THE PROP 8 (DECLINE IN MARKET VALUE)
REVIEW PROCESS
Proposition 8, passed in November 1978, amended Proposition 13 to reflect declines in value. As a result, Revenue & Taxation Code Section 51 requires the Assessor to annually enroll either a property’s Proposition 13 base year value factored for inflation, or its Market Value as of January 1(taking into account any factors causing a decline in value), whichever is less.
Prop 8 reductions in value are TEMPORARY reductions which recognize the fact that the current market value of a property has fallen below its current (Prop 13) assessed value. Once a Prop 8 value has been enrolled, a property’s value must be reviewed each following January 1, to determine whether its then current market value is less than its Prop 13 factored value. When and if the market value of the Prop 8 property increases above its Prop 13 factored value, the Assessor will once again enroll its Prop 13 factored value. Prop 8 values can change from year to year as the market fluctuates up and down, but in no case may a value higher than a property’s Prop 13 factored value be enrolled.
For any given Roll Year, Prop 8 assessments may be adjusted by the Assessor
no later than one year after the roll is published (normally July 1). Prop 8
assessments may also be appealed to the Assessment Appeals Board during the
normal appeal periods (July 2 through November 30). Prop 8 assessment requests
for reductions regarding the current roll which are denied after the normal
assessment appeal period has expired cannot be appealed to the
The Process is as follows:
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1) Property owner provides
Assessor with facts they feel justify a reduction in value and requests a
review of the property’s value (or, the Assessor discovers the problem
independently*). |
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2) Appraisal staff reviews
market data as of January 1, estimates the property’s market value as of that
date and then compares this market value to the property’s current Prop 13
factored base year value. ←→ |
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If current market value is below factored Prop 13 value, then: |
If market value is higher than factored Prop 13 value, then: |
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↓↓ |
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Assessed value is lowered to market value for next fiscal year |
No change in assessed value is made, and |
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↓↓ |
↓↓ |
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Owner is notified of reduced value by July 1 |
Owner is notified that value will not be reduced (not later than July 1), and |
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↓↓ |
↓↓ |
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New tax bill is based on lower value for next fiscal year, and |
If owner still feels value should be reduced, then owner
may file an appeal with the |
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The following January 1, Assessor repeats process and enrolls current market value at that time or Prop 13 factored value, whichever is lower value |
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*The Assessor may also initiate the Prop 8 process without a request from an owner. The office constantly monitors market conditions and, when practical, lowers assessed values. Owners are notified and may file an assessment appeal if they feel the value was not lowered sufficiently.
It is important to understand that Prop 8 reductions are not permanent and may decrease or increase more than 2% from year to year. Also, Prop 13 base year values suspended by Prop 8 values continue to increase by an annual inflation factor of no more than 2% per year.
Although the values of many properties may suffer a significant decline during a recession, not all may qualify for a Prop 8 reduction. The current market value must fall below the factored base year value (assessed value), before the Assessor can recognize the decline. For example a property purchased in 1980 for $25,000 may have risen to a value of $250,000 by 2000. The fact that by 2003, it has declined in value to $200,000 will not trigger a Prop 8 reduction because its factored base year value ($25,000 plus 2% per year inflation) is still far below its current $200,000 value.
Examples of Assessments Involving Properties Declining in Value:
Example 1
Home purchased January, 1998, for $120,000 and assessed with $120,000 base year value.
On
Action: Assessor reduces assessed value to $100,000 for 1999-00 assessment roll.
↓↓
On January 1, 2000, the home’s value continues to decline and is now $90,000, while its factored base year value has risen to $124,848 ($120,000 + 2% inflation compounded for 2 years).
Action: Assessor reduces assessed value to $90,000 for 2000-01 assessment roll.
↓↓
On January 1, 2001, the home’s market value increases to $110,000 while factored base year value rises to $127,344 ($120,000 + 2% inflation compounded for 3 years).
Action: Assessor raises assessed value to $110,000 for 2001-02 assessment roll.
↓↓
On January 1, 2002, the home’s market value increases to $150,000 while factored base year value rises to $129,891 ($120,000 + 2% inflation compounded for 4 years).
Action: Assessor reinstates factored base year value of $129,891 for the 2002-03 assessment roll.
Example 2
Home purchased 1975 for $30,000.
In 2002, the market value of the home had risen to $200,000 but by January 1,
2003, its value had declined to $150,000.
Home’s 2003-04 factored base year value is $50,781 ($30,000 + 2% inflation compounded 28 yrs)
Action: Assessor enrolls $50,781 for 2003-04 assessment roll.
No Prop 8 reduction granted even though property has lost $50,000 in value over
the last year.
Factored base year value is still less than market value.
If you have other questions about
the Prop 8 process, you may direct them to the Assessor’s Real Property
Division at (760) 482-4244, between