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HomeMy WebLinkAbout01-05-2016 Item 10 - Review of Mills Act Contract for Falkenstein House 1445 Broad Street Meeting Date: 1/5/2016 FROM: Michael Codron, Community Development Director Prepared By: Walter Oetzell, Assistant Planner SUBJECT: REVIEW OF A MILLS ACT CONTRACT FOR THE FALKENSTEIN HOUSE AT 1445 BROAD STREET (APPLICATION HIST-1990-2015) RECOMMENDATION As recommended by the Cultural Heritage Committee, adopt a resolution (Attachment A) approving a Mills Act Historic Preservation Contract between the City and the owner of the Falkenstein House at 1445 Broad Street, under the terms described in the contract. SITE DATA Applicant and Property Owner Francis and Aline Cullen General Plan Medium High Density Residential Zoning R-2-H (Medium-Density Residential with Historic Preservation Overlay) Historic District Old Town Historic District Environmental Status Not a Project under CEQA (CEQA Guidelines §15378) DISCUSSION The owners of the property at 1445 Broad Street, Frances and Aline Cullen, have submitted an application to enter into a Mills Act historic preservation agreement with the City for the improvement and preservation of the historic Falkenstein House in exchange for property tax relief. The Mills Act Program The Mills Act Property Tax Abatement Program enables California cities to enter into contracts with owners of historical property to provide them with tax relief in exchange for an agreement 10 Packet Pg. 97 Figure 1: Falkenstein House Broad Street (east) elevation to actively participate in the restoration and maintenance of historical resources. A Mills Act contract is effective for an initial 10-year period, and then is automatically extended annually for an additional year. After the initial term, either the City or the owner may, by written notice, decide not to renew the contract. During the effective term of the contract, the property owner must improve or rehabilitate the property, maintain the property consistent with the Secretary of the Interior’s Standards, and provide visibility of the historical resource from the public right-of- way. The Conservation and Open Space Element (COSE) of the General Plan describes the City’s goals and policies for the protection of cultural resources. It is the City’s policy that significant historic resources be rehabilitated and preserved (COSE §3.3). Participation in the Mills Act Program is one of the means by which the City encourages the maintenance and restoration of historic properties (COSE §3.6.2). A property must be on the City’s Master List of Historic Resources in order to be enrolled in the program. Currently there are 51 properties participating in the program, with the last request approved by the Council in September, 2014. The Falkenstein House The Falkenstein House is a two-story, single- family residence, built in 1895 for J.J. and Birdie Falkenstein, owners of the San Luis Music Company. It is an example of the Carpenter Gothic architectural style with Victorian embellishment. The exterior is sheathed in shiplap siding, and decorated with sunburst accents, decorated brackets and fascia, window hoods and ornamentation, and spindle and spool porch detailing. The roof was at one time covered with diamond-shaped shingles, with terra cotta tiles at roof joints. It has since been re-roofed with more conventional rectangular shingles, without tiles. Also of note is the extensive granite curbing around the yard areas on the south and east side of the property, along the Buchon Street and Broad Street frontages. Prior to construction of the house, the site hosted feed lot buildings belonging to Horatio Rogers, an influential farmer who came to San Luis Obispo County in 1874. The property was added to the Master List of Historic Resources in 1983. It remains in good overall condition, though, as indicated in the list of proposed property improvements, the house exterior and fencing suffer from some wood rot and fading paint. 10 Packet Pg. 98 Proposed Improvements and Maintenance The intent of the Mills Act Program is to encourage rehabilitation, restoration, and maintenance of historic property. A property owner participating in the program receives tax relief that is, in part, dependent upon the cost of planned improvements that are related to those purposes. Savings from the tax relief provided under the contract are an incentive to undertake improvements and maintenance related to the historic character of the property. The applicant has provided an outline of the improvements proposed to be undertaken, and these improvements are included in Exhibit A of the draft Mills Act Contract (Attachment B): 1) Repair of wood rot on house and paint the exterior with historically appropriate colors 2) Replace back deck with porch suiting age and style of home 3) Replace rotting fence on property line 4) Replace front entryway to the property to a period-appropriate appearance 5) Landscape front and back yards with period-appropriate plantings 6) Replace engineered floors on second floor with period-appropriate flooring. 