Benicia City Council will take up an issue Tuesday that sparked plenty of conversation at a recent Historic Preservation Review Commission meeting — what to do about the city’s Mills Act program.

The city has 37 contracts with owners of historic properties.

In exchange for a tax break that is approaching costing Benicia $35,000 annually in revenues, the landowners agree to complete a work plan of tasks that would restore or maintain their buildings in historically-appropriate ways.

The Mills Act was enacted in California in 1972 to encourage preserving specific historic buildings through reduction of property taxes in exchange for owners’ promises to restore and maintain their properties in an appropriate manner.

In Benicia, which has offered Mills Act contracts since 2003, a property owner initially has a 10-year contract as well as a list of required tasks to perform by certain dates. At the 10-year conclusion, the contract can be renewed annually.

Benicia has 37 such contracts, the most recent of which were approved Nov. 18, 2014.

Those might be the last two if things don’t change, because the program has reached the city’s threshold of $35,000, set as the limit for staff time expenditure and reduced property tax loss associated with Mills Act contracts.

The program is seen as an incentive for historic property owners, particularly in a city that prides itself on its history that dates back to California’s earliest days.

But when it approved the latest two contracts last year, the Council asked employees for a status analysis and a benefits assessment of the program.

Before the Council saw the staff analyses, Principal Planner Amy Million ran it past the Historic Preservation Review Commission (HPRC) at its March 26 meeting.

At that meeting, Million said it was difficult to put a dollar figure on the benefits of historic preservation, although it gives the city a charm that attracts businesses, new residents and tourists.

She said Benicia has hundreds of well-maintained historic-era homes, but only a handful have Mills Act contracts.
Million said the Office of Historic Preservation also has no specific figures related to historic preservation benefits, although its employees have heard those homes held value better than others during the recent deep recession.

She presented three options composed by city staff. One, which has received city employee recommendation, would change the threshold from a dollar amount to a maximum number of contracts, which she suggested should be limited to 40,
A second would close the program to new contracts. allowing only existing contracts to continue. That didn’t get staff backing.

The third suggestion, which also got employee endorsement, would terminate all 37 contracts at their current end date, starting with all “maintenance only” contracts and those that date before Jan. 1, 2010. By 2020, all contracts effective before 2015 would be phased out, and by 2030, all 37 existing contracts would expire.

Those whose contracts are in the midst of the 10 year period would continue through those years, but would not be renewed. While this would allow for completion of restoration tasks, it would relieve the city of continuing “maintenance only” contracts and tax losses.

However, it would open the program to additional properties, although previous contract holders could reapply as well.
Another option she suggested would keep the 37 contracts active and would increase the threshold to $50,000, a number the HPRC suggested at its July 22, 2010, meeting.

The city also could consider modifying its criteria for Mills Act homes so those that have lost original integrity could be restored, making them eligible for historic designation, she said.

At the March meeting, the Commission heard from many of the Mills act contract holders, including from HPRC members themselves who have contracts.

Among those speaking that nigh, Mills Act contract holder Jack Maccoun said “a rising tide lifts all boats,” and that Mills Act contracts raise the value of all Benicia properties.

Others pointed out that even though their taxes are reduced, those savings don’t cover the added expenses of rehabilitating or maintaining a historic home, which is governed by different and, in some cases, stricter regulations than newer structures.
Several speakers mentioned that replacing windows is a classic example. Not only should those windows be rimmed in wood, the window sizes often aren’t standard, and must be custom made.
Regardless, the contracts and their associated savings have helped restore such landmark homes as the Frisbee-Walsh house across from City Hall, several told the HPRC.

Commissioner Toni Haughey, a real estate agent and the owner of a Mills Act historic home, said canceling contracts would be a backward step. But if the city takes that step and contracts aren’t renewed, contractors shouldn’t be compelled to finish their work plans.

Another Commissioner who is a Mills Act contract holder is Jon Van Landschoot, who said the program reflects Benicia’s commitment to repairing its historic buildings. He called the $35,000 ceiling “insulting.”

David Hofheimer, who has a Mills contract for his 121 West J St. home, said he wanted his pact with the city to remain unchanged. Otherwise, his taxes would go up when he was of retirement age.

“I will still most likely be paying a mortgage payment with higher taxes on top of that, at a time when income could be reduced from current levels,” he said.

He recommended Benicia absorb a greater property tax loss through the program, saying the “greater beauty and character bestowed upon the city” through historic preservation exceeds the revenue loss.

