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Carmel reopens Mills Act review; council asks staff for policy options including possible nonrenewals
Summary
Council received a staff report on the Mills Act, discussed the program's fiscal impact and administrative burden, and directed staff to return with proposed policy modifications (options included issuing nonrenewal notices, establishing revenue or value caps, and developing alternative incentives). No final action taken.
Carmel-by-the-Sea — The City Council on Oct. 6 received a staff presentation on the Mills Act and directed staff to prepare potential policy modifications for future council consideration, including the option of issuing nonrenewal notices for existing contracts, establishing annual-revenue or fair-market-value caps, and exploring alternative incentive programs. The council did not adopt a policy change at the meeting.
Anna Jannett of Community Planning and Building reviewed the state program's intent and the city's local Mills Act history. She told the council the Mills Act is a state-authorized tool that provides property-tax relief to owners who preserve and maintain historic properties and that cities may adopt local program components. Jannett presented corrected tax-roll figures for the 2024-25 tax year and noted that four Mills Act contracts approved since the council's 2023 moratorium materially increased the city's estimated annual tax revenue reduction.
According to the staff presentation, the city had previously approved 15 Mills Act contracts; four additional contracts approved in 2024 raised the total tax revenue reduction for the 2024-25 roll from roughly $76,251 to approximately $315,000 (staff presented the corrected spreadsheet at the meeting). Staff outlined several policy options for council consideration: issue nonrenewals (which take effect after the recorded contract's 10-year renewal period ends), limit annual revenue loss (some cities set an annual cap), establish a fair-market-value cap for eligible properties, restrict eligible land uses to residential or commercial only, limit the number of new contracts per year, or tighten eligibility requirements (for example, disallow contracts where the historic work was already completed before application).
The council questioned administrative oversight, annual verification of maintenance, and how the county assessor values restricted Mills Act properties. The county assessor's office was represented on the meeting by Nicholas Ortega (joined by phone), who explained the assessor's statutory role and valuation method: "Once the contract is recorded, then we can look at it for the following fiscal year," Ortega said, adding that assessors value restricted properties using estimated market rents and a capitalization rate prescribed by the State Board of Equalization, which can cause significant variation year-to-year. Ortega said the assessor follows state guidelines and cannot simply apply a local floor on value without departing from BOE valuation rules.
Public comment included speakers who said the Mills Act's original purpose — helping owners who cannot afford historic repairs — remains valid, and others who said the program has been used in ways that produce unexpectedly large tax losses and should be limited. Karen (last name provided in the record) urged stricter limits and more inspections; Will Ray and Christy Raymers urged keeping maintenance eligible but improving oversight. Several council members expressed concerns about administrative capacity to monitor contracts and the unpredictability of tax revenue impacts under current valuation rules.
By the end of the discussion, council members generally signaled a preference for staff to prepare a formal package of options for future consideration rather than adopt changes immediately. Staff was asked to return with a draft resolution and municipal code amendments that could include issuing nonrenewal notices for existing contracts, proposed caps or eligibility limits, and alternative incentive approaches (for example, fee waivers or targeted assistance for low-assessed-value historic homeowners). The moratorium approved previously remains in effect pending further council action.
Council direction: staff to return with proposed policy modifications (including nonrenewal, caps, eligibility changes and alternative incentives) and to provide corrected and fully documented tax-roll figures for the council to review before any vote.