7) Strip interior stairway banister and stair treads and refinish them in an historically appropriate finish and method 8) Replace insulation in attic space; upgrade furnace in attic and basement 9) Replace heating and ductwork which has been damaged by rodent infestation 10) Maintain the building exterior and grounds to a high level, as evidenced by periodic repair of exterior materials and surfaces, high quality landscape maintenance, and repair or replacement of site features as necessary. Under the terms of the agreement, all work must be completed within the initial 10 year contract term, to the satisfaction of the Community Development Director. Improvements made to the property must be consistent with applicable historical preservation standards and guidelines. It should be noted that the City reviews properties that are subject to Mills Act Contracts every five years to confirm that improvements made to the property are consistent with the terms of the contract and with the City’s historic preservation program standards and policies. Cultural Heritage Committee Recommendation The Cultural Heritage Committee reviewed the application and the terms of the draft contract at a public hearing on November 23rd, 2015. The Committee, by unanimous vote, recommended that the Council approve the contract. The staff report and the Committee’s adopted resolution are attached to this report (Attachment D). ENVIRONMENTAL REVIEW Entering into a “Mills Act Contract” with the owners of historic property is not subject to the provisions of the California Environmental Quality Act (CEQA) because it is not a project as defined in CEQA Guidelines § 15378 (Definitions). Implementation of the Mills Act is a government fiscal activity which does not involve commitment to any specific project resulting in a potentially significant physical impact on the environment. 10 Packet Pg. 99 FISCAL IMPACT Estimated Tax Relief Under a Mills Act Contract, the value of property is assessed using a “capitalization of income” method described in the California Revenue and Taxation Code. The “Restricted Value” may be significantly lower than the current assessed value of the property, resulting in tax savings to the property owner. This tax savings represents the financial incentive to invest in rehabilitation, restoration, and maintenance of the historic resource. By this method of valuation, it is estimated that the property owner may realize a total tax savings of about $22,750 over the initial 10-year period of the contract (see Attachment E). About 3.36% of property taxes are allocated to the City for the 2015/2016 fiscal year,1 and so the tax savings may have an impact to the City of about $765 over the initial 10-year period of the contract. This is an approximate calculation; actual costs and values are calculated by the County Assessor after the contract is agreed upon. ALTERNATIVES 1. Continue review of this request to a future date for additional analysis or research; or 2. Do not enter into a Mills Act Historic Preservation Contract with the property owner. This alternative is not recommended. The contract provides a tax relief incentive that is a tool for achieving the City’s goals for historical preservation. Attachments: a a - Draft Resolution b b - Draft Historic Property Preservation Agreement c c - Vicinity Map d d - CHC Agenda Report and Resolution (Nov. 23, 2015) e e - Historical Property Valuation Example 1 Property Tax Perspective, Fiscal Year July 1, 2015 to June 30, 2015 ; County of San Luis Obispo [ONLINE at http://www.slocounty.ca.gov/Assets/AC/Digital/Property+Tax/Perspective/2015-16+Property+Tax+Perspective.pdf, accessed December 23, 2015] 10 Packet Pg. 100 R ______ RESOLUTION NO. _______ (2016 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, APPROVING A HISTORIC PROPERTY PRESERVATION AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISPO AND OWNERS OF THE FALKENSTEIN HOUSE AT 1445 BROAD STREET WHEREAS, the City Council of the City of San Luis Obispo is authorized by California Government Code § 50280 et seq. (known as “the Mills Act”) to enter into contracts with the owners of qualified historical properties to provide for appropriate use, maintenance, and rehabilitation such that these historic properties 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 City Council of the City of San Luis Obispo has designated this property as a historic resource of the City of San Luis Obispo pursuant to the policies in the City’s Historic Preservation Program Guidelines; and WHEREAS, the owners possess fee title in and to that certain qualified real property, together with associated structures and improvement thereon, located on Assessor’s Parcel Number 003-531-017, located at 1445 Broad Street, San Luis Obispo, California, also described as the Falkenstein House (hereinafter referred to as the “historic property”); and WHEREAS, the City and owners, for their mutual benefit, now desire to enter into this agreement to limit the use of the property 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 carry out the purposes of California Government Code, Chapter 1, Part 