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Scrutinize Mills Act tax breaks

The way SLO city grants historic designation to properties amounts to an entitlement program for the wealthy at public expense.



The grand old houses on the 1300 block of San Luis Obispo’s Mill Street look great. In fact, they’ve looked great for as long as I can remember, which is 40 years. I must be oblivious to subtle signs of blight, however, because abruptly, starting in 2005, the city decided it needed to “preserve” these houses by giving their owners property tax breaks.

Today, six houses on Mill Street are among 42 “historic” SLO properties whose owners get up to 60 percent knocked off their taxes. That can mean a lot of tax relief. For someone who just bought a million-dollar house, taxes could drop from $12,500 to $5,000, which is about what taxes would be on a $400,000 condo. That’s money a cash-starved city, county and school district don’t get.

These tax gifts result from the city’s administration of the Mills Act, a state law intended to promote historic preservation. Tax breaks could be used to persuade owners of valuable real estate to keep smaller historic buildings instead of tearing them down to build something more profitable, and if so used could forestall the unpopular history-destroying high-rising of the downtown. In San Luis Obispo, however, instead of being a planning tool, the Mills Act operates as an entitlement program for people who know to ask for it, most of whom are in an economic bracket where they don’t need tax subsidy from the rest of us. City acknowledgement of this includes the $3,541 application fee just to request a tax break.

The results of running the program this way may raise an eyebrow or two. The acting chair of the Cultural Heritage Committee, which recommends individual tax breaks to the City Council, has one. A former member has three. Tax breaks have gone to former estate-like historic properties after developers chopped them up, squeezed out profits, and destroyed whatever historic character they once had (for example, the Judge’s House, on Johnson at San Luis Drive, a once grand place now wearing a tight necklace of banal condos). Some tax-subsidized houses are income-producing rentals; others are second homes occupied intermittently by out-of-town owners. Few are the sorts of places most city residents could afford to own, for the city’s designation of “historic” favors the grand, picturesque, and sentimental over the significant, humble, or vernacular.

Amazingly, the city’s definition of “historic” is so elastic it embraces new buildings, even buildings still under construction. Case in point: 375 Chorro, recipient of the city’s most recent Mills Act subsidy, whose owners tore down an actual historic house, and are building a new house. Not a replica: It’s just a fancy new custom house with a big tax break from the city for “historic preservation.”

Mills Act tax subsidy is supposed to terminate upon demolition of the historic property. At 375 Chorro, the city seems to have approved a subsidy knowing the house would be torn down, rationalizing this with mumbo jumbo about preserving “historic” windows and siding and putting up a historic marker commemorating what was destroyed. Also curious: the old house was not deemed “historic” until the Mills Act application came in, then was found both “historic” and eligible for tax subsidy.

You don’t have to do much to “preserve” your “historic” SLO property in return for a tax subsidy. Just promise to paint it from time to time, pull the weeds—the sorts of things any decent homeowner does. Then the tax break hums on forever, propelled by an annually self-renewing 10-year contract. You can get out of it, by giving 10 years’ notice, but why would you want to?

The city claims tax subsidies further the city’s goal of encouraging historic preservation. That brings us back to Mill Street. These houses were handsomely maintained for decades. What “preservation” goal is accomplished by the city’s subsidizing what’s already going on? Or, to frame the matter more crassly, what preservation problem was the city trying to correct by throwing money at it?

There’s little nexus between the city’s preservation goal and what it’s actually doing with tax subsidies. Look around town at all the historic buildings needing help. The people getting tax subsidies clearly aren’t those who need help preserving their historic buildings.

Personally, I support historic preservation, and have a long record to prove it. But I’m disgusted by the city’s perverse implementation of the Mills Act. This is our money they’re giving away, but where is its public benefit? This maladministration of the Mills Act undermines the  public trust and good will, which support such programs. Is it worth continuing it?

Richard Schmidt of San Luis Obispo is an architect and teacher, and was a city planning commissioner for eight years. Send comments via the editor at econnolly@newtimesslo.com.

-- Richard Schmidt - San Luis Obispo

-- Richard Schmidt - San Luis Obispo

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