HomeMy WebLinkAboutStaff Report 8554
City of Palo Alto (ID # 8554)
City Council Staff Report
Report Type: Consent Calendar Meeting Date: 12/11/2017
City of Palo Alto Page 1
Summary Title: CONSENT: Squire House (900 University) Revised Mills Act
Contract
Title: Approval and Authorization for the City Manager to Execute
Amendment Number 1 to the Mills Act Historic Property Preservation
Agreement for 900 University Avenue (Squire House) Removing the Public
Tour Requirement Consistent With State Law
From: City Manager
Lead Department: Planning and Community Environment
Recommendation
Staff recommends that Council approve and authorize the City Manager to execute
Amendment No. 1 (Attachment A) to the Mills Act Historic Property Preservation Agreement for
preservation of the historic Squire House (900 University Avenue).
Executive Summary
At the property owner’s request, the recommended action would amend the existing Historic
Property Preservation Agreement (referred to also as the “Mills Act contract”) for the Squire
House to remove the requirement for an annual public tour, which is consistent with State law.
Mills Act contracts are agreements between a local jurisdiction and a property owner whereby
the property owner agrees to preserve an historic resource in exchange for property tax
savings. There has been a Mills Act contract between the City and the owner of the nationally-
recognized Squire House at 900 University in place since 1996; this is the only Mills Act contract
in Palo Alto. The owner, who last conducted a public tour of the Squire House in December
2016, will request non-renewal of the contract if the annual home tour remains a requirement.
Background & Discussion
The Squire House is listed as a Category 1 local historic resource, which is defined as a
“Significant” historic resource in PAMC Chapter 16.49. The home was the first property in Palo
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Alto to be listed on the National Register of Historic Places, and is one of only 16 individually
listed Palo Alto properties on the National Register. It is also a California Landmark - which
carries a much higher historic status than a standard California Register listing.
The Mills Act, enacted in 1972, allows participating local governments in California to enter into
contracts with owners of qualified historic properties who actively participate in the restoration
and maintenance of their historic properties to potentially receive a property tax reduction.
(California Government Code, Article 12, Sections 50280-50290 and California Revenue and
Taxation Code, Article 1.9, Sections 439-439.4).
The law was revised in 1985 when new legislation relaxed the rules to encourage the
preservation of historic properties. The 1985 amendments to the Mills Act expanded the
definition of Qualified Historical Properties, reduced the Mills Act contract minimum period
from 20 to 10 years, clarified tax assessment by “use,” eliminated the previous Historic Zone
requirement, and eliminated the required public visitation (Attachment B).
In 1996, the owners of the Squire House, located at 900 University Avenue, entered into a Mills
Act contract with the City of Palo Alto (Attachment C). County records indicate that there is
only one such Mills Act contract in the City of Palo Alto. The Squire House contract included a
provision that required an annual public tour to be conducted by the owners although State law
had been amended in 1985 to remove the requirement. While State law no longer requires a
public tour, there is no prohibition on the inclusion of this condition under a local program and
the contract was entered into voluntarily by the owners in 1996. Subsequent owners have
received notice of the recorded agreement prior to acquisition.
Original and subsequent owners of the Squire House complied with the “public tour”
component of the contract and opened the home to several nonprofit organizations over the
years including: Palo Alto Stanford Heritage event and home tour, Bing Nursery School, Eastside
College Preparatory School, Community Foundation of Silicon Valley, Nature Conservancy,
Stanford University, Purdue University, Legacy Venture and Children’s Health Council.
However, enforcement of the “public tour” provision by the City has been inconsistent and
irregular.
If the proposed contract amendment is not approved, the property owner has conveyed she
will pursue non-renewal of the Mills Act contract, resulting in the termination of the contract
after the remaining nine years of the contract’s term. Mills Act contracts continually renew for
another year to maintain a 10-year term at all times, unless a party submits a timely notice of
non-renewal to the other party.
Palo Alto is a Certified Local Government (CLG), recognized by the State Office of Historic
Preservation for its preservation program. Part of Palo Alto’s obligations as a CLG is to carry out
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the intent of the National Historic Preservation Act and the Secretary of the Interior's
Standards; one way to do this is to provide assistance to owners of historically significant
buildings. According to the State Office of Historic Preservation, the Mills Act program is the
single most important economic incentitve program for historic preservation.
Maintaining a Mills Act contract, with the proposed amendment, is also a key way to further
the historic preservation policies of the City’s Comprehensive Plan. Council recently reaffirmed
the Comprehensive Plan’s longstanding historic preservation goal of “Conservation and
preservation of Palo Alto’s historic buildings, sites and district” (Goal L-7), and adopted a policy
to “encourage and assist owners of historically significant buildings in finding ways to adapt and
rehabilitate these buildings, including participation in state and federal tax relief programs”
(Policy L-7.12). The importance of preserving significant historic buildings on University Avenue
is also called out in the Comprehensive Plan Policy L-7.5, which states, “To reinforce the scale
and character of University Avenue/Downtown, promote the preservation of significant historic
buildings.”
