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HomeMy WebLinkAboutItem 11a - Mills Act Application No. MILLS 25-01 STAFF REPORT DEVELOPMENT SERVICES DEPARTMENT DATE: September 16, 2025 TO: Honorable Mayor and City Council FROM: Jason Kruckeberg, Assistant City Manager/Development Services Director Lisa L. Flores, Deputy Development Services Director By: Edwin Arreola, Senior Planner SUBJECT: MILLS ACT APPLICATION NO. MILLS 25-01 FOR A TEN-YEAR MILLS ACT CONTRACT BETWEEN THE CITY OF ARCADIA AND THE PROPERTY OWNER OF THE HISTORIC "BROD-PAPP HOUSE" LOCATED AT 1203 OAKWOOD DRIVE CEQA: Not a Project Recommendation: Approve SUMMARY The Applicant and Property Owner, Chris Karlen, on behalf of the Ismaili Karlen Family Trust, is requesting that the City Council approve Mills Act Application No. MILLS 25-01. The application is to enter into a ten-year Mills Act property tax abatement contract between the City, and the Property Owner of the historic “Brod- Papp House”, for the repair, rehabilitation, restoration, and maintenance of that property. It is recommended that the City Council determine that the approval of the contract is not a project under CEQA; approve Mills Act Application No. MILLS 25-01; direct the City Attorney to prepare the ten-year Mills Act contract for the “Brod-Papp House” located at 1203 Oakwood Drive; and authorize the City Manager, or designee, to review and execute the contract between the City and the Property Owner. BACKGROUND The subject property is an 18,988 square foot corner lot that is located at the Mills Act Application No. MILLS 25-01 September 16, 2025 Page 2 of 9 northwest corner of Oakwood Drive and E. Sycamore Avenue, in the Highlands Homeowners’ Association – refer to Figure 1 below for an aerial photo. The site contains a 2,113 square foot single-story Mid-Century Modern house, with an attached two-car garage that was built in 1949 and was designed by the famed architect, Richard Neutra. The site has decorative landscaping and mature trees, including two oak trees, a screened garden room, and a swimming pool around the northeast corner of the house. On December 17, 2024, the City Council adopted Resolution No. 7605, designating the home as a historical local landmark due to its significance as an outstanding example of the Mid-Century Modern architectural style. Figure 1 – Aerial of the Subject Site One of the incentives granted to property owners of historic landmarks is the ability to apply for the Mills Act Property Tax Abatement Program (“Mills Act”). This program was enacted in 1972 by the State of California to grant local governments the authority to execute contracts with owners of qualified historic properties, who Mills Act Application No. MILLS 25-01 September 16, 2025 Page 3 of 9 actively participate in the repair, rehabilitation, restoration, and maintenance of their properties. Owners receive property tax relief to offset the costs of maintaining a historically designated property. Mills Act contracts must comply with Sections 50280 through 50290 of the California Government Code. Requirements include a minimum ten-year term, adherence to the Secretary of the Interior’s Standards for the Treatment of Historic Properties and State Historic Building Code, which specify the types of rehabilitation allowed, authorization for periodic inspections to ensure compliance, and that the contract be binding upon all successors-in-interest of the owner. If approved, the City Attorney will prepare the contract, ensuring it includes all provisions required by state law and the City’s Development Code, including the City’s Historic Preservation Ordinance. The Planning Commission, acting in its capacity as the City’s designated Historic Preservation Commission, reviewed the Mills Act Application at its August 12, 2025, meeting, and recommended approval to the City Council. The Commission found no issues with the application. Further details of the Commission’s discussion and recommendation can be found later in the Discussion section of this report. DISCUSSION As part of the Mills Act Application, the property owner must submit a rehabilitation plan outlining the proposed work to maintain the historical integrity of the structure. The property owner has submitted such a plan, listing the work to be completed within the ten-year contract period – refer to Attachment No. 1. The plan includes the items listed in the table below. Figures 2-6 show elements of the property to be repaired/maintained. Proposed Scope of Work Estimated Cost Year of Proposed Work 1. The redwood siding and window framing around the home will be refinished and/or replaced – refer to Figure 3 below. $25,000 1 2. The aluminum windows will be re- puttied, stripped, and repainted with some windows also having their glass replaced – refer to Figure 3 below. $15,000-25,000 1 Mills Act Application No. MILLS 25-01 September 16, 2025 Page 4 of 9 3. The planter in front of the home will be rehabilitated. $5,000-15,000 1 4. A glass panel facing the living room will be replaced with tempered glass due to cracking and water damage. $4,000 1 5. The garage door and the entry door facing Sycamore Avenue will be replaced with a redwood doors to match the rest of the home – refer to Figure 5 below. $15,000 1 and 2 6. The exterior of the home will be repainted, with certain portions re-stuccoed – refer to Figure 6 below. $15,000 2 7. The roof will be replaced – refer to Figure 7 below. $30,000 3 Total Investment in Rehabilitation $109,000- 129,000 Figure 2 – Redwood siding, window frame and windows in need of repair Mills Act Application No. MILLS 25-01 September 16, 2025 Page 5 of 9 Figure 3 – Planter in need of re-habitation Figure 4 – Garage door to be replaced with redwood door Mills Act Application No. MILLS 25-01 September 16, 2025 Page 6 of 9 Figure 5 – Northeast elevation of the home, walls will be repainted and/or re-stuccoed Figure 6 – Flat roof to be replaced The estimated costs of the proposed improvements range from approximately $4,000 for replacing the glass panel in the living room, to as much as $30,000 for reroofing the home. The total estimated cost for all improvements is approximately $109,000 to $129,000. Mills Act Application No. MILLS 25-01 September 16, 2025 Page 7 of 9 The proposed scope of work is intended to preserve the home’s Mid-Century Modern architectural character. This includes the replacement and rehabilitation of exterior materials, such as windows, stucco, and wood, as well as the installation of new garage and entry doors that are consistent with the home's original materials. All proposed work will comply with the Secretary of the Interior’s Standards for the Treatment of Historic Properties and the State Historic Building Code. Some elements of the project may be subject to design review and approval through a Short Review Application by the Architectural Review Board of the Highlands Homeowners’ Association. However, none of the work will adversely impact the significance of the designated historic landmark because all the work involves rehabilitation and maintenance of existing features and does not alter the historic character of the structure. Therefore, a Certificate of Appropriateness, which applies to major alterations on historic structures, is not required. The Mills Act contract shall automatically renew each year unless either the Applicant or the City provides written notice of non-renewal, prior to the expiration of the current term. The contract may be cancelled or modified, following written notice to the Applicant, if the Applicant fails to comply with any of the terms or conditions of the agreement, or if the property is destroyed. Non-compliance may include the failure to complete any improvements within a given year. The City will conduct periodic inspections throughout the term of the contract to ensure that progress is being made in accordance with the Applicant’s approved work plan, and that all improvements are consistent with the requirements of the Mills Act. If any alterations to the approved work plan are proposed during the life of the contract, the City must review and may approve those changes administratively. The Mills Act program provides property tax abatement to support the preservation of significant historic resources. While this results in a modest reduction in annual property tax revenue, it reflects the City’s commitment to protecting its architectural and cultural heritage. It is also important to note that the fiscal impact to the City itself from the tax breaks is relatively limited. The City receives approximately 9.5 cents of every property tax dollar paid, meaning that for a property owner paying $10,000 annually in property taxes, the City’s share is approximately $950. Most of the deferred tax revenue is absorbed by other taxing entities. In this case, the cost of the proposed improvements, ranging from $4,000 to $30,000, matches or exceeds the estimated annual tax savings, reflecting a significant investment in the long-term preservation and upkeep of the property. Mills Act Application No. MILLS 25-01 September 16, 2025 Page 8 of 9 HISTORIC PRESERVATION COMMISSION The Mills Act Application was presented to the Planning Commission, acting in its capacity of the City’s Historic Preservation Commission, at its meeting on August 12, 2025, for consideration and recommendation to the City Council – refer to Attachment No. 2 for the Historic Preservation Commission Resolution No. 2173, Historic Preservation Commission Staff Report, and excerpt of the approved minutes. The Commission agreed that the proposed improvements and the estimated cost justified property tax abatement over the next ten years to support the continued maintenance and rehabilitation of the property, ensuring it remains an excellent example of Mid-Century Modern architecture. The Historic Preservation Commission unanimously recommended that the City Council approve Mills Act Application No. MILLS 25-01. ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), as it can be seen with certainty that it will have no impact on the environment. FISCAL IMPACT As of 2024, the assessed value of the property is $1,675,000, resulting in an annual property tax of $18,983. Upon execution of the Mills Act contract, the City will notify the Los Angeles County Assessor’s Office. Each year, the Assessor will calculate a new taxable value for the property based on State Mills Act guidelines. This reassessment can result in a property tax reduction of approximately 40% to 60%, compared to the pre-contract amount, leading to significant savings for the property owner. In this example, the property owner would pay as little as $7,593.20 per year, providing savings of up to $11,390 per year. Given Arcadia’s current share of property taxes, the City will lose approximately $1,100 in revenue per year, if the contract is approved. Since Mills Act properties are assessed annually, the actual tax amount may increase or decrease from year to year, based on market conditions. As a result, the total amount of tax relief over the ten-year contract period may vary. The reduction in property tax to the City is minimal in comparison to the value of retaining this important historic asset within Arcadia. Mills Act Application No. MILLS 25-01 September 16, 2025 Page 9 of 9 RECOMMENDATION It is recommended that the City Council determine that the approval of the contract is not a project under CEQA; approve Mills Act Application No. MILLS 25-01; direct the City Attorney to prepare the ten-year Mills Act contract for the “Brod-Papp House” located at 1203 Oakwood Drive; and authorize the City Manager, or designee, to review and execute the contract between the City and the Property Owner. Attachment No. 1: Mills Act Application No. MILLS 25-01 and Work Plan Attachment No. 2: Resolution No. 2173, Historic Preservation Commission Staff Report, and Approved Minutes Attachment No. 1 Attachment No. 1 Mills Act Application No. MILLS 25-01 and Work Plan Attachment No. 2 Attachment No. 2 Resolution No. 2173, Historic Preservation Commission Staff Report, and Approved Minutes STAFF REPORT DEVELOPMENT SERVICES DEPARTMENT DATE: August 12, 2025 TO: Honorable Chairperson and Historic Preservation Commission FROM: Lisa L. Flores, Deputy Development Services Director By: Edwin Arreola, Senior Planner SUBJECT: RESOLUTION NO. 2173 – A REVIEW OF MILLS ACT APPLICATION NO. MILLS 25-01 FOR A 10 YEAR MILLS ACT CONTRACT BETWEEN THE CITY AND THE PROPERTY OWNER OF THE HISTORIC “BROD-PAPP HOUSE” AT 1203 OAKWOOD DRIVE AND FORWARDING A RECOMMENDATION TO CITY COUNCIL CEQA: Not A Project Recommendation: Adopt SUMMARY The Applicant and Property Owner, Chris Karlen on behalf of the Ismaili Karlen Family Trust, is requesting that the Historic Preservation Commission recommend approval to the City Council of Mills Act Application No. MILLS 25-01 to enter into a 10 year Mills Act contract between the City and the Property Owner of the historic “Brod- Papp House” for the repair, rehabilitation, restoration, and maintenance of that property located at 1203 Oakwood Drive. It is recommended that the Historic Preservation Commission find that the proposed contract agreement is not a project under Section 15061(b)(3) of the California Environmental Quality Act (“CEQA”), and adopt Resolution No. 2173 (Attachment No. 1), recommending that the City Council approve the Mills Act contract. BACKGROUND The subject property is an 18,988 square foot corner lot that is located at the northwest corner of Oakwood Drive and E. Sycamore Avenue in the Highlands Resolution No. 2173 – MILLS 25-01 August 12, 2025 Page 2 of 10 Homeowners’ Association – refer to Figure 1 below and Attachment No. 2 for an aerial photo and zoning information. The site has a 2,113 square foot single-story Mid-Century Modern house with an attached two -car garage that was built in 1949. The site has decorative landscaping and mature growth trees, including two oak trees, a screened garden room, and a swimming pool around the northeast corner of the house. Figure 1 – Aerial of the Subject Site On December 17, 2024, the City Council adopted Resolution No. 7605, designating the home at 1203 Oakwood Drive as a historical local landmark due to its significance as an outstanding example of the Mid-Century Modern architectural style that was designed by the famed architect, Richard Neutra – refer to Figure 2 below. 