Mills Act Program

What is the Mills Act Program?

The Mills Act was enacted by the State of California in 1976, granting local governments the ability to provide property tax abatements to the owners of qualified historical properties. In order for the owner to receive the property tax abatement, they must enter into an agreement with the City, committing to make capital improvements to rehabilitate, restore, preserve, or maintain their qualified historical property.

The Hayward City Council established the Hayward Mills Act Program on May 3, 2016. 

Why the Mills Act Program?

Hayward has some properties of historical significance that add to the City's character. Over the years many of these properties have fallen into less desirable states, some becoming blight on local neighborhoods. 

The goal of the Hayward Mills Act Program is to help facilitate the rehabilitation, restoration, preservation, and maintenance of local historical properties to rejuvenate neighborhoods and increase property values. The Mills Act Program facilitates these activities by allowing the City to enter into agreements with the owners of qualified properties, reducing their property tax burden, in an effort to offset capital improvement costs for approved rehabilitation, restoration, preservation, and maintenance projects to the property in accordance with Secretary of the Interior's Standards, and California Historical Building Code. 

Who is Eligible?

Qualified Historical Properties must be under private ownership, not exempt from property taxation, and must meet either of the following on or before December 31 of the year prior to the submission of an application

  • Listed in the National Register of Historic Places or located in a registered historic district;
  • Listed in any State, County, or City register of historical or architecturally significant sites, places or landmarks.

How do I Apply?

Program applications can be found below. Applications are due on or before June 15 each year. This deadline has been set to allow City (and subsequently Alameda County) staff appropriate time to process applications and submit everything to the County Assessor and County Recorder in time to meet the January 1 county lien date. 

Application Process

Each application must be submitted to the Development Services Department, Planning Division. The Director of Development Services or their designees shall initially determine the eligibility of the property for the program within sixty (60) days of receipt of a complete application. 

If the application is eligible for the program, the Director of Development Services shall prepare a recommendation to City Council to either approve or deny the application. Approval of an application requires a finding that the contract is consistent with and supportive of the General Plan goals and policies for historic preservation and the provisions of the local Mills Act Program ordinance (Hayward Municipal Code Chapter 10, Article 27).

The City Council shall conduct a noticed public hearing to review the contract and the recommendations of City Staff. The City Council has final and full discretion to approve, disapprove, or modify the terms of the proposed contract. Once approved the City will complete annual compliance checks, for the life of the contract, in order to ensure the terms of the contract are being met. 

The program application can be found at the bottom of this page. 

What does the Contract Require?

California Government Code Sections 50281 and 50282 require each contract to include the following:

  • Minimum term of ten (10) years;
  • The owner's commitment and obligation to preserve and, when necessary, restore and rehabilitate the property to conform to the rules and regulations of the Office of Historic Preservation of the State of California Department of Parks and Recreation, the United States Secretary of the Interior's Standards for Rehabilitation, and the State Historical Building Code;
  • The owner's permission for periodic examinations of the interior and exterior of the premises by state and local officials to verify contract compliance;
  • A provision binding all successors in interest of the owner to the benefits and burdens of the contract;
  • A requirement that the owner provide written notice of the contract to the Office of Historic Preservation within six months of entering into the contract;
  • Automatic renewal(s) of the contract, absent timely written notice of nonrenewal by the owner or the City as prescribed in California Government Code Section 50282;
  • A provision that the City may cancel the contract if it determines that the owner has breached any of its conditions or has allowed the property to deteriorate to the point that it no longer meets the standards applicable to a qualified historical property as defined in California Government Code Section 50286. The contract shall also state that if the City cancels the contract for either of the above reasons, the owner shall pay the county auditor a cancellation fee set forth in California Governmental Code Section 50286;
  • A provision that if, pursuant to an owner's application, the City Council determines that preservation, restoration, or rehabilitation has become infeasible due to damage of the property caused by a natural disaster or otherwise, the City may cancel the contract without the owner being required to pay the above referenced cancellation fee, to the extent that nonpayment is permitted by law. 

A draft contract can be found below.

How Much Will I Save on My Property Tax Bill?

Mills Act statute provides a formula for the property tax abatement in California Revenue and Taxation Code Section 439.  The Mills Act contract will reduce the assessed value of the qualified historical property. The reduced assessed value, known as the restricted value, will come from the statutory formula:

Restricted Value=Net Income/Capitalization Rate

Net income is the gross fair rent that can be imputed to the property based on either actual rent received or what similar properties produce, less certain approved operating expenses such as maintenance, repairs, insurance, utilities, etc. 

The capitalization rate is the sum of four components:
  • Interest Component determined by the Board of Equalization for the prior year (4.25% for 2015);
  • Historical property risk component equal to 2% (4% for single family dwellings);
  • Property tax component equal to the property tax rate times the assessment ratio (assessment ratio=assessed value/market value); 
  • Amortization component equal to the reciprocal of the remaining life of the structure, set by the County Assessor.
 
The adjusted property tax assessment is equal to the following:
Adjusted Property Tax Assessment=Restricted Value*Property Tax Rate
An example calculation can be found below. 

ADDITIONAL INFORMATION

Mills Act Program Application

Example Mills Act Contract

Example Calculation