The site is located on Lopez Avenue 5 northwest of 4th Avenue in the Single-Family Residential (R-1) District (Attachment 2). The residence, also known as the “Cosmas House,” was designed by architect Albert Henry Hill and his partner, John Kruse, and was built in 1961 by contractor Grove Bishop. The building is one of three unique, adjacent, “Weekend Houses” designed by Hill on Lopez Avenue. The dominant design element of the “Cosmas House” is the steeply pitched roof which folds down over the walls like the wings of a paper airplane. The house has been determined significant as a good example of the Bay Region Modern/Second Bay Region style designed by Henry Hill and John Kruse; both the style and the architects are recognized in the Carmel Historic Context Statement.
A Department of Parks of Recreation (DPR) 523 Form was completed on February 15, 2002 by Richard Janick, who found the property to be significant under California Register criterion 3 (Architecture). In 2003 the house was included in the DOCOMO-MO survey of significant properties of the Modern Movement. In October 2004, the California Coastal Commission accepted the Cosmas House as part of the City’s Inventory of Historic Resources. However, on December 16, 2006, the Historic Resources Board granted an appeal (submitted by the then- property owner) resulting in the property being removed from the City’s Inventory of Historic Resources. The appeal was granted because at that time, the City’s Historic Context Statement did not cover post-1940 development and the residence was only 44 years old. The staff report at that time recommended that the house be re-evaluated once it reached the 50-year threshold and when an updated Historic Context Statement was available.
On June 2, 2021, the new (and current) property owner applied for a Design Study to remodel the lower level of the house and pursue fenestration changes. The Design Study application triggered the re-evaluation of the property, having since crossed the 50-year threshold. An updated Department of Parks and Recreation (DPR) Form 523 was completed for the property in 2021 by Margaret Clovis (Attachment 3). The evaluation again determined that the property meets California Register criterion three (Architecture) as a representative of the historic context theme of Architectural Development. A Resolution Designating a Historic Resource for the property on Lopez Avenue 5 northwest of 4th Avenue was recorded with the County Recorder on April 19, 2023 (Document #2023011567).
On May 16, 2023, project architect Karen “KC” Cullen submitted an application for a Mills Act Historical Property Contract on behalf of the property owner. In order to qualify for a Mills Act contract, a property must first be included on the Carmel Inventory and then added to the Carmel Register of Historic Resources. As noted above, the property was added (back) to the Carmel Inventory in 2021. On September 18, 2023, the Historic Resources Board adopted Resolution 2023-014-HRB (Attachment 5), adding the property to the Carmel Register and recommending that the City Council enter into a Mills Act Contract with Lopez 5 NW, LLC, for the historic “Cosmas House.”
Contract Value
The Monterey County Assessor’s Office is responsible for determining the value of a property under Mills Act Contract in accordance with Revenue and Taxation Code sections 439 through 439.4. Properties with a Mills Act Contract are not valued based on sales data; rather they are valued by a prescribed income capitalization method (Attachment 6). After a Contract is approved, it is forwarded to the Monterey County Assessor who then determines the Mills Act value.
Contract Summary
A Mills Act contract under State law is an agreement between the City of Carmel and a property owner of a historic building listed on the Carmel Register. In exchange for reduced property taxes, the property owner is contractually obligated to perform annual maintenance on the building. The property owner benefits from a reduction in property taxes. The City benefits from assurance, via contract, that the historic building is rehabilitated, maintained, and preserved with a portion of those property taxes that the city is giving up.
The primary purpose for offering Mills Act contracts in the City of Carmel-by-the-Sea is to assist in and ensure the rehabilitation or restoration and long-term maintenance of historic resources. All properties listed on the City’s Historic Register in all districts that have been preserved in their historical size, form, and design without significant alterations are eligible for Mills Act contracts.
