REPORT TO COUNCIL
SUBJECT
Title
Action on the Historic Preservation Agreement (Mills Act Contract) (PLN21-15422) for 1365 Main Street
Report
COUNCIL PILLAR
Promote and Enhance Economic Housing and Transportation Development
BACKGROUND
Property owners, Pear Tree, LLC, applied for a Historical Preservation Agreement (Mills Act Contract) (File No. PLN21-15422) for the property located at 1365 Main Street. Enacted in 1972, the California Mills Act legislation grants participating local governments the authority to enter into contracts with owners of qualified historic properties who actively participate in the restoration and maintenance of their historic properties while receiving property tax relief. Santa Clara participates in the Mills Act Program. 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. The property is currently listed on the City’s Historic Resource Inventory (HRI) for age and the architectural integrity of the residential structure.
The proposed Mills Act Contract (Attachment 1) and supporting documents were presented to the Historical and Landmarks Commission (HLC) hearing on May 17, 2023. The HLC unanimously recommended that the City Council approve the Mills Act Contract and adopt the 10-Year Restoration and Maintenance Plan for 1365 Main Street. The staff report and minutes for the May 17, 2023, HLC meeting is attached for reference (Attachment 3 and 4).
There were other requested entitlements for the property. On October 10, 2023, Council approved the associated Rezone from Single-family (R1-6L) to Planned Development (PD) and Tentative Parcel Map to split the one lot into two lots. The applicant wanted to complete recordation of the map, so that the Mills Act contract can be approved only for the property at 1365 Main Street. The final map was recorded in July 2024.
DISCUSSION
The subject property is a one-story over a basement single-family Craftsman bungalow at 1365 Main Street. The structure is square in form and clad in stucco. The wood-frame building has a cross gabled roof with two shed roofs over the east and west facades all clad in asphalt shingles. While the house at 1365 Main Street underwent alterations, many of the character defining features have been retained. Major exterior alterations include the stucco cladding over the horizontal wood siding, the east and west additions, and new windows and doors.
An updated State of California Department of Parks and Recreation (DPR) form in the Secretary of Interior Standards for the Treatment of Historic Properties evaluation was prepared by Lorie Garcia of Beyond Buildings on December 2, 2021. The proposed project has been determined to be historically significance resource as indicated through the DPR form provided by the applicants to evaluate the significance of the structure. The evaluation of the historical and architectural qualities of the property supports the conclusion that the property remains eligible for listing in the Historic Resources Inventory.
The draft Mills Act agreement is attached to this report along with the 10-year preservation plan and associated exhibits. Some of the notable work that would be performed under this Plan include interior remodel, repair and replacement of exterior windows, termite fumigation, adding heating, ventilation and air conditioning, interior paint, and foundation replacement.
The Mills Act Program allows a qualified property owner to receive a potential property tax reduction and use that savings to assist in offsetting the costs to rehabilitate, restore, and maintain their property. To qualify for this program, the property and/or building must be listed on either a local, State, or National register. The property must also have a plan to restore and rehabilitate the property.
The HLC in their recommendation to the City Council found that the work proposed in the 10-Year Restoration and Maintenance Plan adheres to the Secretary of the Interior’s Standards for Rehabilitation. The proposed improvements and the owner’s 10-year preservation plan support the preservation, protection, and maintenance of a locally designated significant structure.
This request is one of five Mills Act Contracts on track for Council approval this year out of the allowed 10.
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 Standards. The Project will result in the restoration and rehabilitation of the 1898 structure consistent with the Secretary of the Interior 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 $1,430,550 (06/30/2024 information) and the annual property tax is approximately $16,756 (2024/25 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 $335 to $1,173. The actual future fiscal impact may be greater due to the reassessment of property value by the County upon transfer of ownership.
As the current Council policy allows up to 10 Mills Act Contracts to be approved each year, the cumulative economic impact for multiple Mills Act contract does not significantly reduce the overall property tax income for the City.
COORDINATION
This report has been coordinated with the Finance Department and the City Attorney’s Office.
PUBLIC CONTACT
No public notices are required for this item. 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 pursuant to CEQA Guidelines Section 15331(Class 31 - Historical Resource Restoration / Rehabilitation); and
2. 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 1365 Main Street.
Staff
Reviewed by: Reena Brilliot, Acting Director, Community Development Department
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Statement of Justification
2. Draft Mills Act Contract and Exhibits
3. Historical and Landmarks Commission Staff Report from May 17, 2023
4. Historical and Landmarks Commission Minutes from May 17, 2023