1203 N. S A N T A A N I T A A V E . E. SYCAMORE AVE. OA K W O O D D R . Resolution No. 2173 – MILLS 25-01 August 12, 2025 Page 3 of 10 Figure 2 – The Brod-Papp House, front entry from Oakwood Drive One of the incentives granted to property owners of historic landmarks is the ability to apply for the Mills Act Property Tax Abatement Program (“Mills Act”). This program was enacted in 1972 by the State of California to allow local governments the authority to enter into contracts with owners of qualified historic properties who actively participate in the repair, rehabilitation, restoration, and maintenance of their properties to receive property tax relief to offset the costs of maintaining a historically designated property. This Mills Act Application is the first submitted to the City, despite there being two properties currently eligible for the program, including the Arcadia Women’s Club at 324 S. 1st Avenue. Mills Act contracts must comply with Sections 50280 through 50290 of the California Government Code. Requirements include a minimum 10 year term, adherence to the Secretary of the Interior’s Standards for the Treatment of Historic Properties and State Historic Building Code which specify the types of rehabilitation allowed, authorization for periodic inspections to ensure compliance, and that the contract be binding upon all successors-in-interest of the owner. Additionally, all proposed improvements to the structure under the Mills Act must be made to the exterior of the structure. Once the Mills Act application is deemed complete, it is then presented to the Historic Preservation Commission for recommendation to the City Council. The City Council, Resolution No. 2173 – MILLS 25-01 August 12, 2025 Page 4 of 10 in its sole discretion, will authorize the execution of the Mills Act contract. This approval is procedural and does not require a public hearing. After approved, the City Attorney will prepare the contract, ensuring it includes all provisions required by state law and the City’s Development Code. Following the contract’s executive, the City notifies the Los Angeles County Assessor’s Office. Each year, the Assessor calculates a new taxable value for the property based on state guidelines. This can be as much as 40% to 60% of the pre-Mills Act contract tax rate, resulting in significant property tax savings. However, because Mills Act property are assessed annually, taxes may increase or decrease from year to year depending on the market conditions, so the amount of tax relief over the 10 year contract period may vary. Additionally, all Mills Act contract benefits are transferable if the qualified historical property is sold. As part of the Mills Act Application, the property owner must submit a rehabilitation plan outlining the proposed work to maintain the historical integrity of the structure. The property owner has submitted such a plan, listing the work to be completed within the 10 year contract period. The plan includes the following: Proposed Scope of Work Estimated Cost Year of Proposed Work 1. The redwood siding and window framing around the home will be refinished and/or replaced – refer to Figure 3 below. $25,000 1 2. The aluminum windows will be re-puttied, stripped, and repainted with some windows also having their glass replaced – refer to Figure 3 below. $15,000-25,000 1 3. The planter in front of the home will be rehabilitated. $5,000-15,000 1 4. A glass panel facing the living room will be replaced with tempered $4,000 1 Resolution No. 2173 – MILLS 25-01 August 12, 2025 Page 5 of 10 glass due to cracking and water damage. 5. The garage door and the entry door facing Sycamore Avenue will be replaced with a redwood doors to match the rest of the home – refer to Figure 5 below. $15,000 1 and 2 6. The exterior of the home will be repainted, with certain portions re- stuccoed – refer to Figure 6 below. $15,000 2 7. The roof will be replaced – refer to Figure 7 below. $30,000 3 Total Investment in Rehabilitation $109,000-129,000 Figure 3 – Redwood siding and window frame and windows in need of repair Resolution No. 2173 – MILLS 25-01 August 12, 2025 Page 6 of 10 Figure 4 – Planter in need of rehab Figure 5 – Garage door to be replaced with redwood door Resolution No. 2173 – MILLS 25-01 August 12, 2025 Page 7 of 10 Figure 6 – Northeast elevation of the home, walls will be repainted and/or re-stuccoed Figure 7 – Flat roof to be replaced The estimated cost of the proposed improvements ranges from approximately $4,000 for replacing the glass panel in the living room to as much as $30,000 for reroofing the home. The total estimated cost for all improvements is approximately $109,000 to $129,000. As of 2024, the assessed value of the home is $1,675,000, resulting in an annual property