Proposition 13, passed in 1978, provided for the establishment of a base year value of 1975. When a property undergoes a change in ownership or new construction, a new base year is created at the date of the event. To the base-year value, a maximum two % increase in value is applied annually, assuming that the California cost-of-living index increases by at least two %. This value is called the trended base year value.
Proposition 13 made no provisions for a decline in value. However, a subsequent Constitutional Amendment (Proposition 8) allows the Assessor to take into consideration factors that may cause a decline in value. Property law further states that the Assessor is to enroll on the lien date January 1, the lower of the trended base year value or the current fair market value.
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