5 of Division 1 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, the Cultural Heritage Committee of the City of San Luis Obispo conducted a public hearing in the Council Hearing Room of City Hall, 990 Palm Street, San Luis Obispo, California, on November 23, 2015, for the purpose of reviewing the proposed historic property preservation agreement, and recommended that the Council enter into the agreement; and WHEREAS, notices of said public hearings were made at the time and in the manner required by law; and WHEREAS, the City Council held a hearing on January 5, 2016, in the Council Chamber at 990 Palm Street of the City of San Luis Obispo as part o f its regularly scheduled meeting for the purpose of considering approval of the historic preservation agreement, and has 10.a Packet Pg. 101 At t a c h m e n t : a - D r a f t R e s o l u t i o n ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Resolution No. _____ (2016 Series) Page 2 R ______ duly considered all evidence, including the record of the Cultural Heritage Committee hearing and recommendation, testimony of the applicant and interested parties, and the evaluation and recommendation by staff, present at said hearing. NOW THEREFORE, BE IT RESOLVED, by the City Council of the City of San Luis Obispo as follows: SECTION 1. Findings. Based upon all the evidence, the City Council makes the following findings: 1. Conservation and Open Space Element program 3.6.2 states that the City will participate in financial assistance programs such as property tax reduction programs that encourage maintenance and restoration of historic properties. 2. The Falkenstein House, located at 1445 Broad Street, has been recognized as a historic asset in the community by its designation as a Master List Historic Property. 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. Environmental Determination. The City Council has determined that the above actions do not constitute a project, as defined by § 15378 of the California Environmental Quality Act and are exempt from environmental review. SECTION 3. 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 Property Located at 1445 Broad Street", and entered into between the City and owners, Francis X. and Aline V. Cullen. SECTION 4. Community Development Director Authorized to Sign Agreement for City. The City Council hereby authorizes the Community Development Director to execute said agreement on behalf of the Council of the City of San Luis Obispo. SECTION 5. Recordation of the Agreement. No later than twenty (20) days after the parties enter into said agreement, the City Clerk shall cause the agreement to be recorded in the Office of the County Recorder of the County of San Luis Obispo. Upon motion of Council Member ________, seconded by Council Member ________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was passed and adopted this 5th day of January, 2016. 10.a Packet Pg. 102 At t a c h m e n t : a - D r a f t R e s o l u t i o n ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Resolution No. _____ (2016 Series) Page 3 R ______ ___________________________________________ Mayor Jan Marx ATTEST: __________________________________________ Jon Ansolabehere Interim City Clerk APPROVED AS TO FORM: ____________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. ______________________________ Jon Ansolabehere Interim City Clerk 10.a Packet Pg. 103 At t a c h m e n t : a - D r a f t R e s o l u t i o n ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) HISTORIC PROPERTY PRESERVATION AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISPO AND THE OWNERS OF THE HISTORIC BUILDING LOCATED AT 1445 BROAD STREET, IN THE CITY AND COUNTY OF SAN LUIS OBISPO, STATE OF CALIFORNIA. THIS AGREEMENT is made and entered into this ________ day of ________ , 2016, by and between the City of San Luis Obispo, a municipal corporation (hereinafter referred to as the “City”), and Francis X. Cullen and Aline V Cullen (hereinafter referred to as “Owners”), and collectively referred to as the “parties.” Section 1. Description of Preservation Measures. The Owners, their 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 Owners or the City desire in any year not to renew the agreement, the Owners or the City shall serve written notice of nonrenewal of the agreement on the other party. Unless such notice is served by the Owners to the City at least ninety (90) days prior to the annual renewal date, or served by the City to the Owners 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 Owners 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 Owners of nonrenewal. d. If either the City or the Owners serve 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 property shall be subject to the following conditions: a. Owners agree to preserve, maintain, and, where necessary, restore or rehabilitate the building and its character-defining features, including: the building’s general 10.b Packet Pg. 104 At t a c h m e n t : b - D r a f t H i s t o r i c P r o p e r t y P r e s e r v a t i o n A g r e e m e n t ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Historic