The Mills Act and Property Taxes

Summary:

Achieving Property Tax savings under the Mills Act is complicated, depends on the repairs that you will be making to historical standards, the calculated subsidy for those repairs and you must sign a contract with the government to commit to those repairs.

The program has to be administered by Cities and approved by the City Council. And since very few owners are likely to engage in Mills Act contracts and these result in reducing City revenue, City resources to support are likely to be limited.

The Mills Act and the Myth of

Property Tax Relief for Historic Homes

By Andrew Ryan

Property taxes fund cities. Do you really think San Mateo will make it easy to reduce your property taxes by 20-70%?

The San Mateo Heritage Alliance has claimed that under the Mills Act, “Typically, property owners [in historic districts] can expect a 20 to 70% tax savings on property taxes.” This is a lie. Where are the receipts, SMHA? Can you show us the receipts from a single homeowner in San Mateo that has ever saved 70% on their property taxes because of the Mills Act? No, you cannot, because this has never happened. It’s just another lie you’re telling San Mateo to try and sneak historic districts past Baywood homeowners.

The Mills Act is a 10 year contract signed between a homeowner and the City. In the contract, the homeowner promises to do certain specific repairs to their historic house (e.g. “fix roof,” “replace windows”) and in return, the City gives them a property tax reduction. The upgrades can’t be things like “add a second story” or “install a brand new kitchen.” The intent is to do work that maintains or restores the historic character of the house. There are lots of things to know around Mills Act contracts, and the Mills Act is administered slightly differently in every city, but here are a few key points about San Mateo’s implementation of the Mills Act:

The Mills Act involves a long, complicated application process and, in San Mateo, applications have to be directly approved by the City Council. You’ll be taking money directly from the City’s pockets, so don’t expect an easy approval process.
While your actual savings are impossible to calculate beforehand, the Mills Act is meant only as a subsidy to offset the costs of maintenance, not pay for it entirely. Homeowners will still end up paying net out-of-pocket for their repairs.
Mills Act contracts stay with the property even if you sell or transfer your home to someone else. The new owners have to agree to maintain the contract. An active Mills Act contract will make your house more difficult to sell.
The Mills Act legally obligates you to complete the work and allows the City to inspect the work to verify that the repairs occurred and were done in a proper historic fashion. If homeowners are found out of compliance, they may have to return their tax refund and even pay a penalty.

For people that want to really invest in their historic homes and keep them historic, the Mills Act is a really nice way to encourage that. But for the vast majority of homeowners in historic districts, including Baywood, the Mills Act will not save them money and will not even apply to them.