Mills Act Contracts

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Governor Pio Pico Casa and 1st National Bank/Bank of America Building

  • Download this Mills ct Contract Application.
  • Application Fee: $4,849.00.
  • The Certificate of Appropriateness Fees are waived for Fiscal Year 2019-2020.


If you privately own property that is listed on a local, state or national historic register or your property is a contributing resource within a designated historic district and it is not exempt from property taxation, you are eligible to enter into a Mills Act Contract with the City of Whittier since your property constitutes as a “qualified historic property.” Mills Act Contracts are considered by many to be the single most important economic incentive program available to owners of designated historic landmarks in California.

Enacted in 1972 by the State of California, California Government Code Sections 50280-50290 fosters and encourages the preservation, rehabilitation, and restoration of historic properties by enabling local governments to voluntarily establish, implement and manage their own historic preservation program through reduced property taxes. Approximately 86 cities and counties throughout California currently offer Mills Act Contracts. The City of Whittier has been offering Mills Act Contracts to its residents since 2001.

Mills Act Contract Basics and Application Processing

Any owner of a qualified historic property that is interested in entering into a Mills Act Contract with the City of Whittier does so voluntarily by submitting a Mills Act Contract Application and paying the requisite fee. As part of the application submittal, the property owner is responsible for photographing and identifying all proposed preservation, rehabilitation and/or restoration work to their qualified historic property over a ten year period. The estimated cost of all work must also be submitted with the application. City staff will visit the property to verify the appropriateness of the proposed work.

Once the application is deemed complete, the Historic Resources Commission will review the Mills Act Contract Application and make its recommendations to the City Council. If approved by the City Council, the Mills Act Contract is subsequently signed by the owner of the qualified historic property and the City of Whittier. All Mills Act Contracts are initially valid for a minimum 10 year term. However, an additional one year is automatically added to the term of the contract upon each anniversary date of the signed agreement until a notice of non-renewal is given by either party. In effect, the Mills Act Contract becomes a perpetual 10 year agreement. All work done to the qualified historic property should be roughly equal to or exceed the property tax savings leveraged by the Mills Act Contract.

Once the Mills Act Contract is fully executed and recorded by the Los Angeles County Recorder’s Office, the property owner is responsible for:

  • Implementing the work provisions contained in the Mills Act Contract in conjunction with following the U.S. Secretary of the Interior’s Standards for the Treatment of Historic Properties with Guidelines for Preserving, Rehabilitating, Restoring and Reconstructing Historic Buildings and the California State Historic Building Code;
  • Permit re-occurring five-year inspections of the interior and/or exterior of the qualified historic property where preservation, rehabilitation and/or restoration work that was contractually committed to during that five-year time period;
  • If a property owner decides not to renew their Mills Act Contract, a written 90-day notice of non-renewal (prior to the anniversary date of the contract execution) must be given to the City of Whittier. The notice of non-renewal will result in the legal cancellation of the Mills Act Contract 10 years after it was delivered. The City of Whittier can also provide notice of non-renewal of the contract by giving a property owner a minimum 60-day notice prior to the contact anniversary date. Either party can give notice of non-renewal for any reason; and,
  • The property owner can be assessed a 12.5% penalty for the current fair market value of their qualified historic property by the Los Angeles County Assessor if the Mills Act Contract is cancelled by the City of Whittier due to breach of contract or the site no longer constitutes a qualified historical property after holding a public hearing. Alternatively, the City can initiate action in court to enforce the Mills Act Contract with the property owner.

You can find more information about Mills Act Contracts by clicking on the following links: W.M.C Section 18.84.300 (Mills Act Agreements) and State of California, Office of Historic Preservation.

Benefits of a Mills Act Contract

Some of the benefits of entering into a Mills Act Contract include:

  • Property tax savings. The property tax savings can be up to 40%-60% of the pre-Mills Act Contract tax rate;
  • Reduced maintenance costs. The cost to maintain a qualified historic property is reduced by leveraging property tax savings; and,
  • Transferability. All Mills Act Contract benefits are transferable to the buyer of a qualified historic property if it is sold.

It should be noted that a Mills Act Contract is most effective in reducing a property owner’s tax liability when the historic property is purchased with a high mortgage interest rate and/or purchased at a premium market rate. Properties that are owned free and clear, have a very low assessed valuation or have a low mortgage interest rate are less likely to enjoy substantial benefits from a Mills Act Contract.

How Mills Act Contract Savings Are Calculated

Mills Act Contracts are unusual among preservation incentives in that tax benefits are available not only for income property, but also for owner-occupied property. The property valuation is determined by the "income method” set out in U.S. Revenue and Tax Code Section 439.21. A property’s income, or projected income, less certain yearly expenses, is divided by a capitalization rate to determine the assessed value of the qualified historic property. When the property is owner-occupied, the determination of income is based on what a property could “reasonably” be expected to yield, or an amount stipulated in the Contract as the minimum income to be used. The income projected for an owner-occupied historic property is based on comparable rents in the immediate area for a similar property. If sufficient rental information is not available, the property’s income is based on what it could reasonably be expected to produce under prudent management. When a qualified historic property is used to produce income, the income amount is based on the rent actually received and on typical rents received for similar property being used in the same manner.

The capitalization rate for both owner-occupied and income producing property is determined by the Los Angeles County Assessor’s Office by adding together: an interest component, a historical property risk component, an amortization component; and, a property taxes component. It should be noted that:

  • Interest component is determined by the State Board of Equalization by September of the year preceding the assessment year and is based on the effective rate on conventional mortgages as determined by the Federal Home Loan Bank Board;
  • Historical property risk component is 4% in the case of owner occupied single-family dwellings. In all other cases, the property risk component is 2%;
  • Amortization component is a percentage equal to the reciprocal of the remaining life of the improvements. Although this calculation varies by individual structure, as an estimate, a typical remaining life of a frame building would be 20 years (or 0.05); for masonry buildings the remaining life might be up to 50 years (or 0.02); and,
  • The property taxes component is defined as the "percentage of the estimated total tax rate applicable to the property for the assessment year times the assessment ratio.” Typically, this component will be 1% (0.01 post-Proposition 13 tax rate).

Hypothetical Example of a Property Tax Calculation

Current assessed valuation = $ 250,000
Current taxes = $ 2,500 ($250,000 X 0.01)

Property Tax Re-Calculation Using a Mills Act Contract Assessment Method

a) Gross income per year = $ 14,400 ($1,200 (income produced per month) X 12 months)
b) Less expenses per year = $ 2,000 (insurance, grounds maintenance, repairs and etc.)
c) Net income per year = $ 12,400
d) Capitalization rate = 18% (mortgage rate @ 8%

+ risk component @ 4%

+ tax rate @ 1 %

+ amortization @ 5%)
New valuation = $ 68,888 ($12,400 (net income) divided by 0.18 (capitalization rate)
New taxes = $ 688 ($68,888 (new valuation) X 0.01 (tax rate))

A Total Savings of $1,812 in Annual Property Taxes

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