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Mills Act Contracts
Owners of qualified historical properties who participate in a local Mills Act program enter into a formal agreement, generally known as a Mills Act or Historical Property Contract, with the local government for a minimum ten- year term. Contracts are automatically renewed each year and are transferred to new owners when the property is sold. Under the Mills Act or Historical Property Contract, property owners agree to restore, maintain, and protect the property in accordance with specific historic preservation standards and conditions identified in the contract. Periodic inspections by the local government officials ensure proper maintenance of the property. Local authorities may impose penalties for breach of contract or failure to protect the historic property in accordance with the contract. The Mills Act or Historical Property Contract is binding to all owners during the contract period or, in other words, the obligations
under and benefits of the contract transfer to purchasers or transferees of the qualified property.
Reassessment and Annual Reassessment
The Mills Act prescribes a specific, annual appraisal process for historical properties. Count Assessors appraise qualified historic properties as of a January 1st “lien date” and each year thereafter based upon the lower of three calculated values: (i) current market value, (ii) factored base year value (e.g., Proposition 13 valuation), and (iii) “Restricted Value.”
The Restricted Value, which is most often the lowest appraised value, utilizes the income approach to determining the “Restricted Capitalization Rate,” which is based upon four components: (i) an interest component determined annually by the state Board of Equalization, (ii) a level of risk component of 2% for rental properties or 4% for owner occupied properties, (iii) a component for property
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