Policy Implications
Mills Act contracts are an historic preservation incentive available to property owners and local
jurisdictions under State law. As noted above, use of Mills Act contracts is consistent with the
City’s Comprehensive Plan which includes a goal about the conservation and preservation of
Palo Alto’s historic buildings, sites, and districts (Goal L-7). In addition, Policy L-7.12 of the
Comprehensive Plan calls on the City to “Encourage and assist owners of historically significant
buildings in finding ways to adapt and rehabilitate these buildings, including participation in
state and federal tax relief programs.”
Resource Impact
Based on County records, the City’s Administrative Services Department estimates that the City
of Palo Alto receives about $5,000 less in property taxes each year because of this Mills Act
contract. This would not change as a result of the requested action.
Attachments:
A: Squire House (900 University) Amendment No. 1 to Mills Act Historic Property Preservation
Agreement Signed (PDF)
B: Technical Bulletin 12 (PDF)
C: Squire House (900 University) Mills Act Historic Property Preservation Agreement (PDF)
D: John Adam Squire House National Register Nomination (PDF)
Mills Act Property Tax Abatement Program
Technical Assistance Bulletin #12
CALIFORNIA OFFICE OF HISTORIC PRESERVATION
Department of Parks & Recreation
1416 9th Street Room 1442-7
Sacramento, CA 95814
PO Box 942896
Sacramento, CA 94296
916-653-6624
calshpo@ohp.parks.ca.gov
www.ohp.parks.ca.gov
This publication has been financed in part with Federal funds from the National Park Service, Department of the
Interior, under the National Historic Preservation Act of 1966, as amended, and administered by the California Office
of Historic Preservation. The contents and opinions do not necessarily reflect the views or policies of the Department
of the Interior, nor does the mention of trade names or commercial products constitute endorsement or
recommendation by the Department of the Interior. Under Title VI of the Civil Rights Act of 1964 and Section 504 of
the Rehabilitation Act of 1973, the U.S. Department of the Interior strictly prohibits unlawful discrimination on the
basis of race, color, national origin, age, or handicap in its federally- assisted programs. If you believe you have
been discriminated against in any program, activity, or facility as described above, or if you desire further information,
please write to Office for Equal Opportunity, U.S. Department of the Interior, National Park Service, Box 37127, Washington DC 20013-7127.
December 2004
Table of Contents
Mills Act Property Tax Abatement Program .................................................................1
Purpose of the Mills Act Program.............................................................................1
Benefits to Local Governments................................................................................1
Benefits to Owners..................................................................................................1
Qualified Historic Property.......................................................................................2
OHP’s Role.............................................................................................................2
For Additional Information .......................................................................................2
California State Codes Relating to Mills Act Program...................................................3
California Government Code, Article 12, Sections 50280 - 50290.............................3
California Revenue and Taxation Code, Article 1.9, Sections 439 – 439.4.................6
Mills Act Property Tax Abatement Program 1
OHP Technical Assistance Bulletin #14
Mills Act Property Tax Abatement Program
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) 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.
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OHP Technical Assistance Bulletin #14
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.
For Additional Information
Contact the planning department of the city or county within which the historic property
is located.
California’s four largest cities (Los Angeles, San Diego, San Francisco, and San Jose)
as well as more than 75 other city and county governments have instituted Mills Act
programs. A list of communities participating in the Mills Act Program is available online
at http://www.ohp.parks.ca.gov/default.asp?page_id=21412 .
For additional information on the Mills Act, please contact Maryln Lortie in the Office of
Historic Preservation, PO Box 942896, Sacramento CA 94296-0001, (916) 653-8911,
mlort@ohp.parks.ca.gov.
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California State Codes Relating to Mills Act Program
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, and 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.
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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.
(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.
Mills Act Property Tax Abatement Program 5
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(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
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) Notwithstanding 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. Consultation 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.
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California Revenue and Taxation Code, Article 1.9, Sections 439 – 439.4
439. Historical Property Restrictions; enforceably restricted property.
For the purposes of this article and within the meaning of Section 8 of Article XIII of the
Constitution, property is "enforceably restricted" if it is subject to an historical property
contract executed pursuant to Article 12 (commencing with Section 50280) of Chapter 1
of Part 1 of Division 1 of Title 5 of the Government Code.
439.1. Historical Property; definitions.
For purposes of this article "restricted historical property" means qualified historical
property, as defined in Section 50280.1 of the Government Code, that is subject to a
historical property contract executed pursuant to Article 12 (commencing with Section
50280) of Chapter 1 of Part 1 of Division 1 of Title 5 of the Government Code. For
purposes of this section, "qualified historical property" includes qualified historical
improvements and any land on which the qualified historical improvements are situated,
as specified in the historical property contract. If the historical property contract does
not specify the land that is to be included, "qualified historical property" includes only
that area of reasonable size that is used as a site for the historical improvements.
439.2. Historical Property; valuation.
When valuing enforceably restricted historical property, the county assessor shall not
consider sales data on similar property, whether or not enforceably restricted, and shall
value that restricted historical property by the capitalization of income method in the
following manner:
(a) The annual income to be capitalized shall be determined as follows:
(1) Where sufficient rental information is available, the income shall be the fair rent
that can be imputed to the restricted historical property being valued based upon rent
actually received for the property by the owner and upon typical rentals received in the
area for similar property in similar use where the owner pays the property tax. When
the restricted historical property being valued is actually encumbered by a lease, any
cash rent or its equivalent considered in determining the fair rent of the property shall be
the amount for which the property would be expected to rent were the rental payment to
be renegotiated in the light of current conditions, including applicable provisions under
which the property is enforceably restricted.
