El Rancho Harpo was designated as a historic site by the City Council of Rancho Mirage on May 17, 2007.  There are important property tax benefits/savings for owners of properties such as this, designated as Rancho Mirage Historical Resources.

         THE MILLS ACT

• An owner of private property designated as an historic resource may be eligible for property tax benefits pursuant to the Mills Act; property taxes recalculated using the special Mills Act assessment method can be reduced 50% or more.

• The Mills Act tax savings are intended to encourage the preservation of historic resources.

• The Mills Act allows local communities to enter into a contract with the property owner to reduce the taxes on the property in exchange for the continued preservation of the property.

• The Mills Act is set forth in it's entirety at California Government Code Section 50280.
  
  
  WHO QUALIFIES
                 

• Private property owners of property designated as an historic resource by the National Register of Historic Places or by a local legislative body may qualify for the Mills Act property tax reduction.

• Rancho Mirage property owners may qualify if their property is nominated as an historic resource and designated as such by the City Council of Rancho Mirage.
  
  HOW IT WORKS
   

• The owner of an historic resource and the City of Rancho Mirage may enter into a contract by which the owner agrees to preserve and, when necessary, to restore and rehabilitate the historic structure.

• The contract is for a period of ten years and automatically renews each year, so that the owner is always ten years away from termination; either the property owner or the City may elect not to renew the contract by notice to the other at least ninety days prior to the annual renewal date.

• The property owner may petition the City for immediate cancellation, if cancelled, a 12.5% cancellation penalty is imposed; the City may cancel the contract only in the event of breach by the property owner.
  
  THE PROPERTY TAX REDUCTION
    

• The Mills Act offers property tax incentives to owners of historic structures, whether the property is income-producing or owner-occupied.

• The reduced property tax results from an assessment of the property based on its current use, rather than fair market value.

• The Mills Act directs the county assessor to reduce the assessed property value to reflect the restrictions placed on the property by the historic preservation contract.

• The specific methods used for valuing Mills Act property is set forth in California Revenue and taxation Code Sections 439-439.4.

• A hypothetical property tax calculation, using the Mills Act methodology, is set forth below:

TRADITIONAL ASSESSMENT
Current assessed value:
Current taxes:

Mills Act Reassessment
Income value of property:
Less expenses:
Net income:
Capitalization rate:




New Valuation
New Taxes:

$250,000
$     2,500


$14,400
($  2,000)  (insurance, repairs,  utilities)
$ 12,400
16%
•  conventional mortgage rate @ 8% (varies each year)
•  historical property risk component @ 2%
•  property tax rate @ 1%
•amortization rate @ 5% (varies by property)
$ 77,500 ($12,400/.16)
$       775

Total Savings:    $1,725 in reduced annual property taxes     

Please note that the home value above is based on a property much lower in value than El Rancho Harpo.  Please contact Paul Segal for the very considerable Property Tax savings on this estate.