REPORT TO COUNCIL
SUBJECT
Title
Action on Historic Resource Inventory Property Designation and Historic Preservation Agreement (Mills Act Contract) for 1053 Lexington Street
Report
COUNCIL PILLAR
Promote and Enhance Economic Housing and Transportation Development
BACKGROUND
Property owner Lily Chen applied for approval of a Preservation Agreement (commonly known as a Mills Act Contract) for the property located at 1053 Lexington Street. The subject property is a 3,562 square foot lot located on the north side of Lexington Street between Washington Street and Main Street. Constructed in 1935, the existing residence on the property is a 546 square-foot, one-story house designed in the side-gabled roof (commonly called Cape Cod) subtype of the Minimal Traditional architectural style. The property has a detached garage that appears to have been constructed at the same time as the residence. Shortly after construction, the home was altered by the addition of a small side-gable-roofed wing at the rear of the east side-elevation. However, the early addition of a small wing was a common occurrence for the Cape Cod architectural style and has no effect on its integrity.
A requirement of the Mills Act Contract is that the building must be a qualified structure, listed on either a local, State, or National register. Property owners must also demonstrate a plan to restore and rehabilitate the property. The property owners submitted the requisite application, including a historic survey (DPR 523A Form) of the property to determine eligibility to the Historic Resources Inventory (HRI), Statement of Justification for the request, and a 10-Year Restoration and Maintenance Plan for evaluation of the proposed workplan to restore, rehabilitate, and maintain the property. The Mills Act Contract with 10-Year Restoration and Maintenance Plan and supporting documents were made part of the Historical and Landmarks Commission (HLC) staff report, included here as Attachments 1 and 2 respectively, and reviewed at the June 1, 2023 HLC meeting.
Following review of the application, staff report and public testimony, the HLC unanimously recommended that the City Council approve the addition of 1053 Lexington Street to the City’s HRI, approve the Mills Act Contract, and adopt the 10-Year Restoration and Maintenance Plan for the subject property. An excerpt of the draft Minutes of the June 1, 2023 HLC meeting is provided as Attachment 3.
DISCUSSION
The purpose of the Mills Act Contract is to offer owner(s) of historically significant properties an economic incentive to maintain and preserve the historical physical integrity of their properties, which thereby also increases the aesthetic and economic health of the surrounding neighborhood and the City. A 10-Year Restoration and Maintenance Plan is required to document specific maintenance and preservation activities proposed to be undertaken by the property owners for the contract period in exchange for property tax reduction (discussed later in this report). Inspections by City staff occur pursuant to the Mills Act Contract to ensure compliance and progress is made.
The Council established a process for evaluating Mills Act Contract requests on September 4, 1993 (Resolution No. 5843), that set a limit of five contracts per year. In 2004, the City Council increased the number of allowable contracts to 10 per year. If approved, the subject property would be the first for 2023 and within the City’s allowed number of 10 contracts for 2023.
The historic survey prepared for the property details the criteria for evaluation and listing of a potentially historic resource and concludes that the property is eligible for listing on the City’s HRI based on cultural, architectural, and geographic criteria. The property owner’s Statement of Justification along with the 10-Year Restoration and Maintenance Plan demonstrate the property owner’s intent to invest in the subject property consistent with the purpose of Mills Act Contracts.
ENVIRONMENTAL REVIEW
The Mills Act program is exempt from the California Environmental Quality Act (“CEQA”) pursuant to Section 15331 of the CEQA Guidelines (Historical Resource Restoration / Rehabilitation). This exemption consists of projects limited to maintenance, repair, stabilization, rehabilitation, restoration, preservation, conservation or reconstruction of historical resources in a manner consistent with the Secretary of the Interior's Standards for the Treatment of Historic Properties (“SOI Standards”). The Project will result in the restoration and rehabilitation of the 1935 structure consistent with the SOI Standards.
FISCAL IMPACT
The amount of the property tax reduction depends upon the property, location, size, and comparable properties in the area. Currently, the assessed value of the property is approximately $482,760 (6/30/2023 information) and the annual property tax is approximately $5,718 (2022/23 value) (Source: Santa Clara County Assessor’s Office). The City receives approximately 10% of the base property tax. The Mills Act Contract tax reduction is based on an income capitalization method (ICM) calculation based on the average monthly rent, average maintenance costs, and an amortization schedule to arrive at a reduced appraisal value resulting in lower property taxes. The anticipated tax reduction would be 20% to 70% based on the County’s evaluation of the property’s age, condition, and local market value factors in accordance with the formula set by state law. Based on the latest information available, the estimated annual fiscal impact to the City for this individual Mills Act Contract would be a decrease of property tax revenue in the range of $114 to $400. The actual future fiscal impact may be greater due to the reassessment of property value by the County upon transfer of ownership.
This is the first Mills Act contract request in 2023.
COORDINATION
This report has been coordinated with the Finance Department and the City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Determine that the project is categorically exempt from CEQA under Class 31 (Section 15331) - Historical Resource Restoration / Rehabilitation
2. Approve the addition of the property located at 1053 Lexington Street to the City’s Historic Resource Inventory (HRI); and
3. Authorize the City Manager to execute a Mills Act Contract in a final form approved by the City Attorney, and adopt the 10-Year Restoration and Maintenance Plan associated with the property at 1053 Lexington Street.
Staff
Reviewed by: Andrew Crabtree, Director of Community Development
Approved by: Jōvan D. Grogan, City Manager
ATTACHMENTS
1. Mills Act Contract and 10-Year Restoration and Maintenance Plan
2. Staff Report from Historical and Landmarks Commission meeting of June 1, 2023
3. Draft Excerpt Historical and Landmarks Commission meeting minutes of June 1, 2023