All Mills Act contracts have a term of 10 years, and one year is added to this term annually upon each anniversary date of the contract unless one or both parties (City and property owner) have taken action to terminate the contract. The City Administrator is authorized to initiate contract termination on behalf of the City based on recommendations of the Community Planning & Building Department. The contract rights and obligations are binding upon all successive owners of the property during the life of the contract. The property retains the lower Mills Act tax rate when sold. To end a contract, either party may submit a notice of non-renewal to the other party. Such notices shall cause the contract to terminate at the end of the then-current 10-year contract period. Cancellation of a contract by the City due to non-compliance requires a public hearing and, if canceled, results in the immediate termination of the contract and a penalty equal to 12.5 percent of the assessed market value of the property.
The contract requires that the historical elements of the property are maintained in good condition. This includes a plan for rehabilitation and maintenance and may include a program to restore deteriorated features. All recipients of Mills Act contracts are required to implement a rehabilitation/restoration and maintenance plan prepared by a qualified professional. An annual report is submitted to the Community Planning & Building Department specifying all work that has been done to maintain and preserve the historic resource over the year in compliance with the approved rehabilitation/restoration and maintenance plan. All rehabilitation/restoration and maintenance work must be completed in conformance with the Secretary of Interior’s Standards for Rehabilitation, and all proposed projects are subject to a Design Study prior to commencement of work. Minor alterations, as defined in CMC Section 17.32.150, may be approved by staff; however, major alterations (CMC Section 17.32.160) would be reviewed by a qualified professional and presented to the Historic Resources Board for review. All Mills Act contracts must specify that the rehabilitation/restoration and maintenance plan shall be updated at least every ten years by a qualified professional and approved by both parties.
The Historic Resources Board considers each application for a Mills Act contract and provides a recommendation to the City Council to approve, approve with conditions, or deny the application.
The City Council considers the recommendations from the Historic Resources Board at a public hearing and resolves to approve, approve with conditions, or deny the proposed contract with sufficient time for action by the City Clerk so that recordation of approved contracts occurs before December 31st of the year in which the application is received.
Staff Analysis:
Findings
Carmel Municipal Code Section 17.32.100.B.6(c) sets forth findings that the Historic Resources Board and City Council shall make in order to grant approval of a Mills Act Contract. The required findings are listed below followed by a staff response on how the application meets the requirements.
1. The building is designated as a historic resource by the City and is listed on the Carmel Register.
Staff Response: The residence was the subject of a historic evaluation in 2021 by Margaret Clovis and was placed on the Carmel Inventory of Historic Resources in 2021. The Historic Resources Board added the resource to the Carmel Register on September 18, 2023. The application meets this finding.
2. The proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property.
Staff Response: The applicant submitted a rehabilitation and maintenance plan (Attachment 4). The plan covers a period of 10 years from 2024-2033 and estimates $87,300 in work projects. The plan, compiled by KC Cullen, Architect (and qualified professional), includes rehabilitation and maintenance work including: structural deck/roof wood post repair or replacement; new roof; stain exterior deck and siding; repaint door and window trim; re-paint beams and eaves; termite testing and repairs, landscape maintenance; and sump cleanout/maintenance. All planned rehabilitation and maintenance work will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. All exterior work is subject to Design Study approval and a determination of consistency with the Secretary of the Interior's Standards for Rehabilitation.
While the repair of the structural wood post qualifies as rehabilitation, the majority of the planned work items qualify as maintenance rather than rehabilitation. Replacement of the roof with treated Cedar shakes and re-staining of the historic Redwood exterior siding and deck would be considered more significant than routine maintenance, whereas re-painting, landscaping, sump cleanout/maintenance, and termite inspection would be considered routine maintenance expected for any property.
The current property owners recently completed a rehabilitation project (BP 21-0440 finaled on May 2, 2023) which resulted in a 2024-2033 Mills Act work plan that contains primarily maintenance rather than rehabilitation items. The Council should consider the purpose of the Mills Act, intended as an incentive program to encourage future rehabilitation work to happen. If an owner was able to successfully complete their project without financial subsidy, there is no established need for granting a Mills Act contract. While the City’s municipal code does not explicitly speak to completed work, the code language clearly requires that the “proposed rehabilitation/restoration and maintenance plan is appropriate in scope and sufficient in detail to guide long-term rehabilitation/restoration and maintenance. Required maintenance and rehabilitation should be more significant than just routine maintenance that would be expected for any property.” The Council should consider whether the plan is satisfactory to meet Finding #2.
