Title
PLN260022 - TELLEEN ALISON S TR (BUTTERFLY HOUSE TRUST)
Public hearing to consider a recommendation of a Historic Property (Mills Act) contract application for the property commonly referred to as the "Butterfly House".
Project Location: 26320 Scenic Road, Carmel, CA 93923
Report
RECOMMENDATION:
Staff recommends that the Historic Resources Review Board adopt a resolution (Attachment A):
1) Finding that a recommendation of denial to the Chief of Planning is not a project under CEQA as defined in Public Resources Code Section 21065 and CEQA Guidelines Section 15378(c); and
2) Recommending the Chief of Planning find the property ineligible and deny the historic property (Mills Act) contract application for the property at 26320 Scenic Road, commonly referred to as the “Butterfly House”.
PROJECT INFORMATION:
Agent: Brittney Schloss
Owners: Alison S. Telleen, trustee for The Butterfly House Trust dated July 11, 2023
APNs: 009-443-001-000 and 009-443-002-000
Plan Area: Carmel Area Land Use Plan
Flagged and Staked: No
Project Planner: Jordan Evans-Polockow, Assistant Planner x7065
SUMMARY:
The property situated on the coastal side of Scenic Road in the Carmel area and contains a one-story single-family home constructed in 1952 (known as the “Butterfly House”). The house was listed on the County of Monterey Register of Historic Resources by the Board of Supervisors on January 12, 2010, and is historic for its unique architecture and design by architect Francis “Frank” Wynkoop (Board of Supervisors Resolution No. 10-032, Attachment B). The applicants have requested a historic property (Mills Act) contract between the County and the property owner. Mills Act contracts provide preferential property tax assessments in exchange for property owner’s commitment to preserve and maintain a historic property.
In accordance with Monterey County Code (MCC) section 18.28.090.B, this application for Mills Act contract is being referred to the Historic Resources Review Board (HRRB) for a recommendation to the Director of Planning, including a request for an exception from the property valuation limit.
Most of the eligibility criteria for consideration of a historic property contract have been met in this case, except that the application requires approval of an exception to the $3 million residential value cap limitation established in MCC section 18.28.040.C. The property has a current fair market value of approximately $40 million, $37 million dollars over the value cap for residential properties.
This program is voluntary, therefore the Board of Supervisors has discretion as to whether to enter into a Mills Act contract. The value cap was established after the adoption of a Mills Act Pilot Program (MCC Chapter 18.27), where it was found that one property with a high fair market value accounted for nearly 80% of the total reduction in property tax revenue experienced by the County as a result of the pilot program, which included three properties. The current $3 million cap was applied to the Mills Act program (MCC Chapter 18.28) to address the cumulative financial impact of continuing to add properties over the value cap into the County’s Mills Act Program. It also is to address the disproportionate financial impact of the contract in comparison to the average tax savings of properties under the value cap, as well as equity considerations regarding how the majority of the program is benefiting higher value properties, who may require the financial relief afforded by the Mills Act the least.
Based on the facts of this case, staff recommends that the contract application be denied due to. Staff has reviewed the application materials, including the value cap exception justification, and finds the property ineligible for the value cap exception (i.e. the significant financial difference between the $3 million cap and the $40 million current value), based on the lack of evidence for the exception criteria that the resource is substantial risk of immediate adverse physical change.
If the HRRB proves a recommendation that the Board follows through with and approves the Mills Act contract for The Butterfly House, the total number of Mills Act contracts approved in the unincorporated County would increase from 15 to 16. Because the Mills Act program includes reductions in property taxes, approval of the contract would result in a fiscal impact to the County and other entities which receive a portion of the property taxes, which is cumulative with the other properties under existing Mills Act contracts.
DISCUSSION:
Mills Act Contract Eligibility Criteria
To be eligible for a Mills Act contract, five criteria detailed in MCC section 18.28.080.A, must be met. This application meets all the criteria, but two.
Mills Act Eligibility Criterion 1: “The property that is the subject of the application is a qualified historical property as defined by this Chapter.”
