BACKGROUND:
The property is located on the northeast corner of 7th Avenue and Lincoln Street in the Residential and Limited Commercial (RC) Zoning District (Attachment 1, Exhibit A). Originally named “La Ribera,” the hotel was designed by Blaine & Olsen (an Oakland-based architectural firm) and built by Meese & Briggs in 1929. The hotel was re-named “Cypress West” c.1960 and later renamed “The Cypress Inn,” in the 1980s. The property is significant as an excellent example of Spanish Eclectic commercial design by Blaine & Olsen. The reinforced concrete building is particularly notable for its red ceramic roof tiles, Moorish-style 3-story tower with a ziggurat top, and central courtyard. It is also significant for its 1949 two-story addition located at the southwest corner of the building, designed by San Francisco architect, Gardner Dailey, and built by Harold Geyer.
In 1990, a 4,000-square-foot lot (APN 010-147-009-00) located on Lincoln Street immediately north of the Cypress Inn was acquired by the hotel owners. The property contained the Mary DeNeale Morgan studio, a building deemed historically significant but which had lost integrity. The studio was demolished to accommodate a north addition to the Cypress Inn, containing a restaurant space and six new hotel unit. The project was approved by the Historic Resources Board (then called the Historic Preservation Committee) and the Planning Commission in 1999. Although the north addition is physically connected to the original hotel building, the lot (APN 010-147-009-000) was not merged with the original hotel property (APN 010-147-008-000) and the lots remain separate to this day. The north addition is located in the Central Commercial (CC) zone, and the original Cypress Inn is located in the Residential and Limited Commercial (RC) zone. Additionally, the north addition is not listed on the Carmel Inventory nor the Carmel Register and is not part of this Mills Act application.
The Cypress Inn was first identified as a significant historic resource in 1978, in the “Monterey Architecture Resource Inventory” survey conducted by Richard Janick and the Monterey Peninsula College. In 1990, the property was documented by Erling Lagerholm; in 1997, Lagerholm prepared a Department of Parks and Recreation (DPR) Form 523 that included a more extensive description and analysis. In 2003, another DPR was completed by Kent Seavey (Attachment 1, Exhibit B). Also in 2003, a “Historic Preservation/Conservation Easement” for Block 75, lots 16, 18, 20, and 22 was recorded with the Monterey County Recorder. The Easement record does not list Assessor Parcel Numbers. Lot 16 is associated with APN 010-147-009-000 (the north addition to the Cypress Inn), while lots 18, 20, and 22 are all associated with APN 010-147-008-000 (the original Cypress Inn property). It appears as though lot 16 was included in the Easement to ensure appropriate historical documentation and interpretation of the Mary DeNeale Morgan studio (i.e. a commemorative plaque).
In order to qualify for a Mills Act contract, a property must be included on the Carmel Inventory and added to the Carmel Register of Historic Resources. At the request of the then-property owner, the Planning Commission designated the Cypress Inn as a historic resource on June 9, 1999 following a unanimous recommendation by the Historic Preservation Committee on May 17, 1999. The resource was added to the Carmel Register on June 9, 1999 and later listed on the Carmel Inventory on May 25, 2005 (following the adoption of the City’s Local Coastal Plan). A Resolution designating a Historic Resource for APN 010-147-008-000 was recorded with the County Recorder on January 4, 2007 (Document #2007001226). Please note that the designation recorded with the County Recorder lists only APN 010-147-008-00 as a historic resource (not APN 010-147-009-000, the separate north lot accommodating the 2003 north addition).
On April 4, 2023, Gerard A. Rose, Attorney, submitted an application (MA 23-103, Cypress Inn) for a Mills Act Historical Property Contract for the Cypress Inn on behalf of the property owner, Sentimental Journey LLC. On August 21, 2023, the Historic Resources Board adopted Resolution 2023-011-HRB (Attachment 2), recommending that the City Council enter into a Mills Act Contract with Sentimental Journey, LLC for the historic “La Ribera Hotel.”
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 3). 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 review prior to commencement of the work. Minor alterations, as defined in CMC section 17.32.150, may be approved by staff; however, major alterations, as defined in 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.
