BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 654 HEARING: 6/22/11
AUTHOR: Hueso FISCAL: Yes
VERSION: 6/13/11 TAX LEVY: No
CONSULTANT: Detwiler
HISTORICAL PROPERY PRESERVATION CONTRACTS
Changes the requirements and enforcement of historical
property preservation contracts.
Background and Existing Law
Property owners and local officials can cooperate to
preserve historical properties under a two-part scheme:
Voluntary contracts that restrict the use of
qualified historical properties in historic zones.
The contracts run for at least 10 years and
automatically renew each year for an additional year.
Reduced property tax assessments for the contracted
properties, based on statutory formulas instead of
their acquisition prices.
Using these statutes, informally known as the "Mills Act,"
about 85 cities and counties have signed about 2,400
contracts with the owners of qualified historical
properties.
Proposed Law
I. Inspections . Contracts to preserve historical property
must provide for periodic examinations of the properties'
interior and exterior by the county assessor, the State
Department of Parks and Recreation, and the State Board of
Equalization to determine the property owners' compliance
with the contracts. Both state agencies say that their
staffs never inspect Mills Act properties and don't need
this authority. Besides the county assessors, building
inspectors and other local officials may need to conduct
inspections. Assembly Bill 654 repeals the authority for
county assessor, the State Department of Parks and
Recreation, and the State Board of Equalization to
AB 654 -- 6/13/11 -- Page 2
periodically examine qualified historical properties. AB
654 requires historical property preservation contracts to
allow the city or county to inspect a property's interior
and exterior before a new agreement and then every five
years, to determine the property owner's contract
compliance.
II. Fees . Proposition 13 (1978) and Proposition 218
(1996) amended the California Constitution to require voter
approval of new and increased local taxes. Proposition 26
(2010) amended the California Constitution to define nearly
all local charges as "taxes," with seven specific
exceptions. Among those exceptions are service charges and
charges for regulatory costs. Cities and counties with
historical property preservation contracts may charge
participating property owners a fee that doesn't exceed the
cost of administering the program (AB 2104, Killea, 1985).
Although there is no statewide survey of Mills Act fees,
many counties and cities don't recover their full
administrative costs. Assembly Bill 654 requires cities
and counties to require participating property owners to
pay a fee that cannot exceed their reasonable costs.
III. Contract notices . Contracts to preserve historical
property must require the property owner or owner's agent
to provide written notice of the contract to the State
Office of Historic Preservation within six months of
entering the contract (SB 221, Marks, 1993). The Office
says that it doesn't index the contracts it receives and
believes that this notice no longer serves a purpose.
Assembly Bill 654 repeals the requirement for owners or
agents of historical properties to send their historical
property preservation contracts to the State Office of
Historical Preservation. AB 654 requires that they record
the contracts with the county where the property is
located.
IV. Contract enforcement . Historical property
preservation contracts can end in two ways:
(1) Either party can give a notice of nonrenewal
before a contract's anniversary date in which case the
contract doesn't automatically renew, but instead runs down
over the remaining term, or
(2) The city council or county board of supervisors
can cancel a contract if it determines that the property
owner has:
AB 654 -- 6/13/11 -- Page 3
Breached the contract,
Allowed the property to deteriorate, or
Failed to restore the property as required by the
contract.
As an alternative to cancellation, either party can sue to
enforce a contract. Assembly Bill 654 repeals the
authority of a city or county to cancel a historical
property preservation contract for failure to restore the
property. AB 654 allows a city or county to sue to enforce
an historical property preservation contract.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . Mills Act contracts for
preserving historical properties are a lot like Williamson
Act contracts for conserving farms, ranches, and open
space. These voluntary agreements between property owners
and local officials cut the property owners' tax bills in
return for preserving historical characteristics.
Legislators review these arrangements from time-to-time to
make sure that the law's public interests balance with
private interests. The Legislature made adjustments in
1985, 1993, and 1998. AB 654 further adjusts the Mills Act
by clarifying who can inspect the contracted properties,
mandating fees that recover local costs, repealing
unnecessary notices, and clarifying how the parties can
terminate their contracts.
2. Feasible fees ? The California Constitution clearly
prohibits local officials from charging fees that exceed
the cost of providing the service or regulation. The Mills
Act allows cities and counties to recover their costs by
charging fees. Some historical property advocates say that
cities and counties don't always charge their full costs as
a way of promoting private property owners to participate
in the Mills Act. Conversely, high local costs may result
in high fees which may discourage more historical property
AB 654 -- 6/13/11 -- Page 4
preservation contracts. However, if fees don't recover the
full local costs, then cities and counties provide a local
general fund subsidy to the participating property owners.
The Committee may wish to consider an amendment that
restores local officials' discretion to charge Mills Act
fees. Up to the constitutional limit, let the locals
decide what price is right.
3. Not only prospective . New laws are usually only
prospective, affecting decisions that occur after the
amended statutes take effect. When it comes to Williamson
Act contracts that automatically renew each year unless
either party issues a formal notice of nonrenewal, County
of Humboldt v. McKee (2008) explained how statutory
amendments apply to the contracts when they automatically
renew. By annually renewing a Williamson Act contract on
each anniversary date, the parties enter into a new
contract each year. The decision to not nonrenew binds the
parties to a new contract. Because the Mills Act parallels
the Williamson Act, it is highly likely that AB 654's
changes will apply to Mills Act contracts that the parties
allow to automatically renew after January 1, 2012.
4. Knock, knock, who's there ? The Fourth Amendment
constitutionally guarantees the right to be secure against
unreasonable searches. The courts protect this reasonable
expectation of privacy. The Mills Act requires the
contracts that are signed by local officials and property
owners to allow periodic examinations by county assessors
and state officials who can inspect the properties for
contract compliance. Property owners accept those
conditions when they voluntarily sign Mills Act contracts.
AB 654 repeals the authority for state officials to gain
access to historical properties because of Mills Act
contracts to which they are not parties. If state
officials need to inspect Mills Act properties, they'll
have to find other statutory authority or convince a court
to issue an inspection warrant under the Code of Civil
Procedure.
Assembly Actions
Assembly Water, Parks & Wildlife Committee:10-1
Assembly Local Government Committee: 7-2
Assembly Appropriations Committee: 12-5
AB 654 -- 6/13/11 -- Page 5
Assembly Floor: 57-18
Support and Opposition (6/16/11)
Support : California Assessors' Association; League of
California Cities.
Opposition : Unknown.