has neither approved the guidelines or adopted criteria of your own on how to move forward on the mill zach historically contracts. the board has full discretion to determine whether it is in the public interest to interinto these contracts. he may approve it, disapprove it and make whatever changes you wish. i would also note that this committee and board has previously -- there are four existing mill zach contracts that has been apreviously approved. . this board has rejected some, approved some, amended some. because of the discretion, we indicate this is clearly a

policy decision for this board to make. supervisor avalos: thank you. supervisor mirkarimi? supervisor mirkarimi: thank you, chair avalos. first i want to thank supervisor supervisor alioto-pier:. i think this is warranted and merited. i have sponsored one of the four properties that are identified here that have been contracted over the last several years. when other properties have come before us, i have asked questions about the merit regarding the designation and regarding the tax ducks. can you walk me through a bit at how we arrived at a 75% reduction? >> that is not our determination. this is done by the assessor's office. i will indicate that this property did go through a couple of iterations. it has been in the pipeline for a while.

the planning department or the assessor may be a little more qualified to walk you through that aspect of it. however, i do know that it was purchased as a single family home. however, my understanding -- and that was the way the assessor did the previous determination. it has now been corrected because planning has indicated actually on their roles as a three-unit building. although it is being used as a single family home, it has now been corrected. supervisor avalos: i thought i read in the report that it was purchased as a three-unit structure, a bed and breakfast, was a single family home, and converted back to a three-unit building? >> i will defer to the planning department because of the way it is on their roles and the way it was presented by the previous owner and the current

owner, there were some discrepancies there. >> thank you. tara sullivan. as the budget analyst office did indicate, there was some cushion as to what the legal use of this property was. i believe it is correct that when the current owners did purchase this property, at some point either on the assessor's role or real estate, i don't know where it was, but they were under the impression it was a single family house. however, in the planning department and the building keep's database -- we are the departments that authorize uses for uses -- it is a three-unit apartment building. it was broken up probably in the 1920's or 1930's if not later into three units. after the h.p.c. recommended approval to this board, it did come to our attention that this occurred, that there were some illegal activities occurring in

the building, that they were running a bed and breakfast. there were provisions in the code that would allow them to do that. the property owners chotion to close that business. one of the reasons we delayed in bringing it home is we wanted verification that they were not running that anymore without the permits. the property owners did submit supervised plans -- revised plans to the department. i personally reviewed them with the new zoning administrator, and it is a three-unit house. it's a three-unit apartment building. there may or may not be three individual tenants living in there, but we do not get involved in that. it is legally that three-unit building. supervisor mirkarimi: and to that earned, can it be changed from a three-unit building, and what if the property has been sold?

does the designation in this particular case continue to affiliate with the new property owner? >> they can. we recommended or said one of their options if they wanted it to become a single family building again, they can apply for a dwelling merger. like i mentioned, the property owners decided to retain it as a three-unit building. as for the contract being transferred owner by owner, it does run with the land. so the contract and all of its restrictions as well as benefits will go for each successive owner of the property. over, if a subsequent owner did decide to do a dwelling unit merger, i can't say for sure, but i think we would re-evaluate and redo the numbers based on the property use at the time.

supervisor mirkarimi: this question may be more pertinent from the assessor's office. are they here? >> the gentleman is on vacation. i just got a text from him. unfortunately, he is not here. the reason that the evaluation did change from the initial data until now is it was valued as a multi-unit building whereas initially it was valued as a single family property. the way the state tax code is set up, and i am not an expert on this, they require rental comparisons, and they do rental comparisons for single family and commercial property, and there is a formula that allows them to re-evaluate. supervisor mirkarimi: but you said earlier that they are not utilizing three units? >> but the building is legally a three-unit building.

it is on the books. it is a legal three-unit building. whether or not it is used and they are only using one of the units, we can't force the property owner. they own the entire property. it is not a t.i.c. or condo. otherwise, all of the owners would be involved. this is a single owner who happens to own a multi-unit building, and they are using one of the units. we have checked. there are doors to separate apartments that are on file in the building. so we were able to relegalize this or re-authorize this as a three-unit building. supervisor mirkarimi: i might return back with another question. thank you. supervisor avalos: supervisors elsbernd? supervisor elsbernd: thank you. a few questions on this. i don't know where this one goes first. the impetus for this is the

initial work we heard about from structural and such that need to be done, but this is frankly a contract in perpetuity. so after that work gets paid off, the tax break continues, and i assume the idea is a house of this nature takes a lot of maintenance. in the contract, is the city able to impose maintenance standards? >> that is integral. it is part of the whole package. as a part of the approval you are actually approving an ongoing maintenance plan. it is in your packets, and it is ongoing, and they have priced it out in addition to the structural. yalsyals ask d.b.i. go out and inspect every now and then?

what is being done? >> the supervising department is the lead department. if they are not adhering to the contract, we can terminate the contract. supervisor elsbernd: and you are allowed into the home? >> absolutely. it is not just a drive-by. we will meet with the property owner, we will have the rehabilitation contract, and we will be looking to see that the building is being upkept. it is a contract between the city and the property owner. there are two ends. >> supervisor elsbernd, ills also note that the ongoing maintenance is estimated to be $22,667 annually. as we previously noted, the tax reduction would be $31,617 annually. supervisor elsbernd: so in other words, there is a little extra that is going there.

