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Santa Monica Considers Capping Tax Breaks for Historic Properties

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By Jason Islas
Staff Writer

December 11, 2013 -- Officials want to limit the amount of revenue Santa Monica loses each year in the form of tax breaks to historic property owners.

While City officials said that any proposed limits are very preliminary, they have begun studying the possibility of capping the total amount of lost revenue to the City from the Mills Act -- State legislation that gives property tax breaks to owners of registered historic properties -- at $25,000 a year.

"We're looking at what other cities do," said Planning Director David Martin. He added that Los Angeles has an overall cap on the amount of tax revenue lost to Mills Act contracts and other cities limit the tax breaks on a per-project basis.

But preservation advocates worry that the cap, proposed by the City Manager’s Office, would discourage landowners from seeking historic status for their properties.

The Mills Act “is the only incentive the City offers to property owners to consider landmarking their structure," said Landmarks Commissioner John Berley.

According to the City, under the Mills Act, in order for landowners to enjoy the tax breaks they must “commit to a restoration and maintenance work plan, developed through an evaluation by an architect.”

There are periodic inspections to make sure that the property owners hold up their end of the bargain.

And the Mills Act savings continue even after the property is sold to a new owner, “as an incentive for buyers in the real estate market,” according to the City.

Originally, staff floated the possibility of capping the total loss of tax revenue to the City through the Mills Act at $15,000 a year, but at Monday’s Landmarks Commission meeting, staff raised that number to $25,000.

Staff told the Commission that the average Mills Act contract costs the City about $2,300 in property tax revenue and that rarely did Santa Monica lose out on more than $15,000 a year due to Mills Act contracts.

Santa Monica Mayor Pam O’Connor, who works in the field of historic property preservation, said that since property taxes go to fund things like schools, the discussion is about “balancing needs.”

“Those monies would go to a whole range of things the City supports,” O’Connor said. The question is, “What's a reasonable amount to help incentivize (property owners) to preserve as many houses as possible?”

Not everyone is convinced that the revenue loss is significant to warrant a cap. 

“Against $42 million in property taxes revenue that rises every year, it would appear that the losses to the City due to the Mills Act are a very small percentage," said Carol Lemlein, president of the Santa Monica Conservancy.

Part of the problem, at least for some of the Commissioners, is that the discussion about the Mills Act cap is happening without much context.

While City officials will go back before the Landmarks Commission in January with more information, at Monday’s meeting they presented their recommendations without any backup material, commissioners said.

As a result, Berley said, “We have not gotten into any real in-depth conversation about it yet."

Martin said that City staff is still doing research about the potential financial impacts of a cap.

"That's excellent news," said Lemlein. "It's clear from where we are right now that we need more time for the discussion."

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