Preservation Agreement 1445 Broad Street Page 2 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. b. The building’s interior closely relates to the property’s eligibility as a qualified historic property. The Owners agree 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 Owners 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 Owners agree to secure all necessary City approvals and/or permits prior to changing the building’s use or commencing construction work. e. Owners agree that property tax savings resulting from this agreement shall be used for property 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 d evice, decoration, structure, or vegetation which is unsightly due to lack of maintenance or because such feature adversely affects, or is visually incompatible with, the property’s recognized historic character, significance, and design as determined by the Community Development Director. g. Owners shall allow reasonable periodic examination, by prior appointment, of the interior and exterior of the historic property 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. 10.b Packet Pg. 105 At t a c h m e n t : b - D r a f t H i s t o r i c P r o p e r t y P r e s e r v a t i o n A g r e e m e n t ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Historic Preservation Agreement 1445 Broad Street Page 3 Section 5. Furnishing of Information. The Owners hereby agree 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 Owners have breached any of the conditions of this agreement or has allowed the property to deteriorate to the point that it no longer meets the standards for a qualified historic property; or if the City determines that the Owners have failed to preserve, maintain, or rehabilitate the property in the manner specified in Section 4 of this agreement. If a contract is cancelled because of failure of the Owners to preserve, maintain, and rehabilitate the historic property as specified above, the Owners shall pay a cancellation fee to the State Controller as set forth in Government Code Section 50286, which states that the fee shall be 12 ½% of the full value of the property 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 b y the Owners, the City shall give written notice of violation to the Owners 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 Owners); 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 Owners 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 Owners 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 10.b Packet Pg. 106 At t a c h m e n t : b - D r a f t H i s t o r i c P r o p e r t y P r e s e r v a t i o n A g r e e m e n t ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Historic Preservation Agreement 1445 Broad Street Page 4 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 Owners may enter into mediation or binding arbitration to resolve disputes or grievances growing out of this contract. Section 8. Binding Effect of Agreement. The Owners hereby subject the historic building located at 1445 Broad Street, San Luis Obispo, California, Assessor’s Parcel Number 003-531-017, to the covenants, reservations, and restrictions as set forth in this agreement. The City and Owners 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 Owners’ successors and assigns in title or interest to the historic property. Every contract, deed, or other instrument hereinafter executed, covering or conveying the historic property 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. To City: Community Development Director City of San Luis Obispo 919 Palm Street San Luis Obispo, CA 93401 To Owners: Francis X. and Aline V. Cullen 1445 Broad Street 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 Owners agree 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 Owners, or from those of their contractor, subcontractor, agent, employee, or other person 10.b Packet Pg. 107 At t a c h m e n t : b - D r a f t H i s t o r i c P r o p e r t y P r e s e r v a t i o n A g r e e m e n t ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Historic Preservation Agreement 1445 Broad Street Page 5 acting on the Owners’ behalf which relates to the use, operation, maintenance, or improvement of the historic property. The Owners hereby agree 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 Owners’ activities in connection with the historic property, 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 property. 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 property, 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. 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 Owners; however the City may charge reasonable and necessary fees to recover direct costs of executing, recording, and administering the historical property contracts. 