always 10 years remaining on the contract until the
owner or City decides not to renew the contract. Once written notice of non-renewal is
given, the contract will remain in effect for the balance of the term remaining since the
original contract execution or since the last renewal date, as the case may be. The agreement
may be amended by mutual consent of the City and property owner.
5. Building changes are possible under the contract; however changes must comply with all
City requirements and with the Secretary of the Interior's Standards for Historic Preservation
Projects, with the guiding objective being the preservation of the building's original
historical character and significance.
The City's standard practice has been to designate only the historic resource on the property as
eligible for the Mills Act tax savings. If non-historic structures or outbuildings are located on the
same property, those improvements and site area are specifically excluded from the calculated
reductions in property tax. Staff works with the County Assessor staff to ensure that exhibits or
narratives are included with the proposed contracts to describe the historic resource eligible for
Mills Act property tax reductions.
FISCAL IMPACT
The following discussion has been expanded to provide additional information since this request
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1
Mills Act Contract for Channel Commercial Wholesale Company building
Page 5
involves commercial property and a request to expand the property tax savings to new
development on the property.
How the Assessor calculates Mills Act benefits
The County tax assessor calculates the final tax savings for each property under the Mills Act on
a case by case basis using the "Capitalization of Income method". This method is defined in the
Revenue and Taxation Code, Section 439.21. Mills Act contracts are unusual among preservation
incentives in that tax benefits are available not only for income property but also for owner-
occupied property..
Typically, there is a three step process the Assessor uses to calculate the Mills Act property tax
rate. First the Assessor determines .fair rent or gross income. Then, maintenance costs are
estimated and subtracted from the rent or income. Finally, the restricted capitalization rate is
applied to determine the restricted value. Attachment 4 provides examples of the calculations
used to define the restricted value for both residential and commercial properties.
Citywide Fiscal Impacts
The Mills Act reduces the tax base liability and therefore reduces the annual tax payment in
exchange for historic property maintenance and upgrades. Properties that have recently changed
ownership will have a much larger tax base and therefore will result in potentially larger fiscal
impacts. For some properties, tax bills can be reduced by as much as 50%.
The current tax rate for properties in the City is approximately 1.1% The City receives
approximately 14.9% of this 1.1% while the remainder goes to other resources such as the
County and the school district. For example, annual tax on a property with a base value(land and
improvements) of $600,000 would be approximately $6,000 and the City would receive
approximately$894 annually.
The City's Mills Act program has been in place for 14 years and limits the number of contracts to
10 per year. Out of the 44 current Mills Act contracts, five are for properties with commercial
buildings and the remaining 39 are properties with residential structures. The County Assessor
reports that the Tax Base property valuation for the 2010/2011 Tax Roll was reduced due to City
of San Luis Obispo Mills Act contracts. This resulted in a reduction of approximately $26,000 in
tax revenue to the City. While this may be averaged to approximately $590 per contract as an
estimate of reduction in yearly tax revenue to the City, commercial buildings result in larger
reductions than residential structures due to the significantly higher property valuation involved.
ALTERNATIVES
1. Continue the item for additional analysis or research. Specific direction to staff would be
needed.
2. Deny the request for a Mills Act agreement. Staff does not recommend this alternative since
the Channel Commercial Wholesale Company building qualifies for the Mills Act incentive
and an agreement that covers the Master List structure will support and recognize ongoing
C6-5
Mills Act Contract for Channel Commercial Wholesale Company building
Page 6
historic preservation efforts.
ATTACHMENTS
1. Vicinity Map
2. List of Historic Properties under Mills Act Contracts, December 2010
3. Applicant's Letter and Landscape Plan
4. Mills Act Property Tax Rate Calculation Examples
5. Draft Council Resolution
6. Draft Mills Act Contract with Preservation Agreement
T. Council Agenda ReportslCommctnity Development CARI20111CHCMA 123-10(1880 SB)
C6-6
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C6-10
DEPOT SQUARE, LP
895 AEROVISTA PLACE,SUITE 100/SAN LUIS OBISPO,CA 93401 Attachment 3
P:805-544-7343/F:805-544-1177
November 19, 2010
James David
City of San Luis Obispo Community Development
919 Palm Street
San Luis Obispo,Ca 93401
Re: Railroad Square Building/1880 Santa Barbara Ave,San Luis Obispo
Mills Act Historic Preservation Program
Dear lames,
We are in receipt of your letter dated November 4,2010,whereby you requested three additional completeness
items in order to certify our application as complete. Enclosed you will find the following:
• Ongoing Maintenance and Rehabilitation Schedule
2011:
Phase II Landscaping(see attached plan)
Installation of antique railroad car.