(2) Where sufficient rental information is not available, the income shall be that which
the restricted historical property being valued reasonably can be expected to yield under
prudent management and subject to applicable provisions under which the property is
enforceably restricted.
(3) If the parties to an instrument that enforceably restricts the property stipulate
therein an amount that constitutes the minimum annual income to be capitalized, then
the income to be capitalized shall not be less than the amount so stipulated. For
purposes of this section, income shall be determined in accordance with rules and
Mills Act Property Tax Abatement Program 7
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regulations issued by the board and with this section and shall be the difference
between revenue and expenditures. Revenue shall be the amount of money or money's
worth, including any cash rent or its equivalent, that the property can be expected to
yield to an owner-operator annually on the average from any use of the property
permitted under the terms by which the property is enforceably restricted. Expenditures
shall be any outlay or average annual allocation of money or money's worth that can be
fairly charged against the revenue expected to be received during the period used in
computing the revenue. Those expenditures to be charged against revenue shall be
only those which are ordinary and necessary in the production and maintenance of the
revenue for that period. Expenditures shall not include depletion charges, debt
retirement, interest on funds invested in the property, property taxes, corporation
income taxes, or corporation franchise taxes based on income.
(b) The capitalization rate to be used in valuing owner-occupied single family
dwellings pursuant to this article shall not be derived from sales data and shall be the
sum of the following components:
(1) An interest component to be determined by the board and announced no later than
September 1 of the year preceding the assessment year and that was the yield rate
equal to the effective rate on conventional mortgages as determined by the Federal
Housing Finance Board, rounded to the nearest 1/4 percent.
(2) A historical property risk component of 4 percent.
(3) A component for property taxes that shall be a percentage equal to the estimated
total tax rate applicable to the property for the assessment year times the assessment
ratio.
(4) A component for amortization of the improvements that shall be a percentage
equivalent to the reciprocal of the remaining life.
(c) The capitalization rate to be used in valuing all other restricted historical property
pursuant to this article shall not be derived from sales data and shall be the sum of the
following components:
(1) An interest component to be determined by the board and announced no later than
September 1 of the year preceding the assessment year and that was the yield rate
equal to the effective rate on conventional mortgages as determined by the Federal
Housing Finance Board, rounded to the nearest 1/4 percent.
(2) A historical property risk component of 2 percent.
(3) A component for property taxes that shall be a percentage equal to the estimated
total tax rate applicable to the property for the assessment year times the assessment
ratio.
(4) A component for amortization of the improvements that shall be a percentage
equivalent to the reciprocal of the remaining life.
(d) Unless a party to an instrument that creates an enforceable restriction expressly
prohibits the valuation, the valuation resulting from the capitalization of income method
described in this section shall not exceed the lesser of either the valuation that would
have resulted by calculation under Section 110, or the valuation that would have
resulted by calculation under Section 110.1, as though the property was not subject to
an enforceable restriction in the base year.
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(e) The value of the restricted historical property shall be the quotient of the income
determined as provided in subdivision (a) divided by the capitalization rate determined
as provided in subdivision (b) or (c).
(f) The ratio prescribed in Section 401 shall be applied to the value of the property
determined in subdivision (d) to obtain its assessed value.
439.3. Historical Property; notice of nonrenewal.
Notwithstanding any provision of Section 439.2 to the contrary, if either the county or
city or the owner of restricted historical property subject to contract has served notice of
nonrenewal as provided in Section 50282 of the Government Code, the county
assessor shall value that restricted historical property as provided in this section.
(a) Following the hearing conducted pursuant to Section 50285 of the Government
Code, subdivision (b) shall apply until the termination of the period for which the
restricted historical property is enforceably restricted.
(b) The board or assessor in each year until the termination of the period for which the
property is enforceably restricted shall do all of the following:
(1) Determine the full cash value of the property pursuant to Section 110.1. If the
property is not subject to Section 110.1 when the restriction expires, the value shall be
determined pursuant to Section 110 as if the property were free of contractual
restriction. If the property will be subject to a use for which this chapter provides a
special restricted assessment, the value of the property shall be determined as if it were
subject to the new restriction.
(2) Determine the value of the property by the capitalization of income method as
provided in Section 439.2 and without regard to the fact that a notice of nonrenewal or
cancellation has occurred.
(3) Subtract the value determined in paragraph (2) of this subdivision by capitalization
of income from the full cash value determined in paragraph (1).
(4) Using the rate announced by the board pursuant to paragraph (1) of subdivision
(b) of Section 439.2, discount the amount obtained in paragraph (3) for the number of
years remaining until the termination of the period for which the property is enforceably
restricted.
(5) Determine the value of the property by adding the value determined by the
capitalization of income method as provided in paragraph (2) and the value obtained in
paragraph (4).
