Does the Marriott Corporation need a $5 million tax break?

Peskin pushes to end historic-preservation benefit for a giant corporation that is doing nothing new to protect its building on Market Street.

California tax law is weird, and Prop. 13 makes it weirder. And for commercial property owners, there are all sorts of loopholes.

Then there’s the Mills Act.

By many accounts, the Mills Act is a good law: It allows individuals and corporations that buy historic properties a tax break if they improve and maintain the historic nature of the place. The Mills Act gives owners an incentive to preserve historic property, which can be an expensive proposition.

The historic Chronicle Building is now a Marriott -Ritz Carlton Residences, and Sup. Peskin says they don’t need at tax break any more. Google Earth photo.

In San Francisco, the Assessor’s Office has never been a big fan, since it gives owners a tax break. And since it was passed in 1972, it wasn’t used much in this town.

But when Aaron Peskin, who has always been an historic preservationist, was first elected supervisor, he started looking for ways to use the law to protect landmarks. He was the first to push for Mills Act designations.

And now he’s the first to push to undo one of those – at the old Chronicle Building at 690 Market Street.

No doubt it’s a historic structure. From the city’s 2009 Mills Act contract:

The building includes … a nine-story plus mezzanine office towner designed by Burhan & Root and constructed in 1889 … reconstructed in 1907 by Willis Polk.

Sometime in the 1950s, Peskin told me, the owners covered the building with some sort of aluminum siding that obscured the original details. When a company called RC Chronicle Building LC bought it in 2004, they agreed to get rid of the siding, restore the place to its previous look – and by the way, in 2007, added a whole bunch of high-end residential condos to the top.

RC Chronicle Building LC is registered in Delaware as a foreign company. It takes a little work to figure out that the RC stands for Ritz Carlton, and that the entire operation is now owned by the Marriott Corporation. Which isn’t hurting for money.

The Mills Act allows owners to claim tax breaks for ten years – and it automatically renews year after year if nobody does anything. In the case of 690 Market, the owners are saving $525,000 a year – that’s $5.2 million over ten years – by presumably protecting an historic structure.

But once they fixed it up, about a decade ago, they haven’t done much of anything, Peskin told me. “Good for them for restoring the place,” he said. “But at this point, they clearly don’t need a tax break forever.”

So the Government Audit and Oversight Committee will hear a proposal Thursday/18 to end the Mills Act designation for the Chronicle Building. Peskin told me he is going back over all of the existing Mills Act breaks to see if the owners are currently doing anything to improve or protect the property – and if not, it time for the tax breaks to end.