Creation of onsite parking spaces.
Completion of outdoor dining area on third floor.
2011—2020:
We will continue to oversee multiple future tenant improvements and ensure compliance with the
Secretary of Interior and the City's standards for maintaining the historical integrity of the building.
Annual window painting,general maintenance,and aesthetic upkeep of building.
Creation and participation in the promotion of the historical railroad district.
Creation and display of historical art and objects.
Historic Background
Chattel Architecture Review of Drawings for Seismic Retrofit/October 11, 2007(see attached)
Chattel Architecture Historical Review Letter/April 6,2007(see attached)
• Photo Documentation
Garcia Architecture Pre and Post Fire Photo Documentation (see attached)
We appreciate your assistance in facilitating our application and we will follow up to verify these items are
sufficient.As we previously discussed,we are in need of a completeness letter to provide to our lender as soon as
possible. In the meantime,please feel free to contact us with any questions.
Sincerely,
Hamish S. Marshall
Managing Partner
C6-11
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Attachment 4
RESIDENTIAL PROPERTY EXAMPLE
SINGLE FAMILY OWNER OCCUPIED HOME
Assume $1,500/month rent
Gross income—vacancy/collection loss= Effective Gross income:
Gross income (fair rent)
$1,500 x 12 months = $ 18,000
Less anticipated vacancy and collection loss
$18,000 x 5% = $900
Effective gross income: $18,000- $900= $17,100
Effective gross income—maintenance costs =Net Operating Income
Maintenance Costs =$2,100
Operating expenses $600
Fire Insurance $360
Management Fee $360
Water& Garbage $240
Grounds Maintenance $400
Building Maintenance $500
Net Operating Income: $17,100 - $2,100 =$15,000
Net operating income/restricted capitalization rate=Restricted Value
Restricted Capitalization Rate = .149
Rate components:
Interest Rate .080
Risk .040
Property Tax (basic tax plus any special taxes for district) .011
Amortization Rate (50 year remaining life; improvements
70%of total property value .02 x .70) .014
Restricted Value: $15,000/ .149= $100,671
The Mills Act contract allows the use of restricted value for property tax purposes versus current
market value which often results in tax savings. For the example shown above, the following tax
comparison could apply:
Current market value: $450,000 x .011 tax rate= $4,950 in annual property tax
Restricted value: $100,671 x .011 tax rate= $1,108 in annual property tax
Savings to the owner: $3,842
C6-13
Attachment 4
COMMERCIAL PROPERTY EXAMPLE
An example of the formula for a 40,000 sq. ft commercial property is shown below:
Gross income—vacancy/collection loss = Effective Gross income:
Gross income (fair rent)
40,000 sq ft @ $1.75/sf= $70,000
$70.000 x 12 months= $ 840,000
Less anticipated vacancy and collection loss
$840,000 x 5%= $42,000
Effective gross income: $840,000- $42,000 = $798,000
Effective gross income—maintenance costs=Net Operating Income
Maintenance Costs (includes operations, insurance, building maintenance etc.)_ $275,000
Net Operating Income: $798,000 - $275,000 =$523,000
Net operating income/restricted capitalization rate = Restricted Value
Restricted Capitalization Rate= .126
Rate components:
Interest Rate .080
Risk .020
Property Tax (basic tax plus any special taxes for district) .011
Amortization Rate (50 year remaining life; improvements .015
75% of total property value.02 x .75)
Restricted Value: $523,000/ .126 =$4,150,793
For the example shown above, the following tax comparison could apply:
Current market value: $5,999,998 x .011 tax rate=$65,999 in annual property tax
Restricted value: $4,150,793 x .011 tax rate=$45,658 in annual property tax
Savings to the owner: $20,340
Definitions
Interest component: Pre-determined on an annual basis by the State Board of Equalization.
Historic property risk component: 4% in the case of owner-occupied dwellings and 2% in all
others.
Amortization component: A percentage equal to the reciprocal of the remaining life of the
improvements.