3. Alterations to the historic resource have been in the past, and will continue to be in the future, limited to interior work and to exterior rehabilitation and alterations that:
(A) Comply with the Secretary’s Standards (future additions only); and
(B) Do not significantly alter, damage or diminish any primary elevation or character- defining feature; and
(C) Do not increase floor area on the property by more than 15 percent beyond the amount established in the documented original or historic design of the resource; and
(D) Do not result in any second-story addition to a single-story historic resource.
Staff Response: The Cosmas House retains a high degree of integrity as few exterior changes have been made to the house since its construction. A new Class A shake roof was added in 2004 (BP 04-9) and fenestration alterations were carried out in 2022-23 (new windows and doors permitted under DS 21-191, on secondary elevations). As noted above, planned rehabilitation and maintenance work will be performed in conformance with the Secretary of Interior’s Standards for Rehabilitation. Any future alterations are required to be consistent with conditions A-D above. Minor alterations, as defined in CMC Section 17.32.150, may be approved by staff; however, major alterations (CMC Section 17.32.160) would be reviewed by a qualified professional and presented to the Historic Resources Board for review.
It should be noted that a major rehabilitation occurred in 2022-2023 (Design Study 21-191, BP 21-0220, LeComte/Bergeron), involving the removal of original knob and tube electrical wiring and necessary electrical upgrades; additional concrete footings retrofitted to the existing foundation; and replacement of the main sewer line. The renovation also included the above-mentioned fenestration changes. When the current owner purchased the home in January 2021, it was not a listed historic resource (having been removed following a successful 2006 appeal by previous owners). In June of 2021 they applied for Design Study 21-191, and by August 2021, the property was listed on the Carmel Historic Inventory. The owner did not apply for a Mills Act contract at that time, and instead moved forward with the desired fenestration changes as well as the electrical work, foundation retrofit, and sewer line. The recently completed work (BP 21- 0440 finaled on May 2, 2023) has resulted in a 2024-2033 Mills Act work plan that contains primarily maintenance rather than rehabilitation items.
4. The Mills Act contract will aid in offsetting the costs of rehabilitating and maintaining the historic resource.
Staff Response: Approval of the contract would assist in offsetting the rehabilitation and maintenance costs of preserving the “Cosmas House” by reducing the tax liability on the property thereby freeing up funds for the rehabilitation. The application meets this finding.
5. Approval of the Mills Act contract will represent an equitable balance of public and private interests and will not result in substantial adverse financial impact on the City.
Staff Response: Approval of the Mills Act Contract will be consistent with Goal 1-5 and Objective 1-16 of the Land Use & Community Character Element of the General Plan which encourages providing incentives for property owners to preserve and rehabilitate historic resources.
Although the adoption of a Mills Act Contract will decrease property tax revenue to the City, this contract represents an equitable balance of public and private interests:
1) The City Council adopted Resolution 2016-068 on September 13, 2016, limiting the number of Mills Act contracts that can be approved to fifteen (15) in any three-year calendar period. No applications were approved in 2020 or 2021, four applications were approved in 2022, one application has already been approved in 2023 (L’Auberge), and four total applications are currently in review in 2023.
2) Carmel currently has 292 historic resources, and since the adoption of the Mills Act program in 2004, the City has entered into a total of fifteen Mills Act Contracts.
3) The City would continue to receive a portion of the property tax revenue and the investment in rehabilitation and maintenance supports local tourism, which benefits both private and public interests.
4) The value of preserving a historic resource offsets the loss of revenue.
Next Steps:
If the City Council enters into a Mills Act Contract for this property, the contract will be recorded with the Monterey County Recorder and will take effect January 1, 2025.