SR - - POSSIBLE ADJUSTMENT TO FEE STRUCTURE1. SUBJECT
Mills Act Program.
1 2. SUMMARY
At their September 13, 2016 meeting, the City Council reviewed a report with a number of
recommended changes to the Mills Act Program. The Council chose to eliminate the cap on new
Mills Act Contracts approved annually. Previously, no more than 10 new contracts were
approved each year. In addition, the City Council requested that staff provide additional
information on the fees currently charged to Mills Act property owners to potentially offset the
costs of program administration.
3. RECOMMENDED ACTION
Provide staff with direction on a possible adjustment to the fee structure for Mills Act Contracts
to offset the costs of five year inspections of Mills Act properties.
4. FISCAL IMPACT
The application fee of $1,000 for each new Mills Act Contract offsets the cost of staff review of
the application and the initial property inspection. The annual fee of $30 for each contract also
offsets the cost of staff time for reviewing the annual progress report forms for each contract.
However, the existing fee structure does not offset the staff costs of five year inspections of each
Mills Act property. Under a change to the state legislation enabling the Mills Act program in
2012, Mills Act properties must be inspected once every five years. An inspection costs
approximately $450 in staff time and /or consulting fees. Increasing the annual fee or establishing
a new five year inspection fee could partially or totally offset the cost of ongoing administration
and five -year inspections associated with the program.
1. STRATEGIC PLAN GOAL(S)
Goal 5 Recognize, promote and preserve Orange's rich heritage.
Strategy B Expand and strengthen processes and practices related to protection of cultural
resources.
2. GENERAL PLAN IMPLEMENTATION
Cultural Resources and Historic Preservation Element:
Goal 3.0 Provide incentives and expand education efforts for historic preservation.
Policy 3.2 Provide incentives to encourage and support historic preservation.
7. DISCUSSION and BACKGROUND
Staff compiled information on the current costs of administration of the Mills Act Program,
including the costs for five year inspections of all Mills Act properties and fees in comparable
cities in the area. Property owners with Mills Act Contracts currently are required to pay two fees
to offset costs of the program's administration:
1) $1,000 application fee. This is a one -time fee, non - refundable and payable at the time of
application submittal
2) $30 annual fee. Payable in January each year that the contract is in effect
Processing each new Mills Act Contract requires approximately 12 hours of staff time. This
includes an on -site inspection where staff and the property owner discuss the current condition of
the historic buildings and the Rehabilitation/Maintenance Plan that will be attached to the
contract. The inspection gives the property owner the opportunity to ask questions about the
responsibilities of the contract and plans that they have repairs and maintenance to the historic
property. The inspection also allows staff to document the baseline condition of the historic
property, to provide guidance for completing repairs that are in conformance with historic
preservation standards, and to recommend rehabilitation items that should be a priority within the
Rehabilitation/Maintenance Plan. As shown below, the $1,000 application fee approximately
offsets the costs in staff time to process the application.
Staff Costs for Processing New Application
Staff Time
Staff Time Costs
Fee Collected
12 hours at $84 /hour
$1,008
$1,000
ITEM 2 11/9/2016
To improve tracking of property owners' repairs and maintenance of their historic properties,
staff implemented an annual progress reporting process for Mills Act properties. In January of
each year, annual progress report forms are mailed to Mills Act property owners, along with an
invoice for the $30 annual fee. Property owners are asked to document the rehabilitation and
repair items that they have finished in the previous year, including photographs of the work, and
return the form to staff. Staff review of each annual progress report form averages approximately
30 minutes. Similar to the Mills Act application fee, as shown below, the $30 annual fee
approximately offsets the costs in staff time to review and file the annual progress report form for
each Mills Act property.
Staff Costs for Reviewing Annual Progress Report Form
Staff Time
Staff Time Costs
Fee Collected
0.5 hours at $84/hour
$42
$30
In 2012, the California Legislature amended the legislation that enables cities to establish a Mills
Act Program. One of the changes implemented by the Legislature requires municipalities to
conduct inspections of the interior and exterior of Mills Act properties once every five years to
determine continued compliance with the terms of the contract. The inspections allow the City to
confirm that the work on the Rehabilitation/Maintenance Plan attached to the contract was
completed on the identified timeline and in conformance with the required historic preservation
standards. The five year inspections also allow the property owner to ask questions about
continued care and maintenance of their historic buildings.