He also said modifying existing contracts’ terms “would most probably violate the due process and contracts clauses of the United States Constitution and any similar clauses with the California Constitution.”

Should the city force existing participants to reapply, he said none should pay any additional fee, since they had paid them with their original applications.

Patrick Ward reminded the panel that the state pays 74 percent of the Mills Act costs, and said that his own house expenses have put $200,000 into the local economy

Jose Coelho said improvements seen from the street don’t reflect the expenses he and others have incurred in restoring their homes’ interiors. He called for adding more contractors to encourage historic preservation, but discouraged penalizing existing contract holders.

Another Mills Act property owner, Donnell Rubay, said the city’s consideration of modifying its Mills Act program is sending the message, “We hate you. We really, really hate you.”

Saying the Mills act was a “bright spot” for historic property owners whose homes help make Benicia “a living museum,” Rubay suggested city employees were asking Benicia “to end the Mills Act.

“Owning an historic home in Benicia is an expensive undertaking,” she said. “These homes are under legal restrictions and cannot be altered unless proposed alterations comply with certain regulations.” Specifically, they must comply with the city’s historic plan and the Secretary of the Interior Standards for Rehabilitation if they are to avoid California Environmental Quality Act requirements for an environmental impact report.

She said if homes are too expensive to maintain, property owners won’t want them, and the buildings’ values would decline. She agreed with Maccoun that Mills Act contracts help increase properties’ value, she said.

She provided photographs of two examples of historic-era houses on West H Street that have no Mills contracts.

One is for sale, billed as a “fixer-upper,” is priced at $449,000, but Rubay said a similar Mills Act home two doors away sold last year for $733,000.

She also provided before and after pictures that showed the decline of non-Mills properties in less than five years.
Rubay pointed out the city’s tax loss through Mills Act contracts is $35,000, while the city’s annual appropriation to the Benicia Historical Museum is $50,000 a year, and said that both are “a fraction of the city’s more than $30 million budget.”

Bob Berman, who with his wife, Carol, lead the Benicia State Parks Association and have been longtime supporters of the Benicia Capitol State Historic Park, in particular the Fischer-Hanlon House, said he would rather the city set no limits on the number of Mills Act contracts.

Instead, he suggested limiting them to 15 years and focusing on rehabilitation rather than maintenance.
Leann Taagepera, a former Historic Preservation Review Commission, said she was concerned about the “unprecedented” proposal to cancel or not renew Mills Act contracts.

The proposal prompted her to speak with employees of the state Office of Historic Preservation (OHP) and Solano County Tax Assessor office.

She said OHP employees told her they had not heard of any other city taking actions she called “shocking and completely unheard of in California.”

She made several recommendations and comments, suggesting the city slate a series of collaborative public workshops on the matter.

She said city employees should remember that “they are proposing taking away money from people, and this is very real to people when they have already obligated their finances and made budget assumptions based on having the Mills Act.”
Taagepera also said the city should have notified property owners that staff members specifically were recommending cancellation or non-renewal of Mills Act contracts.

“The recommendation to cancel the contracts is not found in the notice or in the agenda,” she said.

At the conclusion of discussing the topic, the Commission recommended dispersing the contracts among building types or through different districts, tying the program to new construction, such as one new home would add one new Mills Act contract; having annual inspections of contract properties with greater enforcement of contractors who aren’t in compliance; expanding the program to 50 or more properties; and looking deeper into the benefits of the program.

City Manager Brad Kilger incorporated the panel’s recommendations in his April 14 report, in which he explained that city employees’ objectives were to establish consistent criteria for granting contracts so thresholds are clear and so selected properties would result in greater impact; to ensure the program’s financial sustainability, particularly given Benicia’s economic constraints and in anticipation of few changes in the 2015-17 “status quo” budget that will be adopted this year; and to provide opportunities to expand the program to reach as many historic properties as possible.

“The general message from those who spoke (at the HPRC meeting) was that the reduction in property taxes not only helps them to complete their required work plan items, but also to maintain their property,” he wrote.

“The property owners expressed a strong concern with one of the three recommendations made by staff, which was to expand the program to new properties by providing letters of non-renewal to the existing contract owners,” he wrote.

Kilger noted that in the new budget, the program is expected to cost the city $35,468 in lost revenue and city employee time during Fiscal Year 2015-16.

He won’t be asking the Council to make any formal decision Tuesday night. Instead, he will ask members to review the program’s status, consider the HPRC recommendations and to communicate its own wishes to city employees.

If You Go:
The Council will meet at 7 p.m. Tuesday in the Council Chamber of City Hall, 250 East L St.