(6) Apply the ratios prescribed in Section 401 to the value of the property determined
in paragraph (5) to obtain its assessed value.
439.4. Historical Property; recordation.
No property shall be valued pursuant to this article unless an enforceable restriction
meeting the requirements of Section 439 is signed, accepted and recorded on or before
the lien date for the fiscal year in which the valuation would apply.
p-nsPAGE 1373
This document is recorded
for the benefit of the City
of Palo Alto and is entitled
to be recorded free of charge
in • accordance with Section 6103
gf the Govemiftent Code.
After Recordation, mail to:
OFFICE OP THE CITY ATTORNEY
250 Hamilton Avenue
Palo Alto, CA 94301
FEE
FILED FOR RECORD AT REQUEST OF
96 FEB 15 PH 3:10 •
OFFICIAL RECORDS SANTA CURA COUNTY BRENDA DAVIS RECORDER.
HISTORIC PROPERTY PRESERVATION AGREEMENT
[Gbverxuaiant Code section 50280]
• THIS AGREEMENT is made and entered into this [1> day of •
FcJiprtuo^y 1996, by and between ERNEST MARIO and MILDRED M.
MARIO ("Owriers") and the CITY OP PALO ALTO, a chartered city and
California municipal corporation ("City") .
RECITALS
A. Owners possess certain real property located in the'
City of Palo Alto, Santa Clara County, California, commonly known
as 900 University Avenue and described in Exhibit "A" attached
hereto ("Property") , . which contains, the historic residential
structure known as the Squire House and which, as hereinafter set
forth, is a "c[ualified historic property" as defined in Government
Code section 50280.1.
B. The predecessor of the Owners, CONSTRUCTION SYSTEMS,
INC., and the City entered into an Agreement dated April 11, 1977,
entitled "GRANT DEED, RESERVATION OP PACADE EASEMENT, AND
DECLARATION OP COVENANTS, CONDITIONS AND RESTRICTIONS" (hereinafter
called "Easement")., which was filed for record in the Office of the
Santa Clara County Recorder at Book C 793 Page 612 and which is
binding on Owners and the City and remains in full force and
effect. . .
C. Owners and City desire to protect and preserve the
Property in a. manner which retains its characteristics of
hiBtorical significance.
D. Owners .have requested that City enter .into an
historical property agreement with respect to the Property, in
consideration for which Owners will agree to perform certain new
obligations with respect to the Property,
NOW, THEREFORE, the parties in consideration of the
mutual covenants and conditions set forth herein and . the
960201 h« rX)80198
substantial public benefit to be derived therefrom, do agree as
follows: . ^ .
SECTION 1 - AUTHORITY
This Agreement is made and executed pursuant to Article
12 (commencing with Section 50280) of Chapter 1 of Part 1 of
Division 1 of Title ,5 of the Government Code. This Agreement
establishes that the subject property is a qualified historic .
property under Government Code section 50280.1, in that it has been
designated as an. historic landmark by the City pursuant to Chapter
16.49 of the Municipal Code, is State of California Historical
Landmark No. 857, and is listed on the National Register of
Historic Places. This Agreement does not affect or alter the
—vatl-djrty-and-full ferco in o&lect of tJae-Bas-ement , •
SECTION .2 - TERM OF AGREEMENT
This Agr.eement shall be effective as of the. date of
recordation, and shall remain in effect until March 1, 2006. Such
term will automatically be renewed on its Renewal Date as provided
in Section 5 of this Agreement.
SECTION 3 - LIWITAf XONS ON LMTO UgE
In addition to the limitations of the. Easement, during
the term of this Agreement, the Property shall be subject to the
following provisions, reqtuirements, and restrictions:.
(a) Owners shall preserve and maintain (1) the first
floor.interior of the Squire House, excluding the
kitchen, and (2) the original oak main staircase up
to the second floor, in substantially the same
condition as depicted in the photographic inventory
dated December, 1995, and entitled "Squire House
Chronicle." Owners shall also, when necessary.,
restore and rehabilitate these elements of the
Property according to the rules and regulations of
the Office of the Historic. Preservation of the
State Department of Parks and Recreation.
(b) Owners shall provide whatever information shall be
required by City to det;eimine the Property's
continuing eligibility as a qualified historic
property. • .
(c) Owners shall, on an annual basis, open the
Propierty, including the interior of the Squire
House, to a public tour conducted by Owners or by
a civic or historic organization selected by
Owners.'
(d) Owners shall provide for such periodic
examinations, by appointment, of the interior and
exterior of the Property by the County Assesses:,
960201 lac0080l';8
d8PflGE|375
the State Department of Parks and Recreation, the
State Board of Equalization and City, as may be
necessary to determine Ovmers's compliance with
this Agreement.
SECTION 4 - RECORDATION; WRITTEN NOTICE
On or before March 1, 199 S, City shall record an executed
copy of this Agreement in the Office of the Santa Clara County
Recorder. Owners shall provide written notice of this Agreement to
the Office of Historic Preservation, within six (6) months of
entering into this Agreement.