Property tax component: Def ned as the percentage of the estimated total tax rate applicable to
the property for the assessment year multiplied by the assessment ratio.
C6-14
Attachment 5
RESOLUTION NO. (2011 Series)
A RESOLUTION APPROVING A HISTORIC PROPERTY PRESERVATION
AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISPO AND DEPOT SQUARE
LP, OWNER OF A DESIGNATED HISTORIC BUILDING AT 1880 SANTA BARBARA
AVENUE, IN SAN LUIS OBISPO
WHEREAS, the City Council of the City of San Luis Obispo is authorized by California
Government Code Section 50280 et seq. (known as "the Mills Act") to enter into contracts with
the owners of qualified historical buildings to provide for appropriate use, maintenance, and
rehabilitation such that these historic buildings retain their historic characteristics; and
WHEREAS, the City Council has adopted Resolution No. 9136 (2000 Series),
establishing the Mills Act Historic Property Tax Incentive Program as an on-going historic
preservation program to promote the preservation, maintenance and rehabilitation of historic
resources through financial incentives; and
WHEREAS, the owners possess fee title in and to that certain qualified real property,
together with associated structures and improvements thereon, located on Assessor's Parcel
Number 003-659-009, located at 1880 Santa Barbara Avenue, San Luis Obispo, California
93401, also described as the Channel Commercial Wholesale Company Building, (hereinafter
referred to as the"historic property"); and
WHEREAS, the City Council of the City of San Luis Obispo has designated the Channel
Commercial Wholesale Company Building as a historic resource of the City of San Luis Obispo
pursuant to the policies in the City's Historic Preservation Ordinance; and
WHEREAS, the City and owner, for their mutual benefit, now desire to enter into this
agreement to limit the use of the building to prevent inappropriate alterations and to ensure
that character-defining features are preserved and maintained in an exemplary manner, and
repairs and/or improvements are completed as necessary to cant' out the purposes of California
Goverment Code, Chapter 1, Part 5 of Division I of Title 5, Article 12, Sec. 50280 et seq., and
to qualify for an assessment of valuation pursuant to Article 1.9, Sec. 439 et. seq. of the Revenue
and Taxation Code; and
WHEREAS, as provided by adopted procedures, the Cultural Heritage Committee held a
public hearing on February 28, 2011, to consider a request by Depot Square LP, owner of 1880
Santa Barbara Avenue; and
WHEREAS, the City Council has considered the Cultural Heritage Committee's
recommendation, documentation for the building on file in the Community Development
Department,public testimony, the staff report, and the City's Historical Preservation Ordinance.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis
Obispo as follows:
C6-15
ATTACHMENT 9
Council Resolution No. XXXX(2011 Series)
1. Conservation and Open Space Element program 3.6.2 indicates the City will participate in
financial assistance programs such as property tax reduction programs that encourage maintenance
and restoration of historic buildings.
2. The Channel Commercial Wholesale Company Building, located at 1880 Santa Barbara Avenue,
has been recognized as a historic asset in the community by its designation as a Master List
Historic Building. As such, maintaining the structure will meet the City's goals for historic
preservation listed in policies 3.3.1 through 3.3:5 of the Conservation and Open Space Element.
SECTION 2. Historic Preservation Agreement approved. The City Council hereby approves the
"Historic Preservation Agreement Between the City of San Luis Obispo and the Owners of the Historic
Building Located at 1880 Santa Barbara Avenue", and entered into between the City and Depot Square
LP.
SECTION 3. Mayor Authorized to Sign Agreement for City. The City Council hereby authorizes the
Mayor to execute said agreement on behalf of the Council of the City of San Luis Obispo.
SECTION 4. Environmental Determination. The City Council has determined that the above actions
do not constitute a project, as defined by Section 15378 of the California Environmental Quality Act and
are exempt from environmental review.
SECTION 5. Recordation of the Agreement. No later than twenty (20) days after the parties enter into
said agreement, the City Clerk shall cause this agreement to be recorded in the Office of the County
Recorder of the County of San Luis Obispo.
Upon motion of seconded by , and on the following vote:
AYES:
NOES:
ABSENT:
The foregoing Resolution was adopted this 72011.