10.b Packet Pg. 108 At t a c h m e n t : b - D r a f t H i s t o r i c P r o p e r t y P r e s e r v a t i o n A g r e e m e n t ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Historic Preservation Agreement 1445 Broad Street Page 6 IN WITNESS WHEREOF, the City and Owners have executed this agreement on the day and year written above. OWNERS ____________________________________ ______________________________ Francis X. Cullen Date ____________________________________ ______________________________ Aline V. Cullen Date CITY OF SAN LUIS OBISPO ____________________________________ ______________________________ Mayor Jan Marx Date ATTEST: ______________________________ John Ansolabehere, Interim City Clerk APPROVED AS TO FORM: ______________________________ Christine Dietrick, City Attorney ALL SIGNATURES MUST BE NOTARIZED 10.b Packet Pg. 109 At t a c h m e n t : b - D r a f t H i s t o r i c P r o p e r t y P r e s e r v a t i o n A g r e e m e n t ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Historic Preservation Agreement 1445 Broad Street Page 7 EXHIBIT A MAINTENANCE AND IMPROVEMENT MEASURES FOR THE FALKENSTEIN HOUSE LOCATED AT 1445 BROAD STREET, SAN LUIS OBISPO, CALIFORNIA 1. Owners 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 property located at 1445 Broad Street. 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. Owners agree 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 Ordinance and the Secretary of the Interior’s Standards for the Treatment of Historic Properties:  Repair of wood rot on house and paint the exterior.  Replace back deck with porch suiting age and style of home.  Replace rotting fence on property line.  Replace front entryway to the property to a period-appropriate appearance.  Landscape front and back yards with period-appropriate plantings.  Replace engineered floors on second floor with period-appropriate flooring.  Strip interior stairway banister and stair treads and refinish them in an historically appropriate finish and method.  Replace insulation in attic space; upgrade furnace in attic and basement.  Replace heating and ductwork which has been damaged by rodent infestation.  Maintain the building exterior and grounds to a high level, as evidenced by periodic repair of exterior materials and surfaces, high quality landscape maintenance, and repair or replacement of site features as necessary. OWNERS ____________________________________ ______________________________ Francis X. Cullen Date ____________________________________ ______________________________ Aline V. Cullen Date 10.b Packet Pg. 110 At t a c h m e n t : b - D r a f t H i s t o r i c P r o p e r t y P r e s e r v a t i o n A g r e e m e n t ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Historic Preservation Agreement 1445 Broad Street Page 8 State of California } County of San Luis Obispo } On ________________, before me _________________________________________ , Date Name and Title of the Officer personally appeared, ____________________________________________________ , Name of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature _____________________________ Signature of Notary Public Place Notary Seal Above State of California } County of San Luis Obispo } On________________, before me,__________________________________________, Date Name and Title of the Officer personally appeared, _____________________________________________________, Name of Signer(s) who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature _____________________________ Signature of Notary Public Place Notary Seal Above 10.b Packet Pg. 111 At t a c h m e n t : b - D r a f t H i s t o r i c P r o p e r t y P r e s e r v a t i o n A g r e e m e n t ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) R-2-H O R-2-H R-2-H R-2-H R-2-H O-H O R-2-H R-2-H R-2-H O-H R-2-H R-2-H R-2-H B R O A D B U C H O N PIS M O IS L A Y NIP O M O VIC INITY MAP HIST-1990-20151445 Broa d Street ¯ 10.c Packet Pg. 112 At t a c h m e n t : c - V i c i n i t y M a p ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) CULTURAL HERITAGE COMMITTEE AGENDA REPORT SUBJECT: Review of a draft Mills Act contract for the Master List historic Falkenstein House. ADDRESS: 1445 Broad Street BY: Walter Oetzell, Assistant Planner Phone: 781-7593 E-mail: woetzell@slocity.org FILE #: HIST-1990-2015 FROM: Brian Leveille, Senior Planner RECOMMENDATION: Forward a recommendation to the City Council to approve the applicant’s request to be a part of the Mills Act Historic Preservation program. SITE DATA Applicant Aline Cullen Historic Status Master List Resource Submittal Date September 10, 2015 Complete Date November 2, 2015 General Plan Medium High Density Residential Zoning R-2-H (Medium-Density Residential with Historic Preservation Overlay) Site Area 7,250 sq. ft. Environmental Status Not a Project under CEQA (CEQA Guidelines §15378) SUMMARY & COMMITTEE PURVIEW The owner of the Falkenstein House at 1445 Broad has submitted an application to enter into a Mills Act historic preservation agreement with the City. The draft Mills Act contract is being referred to the Cultural Heritage Committee (CHC) for a recommendation prior to Council action.1 BACKGROUND Historic preservation is an important goal, as stated in the Conservation and Open Space Element 1 As described in § 14.01.030 (B)(8) of the City’s Historic Preservation Ordinance Meeting Date: November 23, 2015 Item Number: 1 CHC1 - 1 10.d Packet Pg. 113 At t a c h m e n t : d - C H C A g e n d a R e p o r t a n d R e s o l u t i o n ( N o v . 