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HomeMy WebLinkAbout2017-04-27 Historic Resources Board Agenda Packet1. Spokespersons that are representing a group of five or more people who are identified as present at the meeting at the time of the spokesperson’s presentation will be allowed up to fifteen (15) minutes at the discretion of the Chair, provided that the non‐speaking members agree not to speak individually.  2. The Chair may limit Oral Communications to 30 minutes for all combined speakers.  3. The Chair may reduce the allowed time to speak to three minutes to accommodate a larger number of speakers.    Historic Resources Board  Regular Meeting Agenda: April 27, 2017  Council Chambers  250 Hamilton Avenue  8:30 AM        Call to Order / Roll Call  Oral Communications  The public may speak to any item not on the agenda. Three (3) minutes per speaker.1,2    Agenda Changes, Additions, and Deletions  The Chair or Board majority may modify the agenda order to improve meeting management.    City Official Reports  1. Historic Resources Board Meeting Schedule Assignments  2. Eichler Design Guidelines    Study Session  Public Comment is Permitted. Three (3) minutes per speaker.1,3    3. HRB discussion of Mills Act    Action Items  Public Comment Permitted. Applicants/Appellant Teams: Ten (10) minutes, plus ten (10) minutes rebuttal. All  others: Three (3) minutes per speaker.1,3    Approval of Minutes  Public Comment is Permitted. Three (3) minutes per speaker.1,3    4. Approval of Minutes for February 27th, March 9th and ARB/HRB Joint meeting excerpt  April 6, 2017     Subcommittee Items  Board Member Questions, Comments or Announcements  Adjournment  1.Spokespersons that are representing a group of five or more people who are identified as present at the meeting at the time of the spokesperson’s presentation will be allowed up to fifteen (15) minutes at the discretion of the Chair, provided that the non‐speaking members agree not to speak individually. 2.The Chair may limit Oral Communications to 30 minutes for all combined speakers.  3.The Chair may reduce the allowed time to speak to three minutes to accommodate a larger number of speakers. Palo Alto Historic Resources Board  Boardmember Biographies, Present and Archived Agendas and Reports are available online:  http://www.cityofpaloalto.org/gov/boards/architectural/default.asp. The HRB Boardmembers  are:  Chair Martin Bernstein  Vice Chair Margaret Wimmer  Boardmember David Bower  Boardmember Brandon Corey  Boardmember Beth Bunnenberg  Boardmember Roger Kohler  Boardmember Michael Makinen  Get Informed and Be Engaged!  View online: http://midpenmedia.org/category/government/city-of-palo-alto/ or on Channel 26.  Show up and speak. Public comment is encouraged. Please complete a speaker request card  located on the table at the entrance to the Council Chambers and deliver it to the Board  Secretary prior to discussion of the item.  Write to us. Email the HRB at: arb@cityofpaloalto.org. Letters can be delivered to the Planning  & Community Environment Department, 5th floor, City Hall, 250 Hamilton Avenue, Palo Alto, CA  94301. Comments received by 2:00 PM the Thursday preceding the meeting date will be  included in the agenda packet. Comments received afterward through 3:00 PM the day before  the meeting will be presented to the Board at the dais.  Material related to an item on this agenda submitted to the HRB after distribution of the  agenda packet is available for public inspection at the address above.  Americans with Disability Act (ADA)  It is the policy of the City of Palo Alto to offer its public programs, services and meetings in a  manner that is readily accessible to all. Persons with disabilities who require materials in an  appropriate alternative format or who require auxiliary aids to access City meetings, programs,  or services may contact the City’s ADA Coordinator at (650) 329‐2550 (voice) or by emailing  ada@cityofpaloalto.org. Requests for assistance or accommodations must be submitted at least  24 hours in advance of the meeting, program, or service.  Historic Resources Board Staff Report (ID # 8050) Report Type: City Official Reports Meeting Date: 4/27/2017 City of Palo Alto Planning & Community Environment 250 Hamilton Avenue Palo Alto, CA 94301 (650) 329-2442 Summary Title: HRB Meeting Schedule Assignments Title: Historic Resources Board Meeting Schedule Assignments From: Hillary Gitelman Recommendation Staff recommends the Historic Resources Board (HRB) review and comment as appropriate. Background Attached is the HRB meeting schedule and attendance record for the calendar year. This is provided for informational purposes. If individual Boardmembers anticipate being absent from a future meeting, it is requested that be brought to staff’s attention when considering this item. No action is required by the HRB for this item. Attachments:  Attachment A: HRB Meeting Schedule Assignments (PDF) 2017 Schedule  Historic Resources Board  Meeting Schedule & Assignments  Meeting Dates Time Location Status Planned Absences 1/12/2017 8:30 AM Council Chambers Cancelled   1/26/2017 8:30 AM