Decline in Value Information
In 1978 California voters passed a constitutional amendment (also known as “Prop 8”) that allows a temporary reduction in assessed value when a property suffers a “decline-in value.” A decline-in-value occurs when the current market value of your property is less than what the taxable value would be under Proposition 13 as of January 1, which is the date set by law for determining the coming year assessment.
For more information on this and decline-in-value information please see:
State Board of Equalization website - Click here .
Typically a request is necessary to initiate a review of your property value by the assessor. However in 2008, and since then, a proactive review of properties has been done yearly. For the 2013/2014 tax year, the review included most single family residences and condominiums, and was expanded to most multi-family dwellings, apartments and many commercial and industrial properties.
If your property assessment was reduced or changed for this year (except for the 2% CPI increase) you should receive a “Notice of Assessment” from our office and your 2013/2014 tax bill that you’ll receive in October will be based on the assessed value indicated on the notice.
If you feel the value indicated is a fair indication of the
market value no further action is necessary.
Up until September 15, 2013 we accept "Informal Request for Review" forms for the 2013-2014 assessment year. For those who have filed forms, prior to September 15, 2013, you should receive a response from our office by October 31, 2013. If you have not received a response by then you may need to file an appeal.
We will stop accepting informal requests as of September 15, 2013. Because of the added workload we cannot guarantee we will provide a response prior to the appeals deadline – December 2, 2013. To file an appeal contact the Clerk of the Board.
An excellent source of information about appealing your assessment is on the State Board of equalization website - click here.
If you purchased your property after January 1, 2013:
If the taxable value shown on “Notice of Assessment” you receive in July is an amount other than your purchase price (if it is fair market value), an adjustment will be made on the supplemental roll when the change in ownership is processed and you’ll receive a “Notice of Supplemental Assessment”. Your regular 2013/2014 tax bill will be based on the value shown on the “Notice of Assessment” and should be paid as issued.
If the new “Base Year Value” shown on the Notice of Supplemental Assessment is less than the 2013/2014 taxable value, you will receive a supplemental refund from the San Joaquin County Treasure/Tax Collector’ Office. The supplemental refund will be pro-rated to cover the number of months during the tax year that you owned the property. It will not be necessary to file an appeal or an “Informal Decline-in-Value Review Application”; however, it does take several months from the time a deed is recorded until the Auditor’s Office is able to process supplemental refunds.
If you purchased your property before January 1, 2013:
Decline-in-value reductions are temporary reductions that are made because the market value of your property has dropped below its Proposition 13 value (factored base year value). If your assessed value has been reduced, the value of your property will be reviewed as of January 1st every year until its market value is greater than its Proposition 13 value. At that time the Proposition 13 value will be restored.
Properties adjusted due to a decline in value are not subject to the 2% annual increase limitation imposed by Proposition 13. They are reviewed and adjusted annually but will not exceed what the Prop 13 value would be.
What’s My “Assessed Value?”
You may wonder why the assessed value of your property as shown on the notice we recently sent out to you, or on your tax bill, went up more than 2 percent?
The answer is in the way property is assessed under Proposition 13. Generally speaking the assessed value of your property under Proposition 13 is established when you either buy or build your property. This is called the "base year value". This base year value can only increase by 2% each year but not more than the rate of inflation (CPI), even if the Market Value (MV) of the property increases at a significantly higher rate. In a rapidly increasing real estate market, like we experienced in the early to mid 2000's, the difference between the assessed value of your property and the actual market value can be substantial.
For example, look at the chart above. If you purchased your home in Year 1 (say for example 2006) for $200,000, the base year value is $200,000. By Year 2, the actual market value of your property had increased to $250,000 but the assessed value, limited by 2% annual increases, had only increased to $204,000. So your property tax was based on the $204,000.
As long as the market value is lower than the assessed the market value will be assessed. However, when at some time in the future the market rebounds to the point the market value is once again above the factored base year value the assessed value will be the factored base year value (Prop 13). For example in this case the market has rebounded to $300,000 in Year 7 but the factored base year value is $225,232. The assessed value would be the lower of the two, the Prop 13 value.
Last year over 100,000 properties were assessed at the market value (Prop 8), which was less than the Prop 13 value. This year the market has improved and consequently 15,167 properties are back to being assessed at the Prop 13 value. 87,042 properties are still being assessed at the market value instead of the Prop 13 value because we have determined the market value is still less than the Prop 13 value.
But you may ask, “I thought under Prop 13 increases in value are limited to a maximum of 2 percent?” That is true for your Prop 13 value. However, in the chart above, Year 7, the market value is $300,000 - an increase of 40 percent. So the year-to-year increase in the assessed value is up 7 percent – more than 2 percent. In many cases – the 87,042 – the market value of the property is still less than the Prop 13 value and many have gone up even higher – some as high as 25 percent.
In theory the annual increases are subject to increases to whatever the market value until it reaches the factored base year value (Prop 13 value). As an example if the market increases 10 percent per year, and your value has dropped 40 percent of the Prop 13 value, it will take 4 years until the market catches up to the Prop 13 value. In the meantime the taxes will be increasing 10 percent annually. Once the market value catches up to the factored base year the annual assessed value will then again be capped at 2 percent annual increases.
If you have evidence that indicates the fair market value of your property as of January 1, 2013 is lower than the new assessed value you may file a “2013/14 Informal Request for Decline in Market Value Review Application” through September 15, 2013 with the Assessor’s Office at: www.sjgov.org/assessor. If you disagree with the results of that review you can still file a formal appeal through November 30, 2013 with the independent Assessment Appeals Board: See www.sjgov.org for the application or request it at (209) 468-2350.