HomeMy WebLinkAbout10/16/2001, PH2 - MILLS ACT PROGRAM APPLICATION FEES 1 � ;
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C ITY O F SAN L U 15 O B I S P O
FROM: Bill Statler, Director of Finance
SUBJECT: MILLS ACT PROGRAM APPLICATION FEES
CAO RECOMMENDATION
Adopt a resolution setting fees for Mills Act program applications in the amount of$612.
DISCUSSION
Background
Under the Mills Act program, qualifying historical properties are eligible for an alternative
method of assessing their value for property tax purposes. This alternative method results in
reducing property taxes by up to 50%. Since we began this program in 1996, the City has
approved applications for 19 properties.
At this time, there are no application fees for this program. However, at its meeting on
December 5, 2000, when the Council reviewed the status of this program and approved it as an
ongoing City program, the Council specifically directed staff (via Resolution 9136) to analyze
City and County administrative costs, and to return with a fee recommendation that would at
least partially offset costs for both agencies.
Cost Analysis
City Costs. On average, each Mills Act program application requires 24.5 hours of Community
Development staff time, including review, analysis and processing by the Director, Long Range
Planning Manager, Associate Planner and clerical staff. The review process includes public
hearings by the Cultural Heritage Committee and the Council. Using the City's "full cost"
hourly labor rates for these positions, the City's average cost for each application is $1,717.
County Costs. According to the most recent information provided to us by the County Assessor,
the Mills Act program generated 203 additional County staffing hours beyond what would
normally be required from 1996-97 to 1999-00:
Fiscal Year Hours
1996-97 36.0
1997-98 72.5
1998-99 68.0
1999-00 26.5
Total 203.0
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Council Agenda Report—Mills Act Program Application Fees
Page 2
During this period, the County processed 18 applications (one more has been processed since
then). At an estimated "full cost" of $65 per hour, County staffing costs over this four-year
period total $13,200, or$733 (11.3 hours)per property.
Proposed Fee
For most planning review services, the City's cost recovery goal is 45%. In this case, given that
property owner participation helps achieve General Plan goals for historic preservation and
neighborhood enhancement, we recommend that the cost recovery be set at 25%: $429 for the
City and $183 for the County, for a total fee of$612. Compared with other City planning fees,
this is very similar to the fee for an administrative use permit ($646).
At this level, this one-time fee will improve cost recovery for the City and County, while at the
same time—given the ongoing benefits of the program to historical property owners—not
discourage participation in the program.
FISCAL IMPACT
There will be minimal fiscal impacts associated with this fee. On average, about 4 properties
year have applied annually for the Mills Act program in the City since it began in 1996. At this
level, net City revenues (after passing through the County portion) will increase by about $1,700
annually. (Note: At its December 2000 review, the Council limited approval of Mills Act
applications to 10 annually.)
In accordance with existing City policy for all other service charges, the proposed resolution
provides for annual fee increases based on changes in the Consumer Price Index until completion
of the next comprehensive cost of services study(scheduled for 2005).
CONCURRENCES
The Community Development Department concurs with this recommendation.
PUBLIC NOTIFICATION
In addition to our standard public hearing notification process, we have notified four property
owners who have previously expressed interest in this program about the proposed fee. We have
also notified the County Assessor.
ALTERNATIVES
There are a broad range of fee options based on varying levels of City and County cost recovery.
The following summarizes five of these:
1. Continue to not charge fees for Mills Act program applications. This would be consistent
with our past practice for the last five years, but not with the Council's most recent direction.
Z-Z
Council Agenda Report—Mills Act Program Application Fees
Page 3
2. Only charge (and pass through)the County's full cost of$733.
3. Set the cost recovery rate at 45% for both agencies: $772 for the City and $330 for the
County, for a total fee of$1,102.
4. Only charge (and pass through) the County's costs, but at less than full cost recovery. For
example, at 50% this would be $367.
5. Set the application fee at full cost recovery for both agencies: $1,717 for the City and $733
for the County, for a total fee of$2,450.
In summary, the fee options range from $0 to $2,450, depending on cost recovery levels. As
reflected above, the cost recovery levels could be different for the City and the County.
