When the county reassessed the value of the Gilroy properties, the homes, as in the rest of the county, were reduced an average of $70,000 to $80,000 each. Commercial and industrial property values fell by more than twice that amount. In Gilroy, that translates to a savings of nearly $1,000 in property taxes for each homeowner, assuming a 1.25 percent property tax.

But the $3 million decrease in Gilroy property taxes, due Dec. 10, means less money for schools, cities and other public agencies.

Properties are assessed when a change in ownership or new construction occurs. Otherwise, the county assessor tacks 2 percent of the original purchase price onto a home each year. If the market value of a home falls below the assessed value, property owners are allowed to request that the value of their homes be temporarily lowered to market value.

While the assessor's office proactively reduced the assessed values of 41,886 county properties in 2008, about 8,000 property owners appealed the assessed values of their properties when they were notified of their property values in the spring. In addition, 5,000 to 6,000 applied to have their property reassessed at a lower value, according to the clerk of the board of supervisors' office. Because some of those numbers overlap and some appeals were denied, Stone said about 45,000 properties were assessed at a value lower than the purchase price and he doesn't expect the trend to reverse itself anytime soon.

Although Gilroy's assessment roll grew to $6.77 billion in 2008, up 6.5 percent from 2007, the roll would have been $230 million higher had the property values not been reassessed, according to the county. In addition, Gilroy's rate of growth was one of the lowest in the county. Towns like Cupertino, Palo Alto and Santa Clara grew by over 10 percent as Gilroy, Monte Sereno, Morgan Hill and San Jose lagged behind.

"The high-end areas held up pretty well through 2007 because they're more established," said County Assessor Larry Stone. "The impact was greater on the growing areas of the county."

Plummeting assessment values in Santa Clara County show that even the burgeoning Silicon Valley is not immune to the sub-prime mortgage mess and consequent economic meltdown. But Santa Clara is weathering the storm far better than most counties, Stone said. Some surrounding counties, like Stanislaus, San Benito, San Joaquin and Solano actually saw their assessment rolls shrink, despite the automatic 2 percent annual increase provided by Proposition 13 - a 1978 ballot initiative that capped property taxes at one percent of the assessed value. In the last 75 years, Santa Clara County's assessment roll was negative only four times: during the Great Depression and immediately following the passage of Proposition 13, Stone said.

The county's assessed value grew by 7 percent. During the dot-com boom of 2001, the assessment roll growth exceeded 15 percent. When that bubble burst, the growth rate bottomed out at 2 percent in 2004.

"The emergency is for people who bought at the top of the market," Stone said. For people like Stone, who have owned their homes for decades, the fluctuations in assessed value are not as dramatic. For people who bought their homes at the apex of the housing boom, the market value of their homes has tumbled while their assessed value has continued to increase.

"This is the most pervasive economic crisis that I have ever seen in my entire career," Stone said. "It's going to last longer than most people hope. This is a global issue. It's a crisis of proportions I haven't seen in 38 years."