$9,000 a year, but over the course -- one more. i am not the best when it comes to appreciation of architecture. that said, it is an absolutely beautiful building. i have driven by it many times growing up in san francisco. i knew exactly where it was. that said, san francisco has a lot of beautiful homes very similar to this, and what i need to hear a little bit more is what is going to differentiate this one from the -- even if it is just 50 other homes. if you do the masters, 50 times $35,000 a year, and we are in trouble. what is the uniqueness of this

place? >> the contract is designed as a preservation incentive program. the only way that a property can qualify to even enter into this is if they are a designated landmark either locally, at the state level or the national level. there may be other buildings in the city that are architect really similar to this. however, they are not landmarks. they have not applied to partake in the program. this particular house at 1818 is landmark number 55. it is a very low landmark number, indicating it was probably designated in the 1970's. it is a very significant building to the city and county of san francisco. the board of supervisors at the time felt that way. that really is my short answer as to why this building over any other building. it has long qualified, and the city has long held this building to be of significance to the city. that is why this building is

eligible under the add minute code, and that is where they have applied and the money can go ideally into the building. supervisor avalos: supervisor mirkarimi? supervisor mirkarimi: thank you. to the three of questions that have been asked, i don't think anybody at all is question a, the validity of the landmark and should this not be under the contract. it is just a question of the formula with regard to the property tax reduction and how that is justified so it doesn't seem so arbitrary. i don't think it is based on the cost of repairs and maintenance. but when we look at the other four properties, the highest property comes up to a 61% property tax reduction, and the lowest a 25% property tax reduction. so this problem would far exceed in the rankings so far

that has been on roster of who would earn a significant reduction. we just want to make sure that there is something even-handedly applied in this early stage of us contracting important residences and buildings like this. >> supervisor, without the assessor's office here, all i can offer is that the evaluations and tax duckses are very strictly mandated in the state codes. so there is no arbitraryness necessarily in how this is calculated. if you are looking at the other contracts and what is the difference of percentages of taxes back, so to speak, is that most of the properties were valued as residential properties with the exception of the one that is in your district, 1080 h.a.y.t.e.

street, this was valued as a bed and breakfast. there one was that was more commercial than residential, and it had mixed value in calculation, which is why it has a higher level of evaluation and tax back. supervisor mirkarimi: wouldn't a better baseline be just to say, at least for the cost of the maintenance and the care taking that had been assigned -- i don't think it is a significant difference between that and what is being asked for, that at least being more apples to apples. >> that is a policy call this board has to make. we are here just to present the information. supervisor mirkarimi: thank you. supervisor avalos: why don't we go into public comment? any member of the public who would like to comment on this

item? >> walter paulson. california history street. california history here you come. time to go and fix it some. and now you're gonna fix up the oroville pratt house, and it's going to look great now. as you know, i can hardly wait. fix it, open up that house gate. and you're gonna make it great. fix up the california pratt orville house now. >> thank you.

supervisor avalos: thank you very much. please come forward. >> we are the owners of 1818 california. i wanted to thanks you for considering this. thank you to supervisorality's office -- alioto-pier's office for bringing this far. the monthly maintenance is not the situation. it is the $250,000-plus that we would have to get a loan for. we thought we couldoff set that with the property tax, and it would make sense for us financally. i don't know the our applicants, if they did retrofitting or had to come up with so much money other than the monthly maintenance. but it is significant for us or anyone, a quarter of a million dollars-plus, not to mention

that the tremendous appeal that the home that is to the public. every week we get at least five people knocking on the down, wanting to take pictures of the home, giving us gifts and plants to plant in the yard from their yard. it was just overwhelming to us. we really never expected that at all. i spoke with mr. lilienthal this morning, and he is in support of this to maintain the heritage. the main thing is so that we can maintain the structure of the property in the future, and by this contract, we would be able to do that. without it, we will not. thank you for your consideration. supervisor avalos: thank you very much. any other member of the public who would like to comment?

seeing none come forward, we'll close public comment. colleagues, this item is before us. supervisor mirkarimi: first of all, thank you again, supervisor alioto-pier and to the property owners. i agree that this is an important landmark for the city and county of san francisco, and we thank those who want to continue to spotlight this property for all. in the same vein we had structured mill zach before, and i think the city is still new at this since there have been only four properties. i propose we modify the property tax reduction so that

it is -- and i am open to suggestions from colleagues -- the equivalent of the maintenance and care taking that we have more absolute figures on. i know that in other properties that had come before us, there were loans that were required to make those particular retrofits. i am certainly open to the idea of cushioning, if there are funds required that go beyond the maintenance and caretaking that are not captured in that. it would be helpful to have the assessor, but since we don't, maybe the budget analysis or controller can help us with what that looks like? >> supervisors, through the chair, my understanding is that there is this estimated one-time cost of $253,000 to do

the seismic retrofit to the foundation and then the ongoing estimated annual cost of $22,667 in perpetuity and for the life of the contract. we would have to go back and work with the assessor's office to actually calculate out -- my understanding is what you are trying to say is to try to make the tax break equal to what the cost of the maintenance and repairs are? is that correct? supervisor mirkarimi: that was the original thought point, but i am trying to be sensitive -- >> i cannot do that right at this moment. if it was continued, we could come back. we would work with the assessor's office to come back and say what that number would be, but i can't do that right now. supervisor mirkarimi: all right.