ATTEST:
Elaina Cano, City Clerk Mayor Jan Marx
APPROVED AS T RM:
hristine Dietric c, City Attorney
C6-16
ATTACHMENT (v
HISTORIC PROPERTY PRESERVATION AGREEMENT BETWEEN
THE CITY OF SAN LUIS OBISPO AND THE OWNER OF THE HISTORIC BUILDING
LOCATED AT 1880 SANTA BARBARA AVENUE, IN THE CITY AND COUNTY OF SAN
LUIS OBISPO, STATE OF CALIFORNIA.
THIS AGREEMENT is made and entered into this _ day of , 2011, by and between the
City of San Luis Obispo, a municipal corporation (hereinafter referred to as the "City"), and Depot
Square LP (hereinafter referred to as "Owner"), and collectively referred to as the"parties."
Section 1. Description of Preservation Measures. The Owner, its heirs, or assigns hereby agree to
undertake and complete, at their expense, the preservation, maintenance, and improvements measures
described in"Exhibit A" attached hereto.
Section 2. Effective Date and Term of Agreement. This agreement shall be effective and commence
upon recordation and shall remain in effect for an initial term of ten (10) years thereafter. Each year
upon the anniversary of the agreement's effective date, such initial term will automatically be extended
as provided in California Government Code Section 50280 through 50290 and in Section 3,below.
Section 3. Agreement Renewal and Non-renewal.
a. Each year on the anniversary of the effective date of this agreement (hereinafter referred to as
"annual renewal date"), a year shall automatically be added to the initial term of this agreement
unless written notice of nonrenewal is served as provided herein.
b. If the Owner or the City desires in any year not to renew the agreement, the Owner or the City
shall serve written notice of nonrenewal of the agreement on the other party. Unless such notice
is served by the Owner to the City at least ninety (90) days prior to the annual renewal date, or
served by the City to the Owner at least sixty (60) days prior to the annual renewal date, one (1)
year shall automatically be added to the term of the agreement as provided herein.
c. The Owner may make a written protest of the notice. The City may, at any time prior to the
annual renewal date, withdraw its notice to the Owner of nonrenewal.
d. If either the City or the Owner serves notice to the other party of nonrenewal in any year, the
agreement shall remain in effect for the balance of the term then remaining.
Section 4. Standards and Conditions. During the term of this agreement, the historic building shall be
subject to the following conditions:
a. Owner agrees to preserve, maintain, and, where necessary, restore or rehabilitate the building
and its character-defining features, including: the building's general architectural form, style,
materials, design, scale, proportions, organization of windows, doors, and other openings;
interior architectural elements that are integral to the building's historic character or significance;
exterior materials, coatings, textures, details, mass, roof line, porch, and other aspects of the
appearance of the building's exterior, as described in Exhibit A, to the satisfaction of the
Community Development Director or his designee.
C6-17
Attachment 6
b. If the building's interior closely relates to the building's eligibility as a qualified historic
building, the Owner agrees to allow pre-arranged tours on a limited basis, to the approval of the
Community Development Director or his designee.
c. All building changes shall comply with applicable City specific plans, City regulations and
guidelines, and conform to the rules and regulations of the Office of Historic Preservation of the
California Department of Parks and Recreation, namely the U.S. Secretary of the Interior's
Standards for Rehabilitation and Standards and Guidelines for Historic Preservation Projects.
Interior remodeling shall retain original, character-defining architectural features such as oak and
mahogany details, pillars and arches, special tile work, or architectural ornamentation to the
greatest extent possible.
d. The Community Development Director shall be notified by the Owner of changes to character-
defining exterior features prior to their execution, such as major landscaping projects and tree
removals, exterior door or window replacement, repainting, remodeling, or other exterior
alterations requiring a building permit. The Owner agrees to secure all necessary City approvals
and/or permits prior to changing the building's use or commencing construction work.
e. Owner agrees that property tax savings resulting from this agreement shall be used for the
Channel Commercial Wholesale Company Building's maintenance and improvements as
described in Exhibit A.
f. The following are prohibited: demolition or partial demolition of the historic building; exterior
alterations or additions not in keeping with the standards listed above; dilapidated, deteriorating,
or unrepaired structures such as fences, roofs, doors, walls, windows; outdoor storage of junk,
trash, debris, appliances, or furniture visible from a public way; or any device, decoration,
structure, or vegetation which is unsightly due to lack of maintenance or because such feature
adversely affects, or is visually incompatible with, the building's recognized historic character,
significance, and design as determined by the Community Development Director.
g. Owner shall allow reasonable periodic examination, by prior appointment, of the interior and
exterior of the historic building by representatives of the County Assessor, the State Department
of Parks and Recreation, the State Board of Equalization, and the City as may be necessary to
determine the owners' compliance with the terms and provisions of this agreement.