SECTION 5 - RENE^
On M&rch 1, 1997, and on March 1 of each year thereafter
("Renewal Date"), oiie (1) year shall be automatically added to the
initial term of this Agreement, unless notice of nonrenewal is
given as provided in this Section. If either Owners or City desire
in any year not to renew the Agreement, such party shall serve
written notice of nonrenewal of the Agreement oh the other party in
advance of the Renewal Date. Unless, such notice is served by
Owners to City at least ninety (90) days prior to the Renewal Date
or by City at least sixty. (SO) days prior to the Renewal Date, one
(1) year shall automatically be added to the term of this
Agreement. Upon receipt by Owners of the notice of nonrenewal from
City, Owners may make a written protest of the notice i City.may,
at any time prior to the Renewal Date, withdraw its notice- to
Owners of nonrenewal. If either City or Ovnaers serves notice to
the other of nonrenewal in any year, the Agreement shall remain in
effect for the balance of the term remaining since its original
execution, or since the last renewal of the Agreement, whichever
the case may be.
.. .SECTION 6 - CANCELLATION
City may cancel this Agreement if it determines,
following a noticed public hearing, that Owners have breached any
of the conditions of the Agreement or have allowed the property to
deteriorate to the point that it no longer meets the standards for
a qualified historic property. City may also cancel this Agreement
if it determines that Owners have failed to restore or rehabilitate
the property in, the manner specified in Section 3 of this
Agreement. As an alternative, to cancellation of the Agreement .for
breach of any condition, the City shall pursue all available legal
remedies to seek enforcement of the Agreement, including bringing
a court action to enforce the Agreement by specific performance
and/or injunctive relief.
SECTION 7 - ATTORNEYS' FEES
The prevailing party in any action to interpret or
enforce this Agreement shall be entitled to recover its reasonable
attorneys' fees.
960201 Ue 0080198
P208PftGE|378
CERTIFICATE OF ACKNOWLEDGMENT
(Civil Code § 1189) .
STATE OF 0^M.^O^/i/)UA ) •
COUNTY OF Sov^fZtf QJ^A^ ] )
On ^ 799<&. before me,^^^^^ a
notary public in ^nd'for said County, perstonally appeared MILDRED
M. MARIO, personally known to me (or proved to.me on the basis of
satisfactory evidence) to be the person whose name is subscribed to
the within instrument, and acknowledged to me that she executed the
same in her authorized capacity, and that by her signature on the
instniment the person, or the entity upon behalf of which the
person acted, executed the. instrument.
WITNESS my hand and official seal. ^
/ • /) /i^ i ^fS^ Commtalon #1077415 . g.
i^Turi^ a- i OP '*£S£^-Sr'° \
Mf Comm. Expires Nov 12.19991
m m 9 m w V m mnw \
960201 Ik 0080198
EXHIBIT "A"
All that real property commonly designated by street
address as 900 University Avenue, Palo Alto, Santa Clara County,
California 94301, and more particularly described as follows:
Beginning at the Westerly comer of Lot 1,
Block 67 as shown on that certain map entitled
"University Park" recorded on February 27, 1889
in Book "D" .of. Maps at page 69., records of
Santa Clara-. Goointy, California, .. said. poiijit _ _
also being the point of Intersection of the
Northeasterly line of Seneca Street with the
Southeasterly line of University Avenue;
thehce N. 38" 05' E. along said Southeasterly
line 200.00 feet; thence leaving said
Southeasterly line S. 51" 55' E. 200.00 feet;
theiice S.. 38" 05' W. 200.00 feet to a point on-
said Northeasterly line of . Seneca Street;
thence N,. 51" 55' W. along said last named
line 200.00 feet, to the point of beginning,
containing 0.918 acre, more or less, and being
a portion of said Lot X.
a<m(ii l.>-iifiim707
"f *•
. Jir.o Requested BY: e^^-^for.Tia L.arJ •. itle Compar^y =row No. 55702-SV
.••iairTo\ ConfitructioMS Systens Inc. 'VN: 3-4-oS
1499 SticrllhRoad• 6
Moantain View, Caliiorni 94040
N
3-4-15 5032944
- C 793 ntSlZ
GRANT DEED, RESERVATION OF FACADE BASEMENT,
AND DECLARATION OF COVENAiVTS, CONDITIONS,
AMD RESTRICTIONS ' : . . : . ^ .., ^,
THIS AGREEMENT is wad-j by and between the Cr'3f OF PALO ALTO,
a municipal corporation of the State of California, hereinafter
referred to as "City," and CONSTRUrriON SYSTEMS, INC., a California
corporation, with offices at 1499 Stierlin Road, Mountain View,
'^^.'ifornia, hereinafter referred to as "Grantee";
W I N E S S E T H:
WHEREAS, as of the date hereof, CITY is the owner of certain
real property. Including all improvements located thereon, in the
City of Pailo Alto, County of Sai^ta Clara, State of California,
which property is commonly designated by street address as
900 University Avenue, and is more particularly described in the
documeat attached hereto, designated as Exhibit "A", and incor-
por<atecl by reference as though fully set forth herein, all of
which j.s hereafter referred to as the "property*; aiid
traCREAS, situate on the £>rQperty there is a house commonly '
known as "the, SgUire House," which was constructed in 1905, is'
of historical'and architectufdl significanbe, and, together With
the la^id upon which it is situated, is an historical atnd archi-
