The total taxable value of properties in Riverside and San Bernardino counties dropped more this year than at any time in the past three decades, maybe longer, assessors said after certifying tax rolls last week.

Riverside County's total assessed value for 2009 plunged almost 11 percent from 2008. San Bernardino County saw about a 6 percent drop.

The resulting property tax losses have hit many local governments that were already bruised by the state budget crisis and plummeting sales tax revenues.

"It's truly the worst," Riverside County Assessor Larry Ward said, adding the biggest drop on record before this year was less than 1 percent. "We've never had this."

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Assessors said they had prepared local governments for the expected drop in revenue so they could plan their budgets for the new fiscal year, which began July1.

Most Riverside County cities and about four in San Bernardino County saw double-digit percentage drops in their assessed property values. Among the hardest hit were San Jacinto with an almost 27 percent drop and Adelanto, which saw its taxable values fall by roughly 21 percent.

But what's bad news for city and county governments could be a boon for hundreds of thousands of Inland taxpayers. They will see some relief in their fall property tax bills.

Most of the drop in taxable property values stems from counties' reassessment of homes to keep valuations in line with the collapsed housing market.

Generally, assessments increase no more than 2 percent each year because of Prop. 13, passed in 1978. A separate measure, Prop. 8, instructs governments to reduce property taxes when the actual market value of a home drops below its assessed value under Prop. 13.

Those properties are reassessed each year until the value returns to its previous Prop. 13 value plus 2 percent increases for the years that have passed.

Starting this week, more than 300,000 Riverside County homeowners will receive notices that their assessments have been reduced. Ward's office reviewed more than 370,000 homes purchased after 2001, he said.

San Bernardino County sent out the notices in May, said Assistant Assessor Dennis Draeger. His office reviewed about 250,000 homes and lowered the assessments on more than 185,000 of them, he said.

The Worst

Records show the declines in assessed values in both counties are the worst since at least 1978, the year California overhauled its assessment system with Prop. 8 and other changes. It's impossible to make meaningful comparisons with tax-roll numbers before then, because they reflect a whole different methodology, Ward said.

The 2009 total assessed value for Riverside County stands at about $217.4 billion. That's a roughly $25.5 billion drop from last year, according to documents.

San Bernardino County dropped about $11.2 billion to $170.6 billion in total assessed value this year, documents show.

In the early 1980s, high mortgage interest rates slowed the growth of tax rolls in both counties, but did not cause them to shrink, said Inland economist John Husing.

Total assessed values declined in both counties for parts of the 1990s, due to the closure of military bases and other job losses, he said. The worst of it was a 4 percent drop in San Bernardino County in 1994 and Riverside County's 0.7 percent decline in taxable values in 1996, according to records.

"None of it was as bad as this. The reason for that is this is all about real estate," Husing said of the current recession. "This was caused by real estate."

Looking Ahead

Riverside County experienced a sharper drop in property tax values this year than San Bernardino County. Ward and Draeger said that is because Riverside saw more of a run-up in housing prices and a greater frenzy to build and buy.

The total assessed value was climbing by double digits every year from 2000 to 2007 in Riverside County, peaking with an almost 23 percent increase in 2006. San Bernardino County was growing by double digits for only four of those years.

Riverside County had further to fall, Ward said.

The total assessed value in the county has fallen back to near 2006 levels, Ward said.

Declining property tax revenue left Riverside County with a $75 million hole in its budget, part of a larger $130 million shortfall for this fiscal year, according to budget documents. The county closed the gap with layoffs, pay reductions, service cuts and other trims to its budget.

San Bernardino County plugged an $80.2 million shortfall with program cuts, pay freezes and other measures but avoided layoffs.

Banning eliminated city-sponsored fireworks for July 4, laid off workers, imposed furloughs and closed City Hall on Fridays. The city of Riverside left more than 100 positions unfilled, froze pay and made cuts to libraries, parks and other community services.

Redlands staved off layoffs by rerouting funds set aside for water and sewer projects. Last week, the city of San Bernardino delayed approval of a new budget as officials determine how best to offset dwindling revenues.

Ward and a county-commissioned Cal State Fullerton economic forecast project that the decline in property tax revenues will continue but slow next year. Then revenues could grow modestly.

County officials and the forecast report say full recovery will be slow, a matter of years not months. The Inland region is unlikely to see a return to double-digit percentage increases in property values in the near future.

Reach Julia Glick at 951-368-9442 or jglick@PE.com