Council Chambers Regular   2/9/2017 8:30 AM Council Chambers Cancelled   2/23/2017 8:30 AM Council Chambers Retreat   3/9/2017 8:30 AM Council Chambers Regular   3/23/2017 8:30 AM Council Chambers Regular David Bower  4/13/2017 8:30 AM Council Chambers Cancelled   4/27/2017 8:30 AM Council Chambers Regular   5/11/2017 8:30 AM Council Chambers Regular   5/25/2017 8:30 AM Council Chambers Regular   6/8/2017 8:30 AM Council Chambers Regular   6/22/2017 8:30 AM Council Chambers Regular   7/13/2017 8:30 AM Council Chambers Regular   7/27/2017 8:30 AM Council Chambers Regular   8/10/2017 8:30 AM Council Chambers Regular   8/24/2017 8:30 AM Council Chambers Regular   9/14/2017 8:30 AM Council Chambers Regular   9/28/2017 8:30 AM Council Chambers Regular   10/12/2017 8:30 AM Council Chambers Regular   10/26/2017 8:30 AM Council Chambers Regular   11/9/2017 8:30 AM Council Chambers Regular   11/23/2017 8:30 AM Council Chambers Regular Canceled  12/14/2017 8:30 AM Council Chambers Regular   12/28/2017 8:30 AM Council Chambers Regular     2017 Subcommittee Assignments    January February March April May June           July August September October November December          Historic Resources Board Staff Report (ID # 7973) Report Type: Study Session Meeting Date: 4/27/2017 City of Palo Alto Planning & Community Environment 250 Hamilton Avenue Palo Alto, CA 94301 (650) 329-2442 Summary Title: Mills Act Discussion Title: HRB discussion of Mills Act From: Hillary Gitelman Recommendation Staff recommends that the Historic Resources Board (HRB) conduct a study session regarding Mills Act programs. Report Summary This report provides background regarding the Mills Act and is a follow up from the February 23, 2017 HRB retreat and the May 6, 2015 joint meeting of the HRB and City Council. Staff’s intent is to assist the HRB as it moves toward recommending parameters for an improved Mills Act program for Palo Alto. This report also serves as notification to the HRB that staff received a request for a conclusion of Palo Alto’s last remaining Mills Act contract. Background Past Council Direction At the May 2015 joint meeting, the historic preservation planner noted three HRB recommendations, including this one: ‘make preservation incentives available to more owners of historic properties’. HRB members noted the need for new and better tools to help preserve historic properties; the Mills Act was noted as a helpful and successful tool. The former Councilmember-HRB liaison stated a desire for the HRB to “propose parameters for an updated Mills Act application for Palo Alto” and “strike a balance for the right amount of incentive for preservation without taking too much revenue away from the schools and the City” noting potential benefits for mid-century buildings. The May 6, 2015 joint HRB-Council meeting minutes are at this link: http://www.cityofpaloalto.org/civicax/filebank/documents/49521. Mills Act Overview and Participating Bay Area Cities The Mills Act provides property tax relief to owners of qualified historic properties in California who enter into individual contracts with the local government agency, city or county, in return City of Palo Alto Planning & Community Environment Department Page 2 for an agreement to comply with certain preservation requirements. Originally adopted in 1972, the Mills Act was not widely used until 1984, when it was amended to reduce the minimum term of the contract to ten years and to eliminate requirements pertaining to public access to significant building interiors. Under the terms of these agreements (which are individually negotiated), the property owner will typically be required to: (1) restore or rehabilitate the historic property, if necessary; (2) agree to maintain its historic character; and (3) use it in a manner compatible with its historic characteristics. All work performed must conform to the rules and regulations of the State Office of Historic Preservation (OHP), including compliance with the Secretary of Interior’s Standards and the State Historic Building Code. The OHP website provides a program bulletin, found at this link: http://ohp.parks.ca.gov/pages/1069/files/12%20mills%20act.pdf, and a document about tax abatement program with Frequently Asked Questions, found at this link: http://ohp.parks.ca.gov/?page_id=21412. The OHP website also lists Palo Alto among 15 Bay Area Cities and counties that participate with Mills Act contracts, as well as other participating cities and counties in California. Attachment A to this report provides the language of California Government Code Article 12, Mills Act sections 50280-50290. Mills Act Case Study – Oakland Staff reviewed the website for the City of Oakland’s program, which began as a grant-funded pilot program for two years followed by passage of an ordinance in December 2009. In 1994, Oakland had adopted a Historic Preservation Element as part of its General Plan. Oakland’s current webpage contains links to a model Mills Act agreement, Mills Act application, minimum property maintenance standards, reference links, a Mills Act Calculator and a brochure. A link to the brochure is