Laguna Beach is famous not only for its coast line and art galleries, but also for its historic charm and lovely beach cottages. In 1993 the City of Laguna Beach adopted The Mills Act in to order to safeguard the architectural heritage of our town. The Act offers an economic incentive for the preservation of historic properties by reducing property taxes.
In the 1980’s the City of Laguna Beach created an Historical Inventory of homes that must retain their original appearance and architectural integrity. Being listed in the Historical Register can provide some perks (from waived building fees to more lenient code requirements) if homeowners agree to preserve their properties. And there you have it… Owning an historical home comes with quite a few responsibilities. Laguna Beach’s historic home owners must for example seek approval for major repairs through a process that requires appeasing two different advisory boards that don’t always see eye to eye. Yet, many desire to own an historical home and might seek historical status to qualify for lower property taxes through the Mills Act. So let’s talk about these lower property taxes.
Mills Act Basics
The Mills Act was adopted in 1976 by State Legislature as an economic incentive to encourage preservation of historic properties by reducing property taxes. Cities are allowed to enter into a completely voluntary contract with owners of “qualified” historic structures. Property owners will receive tax benefits which they can then use to maintain and/or rehabilitate the historic structure in accordance with specific preservation standards.
The Mills Act is in effect for a minimum of 10 years, automatically renewed every year and automatically transferred to new property owners when the property is sold or exchanged.
Does my Laguna Beach home qualify for the Mills Act?
The Laguna Beach City Council has determined that “E” (Excellent) & “K” (Key) rated structures listed on the City’s Historic Register are “qualified” historic structures.
“E” (Excellent) Rating: Outstanding and unique historic architectural examples. Most have been recommended eligible for the National Register.
“K” (Key) Rating: These are very good historical architectural examples which strongly retain their original integrity. They are fine period examples with aesthetic value.
What are the requirements of the Mills Act?
In exchange for the property tax relief, property owners must agree to maintain and preserve their properties for at least 10 years in accordance with specific historic preservation standards. Subject to the discretion of the local government, the contract may provide for the restoration or rehabilitation of properties. This program would not affect owners who wished to make interior improvements or remodel their homes.
What is my tax benefit under the Mills Act?
Mills Act participants may realize substantial property tax savings of between 40% and 60% each year. As property values and tax rates vary and the exact savings also vary from property to property.
In some cases you will not benefit from the program due to an already low base year value (this might for example be the case if the property has been in your family for a long time). It is therefore important to compare your current assessed value with an estimated historic property value to determine whether the Mills Act Program would be beneficial for you.
You can contact the Special Projects division of the Orange County Assessors Department for information at (714) 834-2941.
How is the value of my home assessed?
The Mills Act assesses historical homes according to the “income” method. The value is determined by calculating the projected income, less certain expenses, divided by a “capitalization rate”. “Income” is determined based on what the property could reasonably be expected to yield if rented. The expenses to be deducted include those necessary for the maintenance of the property (insurance, utilities and repairs).
During the term of the Mills Act contract, the assessed value of the property is recalculated each year based on changes in the factors used in the calculation. For more information click here.
Will I be able to remodel my Historical Laguna Beach Home?
Generally, yes. According to Jon Madison (chair of the Heritage Committee) ‘the goal is to preserve the character of their property’. Interiors may be modernized (unless the changes involve interior elements which are integral to the historical building design). Exterior alterations are permissible if they fit the property and neighborhood, and must be approved by the Design Review Board. Characteristics that make the home historically significant –such as a particular architectural feature or material– must be preserved.
The key is that prospective historic homeowners do their homework. Working with a good contractor is important, as well as having realistic expectations that a historic property can’t be completely scrapped.
How do I sign up for the Mills Act Program?
You will have to set an appointment with the City’s Heritage Committee staff liaison to obtain a Mills Act Application Information packet. The liaison will review the application, submittal requirements and the property file. Click here for an application checklist (City of Laguna Beach).
More information about buying or selling a Laguna Beach Historical Home? Give us a call at 949 395 0960. We would be happy to share our expertise regarding Laguna Beach Real Estate and Historical Homes to help you in any way we can.
About Jaleesa Peluso
Jaleesa Peluso is a Laguna Beach Real Estate Agent. She specializes in coastal homes and luxury home marketing. For more information visit: www.jaleesapeluso.com. Contact: (949) 395-0960 or Jaleesa@JaleesaPeluso.com
This information is provided solely as a courtesy by Jaleesa Peluso, Laguna Beach Realtor. It is deemed reliable, but not guaranteed. The rules and regulations regarding the Mills Act or Laguna Beach Historical Homes may be subject to change without notice.