Section 5. Furnishing of Information. The Owner hereby agrees to furnish any and all information
requested by the City which may be necessary or advisable to determine compliance with the terms and
provisions of this agreement.
Section 6. Cancellation.
a. The City, following a duly-noticed public hearing by the City Council as set forth in Government
Code Section 50285, may cancel this agreement if it determines that the Owner has breached any
of the conditions of this agreement or has allowed the building to deteriorate to the point that it
no longer meets the standards for a qualified historic building; or if the City determines that the
Owner has failed to preserve, maintain, or rehabilitate the building in the manner specified in
Section 4 of this agreement. If a contract is cancelled because of failure of the Owner to
preserve, maintain, and rehabilitate the historic building as specified above, the Owner shall pay
a cancellation fee to the State Controller as set forth in Government Code Section 50286, which
C6-18
Attachment 6
states that the fee shall be 12 ''/s% of the full value of the building at the time of cancellation
without regard to any restriction imposed with this agreement.
b. If the historic building is acquired by eminent domain and the City Council determines that the
acquisition frustrates the purpose of the agreement, the agreement shall be cancelled and no fee
imposed, as specified in Government Code Section 50288.
Section 7. Enforcement of Agreement.
a. In lieu of and/or in addition to any provisions to cancel the agreement as referenced herein, the
City may specifically enforce, or enjoin the breach of; the terms of the agreement. In the event
of a default, under the provisions to cancel the agreement by the Owner, the City shall give
written notice of violation to the Owner by registered or certified mail addressed to the address
stated in this agreement. If such a violation is not corrected to the reasonable satisfaction of the
Community Development Director or designee within thirty (30) days thereafter; or if not
corrected within such a reasonable time as may be required to cure the breach or default of said
breach; or if the default cannot be cured within thirty (30) days (provided that acts to cure the
breach or default may be commenced within thirty (30) days and shall thereafter be diligently
pursued to completion by the Owner); then the City may, without further notice, declare a default
under the terms of this agreement and may bring any action necessary to specifically enforce the
obligations of the Owner growing out of the terms of this agreement, apply to any court, state or
federal, for injunctive relief against any violation by the owners or apply for such relief as may
be appropriate.
b. The City does not waive any claim of default by the Owner if the 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 the City's regulations governing historic properties are available to the City
to pursue in the event that there is a breach or default under this agreement. No waiver by the
City of any breach or default under this agreement shall be deemed to be a waiver of any other
subsequent breach thereof or default herein under.
c. By mutual agreement, City and Owner may enter into mediation or binding arbitration to resolve
disputes or grievances growing out of this contract.
Section 8. Binding Effect of Agreement. The Owner hereby subjects the historic building located at
1880 Santa Barbara Avenue, San Luis Obispo, California, Assessors Parcel Number 003-659-009, to the
covenants, reservations, and restrictions as set forth in this agreement. The City and Owner hereby
declare their specific intent that the covenants, reservations, and restrictions as set forth herein shall be
deemed covenants running with the land and shall pass to and be binding upon the Owner's successors
and assigns in title or interest to the historic building. Every contract, deed, or other instrument
hereinafter executed, covering or conveying the historic building or any portion thereof, shall
conclusively be held to have been executed, delivered, and accepted subject to the covenants,
reservations, and restrictions expressed in this agreement regardless of whether such covenants,
restrictions, and reservations are set forth in such contract, deed, or other instrument.
Section 9. Notice. Any notice required by the terms of this agreement shall be sent to the address of the
respective parties as specified below or at other addresses that may be later specified by the parties
hereto.
C6-19
Attachment 6
g. This agreement shall be construed and governed in accordance with the laws of the State of
California.
Section 11. Amendments. This agreement may be amended, in whole or in part, only by a written
recorded instrument executed by the parties hereto.
Section 12. Recordation and Fees. No later than twenty (20) days after the parties enter into this
agreement, the City shall cause this agreement to be recorded in the office of the County Recorder of the
County of San Luis Obispo. Participation in the program shall be at no cost to the Owner; however the
City may charge reasonable and necessary fees to recover direct costs of executing, recording, and
administering the historical property contracts.