provided below: http://www2.oaklandnet.com/oakca1/groups/ceda/documents/marketingmaterial/oak035026. pdf Initiating Mills Act Contracts In order to initiate contracts under the State enabling legislation, the local government typically enacts an ordinance or resolution outlining how the contracts will be administered locally. The agency can choose which qualified historic properties are appropriate for consideration under the contracts it executes. The legislation defines “qualified historic properties” as follows: “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.” Assessed Valuation and Contract Term Under Mills Act contracts, property owners are allowed to choose from among three options for purposes of determining the property’s assessed valuation: using current market value, Proposition 13 value, or (for income producing properties) capitalization of income rate as defined in the legislation. The Mills Act cap rate is determined by a uniform formula that City of Palo Alto Planning & Community Environment Department Page 3 results in a higher rate, hence lower assessed value, than that which would result from using a standard cap rate calculation. Consequently, property taxes are lowered. Participation in Mills Act contracts is voluntary for property owners; however, the minimum term of ten years must be observed or penalties apply. The contracts are automatically renewed each year, unless either party elects not to renew. Since historic properties continue to be protected by the contract when sold, the reduced property assessment and resulting property tax savings are passed on to the new owner. Even when the initial tax savings are not great, the Mills Act program may still benefit the property owner, particularly where significant investment in building rehabilitation is anticipated, as such improvements will not trigger an increased tax assessment. The Mills Act states that the agreement renews annually for an additional year unless the owner sends written notice at least 90 days prior to the effective date’s anniversary. The Santa Clara County Tax Assessor’s Office provides information about the Mills Act, with a helpful presentation found at this link: https://www.sccassessor.org/index.php/forms-and- publications/forms?task=document.viewdoc&id=60 Contract Non-Renewal Request On November 28, 2016, the current owner of the one property in Palo Alto that is subject to the Mills Act (the Squire House) requested to conclude the contract; this is considered a “Notice of Non-Renewal”. The Squire House is a 1904 Greco-Roman revival style mansion at 900 University Avenue. The Non-Renewal process requires a deposit to cover work efforts by the City Attorney and Planning staff members. The deadline of December 1, 2016 was met to allow the first phase of the “count down” of a final ten year term toward conclusion of the contract in 2027. Withdrawal from a Mills Act contract doesn’t require City Council approval. Staff has alerted the Santa Clara County Assessor regarding the request for non-renewal. The Assessor staff noted that the owner would need to record the non-renewal contract at County Recorder’s Office and the ten years would count down from the date of recordation. The Assessor’s presentation indicates it will gradually bring the tax incentive value back to the indexed proposition 13 value over the ten year period. The Mills Act does not contain prescriptive requirements for the City’s response to the owner either in the Act itself or the agreement. The City is now preparing written documentation acknowledging Notice of Non-renewal, along with other requests and a reminder to the owner that the terms of the existing agreement will remain enforceable until the ten years expire. HRB Comments on Mills Act in February and March 2017 At its February 23, 2017 retreat, the HRB briefly discussed Mills Act Program, which appeared under the listed topic ‘Development of Preservation Incentives”. Minutes of the retreat are posted on the website and may be viewed here: http://www.cityofpaloalto.org/civicax/filebank/documents/56747. City of Palo Alto Planning & Community Environment Department Page 4 During the meeting, HRB members Wimmer, Bower and Bunnenberg commented on the topic and several members noted they had attended workshops on this topic. Former Vice-Chair Wimmer noted:  the HRB had discussed the subject, but the City is not encouraging this incentive, and  the Mills Act was a reward for the extra step and extra expense of restoration. Vice Chair (then HRB member) Bower advocated for City adoption of a Mills Act program and:  acknowledged the program is a ”hard sell” since such contracts jeopardize the property tax revenue for the school district, as the bulk of the 9% property tax revenue goes to the school district, which has a budget deficit,  noted other Cities had good experiences with the act, and most limit the benefit to $10,000 a year and all the money not spent on the individual property tax has to be spent on that property to maintain the historic character and features. The owner would spend the same money not spent on property taxes to