Qualified staff and /or consultants provide property owners with specific recommendations on
their future plans for the property to ensure that the work represents the best historic preservation
practices. The five -year inspections provide a service to the property owners with specialized
assistance for the best way to preserve their properties. To continue providing this service, the
five year inspections should either be conducted by qualified staff or by a qualified historic
preservation consultant, meeting the Secretary of the Interior's Professional Qualifications
Standards.
Staff has begun implementing a five -year inspection program as required by the state Mills Act
legislation. As current staffing level within the Community Development Department did not
allow for inspections to be conducted by in -house staff, Jan Ostashay of Ostashay & Associates,
Inc. was engaged to conduct the inspections in 2016. Working with staff, Ms. Ostashay created a
standardized inspection report form for each property, including photographs, to document the
condition of the property and completed repairs at the five year inspections. Ms. Ostashay has
also worked with property owners to update their Rehabilitation/Maintenance Plans attached to
their contracts. Properties with the oldest Mills Act contracts, approved in 1998 and 1999, are
ITEM 3 11/9/2016
being inspected in 2016. Twenty -two properties have been inspected to date with the goal of
inspecting 40 in 2016.
The cost of one five -year inspection conducted by a qualified consultant is approximately $450.
As the program increases in size, the number of five year inspections required each year will also
increase. The City currently has 217 Mills Act Contracts. As such, the City should be conducting
approximately 43 inspections per year at an annual cost of $19,350. Currently, that amount is not
recovered. It is important to note that with the removal of the annual cap on new contracts, the
total number of contracts will increase at a greater rate, and therefore, the number of inspections
needed annually will also increase over the next decade.
Based on staff's research, application fees for other cities in and around Orange County range
from $0 to approximately $2,745. Orange's $1,000 application fee is in the middle of the range
of application fees in surrounding cities. Other cities do not collect an annual fee for
administration of their Mills Act Programs. As a result, many other cities have not yet been able
to implement a plan for five year inspections of their Mills Act properties.
Staff is seeking the Council's direction on options for potentially increasing the Mills Act
Program fees to completely or partially offset the costs of the five year inspections. Options
include:
1) Increase the annual fee up to $120 to offset the costs of both annual program
administration and the five year inspections.
2) Establish a separate five year inspection fee up to $450, charged per property once every
five years. The existing annual fee of $30 could remain the same.
3) No change to the existing fees. The City would absorb the costs of program
administration and the five year inspections, in exchange for the significant investments
by property owners in preserving historic resources in the community.
8. ATTACHMENTS
1. City Council Mills Act Staff Report, dated September 13, 2016
2. Table of Mills Act Fees in Comparable Cities
CITY COUNCIL MINUTES NOVEMBER 9, 2016
7. ADMINISTRATIVE REPORTS
7.1 Mills Act Program. (C2300.I.2)
City Manager Rick Otto introduced the item and Historic Planner Marissa Moshier gave a
brief staff report and answered Council's questions regarding the current annual fee and
proposed options. During discussion, Council agreed to leave the fee schedule as is. City
Manager Otto stated that staff would bring this back to Council if future adjustments
needed to be made.
MOTION — Murphy
SECOND — Alvarez
AYES — Alvarez, Whitaker, Smith, Murphy, Nichols
Moved to not make any adjustments to the fee schedule at this time.
8. REPORTS FROM CITY MANAGER — None
9. LEGAL AFFAIRS
9.1 2016 Edition of the California Codes, Ordinance No. 09 -16 (SECOND READING)
(A2500.0)
An Ordinance of the City Council of the City of Orange amending Title 15 of the Orange
Municipal Code adopting and amending the 2016 Editions of the California Codes and
Related Model Codes with Appendices relating to the Building Codes.
MOTION — Smith
SECOND — Nichols
AYES — Alvarez, Whitaker, Smith, Murphy, Nichols
Moved that Ordinance No. 09 -16 be read by title only and same was approved and adopted
by the preceding vote.
10. ITEMS RELATING TO THE SUCCESSOR AGENCY OF THE ORANGE
REDEVELOPMENT AGENCY — None
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