IN WITNESS WHEREOF, the City and Owner have executed this agreement on the day and
year written above.
OWNER
Hamish Marshall, Managing Partner Date
Depot Square LP
CITY OF SAN LUIS OBISPO
Mayor Jan Marx Date
ATTEST: ,
Elaina Cano, City Clerk
APPROVED AS ORM:
Stine Dietrick, City Attorney
ALL SIGNATURES MUST BE NOTARIZED
C6-20
Attachment 6
To City: Community Development Director
City of San Luis Obispo
919 Palm Street
San Luis Obispo, CA 93401
To Owner: Depot Square LP
895 Aerovista Place, #100
San Luis Obispo, CA 93401
Section 10. General Provisions.
a. 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 them to be considered joint ventures or members of
any joint enterprise.
b. The Owner agrees to hold the City and its elected and appointed officials, officers, agents, and
employees harmless from liability for damage or from claims for damage for personal injuries,
including death, and claims for property damage which may arise from the direct or indirect use
or activities of the Owner, or from those of their contractor, subcontractor, agent, employee, or
other person acting on the Owner's behalf which relates to the use, operation, maintenance, or
improvement of the historic building. The Owner hereby agrees to and shall defend the City and
its elected and appointed officials, officers, agents, and employees with respect to any and all
claims or actions for damages caused by, or alleged to have been caused by, reason of the
Owner's activities in connection with the historic building, excepting however any such claims
or actions which are the result of the sole negligence or willful misconduct of City, its officers,
agents, or employees.
c. This hold harmless provision applies to all damages and claims for damages suffered, or alleged
to have been suffered, and costs of defense incurred, by reason of the operations referred to in
this agreement regardless of whether or not the City prepared, supplied, or approved the plans,
specifications, or other documents for the historic building.
d. All of the agreements, rights, covenants, reservations, and restrictions contained in this
agreement shall be binding upon and shall inure to the benefit of the parties herein, their heirs,
successors, legal representatives, assigns, and all persons acquiring any part or portion of the
historic building, whether by operation of law or in any manner whatsoever.
e. In the event legal proceedings are brought by any party or parties to enforce or restrain a
violation of any of the covenants, reservations, or restrictions contained herein, or to determine
the rights and duties of any party hereunder, the prevailing party in such proceeding may recover
all reasonable attorney's fees to be fixed by the court, in addition to court costs and other relief
ordered by the court.
f. 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 affected thereby.
C6-21
- Attachment 6
EXHIBIT A
MAINTENANCE AND IMPROVEMENT MEASURES FOR CHANNEL COMMERCIAL
WHOLESALE COMPANY BUILDING LOCATED AT 1880 SANTA BARBARA AVENUE,
SAN LUIS OBISPO, CALIFORNIA
1. Owner shall preserve, maintain, and repair the historic building, including its character-defining
architectural features in good condition, to the satisfaction of the Community Development Director or
designee, pursuant to a Mills Act Preservation Contract with the City of San Luis Obispo for the
Channel Commercial Wholesale Company Building located at 1880 Santa Barbara Avenue. Character-
defining features shall include, but are not limited to: roof, eaves, dormers, trim, porches, walls and
siding, architectural detailing, doors and windows, window screens and shutters, balustrades and
railings, foundations, and surface treatments.
2. Owner agrees to make the following improvements and/or repairs during the term of this contract
but in no case later than ten (10) years from the contract date. All changes or repairs shall be consistent
with the City's Historic Preservation Program Guidelines, Historic Preservation Ordinance, and the
Secretary of the Interior's Standards for the Treatment of Historic Properties:
a. Annual window painting, to the satisfaction of the Community Development Director.
b. Periodic inspection of brick and mortar(repointing of mortar joints when necessary).
c. General maintenance and aesthetic upkeep of building; to the satisfaction of the Community
Development Director.
d. Implementation of Phase II landscaping plan, to the satisfaction of the Community Development
Director.
e. Installation of antique railroad car, to the satisfaction of the Community Development Director.
f. Creation and display of historical art and objects on site, to the satisfaction of the Community
Development Director.
g. Correct and/or repair moisture damage or any other structural conditions that could adversely
affect the building's preservation, to the approval of the Community Development Director.
h. Complete installation of building signage, as detailed in sign program approved by Architectural
Review Commission, within one year.
i. Continue a high level of maintenance to the building's exterior and grounds, as evidenced by
periodic repainting and repair of exterior materials and surfaces, high quality landscape
maintenance, and repair or replacement of site features, such as fencing, walls, lighting, or other
historic site features.