preserve the buildings. Failure to perform in accordance with the contract’s terms would result in a loss of the benefit and the taxes were paid back, and  Gave an example of how increasing taxes yield an increase in revenue and with high turnover, the low property tax rates are being replaced by large amounts so the City would have an opportunity to take advantage of the popularity of our properties. Finally, HRB Member Bunnenberg noted that:  Often, part of the Mills Act contract involves reporting each year what the owner has spent – how they’ve spent the Mills Act money, and  Another requirement is holding an open house. On March 23, 2017, HRB member Makinen reported that he attended a webinar on, “A Tale of Three Cities: Case Examples and Preservation Management” which studied the cities of Anaheim, Santa Ana, and Orange with reference to the Mills Act, and stated that:  Anaheim has 341 Mills Act contracts, Santa Ana has 239, and Orange has 229.  This is a very effective incentive, a major tool for historic preservation and Palo Alto is way behind in initiating this action on Mills Act as being a meaningful incentive, which reflects poorly on the City and shows we are inconsistent with what is being done in other major communities for incentives. Earlier Public Discussions about the Mills Act Prior to the joint HRB-Council meeting of May 2015, the HRB had discussed the Mills Act at its April 9, 2015 meeting (continued from the March 26, 2015 meeting). The video of the meeting is viewable here: http://midpenmedia.org/historic-resources-board-11/ In May 2006, the HRB had received a staff report about the City’s policy related to Mills Act. The staff report is provided as Attachment B to this report. Palo Alto’s Published Documents  Staff is not aware of any Palo Alto Municipal Code section setting forth regulations for Palo Alto property owners seeking a Mills Act contract. The State Office of Historic City of Palo Alto Planning & Community Environment Department Page 5 Preservation (OHP) provides informational documents to help interested property owners and others learn about the Mills Act.  The City published the Comprehensive Plan Update Cultural Resources Draft Existing Conditions Report of August 29, 2014, which references the Mills Act and notes the one Mills Act property (the Square House). The link is found here: http://www.paloaltocompplan.org/wp-content/uploads/2016/02/4-4_CulturalResources.pdf  The City’s planning fee schedule requires a deposit of $1,936.00, against which City staff tracks their time, for either establishment of a contract or to initiate the withdrawal process.  The attached 2012 “overview” (Attachment C) was found in the City’s share drive; it may have been linked to the City’s historic preservation webpage at one time. This link: https://www.nps.gov/tps/tax-incentives.html, currently provided on our City’s historic preservation webpage, contains a pamphlet: ‘Historic Preservation Tax Incentives”, which contains this (excerpt): Owners of buildings within historic districts must complete Part 1 of the Historic Preservation Certification Application—Evaluation of Significance. The owner submits this application to the SHPO. The SHPO reviews the application and forwards it to the NPS with a recommendation for approving or denying the request. The NPS then determines whether the building contributes to the historic district. If so, the building then becomes a certified historic structure. The NPS bases its decision on the Secretary of the Interior’s “Standards for Evaluating Significance within Registered Historic Districts” (see page 23). Buildings individually listed in the National Register of Historic Places are already certified historic structures. Owners of these buildings need not complete the Part 1 application (unless the listed property has more than one building). Property owners unsure if their building is listed in the National Register or if it is located in a National Register or certified State or local historic district should contact their SHPO. Discussion As part of its Mills Act discussion, the HRB may wish to suggest ways to improve the City’s historic preservation webpage to provide more information and links to relevant resources. The webpage could have links to an application form, description of contract initiation process and a model Mills Act agreement, similar to other cities that have more active Mills Act programs. And, as suggested by Councilmember Dubois, the HRB may wish to discuss:  Possible parameters for an updated Mills Act application, and  How to strike a balance for the right amount of incentive for preservation without taking too much revenue away from the schools and the City. City of Palo Alto Planning & Community Environment Department Page 6 Report Author & Contact Information HRB1 Liaison & Contact Information Amy French, AICP, Chief Planning Official Amy French, AICP, Chief Planning Official (650) 329-2336 (650) 329-2336 amy.french@cityofpaloalto.org amy.french@cityofpaloalto.org Attachments:  Attachment A: Mills Act Article 12 (PDF)  Attachment B: City Past Policy Regarding Mills Act_Staff