ATTACHMENTS
1. Summary of Mills Act program
2. Resolution setting fees for"Mills Act" applications
G:Finance/Mills Act/Council Agenda Report
Z-3
Attachment 1
Mills Act Program Summa
Benefit for the Property Owner Property owners are required to include a listing
of planned improvements, with estimated
The County Tax Assessor assesses qualifying completion dates, in their Mills Act contract.
historical properties using a "capitalization of
income" method. This typically results in Eligible Improvements
significant property tax savings, particularly for
properties acquired in the 1980s or 1990s. If the The following are general examples of eligible
contract is canceled, the assessment is gradually property improvements. The improvements must
increased to market value basis over the remaining enhance or maintain the building's historic character
contract term. in an exemplary fashion, and follow the Secretary of
Interior's Standards for Historic Preservation
Benefits for the Community Projects (available from the City's Community
Development Department).
• The property owner must promise to preserve
the building and to use the tax savings to • Replace roof
maintain and/or improve the historic building to • Repaint house exterior.
enhance its historical value, exterior appearance, • Install new foundation.
structural condition or longevity. • Repair, replace and/or restore original exterior
architectural features.
• The contract is recorded, and is binding on • Replace or repair windows or doors.
subsequent owners, heirs, or assigns until the
agreement is canceled. There is a significant • Seismically strengthen the building.
financial penalty for breach of the historic . Replace exterior siding.
contract. • Repair or restore interior architectural features
(if these related to the property's historical
• Mills Act contracts have a minimum 10-year listing).
term. The agreement is self-renewing annually . Repair, replace or restore original stairs,
for additional one-year terms, so there is always
porches,bay windows.
10 years remaining on the contract until the 0 Replace or renovate original landsca a elements
owner or City decides not to renew the contract. pp
Once written notice of non-renewal is given, the (plantings, pergola, ornamental fencing,
contract will remain in effect for the balance of lighting,or other original landscape features).
the term remaining since the original contract • Install HVAC and fire protection systems.
execution or since the last renewal date, as the • Correct structural, electrical and safety problems
case may be. The agreement may be amended that could seriously affect the building's
by mutual consent of the City and property appearance or longevity.
owner. • Remove non-original, incompatible exterior
architectural features to allow restoration.
• Building changes are possible under the
contract; however, changes must comply with Other types improvements may be approved by the
all City requirements and with the Secretary of Community Development Director or the Council,
the Interior's Standards for Historic provided these further the program goals and intent.
Preservation Projects, with the guiding objective Furniture and furnishings, wall, floor and window
being the preservation of the building's original coverings; appliances (except HVAC), and interior
historical character and significance. finishes or architectural treatments are not eligible.
• The Mills Act program requires that property
tax savings be used to maintain, repair, restore,
and in some cases, improve historic properties.
Attachment 2
RESOLUTION NO. (2001 Series)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
SETTING MILLS ACT PROGRAM APPLICATION FEES
WHEREAS, the City has analyzed both its costs and the County of San Luis Obispo's in
reviewing and processing Mills Act program applications, under which qualifying historical
properties are eligible for an alternative method of assessing their value that typically results in
lower property taxes; and
WHEREAS, the full cost of this process for each application is $1,717 for the City and
$733 for the County, for a total cost of$2,450.
NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo
that:
SECTION 1. Mills Act application fees are hereby set at $612, which reflects 25% cost
recovery for the City and the County.
SECTION 2. Consistent with adopted cost recovery policies, this fee will be reviewed
and updated on an ongoing basis. Accordingly, it will be adjusted annually on July 1 of each
year by the annual percentage change in the U.S. Bureau of Labor Statistics (or successor
agency) consumer price index for all urban consumers (CPI-U) all-cities average for the prior
calendar year•, and it will be included in the comprehensive analysis of City fees that is made at
least every five years.
Upon motion of , seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted on October 16, 2001.
Mayor Allen Settle
ATTEST:
Lee Price, City Clerk
qVED AS TO FORM:
Jeffr . Jorg n, Ci Attome
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