tax of $18,983. Resolution No. 2173 – MILLS 25-01 August 12, 2025 Page 8 of 10 DISCUSSION The Applicant and Property Owner is requesting that the Historic Preservation Commission recommend approval of Mills Act Application No. MILLS 25-01 to the City Council. The request is to enter into a 10 year contract, which is the minimum term, with the City for property tax abatement, helping to offset the costs of repairing, rehabilitating, restoring, and maintaining the historically designated “Brod-Papp House” located at 1203 Oakwood Drive. The Applicant meets all of the eligibility requirements outlined in Development Code Section 9103.17.100(A), including ownership of a qualified historic property. The property was designated a historic landmark in December 2024. A comprehensive rehabilitation plan has been submitted, detailing proposed work that will preserve and enhance the architectural integrity of the “Brod-Papp House” over the 10 year term of the contract. The proposed scope of work is intended to preserve the home’s Mid-Century Modern architectural character. This includes the replacement of windows and wood elements, as well as the installation of new garage and entry doors that are consistent with the home's original materials. All proposed work will comply with the Secretary of the Interior’s Standards for the Treatment of Historic Properties and the State Historic Building Code. Some elements of the project will be subject to design review and approval through a Short Review Application by the Architectural Review Board of the Highlands Homeowners’ Association. However, because all the work involves rehabilitation and maintenance of existing features and does not alter the historic character of the structure, a Certificate of Appropriateness is not required. This application is typically necessary only for major or minor alterations that could adversely impact the significance of a designated historic landmark. The Mills Act contract shall automatically renew each year unless either the Applicant or the City provides written notice of non-renewal prior to the expiration of the current term. The contract may be cancelled or modified, following written notice to the Applicant, if the Applicant fails to comply with any of the terms or conditions of the agreement, or if the property is destroyed. Non-compliance may include the failure to complete any improvements within a given year. Resolution No. 2173 – MILLS 25-01 August 12, 2025 Page 9 of 10 The City will conduct periodic inspections throughout the term of the contract to ensure that progress is being made in accordance with the Applicant’s approved work plan and that all improvements are consistent with the requirements of the Mills Act. If any alterations to the approved work plan are proposed during the life of the contract, the City must review and may approve those changes administratively. The Mills Act program provides property tax abatement to support the preservation of significant historic resources. While this results in a modest reduction in annual property tax revenue, it reflects the City’s commitment to protecting its architectural and cultural heritage. In this case, the cost of the proposed improvements—ranging from $4,000 to $30,000 matches or exceeds the estimated annual tax savings, reflecting a significant investment in the long-term preservation and upkeep of the property. ENVIRONMENTAL ANALYSIS It has been determined that the project is not subject to the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) of the CEQA Guidelines. This provision applies to activities where it can be clearly demonstrated that there is no possibility of a significant environmental impact. Since the application involves the execution of a Mills Act contract and does not involve any physical alterations to the environment, the approval of this contract is not considered a project under CEQA and therefore will not result in any significant environmental effects. RECOMMENDATION It is recommended that the Historic Preservation Commission find that the proposed contract agreement is not a project under Section 15061(b)(3) of the California Environmental Quality Act (“CEQA”), and adopt Resolution No. 2173 (Attachment No. 1), recommending that the City Council approve the Mills Act contract. If any Historic Preservation Commissioners, or other interested party has any questions or comments regarding this matter prior to the August 12, 2025 hearing, please contact Senior Planner, Edwin Arreola at (626) 821-4334, or by email at earreola@ArcadiaCA.gov. Resolution No. 2173 – MILLS 25-01 August 12, 2025 Page 10 of 10 Approved: Lisa L. Flores Deputy Development Services Director Attachment No. 1: Resolution No. 2173 Attachment No. 2: Mills Act Application No. MILLS 25-01 and Work Plan