The subject property is considered a “qualified historical property”. It was found significant under the California Register of Historic Resources Criterion 2 (its association with the noted architect Francis “Frank” Wynkoop) and Criterion 3 (it embodies distinctive characteristics of the Expressionist style of architecture and represents the work of master architect Frank Wynkoop). As such, the Board of Supervisors added the property to the County’s Local Register of Historic Resources in 2010.
Mills Act Eligibility Criterion 2: “The application is consistent with the County's historic preservation goals and policies, as set forth in the County's General Plan and ordinances.”
Staff reviewed the application and found it consistent with the applicable policies of the 1982 General Plan and the requirements of MCC Chapter 18.25. The property meets the criteria for a historic resource as defined in MCC section 18.25.070, the proposed work activities appear consistent with the review criteria in MCC section 18.25.170.D, and the use utilization of the tax savings from the Mills Act contract to preserve the resource would advance 1982 General Plan Policy 52.1.5.
Mills Act Eligibility Criterion 3: “The application is consistent with the applicable Secretary of the Interior's Standards for the Treatment of Historic Properties, the rules and regulations of the Office of Historic Preservation of the California State Parks Department, and the California Historical Building Code.”
The application includes a work plan indicating how the received tax savings would be utilized for the rehabilitation and preservation of the residence (Exhibit D). The activities have been reviewed by staff and appear consistent with the Secretary of the Interior’s Standards for Preservation and Rehabilitation.
Mills Act Eligibility Criterion 4: “The fair market value of the property that is the subject of the application is equal to or less than the valuation limits set forth in Section 18.28.040.C of this Chapter, unless an exception has been granted pursuant to this Chapter.”
A uniform residential appraisal was prepared by Gerald F. Enders SPRA, SRA, of Independent Real Estate Research, Inc, State Certification No. AG005454, which concluded that the fair market value of the property is $40,000,000, which is $37,000,000 over the value cap limitation for residential properties of $3,000,000 dollars (Exhibit E). There are three criteria that would need to be met in order to grant the value cap exception. After consideration, staff believes that the project does not meet all the value cap exception criteria. The value cap exception criteria are discussed in the next section of this report.
Mills Act Eligibility Criterion 5: “The application is consistent with the requirements of this Chapter.”
Excluding the valuation limit, the application is consistent with the requirements of the MCC Chapter 18.28, the Mills Act Program, and the eligibility criteria for a contract as detailed above.
Value Cap Exception Criteria
In consideration of the requested contract, the Board must grant an exception to the $3 million fair market assessed value limitation in order to approve the contract. As required by MCC section 18.28.080.B, there are several factors to consider in granting the exception. These factors are described in detail below.
Value Cap Exception Criterion 1: “The site, building, object, or structure is a particularly important resource such as the last or only example of its kind, and it represents an exceptional example of an architectural style, the work of a master, or is associated with the lives of significant persons or events important to history; and”
The inclusion of the first phrase is important for this criterion. It isn’t sufficient that a resource be an exceptional example of an architectural style, the work of a master, or is associated with the lives of significant persons or events important to history. It must be especially important. A clear example is something that would be eligible on the National Register of Historic Places at the state or national level of significance, rather than just local/regional.
The residence is historically significant, as evidenced by its listing on the local register and historic report prepared by Meg Clovis (Exhibit C). However, there are other residences designed by this master architect that are examples of this style.
Value Cap Exception Criterion 2: “The historical property contract will result in the preservation of a site, building, object, or structure whose significance as a historical resource would otherwise be at immediate risk of substantial adverse change. A substantial adverse change in the significance of the historical resource means the physical demolition, destruction, relocation, or alteration of the resource or its immediate surroundings such that the significance of the resource would be materially impaired; and”
In this case, the applicants have submitted a second value cap exception justification letter from Haro, Kasunich and Associates, Inc (Exhibit E) prepared by residential inspector Megan Walls, P.E., to discuss the harsh coastal conditions subjected to the property due to the proximity of a coastal bluff, drawing emphasis to the 10-year work plan that their firm drafted for the property and this application. While the improvements identified in the work plan would address long-term maintenance issues, it doesn’t appear that the residence is in immediate danger without the relief afforded by the Mills Act.