2 3 , 2 0 1 5 ) ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) HIST-1990- -2015 (1445 Broad) Page 2 (COSE) of the City’s General Plan (COSE § 3.2), and the Mills Act Program is one of the programs the City uses to achieve this goal (COSE § 3.6.2). Originally begun in 1996 as a pilot program, the program allows the City to enter into preservation contracts with the owners of designated historic properties who promise to preserve, maintain and in some cases, improve the properties in return for property tax savings. It is one of the most effective preservation tools available to encourage the preservation of heritage properties by providing a financial incentive. Participation in the program is limited to properties on the Master List of Historic Resources. About 51 historic properties currently participate in this program, with the last request approved by the Council in September, 2014. Historic Property Contracts are prepared using standard language conforming to the Mills Act (Govt. Code §§ 50280 – 50290), provided by the State Historic Preservation Office. The contracts differ substantively only in the description of the historic property and the maintenance and improvement programs planned by the property owner (Exhibit A of the contract). Standard features of the contracts include:  Assessment of the value of the historic property’s by County Assessor using a “Capitalization of Income” method, which can result in significant property tax savings. If the contract is canceled, the assessment is gradually increased to market value basis over the remaining ten year contract term.  A commitment by the property owner to preserve the building and to use the tax savings to maintain and improve the historic building to preserve and enhance its historical value, exterior appearance, structural condition, and longevity. Each contract includes an exhibit listing the maintenance and improvement measures to which the tax savings will be applied.  The contract is recorded, and is binding on subsequent owners, heirs, or assigns until the agreement is canceled. There is a significant financial penalty if the agreement is cancelled due to breach of performance.  Mills Act contracts have a minimum 10-year term. The agreement “self-renews” annually for additional 10-year terms, so 10 years always remaining on the contract until the owner or City decides not to renew it. Once written notice of cancellation is given, the contract will remain in effect for the balance of the remaining ten year term. The agreement may be amended by mutual consent of the City and property owner.  The structure may be altered under the contract; however alterations must comply with all City requirements and with the Secretary of the Interior’s Standards for the Treatment of Historic Properties, with the guiding objective being the long-term preservation of the building’s original historical character and significance. CHC1 - 2 10.d Packet Pg. 114 At t a c h m e n t : d - C H C A g e n d a R e p o r t a n d R e s o l u t i o n ( N o v . 2 3 , 2 0 1 5 ) ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) HIST-1990- -2015 (1445 Broad) Page 3 Figure 1: Falkenstein House Broad Street (east) elevation SITE INFORMATION2 The property is a 7,250 square-foot parcel at the northwest corner of Buchon and Broad Streets, within the Old Town Historic District. The neighborhood is characterized by single-family residences, many of which are also listed historic resources. The Falkenstein House is a two-story, single- family residence, built in 1895 for J.J. and Birdie Falkenstein, owners of the San Luis Music Company. It is an example of the Carpenter Gothic style with Victorian embellishment. The exterior is sheathed in shiplap siding, and decorated with sunburst accents, decorated brackets and fascia, window hoods and ornamentation, and spindle and spool porch detailing. The roof was at one time covered with diamond-shaped shingles, with terra cotta tiles at roof joints. It has since been re-roofed with more conventional rectangular shingles, without tiles. Also of note is the extensive granite curbing around the yard areas on the south and east side of the property. Prior to construction of the house, the site hosted feed lot buildings belonging to Horatio Rogers, an influential farmer who came to San Luis Obispo County in 1874. The property was added to the Master List of Historic Resources in 1983. It remains in good overall condition, though, as indicated in the list of proposed property improvements, the house exterior and fencing suffer from some wood rot and fading paint. MILLS ACT MAINTENANCE & IMPROVEMENTS The intent of the Mills Act Program is to encourage rehabilitation, restoration, and maintenance of historic property. A property owner participating in the program receives tax relief that is, in part, dependent upon the cost of planned improvements that are related those purposes. Savings from the tax relief provided under the contract are an incentive to undertake improvements and maintenance related to the historic character of the property. Recommended improvements to be included in the historic preservation agreement are included in Exhibit A of the draft Mills Act Contract (Attachment 2) and summarized below. Improvements made to the property under the agreement must be consistent with applicable historical preservation standards and guidelines through and under the terms of the agreement all work must be completed to the satisfaction of the Community Development Director. The City 2 Description from the Historic Resources Inventory (Attachment 4). CHC1 - 3 10.d Packet Pg. 115 At t a c h m e n t : d - C H C A g e n d a R e p o r t a n d R e s o l u t i o n ( N o v . 