Restoring Prop 13 Base Year Values When the Market Recovers

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Assessor

John Tuteur Assessor

 

Restoring Prop. 13 Base Year Values When the Market Recovers 

Between 1991 and 1997 as real estate prices fell during a statewide economic recession, the Assessor’s office temporarily reduced values on almost 6,000 properties as permitted by law.  Under Proposition 13 the base year value established at the time of purchase of a property must be increased by an inflation factor not to exceed 2% per year.  This adjusted value is known as the factored base year value.  There is no limit as to how rapidly the Assessor can reduce values temporarily below the factored base year value to track market conditions.  While there is also no limit as to how rapidly the Assessor can restore values in a recovering market, our policy has been to phase in the restoration over several years.  The upper limit after full restoration is always the Proposition 13 factored base year value unless there has been a change of ownership or new construction.

To understand the reduction and restoration process let’s look at a hypothetical example.  In March 1990, Sam and Dorothy purchased a home for $250,000 at the height of the market.  By 1995 their Proposition 13 factored base year value had increased to $279,275.  However, the real estate market had suffered a severe decline during that same period and as of March 1995 their home was only worth $200,000 which we enrolled as a temporary decline-in-value.  By 1998, the factored base year value had gone up to $293,800.  However, the real estate recovery was just kicking in and the market value of their home as of January 1998 had only recovered to $245,000 which we enrolled for that tax year.   By 2000, the factored base year value of their home had increased to $305,200.   The market had now fully recovered in their neighborhood and the market value as of January 2000 was now $320,000.   For 2000 we enrolled Sam and Dorothy’s factored base year value of $305,200 which was once again below the current market value. 

The housing bubble that began in 2004 finally burst in Napa County beginning in 2007.   In 2008 we reduced the value of approximately 5,700 homes by $638 million.   By January 1, 2011 we had reduced 10,225 residential, commercial, industrial and agricultural properties by $2.312 billion.  When the market eventually recovers, we will notify all owners whose properties may be increasing in value using the county website.

Should you have any questions, please contact Napa County Assessor-Recorder-County Clerk John Tuteur at 707.253.4459 or by e-mail john.tuteur@countyofnapa.org   More articles can be found at http://www.countyofnapa.org/Assessor/