Value Cap Exception Criteria 3: “The exception is warranted due to one or more of the following additional factors: a. The resource is highly visible to the public; b. The difference between the current property tax obligation for the property and the estimated property tax obligation under the Mills Act is within the same range as the expected estimated lost property taxes from historic property contracts for properties meeting the valuation limit; c. The work program proposes to provide for critical improvements immediately necessary to preserve the resource, and it provides for the best and most efficient use of the expected property tax savings; or d. Approval of the contract would generate heritage tourism, affordable housing, or similar public benefits.”
This criterion boils down to, are there significant public policy benefits for allowing the contract over our own value cap limitation requirements? Staff finds there are some public policy benefits for including the property, such as supporting architectural heritage tourism due to the site’s visibility to the public (MCC section 18.28.080.B.3.a.) and its exceptional nature (MCC section 18.28.080.B.3.d). However, these reasons do not appear to sufficiently warrant granting the exception based on the application’s financial and equity impacts.
Nevertheless, as the number of properties in the program increases, the overall financial impact of the program on services that rely on property tax funding increases. The value cap exception process was established to address such financial considerations. It was intended to limit the overall cost of the program, focus benefits of the program on those properties that may require financial relief the most, and allow a pressure release valve for those properties that are of truly extraordinary significance and are presently at risk of being lost, where the public policy benefits of granting the contract outweigh its financial impacts. Based on this, it does not appear that the application meets this broader policy intent.
CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA):
A recommendation of denial to the Chief of Planning is not a project under CEQA as defined in Public Resources Code Section 21065 and CEQA Guidelines Section 15378(c). The HRRB’s recommendation would not be the final action and therefore would not have a reasonably foreseeable, either direct or indirect, physical change in the environment.
OTHER AGENCY INVOLVEMENT:
County Counsel reviews Historic Property Contracts as to form. No other agencies were involved in the review of this project.
FINANCING:
Funding for staff time associated with processing this application is included in the FY 2025-26 Adopted Budgets for HCD. A fee was collected to partially recuperate the cost of staff time associated with processing the application. Denial of the Historic Property Contract would have no financial impact to the County. Approval of the Contract would result in unrealized annual property tax revenue of approximately $289,579.83 annually. The 10-year rehabilitation and maintenance has a total estimate of $6,127,600 in activities over the initial 10-year contract term.
Based on the property’s 2025 - 2026 tax bill, the Proposition 13 assessed value of the property is $29,000,000. The total tax obligation for that year was $302,394. The estimated property taxes based on the Mills Act tax savings worksheet are $12,815, resulting in an approximate tax savings (or loss of revenue) of $289,579.83. As the Mills Act contracts have a minimum contract period of 10 years this would be unrealized revenue of $2,895,798.30 over the initial contract term. Approximately 15 percent of property taxes are distributed to the County, so this would result in unrealized revenue of $434,369.75 dollars annually for this contract. The remaining taxes are distributed as follows: 61 percent for schools, 10 percent for special districts, 8 percent for redevelopment successor agencies, and 6 percent for cities.
Prepared by: Jordan Evans-Polockow, Assistant Planner x7065
Reviewed and Approved by: Anna Ginette Quenga, AICP, Senior Planner
Attachments:
Exhibit A - Draft Denial Resolution
Exhibit B, Attachment 1 - Board of Supervisors Report No. 10-032
Exhibit B, Attachment 2 - Board of Supervisors Resolution No. 10-032
Exhibit C - Combined Phase I and Phase II Historic Report
Exhibit D - 10-Year Work Plan
Exhibit E - Appraisal Report
Exhibit F - Value Cap Exception Justification Letter
Exhibit G - Site Photos
Exhibit H - Public Comment
cc: Jordan Evans-Polockow, Assistant Planner; Anna Ginette Quenga, AICP, Senior Planner; Melanie Beretti, AICP, Chief of Planning; The Butterfly House Trust, owner/applicant; Brittney Schloss, Agent; The Open Monterey Project (Molly Erickson); LandWatch; Lozeau Drury LLP; Project File PLN260081.