tectural site worthy of perpetual preservationi and
WHEREAS, the land surrounding the Squire Incuse has affixed
thereto a stand of twenty-five (25) large palm trees, one (1)
spcciman oak tree, and-two (2)'spesiaien redwood trees, the pre-
servation of which enhances the historical and zurchitectural aspects
of the Squire House; and
vniERSAS, the past tendency to destroy old, graceful and
traditional architecture and td"build in its place often grace-
less, even'if cbntempcrarily..popular, architecture, is being
replaced in the Palo' Alto cointauhil.y by an increasing appreciation
of the' value of retaining the richuesA of our heritage; and
WHEREAS, it is the intent of CITY, and the desire of GRANTEE,
to preserve and zaaintain the property in' a physical t^onditipn which,
as nearly as reasonably possible, would resemble its original
chairacter as a single-family dwelling in a formal estato setting;
NOW, THEREFORE, in recogniliion of the foregoing and for
valuable consideration, receipt'of which hereby is acknowledged,
CITY grants and conveys to ;GRANTEE title to the. property, re-
sdrvin9 therefrom a perpetual facade easement in gross in the
property, hereinafter referred to as the "easemeiv^" which
easement includes and is subject to t^e ccvenanta^^bnditions,
and restrictions that follow. • •"' "
//
ItaMi CkiV Omv^^ flWiflii
odSO
RESERVATION OF FACADE\EASEMENT
the p.v6perty coqsistiiig /
native and negative coves*'? ' The CITY reserves an interest
of the benefit of the following affii
nantS/ conditions/ and restrictionst
(1) Building. GPANTEE shal'I^ot, without the prior wr/ltten
approval o£ CITY, undertake, or penrdt, directly or indirectly,
any destruction, construction; alteration,, remodeling, or sialnting,
or do or-permit, directly or;indirectly, arty other thin^ vpaich
would.materially -affect^'the exterior appearance, includin/j the
roof,. or public view of the Squire House as depicted in yhe
photogfapnn the. plot plan; - and' other documents attache^ hereto,
designated as Exhibit "B^;vand incorporated by refers nc6 as though
fully set forth herein.' ., '
(2) . Historical Designation.Monument;• GRANTEE sAall .not,
without the ::prior written'approval of CITY, under tsJe«j or permit,
direetly or.indirectly, the removal, destruction, a«tera,tion, or
inoveioisnt of' the; miDuument which hais attached to it the historical
designation plaque : as depict.ed .in said Exhibit "B". The written
approval requJired to. be obtained from CXTY hereunder may be given
by the: City Manager of CITY or his/her authorized representative
for th'e.nioveident of. the monuioent to ah alternate location on the
Squire . House property. at the e^ense of GRANTEE and under the
supezvisiori'of'CITY.
(3) Trees J. : GiRANTEE • shal 1- not, without the prior written
approval o£ CITY,;. wider take' or permit, directly or indirectly,
any. removal, destruction, altieration, or major pruning, or do
or permit, directly or indirectly, any other thing which would
niaterially . af fect the appearance, health, or pul>lic view of the
aforesaid palm trees, oak.tree, and redwood trees, as depicted
in the plot.plan,.attached hereto, designated as Exhibit "C", and
incorporated by'^ireference as though fully set forth herein. The
written approval•required to be obtained from CITY hereunder may
be given by the City. Manager of CITY or hie/her e.^thorized rep-
resentative for the. pruning or h-^alth maintenance of the trees,
th<« removal-of diseased trees, '^nd installations, construction,
and repairs on the.property which might affect said trees but
not the Squire House.
(4) Maintenance and Repair. .RAMTEE at all times shall
maintain- the property , in a ^eife, good, and scund state of repair
arid <ihall take all reasonable actiorv so that minimal deteriora-
tion in its present''exterior, appearance, as depicted in said
Exhibit "Bi* and Exhibit "C"/ and any improvements .jnd repairs
thereto shall take place.* GRANTEE agrees to save and hold harmless
CITY, its ^ployees, officers,.agents, and assigns from any and all
liability, including costs and attorneys fees, arising out of
GKAMTEE's failure to properly maintain the property as required
hereunde.:.
(5) Insurance. GRANTEE at all tithes and at his sole cost
and expense shall maintain and keep in force a standard homeowners
insurance policy. Form 3, Or equivalent coverage on the property
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such.as a standard fi
the dyielling special
Best's as A, AAA or b
shall be insured for
cost at the time of 1
nioans replaccc^nb or
architectural integri
from time to time.
re insurance policy with extended coverage,
form, with an insurance company rated by
etter. the Squire House and in»prov6fr.entS!: *•
no less th^n its replacement or reconstruction
osa. Said replaceinent or reconstruction cost
reconstruction to the original character and
ty of the Squire House as It may ba improved
The City of Palo Alto shall be n<ar.ed as an additional insured
under the above-specified insuremce policy.
A certificate of said Property Insurance shall be filed with
Che. City Clerk of CITY concurrently with the execution of this
agreement or .within ten (10) dayj thereafter.