Report (2006) (PDF)  Attachment C: Mills Act Overview dated 2012 (DOC) 1 Emails may be sent directly to the HRB using the following address: hrb@cityofpaloalto.org California Government Code, Article 12, Sections 50280 - 50290 50280. Restriction of property use. Upon the application of an owner or the agent of an owner of any qualified historical property, as defined in Section 50280.1, the legislative body of a city, county, or city and county may contract with the owner or agent to restrict the use of the property in a manner which the legislative body deems reasonable to carry out the purposes of this article and of Article 1.9 (commencing with Section 439) of Chapter 3 of Part 2 of Division 1 of the Revenue and Taxation Code. The contract shall meet the requirements of Sections 50281 and 50282. 50280.1. Qualified historic property. "Qualified historical property" for purposes of this article, 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. 50281. Required contract provision. Any contract entered into under this article shall contain the following provisions: (a) The term of the contract shall be for a minimum period of 10 years. (b) Where applicable, the contract shall provide the following: (1) For the preservation of the qualified historical property and, when necessary, to restore and rehabilitate the property to conform to the rules and regulations of the Office of Historic Preservation of the Department of Parks and Recreation, the United States Secretary of the Interior's Standards for Rehabilitation, a nd the State Historical Building Code. (2) For the periodic examinations of the interior and exterior of the premises by the assessor, the Department of Parks and Recreation, and the State Board of Equalization as may be necessary to determine the owner's compliance with the contract. (3) For it to be binding upon, and inure to the benefit of, all successors in interest of the owner. A successor in interest shall have the same rights and obligations under the contract as the original owner who entered into the contract. (c) The owner or agent of an owner shall provide written notice of the contract to the Office of Historic Preservation within six months of entering into the contract. 50281.1. Fees. The legislative body entering into a contract described in this article may require that the property owner, as a condition to entering into the contract, pay a fee not to exceed the reasonable cost of administering this program. 50282. Renewal. 2 (a) Each contract shall provide that on the anniversary date of the contract or such other annual date as is specified in the contract, a year shall be added automatically to the initial term of the contract unless notice of nonrenewal is given as provided in this section. If the property owner or the legislative body desires in any year not to renew the contract, that party shall serve written notice of nonrenewal of the contract on the other party in advance of the annual renewal date of the contract. Unless the notice is served by the owner at least 90 days prior to the renewal date or by the legislative body at least 60 days prior to the renewal date, one year shall automatically be added to the term of the contract. (b) Upon receipt by the owner of a notice from the legislative body of nonrenewal, the owner may make a written protest of the notice of nonrenewal. The legislative body may, at any time prior to the renewal date, withdraw the notice of nonrenewal. (c) If the legislative body or the owner serves notice of intent in any year not to renew the contract, the existing contract shall remain in effect for the balance of the period remaining since the original execution or the last renewal of the contract, as the case may be. (d) The owner shall furnish the legislative body with any information the legislative body shall require in order to enable it to determine the eligibility of the property involved. (e) No later than 20 days after a city or county enters into a contract with an owner pursuant to this article, the clerk of the legislative body shall record with the county recorder a copy of the contract, which shall describe the property subject thereto. From and after the time of the recordation, this contract shall impart a notice thereof to all persons as is afforded by the recording laws of this state. 50284. Cancellation. The legislative body may cancel a contract if it determines that the owner has breached any of the conditions of the contract provided for in this article or has allowed the property to deteriorate to the point that it no longer meets the standards for a qualified historical property. The legislative body may also cancel a contract if it determines that the owner has failed to restore or rehabilitate the property in the manner specified in the contract. 50285. Consultation with state commission. No contract shall be canceled under Section 50284 until after the legislative body has given notice of, and has held, a public hearing on the matter. Notice of the hearing shall be mailed to the last known address of each owner of property within the historic zone and shall be published pursuant to Section 6061. 