TO: Honorable Mayor and Members of the City Council
THRU: Tom Kisela, City Manager
FROM: Russell Bunim, Community Development Director
1. Subject
title
Historic Property Preservation Agreements (Mills Act Contracts) for 17 qualified historic properties.
body
2. Summary
A request for approval of 17 new Mills Act Contracts for properties in the Old Towne and Eichler Historic Districts. Consideration of the contracts for residential properties was continued by the City Council at its November 12, 2024, meeting, while the single commercial property contract was approved.
3. Recommended Action
recommendation
1. Approve 17 Mills Act Contracts between the City of Orange and the identified property owners for the preservation and rehabilitation of qualified historic properties; and authorize the Mayor and City Clerk to execute the contracts on behalf of the City.
2. Provide staff with direction on accepting applications in calendar year 2025 for the Mills Act Program.
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4. Fiscal Impact
The subject 17 Mills Act contracts, represent a total reduction of property tax of approximately $16,167 per year (average reduction of $951 per property). The actual amount of the property tax reduction will be determined by the Orange County Assessor, using a predetermined income-based approach to assessment, considering area rental rates and maintenance costs.
There is a $1,050 application fee for each contract as well as a $100 annual contract administration fee.
5. Strategic Plan Goals
Goal 5: Recognize, promote, and preserve Orange's rich heritage
b: Expand and strengthen processes and practices related to protection and cultural resources.
6. Discussion and Background
The purpose of the Mills Act Program is to leverage property tax savings to support private investment in the preservation of historic properties. The 17 contracts being presented for City Council consideration involve residential properties; 11 in the Old Towne Historic District and six in the Eichler Historic Districts.
The Mills Act Program requires reinvestment of this property tax reduction in preservation of the historic property through the Rehabilitation Plan attached to each contract. The identified work will generate additional revenues from building permit fees, and the local economy will benefit by generating work for local architects, building contractors and material suppliers. The rehabilitation plans associated with the subject contracts total $1,839,616 in property maintenance and rehabilitation over ten years.
The proposed Rehabilitation Plan (Exhibit D of contract) has been tailored to the preservation needs of that property. Upon entering into a contract, a property owner agrees to complete this work which has been found to meet Mills Act Program requirements and to be in conformance with applicable design standards. Additional contract conditions include:
Preserve and rehabilitate the historic property and its character-defining features.
Meet City of Orange Historic Property Maintenance Standards.
Agree to property inspections once every five years of the contract term and/or when work is completed.
File annual status reports on progress of improvements and repairs and/or any changed conditions of the property.
Provide a ten-year update of proposed rehabilitation and repair items, 90 days prior to the tenth contract anniversary.
A summary of the 2024 Mills Act applications (including the commercial property contract approved on November 12, 2024) is provided in Attachment 1 to the Staff Report.
Program Status
A total of 418 Mills Act Contracts have been established since the start of the program in 1998. In 2016 the City Council removed the 10-contracts per year cap. This, combined with homes in the Eichler Tracts becoming eligible to participate in the program with historic district designation in 2018, resulted in a significant increase in the number of contracts. Key statistics about the contracts and property characteristics are as follows:
• 75% Old Towne
• 23% Eichler
• 2% Individually listed (outside of a historic district)
• 407 residential properties
• 11 commercial properties
• 74% of contract holders have submitted some form of annual reporting since entering into a contract.
• 243 properties are candidates for regular 5-year inspections with only 16% having been inspected.
Financial Implications
Program Costs:
The City has historically supplemented its costs for offering the Mills Act Program, recognizing it as a historic preservation incentive that should be financially accessible to property owners, as well as the role that the City’s historic resources play in the community’s economic development activity. City costs related to staff time (Community Development and Finance Departments) include program administration, and consultant services to perform property inspections (both pre-contract and 5-year) as an extension of staff. Program revenues and expenditures are as follows:
|
Owner Cost |
Staff Cost |
Consultant Cost |
Net |
|
Application: $1,050 |
Application review and contract preparation: $500 |
Work plan review and inspection: $1,000 |
Loss: ($450) |
|
Annual Report: $100 |
Coordination: $500 |
Work plan review and inspection: $1,000 |
Loss: ($1,400) |
Property Tax Loss:
As of 2023, the total loss of annual property tax to the City was $274,818 (avg. $650 per property in FY 2025). Total estimated revenue loss from FY 2004 to FY 2025 is $2.3 million representing an average revenue loss per year of approximately $105,000. The subject contracts represent a higher level of property tax loss per property ($951) than the larger group of 418 active contracts due to increasing property values over time.
7. ATTACHMENTS
• Attachment 1 Summary of 2024 Mills Act Applications, November 26, 2024
• Attachment 2 Mills Act Contract MAC 446.0-24 with photographs
• Attachment 3 Mills Act Contract MAC 447.0-24 with photographs
• Attachment 4 Mills Act Contract MAC 448.0-24 with photographs
• Attachment 5 Mills Act Contract MAC 449.0-24 with photographs
• Attachment 6 Mills Act Contract MAC 450.0-24 with photographs
• Attachment 7 Mills Act Contract MAC 451.0-24 with photographs
• Attachment 8 Mills Act Contract MAC 452.0-24 with photographs
• Attachment 9 Mills Act Contract MAC 453.0-24 with photographs
• Attachment 10 Mills Act Contract MAC 454.0-24 with photographs
• Attachment 11 Mills Act Contract MAC 455.0-24 with photographs
• Attachment 12 Mills Act Contract MAC 456.0-24 with photographs
• Attachment 13 Mills Act Contract MAC 458.0-24 with photographs
• Attachment 14 Mills Act Contract MAC 459.0-24 with photographs
• Attachment 15 Mills Act Contract MAC 460.0-24 with photographs
• Attachment 16 Mills Act Contract MAC 461.0-24 with photographs
• Attachment 17 Mills Act Contract MAC 462.0-24 with photographs
• Attachment 18 Mills Act Contract MAC 463.0-10 with photographs