A certified copy of said policy will also be filed with the
City Clerk of CITY within thirt, (30) days of the execution of
this agreement.
Said certificate and policy shall be subject to the approval
of the City Attorney of CITY. Current certificates and policies
of insurance shall be kept on file with the City Clerk of CITY
during the entire duration of this agreement.
(6) Restoration. In the event of ''ny damage to, or de-
struction of, any.part of the property adversely aff^ctinrr.
directly or indirectly, the interest in the property reserved
hy CITY:
(a) GRANTEE shall immediately notify CITY in writing
of such daxaage or destruction.
(b) GRANTEE shall pursue in a timely maxmer all avail-
able claims and remedies againsU any insurance policy covering,
and against any person or entity responsible fur, the damage or
destruction.
(c) -6RAMTEE shall use any iijoney or other thing de-
rived from any such claim or remedy to restore the damaged or
destroyed part of the property adversely affecting CITY*s
interests therein as soon as possible tn its pre-existing con-
dition and architectural integrity, subject to the required
prior written approval of CITY, ar specified above.
(7) Entry by CITY. CITY shall have the right to enter
upon the property, including any structure thereon, after rea-
sonable prior notice to GRAl^TEE, at all reasonable times in
order to inspect the same and to oxercise any or all of its
rights herein.
(8) Subdivision. The property shall not be subdivided.
Kegardl
(9) fndustrial, Comir^rcial, Mining, or Drilliny Activities,
aiess of the zoning of the property, no xna istrxal, comroorcial.
mining, or drilling activities ah^ll be carried out upon the pro-
perty without the prior written approval of CITY for each such
proposed new or different activity.
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4 (9»
(10) Improvement and Pepair by City. CITY sha:
iht, but hot the obligation, to inake Improvements
CITY shall have the
right, but not tne ouiigation, to maxe amprovements or repairs .
to th.e property, including the Squire House/ and all other'
st!ructu-..s and fixtures thereon, to preserve and enhance the
property's historical emd architectural authenticity and to
retain and maintain as nearly as possible the original character
of the property. ^
(11) Additional Structllres and Planting. No structures in
addition to the existing oiies, including fencing, shall be con-
structed or erected on the proEierty without the prior written
approval pf CITY. No planting shall significantly obstruct the
view of the Squire Tfouae from ad-iaeent Btreeta and sidewalKs.
II
NATURE AND DURATION
The covenants, conditions, and restrictions contained herein
constitute a binding equitable servitude upon the property, in
perpetuityand shall run with the land and shall be binding on
all parties having or acquiring any right, title, or interest in
the property or any part there^pf, including agents, personal
representatives,,ntortgagees, hiiirs, assigns, and all other successors
in interest, and shall inure to the benefit of CITY, its successors,
and assigns. GRANTEE agrees that the covenemts, conditions, and
restrictions contained herein will be inserted in any subsequent
deed or other legal instrument by which GRANTEE divests hintself/
herself of either fee sinqple title to, or of any other possessory
interest in, the property.
Ill
REMEDIES
In the event GRANTEE violates any provision hereof, CITY
shall have available such legal and equitable remedies as are
provided by law to enforce the obliga^tibn or obligations of
GRANTEE hereunder and, in addition thereto and as en alte^rnative,
at the sole option and discretion of CITY> CITY nay enter upon
the property and any structure thereon to'correct any.viblatlon
and hold GRANTEE responsible for the Cost thereof after thirty days*
written notice to GRANTEE to Cure the violation and failure by
GRANTEli; to SO cure the violation. Said costs shall be deemed
to be an assessment.
IV
LIEN FOR ASSESSED COSTS
(I) Creation of Lien and Procedure. Bach of such costs
assessed pursuant to Article III hereof shall be a separate
and .-listincv. debt obligation of GRANTEE. The amovmt of any
assessment, including Interest at the rate of nine and one-half
percent '9-1/21), and costs, i.icluding reasonable attorneys' fees,
shall be a lien upon the property, and GR-J^ITEE hereby expressly
grants tc CITY e.nd its assign or assigns a continuing lien against
the property to secure the payiricnt to CITY and its assign or
assi^-ns of any and all such assessments which may be made from
t-i..e .to time. As such assessmonts are made against GRANTEE, CITY
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C' 793 H«616
.1'
shall cause to be recorded with the county recorder of tJ^o County
cf Santa Clara a notice of assessment, which shall'btate*'uicf ^\
amount of such assessment and such other charges thereon, a des-
cription cf Uifi .p-tpperty, and the name of the record owner or
owners thereof' Such notice shall be signed by the City Manager
of CITY or his/her authorized representative. Upon payment of
such assessment and charges in connection .with which such notice
has been so Recorded, or other satisfaction thereof, the City
Manager of CITY or his/her ^authiorlsed representative shall cause
to be riecbrded a further notice stating the satisi^action and re-
lease of the lien assessment thereof. Except as provided herein,
such continuing lien shall>e prior to all other liens and en-
cu.'Td:>rances recorded subsequent to the record.ation o£ this document
unless CITY, and GRANTEE agree to the subcxdinatlon thereof to
other liens and •..enciunbrances.
