Purpose of the Mills Act
Program
Economic incentives foster
the preservation of residential neighborhoods
and the revitalization of downtown commercial
districts. The Mills Act is the single most
important economic incentive program in
California for the restoration and preservation
of qualified historic buildings by private
property owners.
Enacted in 1972, the Mills Act legislation
grants participating local governments (cities
and counties) 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.
Benefits to Local
Governments
The Mills Act allows
local governments to design preservation
programs to accommodate specific community needs
and priorities for rehabilitating entire
neighborhoods, encouraging seismic safety
programs, contributing to affordable housing,
promoting heritage tourism, or fostering pride
of ownership. Local governments have adopted the
Mills Act because they recognize the economic
benefits of conserving resources and
reinvestment as well as the important role
historic preservation can play in revitalizing
older areas, creating cultural tourism, building
civic pride, and retaining the sense of place
and continuity with the community’s past.
A formal agreement, generally known as a
Mills Act or Historical Property Contract, is
executed between the local government and the
property owner for a minimum ten-year term.
Contracts are automatically renewed each year
and are transferred to new owners when the
property is sold. Property owners agree to
restore, maintain, and protect the property in
accordance with specific historic preservation
standards and conditions identified in the
contract. Periodic inspections by city or county
officials ensure proper maintenance of the
property. Local authorities may impose penalties
for breach of contract or failure to protect the
historic property. The contract is binding to
all owners during the contract
period.
Benefits to Owners
Owners of historic buildings may qualify for
property tax relief if they pledge to
rehabilitate and maintain the historical and
architectural character of their properties for
at least a ten-year period. The Mills Act
program is especially beneficial for recent
buyers of historic properties and for current
owners of historic buildings who have made major
improvements to their properties.
Mills
Act participants may realize substantial
property tax savings of between 40% and 60% each
year for newly improved or purchased older
properties because valuations of Mills Act
properties 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 an owner-occupied 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 from county to
county. In addition, as County Assessors are
required to assess all properties annually,
Mills Act properties may realize slight
increases in property taxes each year.
Qualified Historic
Property
A qualified historic
property is a property listed on any federal,
state, county, or city register, including the
National Register of Historic Places, California
Register of Historical Resources, California
Historical Landmarks, State Points of Historical
Interest, and locally designated landmarks.
Owner-occupied family residences and
income-producing commercial properties may
qualify for the Mills Act program.
OHP’s Role
OHP
provides technical assistance and guidance to
local governments and property owners. OHP
maintains a current list of communities
participating in the Mills Act program and
copies of Mills Act ordinances, resolutions, and
contracts that have been adopted. OHP does not
participate in the negations of the agreement
and is not a signatory to the contract.
