JOHN TUTEUR | Property Owner Tips
Good news/worse news about declines in value
Sunday, March 9, 2003
Proposition 13, passed by California voters in June 1978, created a
new system for valuing property by establishing a base year value as
of a change of ownership or new construction. Once a base year value
was established, inflationary increases were limited to no more than
2 percent per year. There was no provision in Proposition 13 for
values of property to decline below their factored base year value.
In November 1978 voters approved Proposition 8 permitting county
assessors to review properties to determine if the current market
value as of January 1 each year had declined below the factored base
year value established by Proposition 13. As an independently
elected local official, the assessor's job is to be fair, not to
raise revenue. If the value of a piece of property has declined
below its Proposition 13 factored base year value then it will be
reduced.
For property owners a temporary decline in value can be good news
and bad news. The good news is that tax bills go down because
property taxes are based on the value of the property. The worse
news (not just bad) is that the property is not worth what was paid
for it.
To track declining market conditions, the professional appraisers in
the assessor's office review sales of comparable properties and
entire neighborhoods to look for transactions indicating that prices
may be dropping. If a property's market value as of January 1 is
lower than the factored base year value, a decline in value is
enrolled. That lower value will be reviewed each year and reduced
further if necessary. When sales indicate that the market has begun
to recover, the temporary, reduced value will be increased at a rate
that matches the recovery in the real estate market until the
factored base year value is restored.
In Napa County the first declines in value appeared in the
condominium market in the late 1970s and early 1980s when several
hundred properties were reduced in value. In the early 1990s the
real estate market declined across a broad spectrum of properties.
Hardest hit were properties that were purchased or newly constructed
in the period 1988 through 1991.
At the lowest point in that six-year market decline, 5,700 Napa
County properties, which represented 12 percent of all properties,
were in a decline in value status with over one-quarter of a billion
dollars taken off the 1997-1998 assessment roll. With the recovery
in the real estate market in the late 1990s and the beginning of
this century almost all properties have been restored to their
factored base year value.
As for the future, there is no crystal ball. Napa County sales
continue to be strong in some residential sectors but seem to have
leveled off in other areas. The cyclical nature of the wine market
and the impact of regulatory changes can impact the value of
vineyard or potential vineyard properties. Because Napa County is
still a sought-after place to live with its diversified economy,
strong environmental protections and unique quality of life,
declines in value usually are not as severe or widespread as in
neighboring counties or other parts of the state.
Contact Napa County Assessor John Tuteur at 253-4459 or by e-mail at
jtuteur@co.napa.ca.us. More articles can be found at
www.co.napa.ca.us/departments/assessor.
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JOHN
TUTEUR