why don't we just make it easiest based on the number that is before us, and make it strictly beyond the $250,000, not that, and just the $22,000 and whatever the figure is from here on? so relative to the property tax reduction of future caretaking and maintenance. supervisor avalos: to me, that seems best. it seems to coincide with the contract and also with the nature of this building as well. the historic preservation commission has recommended this, but also, this is a landmark, number 55. i think that is a special consideration that separates it from other buildings that are similar in san francisco. i do believe that -- and i

think superelsbernd has talked to the city attorney about it, that we have to have some clear standards and how to apply the contract going 230rd. but in my mind, this building is an exception, and the structural work that needs to get done and with the ongoing maintenance costs, we can approve such a reduction. >> if i may ask a clarify question, when we work with the assessor's office, are you approve can't a $23,000 annual cap -- approving a $23,000 annual cap? i am not sure. >> may i jump in for a moment? now it is my understanding that the gap of $22,000 a year

versus the $31,000, that is the money that would pay for the seismic retrofit. that would pay for the $250,000 . supervisor elsbernd: so you are getting a loan, and you are going to have to pay off $9,000 a year to pay off the loan, is that correct? >> it won't take 35 years to pay off the loan. supervisor avalos: supervisor elsbernd, this is why i had mentioned earlier --

supervisor mirkarimi: about either the twenty-two and change, or do we allot for potentially that initial infusion because of the payoff of the retrofit loan. i am trying to be open-minded about it, but i still think the $22,667 is the more finite number, but if we want to address what supervisor alioto-pier is saying to help cushion the 35-year payoff on this other loan, i would like to hear more from my colleagues. supervisor avalos: i feel more comfortable just approving not the entire $31,000, but the $22,000 range to cover the ongoing minutes costs. i do believe that the contact being enacted here is providing a large benefit that i am willing to approve. but such a reduction, knowing that every property owner has

to make maintenance on their buildings, it seems like it is part and parcel when it demeans their other than property. i am willing to go to $22,000, but we can see where we all stand as a committee on that. ideals elsbernd just curious. the $22,000 figure, when we see that is for maintenance of the property, is that for -- maybe this is a question for you, tara. is that the delta between what the maintenance of a regular home is and an arc direct really significant home, or is that something else? >> i believe it is a bit of boast. historical buildings have a higher cost of upkeep. obviously they have to go through the historic

preservation commission to get any of their permits, which is an added permitting and application cost. they have a higher standard in terms of replacement of materials. woodall, windows, all the detailing has to be replaced in kind. that usually requires hiring a special craftsman to replace anything. the maintenance plan talks about dealing with the woodall sheathing, mill work and ornaments, and inexpecting them and replacing them as necessary, dealing with the sheet metal, the roof. the roof was recently replaced, but they will continue to inspect that. the interior, this is also meant to help the interiors of the property, to help upgrade the electrical, plumbing and all of that. that is all part of their maintenance. supervisor elsbernd: all right. and do we know when -- when was the property purchased? >> i will let the property

owner speak to that. >> i am sam nakamura. the property was purchased in 2004. supervisor elsbernd: i'm sorry if this comes across wrong, but we are talking about a significant gift of taxpayer dollars. when you purchased the property, was the substructure issue disclosed to you? >> no. supervisor elsbernd: when you did your own inspection before you entered into the sale of the property, did you not discover that? >> no, because we didn't realize that the mortar was -- because a lot of it is behind interior walls. supervisor elsbernd: and when you purchased the property, you were aware it was a landmark? >> yes. elsbernd yems and i assume you were a wear of the costs associated with maintaining a landmark piece of property? >> yes.

supervisor elsbernd: ok, thank you. >> but the seismic retrofit is something that we had not considered. supervisor elsbernd: i understand that part. i'm fine with the chair's recommendation that the reduction down to the maintenance level, which was $22,000 -- supervisor avalos: $22,617. supervisor elsbernd: if we need to make a motion pertaining to that amendment. supervisor mirkarimi: i made that motion. supervisor avalos: that motion is there. and we can takes it without objection. >> cloo i clarify that that -- could i clarify that that number is the amount of the reduction or the amount of the contract? supervisor avalos: the actual property tax.

>> because the way it is worded now is the amount of the contract is the $10,6 2. 692. you are changing the savings, the reduction >> you are changing the amount of the actual contract? supervisor elsbernd: i think you understand what we are trying to do. rather than seefing the $31,benefit. supervisor mirkarimi: the $22,000. supervisor elsbernd: we will let you figure out what needs to be done on that end, but that is the motion. supervisor mirkarimi: $22,based on your record. supervisor avalos: moved forward to the full