BILL ANALYSIS Ó AB 654 Page 1 Date of Hearing: March 22, 2011 ASSEMBLY COMMITTEE ON WATER, PARKS AND WILDLIFE Jared Huffman, Chair AB 654 (Hueso) - As Introduced: February 16, 2011 SUBJECT : Historical Property SUMMARY : Requires historical properties subject to historic preservation contracts to be inspected prior to entering into a new contract and every five years. Specifically, this bill : 1)Requires that contracts for preservation of historical properties include a provision providing for an inspection of the interior and exterior of the premises by the county assessor, Department of Parks & Recreation (DPR), and the State Board of Equalization (BOE) prior to a new agreement and every five years thereafter to determine the owner's compliance with the contract. 2)Requires the owner of the property to record the contract with the county in which the property is located. 3)Requires that the administrative fee the owner of the property is required to pay under existing law include the cost of processing designation requests, contracts, monitoring, and enforcement. EXISTING LAW : Authorizes cities and counties to enter into contracts with owners of qualified historical properties that restrict the use of the property in exchange for lowered property assessment values. Requires that the contracts be for a minimum period of ten years and provide for periodic examinations of the premises, as necessary, by the assessor, DPR and BOE. Requires that the owner provide written notice of the contract to the Office of Historic Preservation. The city or county entering into the contract is required to charge the owner a fee not to exceed the reasonable cost of administering the program. FISCAL EFFECT : Unknown COMMENTS : The author indicates this bill is needed to ensure that a property tax break is not given to a property owner without the property owner's compliance. Under existing law AB 654 Page 2 known as the Mills Act, owners of historical properties can enter into a contract with a city or county under which the owner agrees to restrict the use of the property in exchange for a lowered property assessment value. The law sets forth requirements for the contracts and calls for periodic inspections of the property for compliance as needed. According to the author, the inspections are not specifically required and do not always occur. In addition, while the current law requires the city or county to charge the property owner an administrative fee, the fee is not necessarily sufficient to recover all administrative costs of the program. This bill would require the local government entering into the contract to inspect the property at the time of a new contract and every five years thereafter. This bill would also require DPR and BOE to inspect the property prior to a new agreement and every five years thereafter. The author and committee may wish to consider whether it is necessary that inspections be conducted by all three entities - the local government, DPR and BOE -- every five years, or whether five year inspections by one or more of these entities would suffice. The author also indicates that the intent of the bill is to ensure that the fee charged to the landowner by the local government is sufficient to allow the local government to recover all costs associated with administering the program. However, it is not clear that this bill as currently drafted will completely accomplish this objective since the language still says that the property owner shall pay a fee not to exceed the reasonable costs of administering this program. The language does clarify that administrative costs include but are not limited to processing of designation requests, contracts, monitoring and enforcement. Since this bill will require inspections every 5 years, and to ensure that the costs of the inspections are covered, the author and committee may also wish to consider an amendment clarifying that the fee shall also cover the costs of inspections.In addition, although the local government may recoup its costs of administering the program through levying fees, this bill would mandate state DPR and BOE inspections every five years on each property in the program. This bill does not include a mechanism for these state agencies to be reimbursed for their inspection costs. According to information provided by the AB 654 Page 3 author, over 2,000 properties are registered as historic properties under the Mills Act, though this number may not be accurate due to underreporting. This bill would also require the owner to record the contract with the county. Suggested amendments : Amend Section 50281(b)(2) on page 2 to read as follows: (2) For an inspection of the interior and exterior of the premises by the assessor,the Department of Parks and Recreation, and the State Board of Equalizationprior to a new agreement, and every five years thereafter, to determine the owner's compliance with the contract. Periodic examinations may also be conducted by the Department of Parks & Recreation and the State Board of Equalization as may be necessary. Amend Section 50281.1 on page 3 to read as follows: 50281.1 The legislative body entering into a contract described in this article shall require that the property owner, as a condition of entering into the contract, pay a fee sufficient to cover but not to exceed the reasonable cost of administering this program, including, but not limited to, the processing of designation requests, contracts, monitoring, inspections , and enforcement, as needed. Amend Page 3, lines 17 through 21 to read as follows: this section. Each contract shall also provide that after five years, and every five years thereafter, the assessor, the Department of Parks and Recreation, and the State Board of Equalizationshall conduct an inspection to determine the owner's continued compliance with the contract. If the property owner or the REGISTERED SUPPORT / OPPOSITION : Support None on file Opposition AB 654 Page 4 None on file Analysis Prepared by : Diane Colborn / W., P. & W. / (916) 319-2096