Remaking History

When a fire burst through the floor of Fred Gillett’s turn-of-the-century Victorian house last year, he knew it would take more than a trip to Home Depot to repair it.

Restoring the three-story structure to its original 1887 specifications would cost $15,000, but Gillett knew that doing anything less would harm the integrity of the Old Towne Orange neighborhood where he lives.

But he might soon be getting some financial help from an unexpected place: City Hall.

The Orange City Council in the coming weeks will consider a new program that would allow Gillett and other residents in the city’s historic district--the largest in the state--to reclaim some of their own property taxes to repair and improve their aging homes.

If approved, the program could provide homeowners $1,000 to $2,000 each year to pay for rehabilitation work such as roof repairs, electrical rewiring and painting.

Such tax transfers are allowed under the state’s 1972 Mills Act, though few cities in Southern California take advantage of the legislation.

The Mills Act allows cities to make contracts with homeowners of properties listed on local, state or national registers of historic resources. Under the city’s plan, homeowners would get a substantial reduction in property taxes, around 60% in some cases, in exchange for making improvements that will preserve their homes.

Orange would join Laguna Beach, San Clemente, San Juan Capistrano and 53 other California cities and counties in making use of the law. About 400 property owners statewide participate in the program, 25 in Orange County.

“It’s gained popularity in the last five years,” said Eugene Itogawa, the Mills Act expert in the state’s Office of Historic Preservation. “It goes hand in hand with greater awareness of historic preservation. Obviously, as property prices escalate, people are interested in keeping down property taxes.”

But not everyone is enamored of the act and there are pitfalls in the program.

School districts, for example, are wary of the law because they lose some of the tax revenues that go for preservation efforts.

While cities generally get a fairly small cut of the property taxes, school districts get approximately 64 cents of every dollar. County government gets about six cents, and various state and law enforcement agencies get the remainder, according to Rich Swanson of the county assessor’s office.

He also cautioned that homeowners give up some rights to privacy under the Mills Act because the government can inspect restored homes to make sure the work residents got money for was actually completed.

“That’s one point in the contract people think real hard about,” Swanson said.

And those still benefiting from tax reductions of Proposition 13 would likely not find much advantage in the program because their tax cut would not be significant enough to fund any major repairs, he added.

Given the small number of participants, however, the county and school districts have suffered little financial hardship to date.

“It’s really been kind of a sleeper,” said Phyllis Mueller, neighborhood development coordinator in Anaheim. “It was passed over 25 years ago, and here you have in the double digits the cities that have used it.”

Anaheim is not among them.

The city may contemplate the act in the future for their 1850s-era historic district, Mueller said. But at least 10 neighbors have had property taxes reduced because they signed contracts similar to the Mills Act with the Anaheim Redevelopment Agency. They also agreed to abide by architectural guidelines issued by the U.S. Department of the Interior, a requirement of most local historic district regulations.

Other owners of some of the 1,100 historically significant structures in Anaheim’s two-square-mile historic district call frequently seeking preservation programs like the Mills Act, Mueller added.

“I really do think it’s a trend,” she said. “The pendulum for historic preservation was really high in the late 1970s to early 1980s and then interest waned until about 1995. Anaheim’s historic preservation committee didn’t form until 1997.”

At that point, volunteers poured in to conduct historic surveys, and they found that rehabilitated homes sell for about 25% more than non-historic homes, she said.

*

Tustin adopted the act in 1997 for the 186 eligible homes in the city’s historic area. Officials said they want to rehabilitate and preserve the California bungalows, Spanish colonials, craftsman and Victorian homes for the character they add to their 71-year-old city.

But so far no residents have sought tax breaks for preserving their homes, even though Tustin has had ordinances encouraging preservation and offering guidance since 1988, said Scott Reekstin, an associate planner for the city.

“It’s just a hesitancy on people’s part,” he said. “I have a feeling once we take a couple of people through the process, it will catch on. We’ve put a lot of work into it and have done a lot of research. It will be gratifying for the city to see these go through.”

For Old Towne Orange homeowners, the Mills Act program will be the crowning jewel to cap their successful four-year effort to put their mile-square district on the National Register of Historic Places. The district was added to the register last year.

“I’m having a love affair with my house,” said Joan Crawford, president of the Old Towne Preservation Assn. “No sacrifice is too great. . . . This [Mills Act] will help me and my neighbors recoup some of the money we spend on renovating our houses. Their place in history will be preserved for everyone.”