Unquestionably the most important economic incentive program in California for the restoration and preservation of qualified historic buildings by private property owners, the Mills Act Program can provide the historic property owners with a reduction in property taxes. The programs are administered and implemented by local governments and the Mills Act contracts are between the property owner and the local government. Not all cities or counties participate. Locally, the cities of Carlsbad, Chula Vista, Coronado, Escondido, La Mesa, National City, Oceanside, and San Diego do. The unincorporated areas of the county are also covered.
Named after the late San Diegan James Mills, the former State Senator, the Mills Act offers a compelling incentive to owners of designated historic properties in California. In exchange for taking on the responsibility of preserving, maintaining, and restoring these historic landmarks for public benefit, they can receive a reduction in property taxes.
Mills Act participants may realize substantial property tax savings each year for their properties because valuations of properties under a Mills Act contract are determined by the Income Approach to Value rather than by the standard Market Approach to Value. The income approach, divided by a capitalization rate, determines the assessed value of the property. In general, the income of a residential property is based on comparable rents for similar properties in the area, while the income amount on a commercial property is based on actual rent received. Because rental values vary from area to area, actual property savings vary around the state. It is important to note that because County Assessors are required to assess all properties annually, Mills Act properties may see slight fluctuation in property taxes each year.
So what properties qualify for Mills Act? According to the state statute, a “Qualified historical property” means privately owned property which is not exempt from property taxation and which meets either of the following:
(a) Listed in the National Register of Historic Places or located in a registered historic district, as defined in Section 1.191-2(b) of Title 26 of the Code of Federal Regulations.
(b) Listed in any state, city, county, or city and county official register of historical or architecturally significant sites, places, or landmarks.
If you live in a house 50+ years old that retains its historic integrity it might qualify. The first step would be to talk to your local historical society/history center and see what they can find out about your house. There are also consultants you can hire to put together your application for listing on an historic registry which you will need to apply for a Mills Act program.
Mills Act contracts are for a minimum of 10 years with automatic yearly extensions and stay with the property when transferred. Subsequent owners are bound by the contract and have the same rights and obligations as the original owner who entered into the contract. This can save anywhere between 20 - 70 percent off your taxes according to the City of San Diego Mills Act information page, so it can be worth the paperwork and time involved. Because the local government and the property owner negotiate other specific terms of the contract, you need to contact your local government to determine the rights and obligations a Mills Act contract creates. In San Diego we currently have an estimated 1600 properties on the Mills Act but that is not a static number. Perhaps your home can be 1601!