50286. Cancellation. (a) If a contract is canceled under Section 50284, the owner shall pay a cancellation fee equal to 121/2 percent of the current fair market value of the property, as determined by the county assessor as though the property were free of the contractual restriction. (b) The cancellation fee shall be paid to the county auditor, at the time and in the manner that the county auditor shall prescribe, and shall be allocated by the county 3 auditor to each jurisdiction in the tax rate area in which the property is located in the same manner as the auditor allocates the annual tax increment in that tax rate area in that fiscal year. (c) Notwithsta nding any other provision of law, revenue received by a school district pursuant to this section shall be considered property tax revenue for the purposes of Section 42238 of the Education Code, and revenue received by a county superintendent of schools pursuant to this section shall be considered property tax revenue for the purposes of Article 3 (commencing with Section 2550) of Chapter 12 of Part 2 of Division 1 of Title 1 of the Education Code. 50287. Action to enforce contract. As an alternative to cancellation of the contract for breach of any condition, the county, city, or any landowner may bring any action in court necessary to enforce a contract including, but not limited to, an action to enforce the contract by specific performance or injunction. 50288. Eminent domain. In the event that property subject to contract under this article is acquired in whole or in part by eminent domain or other acquisition by any entity authorized to exercise the power of eminent domain, and the acquisition is determined by the legislative body to frustrate the purpose of the contract, such contract shall be canceled and no fee shall be imposed under Section 50286. Such contract shall be deemed null and void for all purposes of determining the value of the property so acquired. 50289. Annexation by city. In the event that property restricted by a contract with a county under this article is annexed to a city, the city shall succeed to all rights, duties, and powers of the county under such contract. 50290. Consulta tion with state commission. Local agencies and owners of qualified historical properties may consult with the State Historical Resources Commission for its advice and counsel on matters relevant to historical property contracts. Summary of the Mills Act The Mills Act provides property tax relief to owners of qualified historic properties in California who enter into individual contracts with the local government agency, city or county, in return for an agreement to comply with certain preservation requirements. Originally adopted in 1972, the Mills Act was not widely used until 1984, when it was amended to reduce the minimum term of the contract to 10 years and to eliminate requirements pertaining to public access to significant building interiors. Under the terms of these agreements (which are individually negotiated), the property owner will typically be required to :  restore or rehabilitate the historic property, if necessary;  agree to maintain its historic character; and  use it in a manner compatible with its historic characteristics. All work performed must conform to the rules and regulations of the State Office of Historic Preservation, including compliance with the Secretary of Interior’s Standards and the State Historic Building Code. In order to initiate contracts under the State enabling legislation, the local government typically enacts an ordinance or resolution outlining how the contracts will be administered locally. The agency can choose which qualified historic properties are appropriate for consideration under the contracts it executes. The legislation defines “qualified historic properties” as follows: ...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. Under Mills Act contracts, property owners are allowed to choose from among three options for purposes of determining the property’s assessed valuation: using current market value, Proposition 13 value, or (for income producing properties) capitalization of income rate as defined in the legislation. The Mills Act cap rate is determined by a uniform formula that results in a higher rate, hence lower assessed value, than that which would result from using a standard cap rate calculation. Consequently, property taxes are lowered. Participation in Mills Act contracts is totally voluntary for property owners; however, the minimum term of ten years must be observed or penalties apply. The contracts are automatically renewed each year, unless either party elects not to renew. Since historic properties continue to be protected by the contract when sold, the reduced property assessment and resulting property tax savings are passed on to the new owner. Even when the initial tax savings are not great, the Mills Act program may still benefit the property owner, particularly where significant investment in building rehabilitation is anticipated, as such improvements will not trigger an increased tax assessment.