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For the Property Owner who wants to know...

the value cap and what it means to you

ASSESSMENT CAP
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 value cap. The language in Proposal A stated that, starting in 1995, the taxable value assessments can be increased only by the amount of the consumer price index (C.P.I.) or 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 the assessed value have been virtually the same. The capped value and the S.E.V are now totally different.

VALUE
As a result of Proposal A, 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 in 1995, the Assessor were still be required to estimate the market value of every property and record 50% of that as the State Equalized Value. In addition, the Assessor was also required to multiply individually each 1994 assessment by the C.P.I. to calculate each individual capped value. The Lesser of the two was the 1995 taxable value for that property. Structural items not previously assessed, for example new construction, were added to the new values.

With this new system, in most cases, a property's taxable value is multiplied by the C.P.I. This "capping" process continues annually until the ownership is transferred.

When a transfer of ownership occurs, the next taxable value will be based on the State Equalized Value that had been calculated annually. New legislation states that the actual sales price must not be the sole basis of the new S.E.V. for that property.

To summarize:

STATE EQUALIZED VALUE (S.E.V.)
equals...
          Half of the Appraised Market Value.

CAPPED VALUE
equals...
     last year's taxable value increased by the amount of the Consumer Price Index (with a maximum of 5%) plus construction charges.

TAXABLE VALUE
equals...
      the lesser of the State Equalized and Capped Values.
The Taxable Value will be used for the calculation of property taxes.