The following is a brief overview of the Mills Act Contract including eligibility, Historic Structure Requirements (HSR), Rehabilitation and Maintenance Plans, and the timeline.
The Mills Act
The Mills Act Contract is an agreement between the City and County of San Francisco and the owner of a qualified property based on California Government Code, Article 12, Sections 50280-50290 (Mills Act). The Mills Act contract is for a minimum term of ten years. It automatically renews each year on its anniversary date and a new ten-year term becomes effective. The Contract runs (essentially in perpetuity) with the land. For more details on the Terms of the Contract, see the Application Guide.
This state law, established in 1976, provides for a property tax reduction for owners of qualifying historic properties who agree to comply with certain preservation restrictions and use the property tax savings to help offset the costs to restore, rehabilitate, and maintain their historic resource according to the Secretary of the Interior’s Standards and the California Historical Building Code.
The Mills Act allows historic property owners to restore their historic buildings; obligate future owners to the maintenance and care of the property; and may provide significant property tax savings to the property owner, particularly to smaller, single-family homeowners.
The San Francisco Board of Supervisors approves all final contracts. Once executed, the contract is recorded on the property and leads to reassessment of the property the following year.
To be eligible for the Mills Act, property owners must meet the following criteria:
- A qualified historic property must either be listed individually or as a contributory building on the National Register or California Register, or those properties that are listed under Article 10 or Article 11 of the San Francisco Planning Code.
- For residential buildings, eligibility is limited to a property tax assessment valuation of less than $3,000,000. For commercial, industrial or mixed-use buildings, eligibility is limited to a property tax assessment valuation of less than $5,000,000.
To be exempt from the property tax assessment valuation requirements, a qualified historic preservation consultant must prepare an Historic Structures Requirement (HSR) or a Conditions Assessment that demonstrates the following:
- the building is an exceptional example of architectural style
- it is in danger of deterioration or demolition without rehabilitation.
The HSR should include, at a minimum, historical background and context, physical description, alterations, evaluation of significance, a list of character defining features, conditions assessment, treatment recommendations, overview and detailed photographs, and a bibliography. Preservation Brief 43: The Preparation and Use of Historic Structure Reports should serve as a guide to writing the HSR.
Rehabilitation & Maintenance Plans
The Mills Act Contract requires Rehabilitation and Maintenance plans for the property. The Rehabilitation Plan includes the scopes-of -work that have been recently completed (one to two years prior to application), and scopes-of-work that need to be performed, including the year they will be performed. The Maintenance Plan includes on-going cyclical inspection and maintenance needs. A licensed contractor must provide a cost estimate for each scope of work, but that contractor does not have to perform the work. Work is generally limited to the exterior of the building, including seismic work; interior scopes of work including mechanical, electrical, and plumbing, should not be included in the application.
The property owner is required to submit a signed and notarized Affidavit to the City on an annual basis documenting the completed scopes-of-work in the rehabilitation and maintenance plans. Failure to complete timely scopes-of-work will result in cancellation of the contract, and the property owner must pay a cancellation fee of 12.5% of the fair market value of the property at the time of cancellation.
The application must be submitted to the Planning Department by May 1st.* However, if the property requires an HSR, the Department would be willing to accept the Mills Act Application, 90% complete HSR and application fees on May 1st. A final Mills Act application and HSR is due to the Department on May 30th. The Department will not transmit the Application to the Assessor-Recorder unless it is complete. If the application and HSR are submitted to the Assessor-Recorder after June 1st, it may not be processed according to the established timeline.
It takes approximately three months for the application to be reviewed by the Historic Preservation Commission, the Budget & Legislative Committee and the Board of Supervisors. The Mills Act Contract must be recorded by the Assessor-Recorder by December 30th for the property owner to see the tax savings the following October. Please refer to the timeline in the Application Guide for Mills Act Historical Property Contract for more information on the Mills Act process and important deadlines.
Please see section “4. Preservation Applications” item “e. California Mills Act Historical Properties Contract” on our Fee Schedule for more details.