- The building is designated as a historic resource by the City and is listed on the Carmel Register.
Staff Response: The resource was added to the Carmel Register on June 6, 1999 and listed on the Carmel Inventory on May 25, 2005. The application meets this finding.
- 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 1, Exhibit C). The plan covers a period of 10 years from 2024-2033 and estimates the total cost of work at $1,114,000. The plan has been compiled by Christopher Barlow, Architect (and qualified professional), and includes rehabilitation and on-going maintenance including structural upgrades; building system upgrades; rehabilitation and maintenance of exterior features, materials, and finishes; and hardscape/landscape projects. All 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. The proposed plan meets this finding.
- 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: Regarding 3.(C), which necessitates that past alterations “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” staff has identified two additions of note. For different reasons, neither addition appears to disqualify the Cypress Inn for Mills Act contract eligibility.
In 1949, a two-story volume was added to the southwest corner of the hotel’s original 1929 design. This was documented in Kent Seavey’s DPR 523 form as a significant addition that contributes to the historicity of the resource. Not only does the southwest addition meet the 50-year-old age threshold, but it is significant as “the earliest known Carmel design by noted California architect, Gardner Dailey.” Therefore, as part of the established historic design of the resource, the southwest addition complies with 3.(C) (full code citation is CMC 17.32.100.B.6.c.iii.C).
In 1990, then-owners of the Cypress Inn acquired an adjacent, 4,000-square-foot lot (APN 010-147-009-000) located immediately north of the hotel (APN 010-147-008-000). In 1999, the Historic Resources Board (then called the Historic Preservation Committee) approved a proposal to redevelop the adjacent north lot to accommodate a hotel restaurant (100 plus seats) and six additional rooms for the Cypress Inn. The 1999 project plans by Mandurrago, Mandurrago, and Sullivan are titled, “Cypress Inn Addition” and by that time the hotel featured 16,917 square feet of floor area. The north addition added 5,738 square feet of floor area (resulting in a floor area increase of 34%).
While the addition is physically connected to the original hotel and is clearly perceived as an addition, the lots were not merged, and the addition remains on a separate lot of record. In addition to remaining on a separate lot of record, the north addition is not included on the City’s Historic Inventory nor the Historic Register, and it is not recorded as historic with Monterey County. If the two lots had been merged, the Council would need to consider whether the merging of the lots violates 3(C) and thereby disqualifies the hotel from a Mills Act Contract. However, that is not the case in this situation. Staff finds, for the reasons cited above, that the north addition does not disqualify the Cypress Inn under section 3(C).
If the City Council votes to enter into a Mills Act contract for the Cypress Inn, the Monterey County Assessor would calculate the tax benefit on the original Cypress Inn property (APN 010-147-008-000; the property upon which the north addition sits (APN 010-147-009-000) would be excluded.
Regarding finding 3 (A, B, and D), the planned rehabilitation and maintenance work for 2024-2032 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. Minor alterations, as defined in CMC section 17.32.150, may be approved by staff; however, major alterations, as defined in CMC section 17.32.160 would be reviewed by a qualified professional and presented to the Historic Resources Board for review. The application meets this finding.
- 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/restoration and maintenance costs of preserving the Cypress Inn by reducing the tax liability on the property thereby freeing up funds for the necessary work. The application meets this finding.
- 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, two applications were approved in 2023 (L’Auberge and Griffin), and two applications have been approved in 2024 (Lopez 5 NW, LLC and Esperanza Carmel, LLC). No new applications are being accepted at this time.
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 eighteen Mills Act Contracts. Three Contracts have completed their ten-year maintenance plans and will be issued nonrenewal notices. A fourth contract will complete their ten-year plan at the end of 2024.
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. The investment in rehabilitation/restoration and maintenance of the historic property supports local tourism, which benefits private and public interests.
5) The value of preserving a historic resource is a long-term investment that offsets a temporary loss in property tax revenue.
As previously described, this application is for APN 010-147-008-000; it does not include APN 011-147-009-000. The contract, if approved by the City Council, would apply only to APN 010-147-008-000.