OWNER
Hamish Marshall, Managing Partner Date
Depot Square LP
C6-22
From: Mandeville, John
Sent: Monday, May 02, 2011 10:44 AM
To: Carter, Andrew
Cc: Murry, Kim; Lichtig, Katie
Subject: RE: Item C6 -- RR Square Mills Act
Hi Andrew, we are a little short staffed today. Here is a list of 4 out of
the 5 properties. We'll get the info on the 5th property as soon as
possible..
Owner Address Business Name Type of Commercial Use
Watson 800 Palm Ah Louis Retail
RKE 1160 Marsh Stovers Sanitorium Mixture of office uses-CASA, SLO
Symphony, Rural Assistance League
Wood 547 Marsh Kaetzel House Spaces Gallery
Sani 1212 Garden McCaffrey House Garden Street Inn
John Mandeville, AICP
Community Development Director
City of San Luis Obispo RED FILE
919 Palm Street MEETING AGENDA
San Luis Obispo, CA 93401 DAT' 3.�ITEM #
805.781-7170
imandevdle(i�slocity.orQ
From: Carter, Andrew
Sent: Sunday, May 01, 20117:44 PM
To: Mandeville, John
Cc: Lichtig, Katie
Subject: Item C6 -- RR Square.Mills Act
On page C6-5, you state that five of the current Mills Act contracts are for properties with
commercial uses. Can you tell me which five those are on the list beginning on page C6-8? Also
can you tell me what sort of commercial use?
Thanks.
hard*am
Andrew Carter 000UNCIL aCDD DIR
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RED FILE
DATE: May 2, 2011 MEETING AGENDA
TO: City Council DAT 3 /� ITEM #_1_(_&_
VIA: Katie Lichtig, City Manager
FROM: John Mandeville, Community Development Director
BY: Kim Murry, Deputy Director of Community Development
SUBJECT: Commercial Properties under Mills Act Contracts—Item C-6
Clarification of program duration
Council Member Carter requested information regarding the commercial properties currently
under Mills Act contracts. The five commercial properties are as follows:
Owner Location Name Use
Watson 800 Palm Ah Louis Retail uses
RKE 1160 Marsh Stovers Sanitarium Various offices
(CASA,,SLO Symphony, Rural Assistance League, etc.)
Wood 547 Marsh Kaetzel House Spaces Gallery
Sani 1212 Garden McCaffrey House Garden Street Inn
also known as the"Goldtree House"
Long Street 3897 Higuera Long/Bonetti Ranch Residence w/approved
Farm, LLC * Commercial use
*The County Assessor lists this property as a commercial property subject to Mills Act
provisions due to the existing preservation agreement on the property that has many of the same
provisions of a Mills Act contract. The Assessor considers this property restricted and as such,
the valuation of the property reflects the restricted value for those portions covered by identified
buildings.
Council Member Smith requested that clarification be provided for:
Timing of the initiation of the Mills Act Program; and
The name of the Historic resource located at 1212 Garden Street.
Mills Act Program Timing:
The staff report for this item indicates that the Council "approved the Mills Act Program as an
on-going historic preservation program" in December of 2000. To clarify, in 1996 the Council .
C-6Redf,16-3-/1
May 3,2011 Item C-6 Page 2
authorized a pilot Mills Act program with limited numbers of contracts available. The action in
2000 established the program as an on-going one; established fees associated with applications to
enter into a contract; and limited the program's availability to ten contracts/year.
1212 Garden Street:
The property located at 1212 Garden Street was originally listed as the McCaffrey House.
Thanks to the research efforts in 1990 of Council Member Smith, and Jim and Gail Hoffinan, the
historic file was updated to indicate the resource is also known as the"Goldtree House" to reflect
the original owners' name. The house was built by the Goldtrees as a single-story Italianate
Queen Anne family home. The property was acquired in 1898 by the McCaffreys and records
indicate that a second story and four flats were added. Since the basic form of the historic
structure as it exists today was most consistent with the 23 year time period during which it was
owned by the McCaffreys, the resource has remained under the primary name of the "McCaffrey
House".
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