2 3 , 2 0 1 5 ) ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) HIST-1990- -2015 (1445 Broad) Page 4 also periodically reviews properties that are subject to Mills Act Contracts to confirm that preservation efforts are in compliance with City standards and policies. Proposed Improvements  Repair of wood rot on house and paint the exterior with historically appropriate colors  Replace back deck with porch suiting age and style of home  Replace rotting fence on property line  Replace front entryway to the property to a period-appropriate appearance  Landscape front and back yards with period-appropriate plantings  Replace engineered floors on second floor with period-appropriate flooring.  Strip interior stairway banister and stair treads and refinish them in an historically appropriate finish and method  Replace insulation in attic space; upgrade furnace in attic and basement  Replace heating and ductwork which has been damaged by rodent infestation  Maintain the building exterior and grounds to a high level, as evidenced by periodic repair of exterior materials and surfaces, high quality landscape maintenance, and repair or replacement of site features as necessary. ENVIRONMENTAL REVIEW Entering into a “Mills Act Contract” with the owners of historic property is not subject to the provisions of the California Environmental Quality Act (CEQA) because it is not a project as defined in CEQA Guidelines § 15378 (Definitions-Project). Implementation of the Mills Act is a government fiscal activity which does not involve commitment to any specific project resulting in a potentially significant physical impact on the environment. RECOMMENDATION Adopt the draft resolution recommending that the City Council approve and enter into a Mills Act Contract for the Master List Falkenstein House at 1445 Broad Street. ALTERNATIVES 1. Continue consideration of the item with direction to the applicant and staff on pertinent issues. 2. Recommend to the City Council that they do not enter into the proposed Historic Property Contract, based on findings of inconsistency with the General Plan, Historic Preservation Ordinance, or Historic Preservation Program Guidelines. ATTACHMENTS 1. Draft Resolution 2. Historic Property Preservation Agreement 3. Vicinity map 4. Historic Resources Inventory for 1445 Broad 5. Applicant’s request letter and list of improvements CHC1 - 4 10.d Packet Pg. 116 At t a c h m e n t : d - C H C A g e n d a R e p o r t a n d R e s o l u t i o n ( N o v . 2 3 , 2 0 1 5 ) ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) 10.d Packet Pg. 117 At t a c h m e n t : d - C H C A g e n d a R e p o r t a n d R e s o l u t i o n ( N o v . 2 3 , 2 0 1 5 ) ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) 10.d Packet Pg. 118 At t a c h m e n t : d - C H C A g e n d a R e p o r t a n d R e s o l u t i o n ( N o v . 2 3 , 2 0 1 5 ) ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Historical Property Valuation Example 1 Falkenstein House (1445 Broad) Determination of Restricted Value Gross income (a) $ 42,000.00 Anticipated vacancy and collection loss 5% $ 2,100.00 Effective Gross Income $ 39,900.00 Anticipated operating expenses (b) 25% $ 9,975.00 Net Operating Income (c) $ 29,925.00 Restricted Capitalization Rate 10.254% Interest rate 4.25% Risk 4% Property tax 1.004% Amortization 1% Restricted Value (d) $ 291,837.33 Estimated Tax Comparison Assessed Value (e) $ 518,319.00 Tax on Assessed Value $ 5,203.92 Tax on Restricted Value $ 2,930.05 Estimated tax saving, annual $ 2,273.88 Estimated tax savings, total $ 22,738.76 Over 10-year initial term Notes (a) Annual Gross Income, estimated as $ 3,500 monthly fair rent (b) Estimated as 25% of Effective Gross Income (c) Effective Gross Income less operating expenses (d) Net Operating Income divided by the Restricted Capitalization Rate (e) Value includes improvements on the property which are not related to its historic value (e.g., garage and duplex) 1 Patterned after the example in Guidelines for the Assessment of Enforceably Restricted Historical Property, provided by the California State Board of Equalization, accessed online December 11, 2015 at http://www.boe.ca.gov/proptaxes/pdf/lta05035.pdf. 10.e Packet Pg. 119 At t a c h m e n t : e - H i s t o r i c a l P r o p e r t y V a l u a t i o n E x a m p l e ( 1 2 1 3 : M i l l s A c t C o n t r a c t - F a l k e n s t e i n H o u s e ( 1 4 4 5 B r o a d ) ) Page intentionally left blank.