(2). Alternative Creiiation of Lieii. If it should be deter-
mined by .a Court, by judicial prececleiM:, or otherwise that the lien
granted hereunder, c&nnot-attach. to .the property until jkhe amount
of the particular assessment ia'.ascertairied,or that the lien is
otherwise invalid "or void, theii the parties agree that a separate
lien s}>all attach to the property and come into being upon recorda-
tion of a Tuatlce of assessxaent as. provided herein and that , each of
such liens shall be prior to all other liens and encumbrances
recorded subsequent to the recordation of said notice of assessment
unless CITY .and GRAltTEZ agree to the subordination thereof to
other liens ^nd encumbrances. '
,(3) Foreclosure. With the prior approval of the Council of
CITY, «ity such lien may be foreclosed by an appropriate action in
Court or in.tne aaamer provided by law for the foreclosure of a
mortgage under power of sale. Any action in Court brought to
foreclose such a lien shall b@« commenced within two (2) years fol-
lowing such recordation. .In the event the foreclosure is under =\
power of sale, as in.the case qf a mpr^gage, the Gity^ Meager of
CITY or hia/hex- authprized representative or the assign or assigns
of CITY shall be deemed to b^ .'acting as the agent of ClTi, and
CITY, or its.^ assign or assigns, as the case may be, shall be en- .
pitied to actual expenses and such fees as may be allowed by law
or as may be prevailing at the time the sale is conducted;
, • • • /• • • '
(4) Sale. Such sale shall be conducted in accordance with
the provisions of law applicable to the exercise of powers of.
salts and mortgages and deeds of trust; of in any other manner.;
permitted by law. With the prior approval o£ the CounciV of CITY
the certificate of sale may be executed and acknowledged by.\'the
City Manager of CITY or by the person cohductin^' the sale. ' A
deed upon th&^GQurt'3 foreclosure shall be executed In a like
mannez after the lapse of the-period of redemption then required
by statute,
(5)' Other Liens. No provision hereof respecting the
creation o^'a contractual lien shall in any way be construed '
as limiting or waiving any right of CITY to assert any statutory
or other lien that may be availeible to it.
i
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4
c m msv?
MORTGAGE PROTECTION
(1) Sulaordination Agreement. Notwithstanding all other provisions herein/ the lien or liens, as the case may be, created uiider Article IV hereof on the property shall be subject and subordinate to., and shall not affect the rights of the holder of tlie indebtedness secured by £iny recorded first mortgage (meaning a mortgage with first priority over other mortgages) upon such interest made in good faith and ^or value, provided that utiere is no outsteuidlng recorded not'.ce of assessment pursuant to Article IV hereof. ' If thnra is any outstanding recorded notice of assessment prior to a first mortgage, then the amount of the lien shown on the notice or notices of assessment shall be senior to the interest of the mortgagee, but otherwise any further right of CITY to lien pursuant to Article IV shall be subordinate to such mortgagee. After the foreclosure of any suuh mortgage, there is, or may be* as the case may be, a lien created pursu2uit to Article IV hereof on the interest of t}ie purq^taser at such foreclosure sale to secure all
assGssroiBnts ass^^ssed hereunder to such purchaser as a GBANTBE after the diate of such foreclosure sale, which said lien, if any claimed, shall have the sair.> effect and be enforced in the saxaa manner as provided herein.
(2) Anig.n4iwfint. No amendment of this Article shall affect
the rights, of the holder of any such mortgage recorded prior to
the recordation of such amendment who does not join in the execution
thereof.
VI
SEVERABILITY
The provisions hereof shall be deemed to be independent
and severable, .and', the invalidity or partial invalidity or unenforceability of any one provision or portion thereof shall
not affect tlie validity or enforceability of any other provision
hereof. . '
VII
INTERPRETATION
The; provisions hereof shall be liberally construed to effectuiite the purposes recited herein. Failure to enforce any provision hereof shall not constitute a waiver of the right to enforce said provision or any other provision hereof.
VIII - •
NOTICES
Any. and all notices or other communications required or permitted hereunder or by law to be served on or given to either party hereto by the other party hereto shall be in writing and shall be deemed duly ser\'cd and given when deposited in the United States mail, first-claiSs postage prepaid, addressed to GRANTEE at the address of the property or to CITY, in care of
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ti'.e City Clerk, Civic Center, 250 Hamilton Avenue, Palo Alto, California 94301. Either party may cfiange their address for the purpose of this Article by giving written notice of puch change to the other party in the manner provided in this Article.
IX
TIME OF ESSENCE
Time is expressly declared to be the essence of this agree-
inent.
COSTS AMD ATTORNEYS' FEES
The prevailing party in any action brought to enforce the terihs of this agreexcent or arising out of this agreement may recover its reasonable costs and attorneys' fees expended in connection with such an action from the other party.
IN WITNESS WHEREOF, CITY has caused its name 2md seal to be affixed hereto a:\d this instrument to be executed bj' its
duly authorized officer this fItL day of /XoA t>C ,
1977. ; I, . ~" m CITY PALO ALT
APPRO
i ty iiaina^)?^
: r -• .V APPROVED:
Ciey Controller
AT'PkOVED: yy
t)lrec;Cor p.f Budget & Staff Services
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