The passage of Proposal A in March of 1994 drastically changed the property assessment and taxation system.
One such change is the "assessment cap." The language in Proposal A stated that, starting in 1995, the taxable assessment 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 (S.E.V) is to be 50% of the current market value. The capped value and the S.E.V. can be totally different.
As a result, there are now 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.
The Assessor is still required to estimate the market value of every property and record 50% of that as the State Equalized Value. In addition, the Assessor is required to multiply individually each prior year's taxable value by the C.P.I. to calculate the individual capped value. The lesser of the two will be the taxable value for that property. Structural items not previously assessed, such as new construction, are to be added to the new values.
Your property's taxable value will not normally increase more than the previous year's taxable value times the C.P.I. This "capping" process will continue 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 has been calculated annually. New legislation states that the actual sales price must not be the sole basis of the new S.E.V. for the property.