THE ASSESSMENT CAP AND WHAT IT MEANS TO YOU

The passage of Proposal A in March of 1994 drastically changed the property assessment and taxation system. Some of the changes are hard to understand. The confusion is compounded because many of the old laws that are still in effect may appear to be in conflict with the intent of Proposal A.
 
One such change is the "assessment cap". The language of Proposal A states that, starting in 1995, the taxable assessment can be increased only by the amount of the consumer price index (C.P.I.) or by 5% (whichever is less). However, other laws still require that the State Equalized Value (S.E.V.) is to be 50% of the current market value. Since 1982, the S.E.V. and assessed value have been virtually the same. The capped value and the S.E.V. can be totally different.
 
As a result, there will be three different "values" recorded for each property: the State Equalized Value; the Capped Value; and the Taxable Value. The property taxes will be calculated on the Taxable Value.
 
Starting 1995, the Assessor will still be required to estimate the market value of every property and record 50% of that as the State Equalized Value. The lesser of the two will be the taxable value for that property. Structural items not previously assessed, for example new construction, are to be added to the new values.
 
With this new system, in most cases, a property's taxable value will not be increased more then the previous year's taxable value times the C.P.I. This "capping" process will continue annually until the ownership is transferred.
 
The year after a transfer of ownership occurs, the Taxable Value will be based on the State Equalized Value that has been calculated annually. New legislation states that the actual sales price must not be the sole bases of the new S.E.V. for that property.