Almost 90,000 Santa Clara County property owners will receive a notice in the mail in the next few weeks letting them know their assessed property values are lower than they were last year, and in most cases a lot lower.

The reductions are the result of a months-long effort by the county assessor's office to update the tax roll in response to waves of foreclosures and overall turmoil in the housing market in recent years.

"We have proactively reduced the assessed value without being asked by the property owners," said county Tax Assessor Larry Stone.

He said the number of properties losing value represents about 25 percent of all residential properties in the county. Out of about 200,000 properties chosen for re-appraisal by the assessor's staff, about 89,000 residential and about 600 commercial properties fell in value. The properties will lose an average of $173,000 each in taxable value, for a total loss in the tax roll of about $17.4 billion from last year's $303 billion roll.

In February, the assessor decided to review all properties in the county that had been purchased since Jan. 1, 2000. Data about those transactions including recent sale prices, surrounding properties, and the unique market activity within each geographic area were plugged into a computer-assisted model that helped county appraisers determine which properties have declined in value and by how much, Stone said.

While many property owners' tax bills will decline for the first time in eight years, a reduction in the value of their assets is difficult.

"It's very stressful for property owners," said Stone. "In a lot of cases, the largest single asset that people own is their home. To see those values go down is not good by any means."

It will also be stressful for county coffers as well as local cities and school districts. Stone said properties in South County will decline the most. In Gilroy, property values may decline by 10 percent, according to David Ginsborg of the assessor's office. That equates to about $1 million less revenue than city officials thought they would get from property taxes next year.

In Morgan Hill, property values could fall by about three percent once the tax roll is closed June 30. Based on an estimate of the loss reported by the assessor's office in April, City Manager Ed Tewes said that means the city will collect about $360,000 less than expected for next year.

And county budget director Leslie Crowell predicted a $29 million drop in property taxes coming into the county.

Next year's tax roll could be even worse, as commercial, industrial and retail property value fluctuations typically lag those of residential parcels, and this year's re-assessment accounts for few commercial value changes, Stone said. Plus, it is unknown how much the overall real estate market has deteriorated since Jan. 1, 2009, the valuation date for this year's assessments, Stone said.

Last year, the assessor's office conducted a similar re-assessment but on a smaller scale. Stone said his office re-assessed the values of about 45,000 properties, which lost a total of $5.3 billion for an average decline of about $130,000. Most of those properties were re-assessed again this year and are included in the $17.4 billion drop.

Individual property tax bills for the 89,000 properties that will be assessed lower than their sale price, likely to be in mailboxes by September, will fall by an average of at least $1,730, assuming a minimum tax rate of one percent, though most properties are taxed more than that.

Stone said about half the property taxes collected in counties go to the state of California. Out of what's left, according to the assessor's annual report for 2007, public schools receive about 45 percent of county property tax revenues; the county itself receives 18 percent; the cities receive a 14 percent share; redevelopment agencies receive 10 percent; community colleges 7 percent; and special districts such as the Santa Clara Valley Water District 6 percent.

Stone noted that all the county's roughly 450,000 property owners will receive a notice informing them of their assessed property value, and Santa Clara is one of only nine counties in the state that notify owners of their assessed values before tax bills arrive in September.

The assessor's office will begin mailing those notices June 26. Property owners who disagree with the assessment and feel their assessed value should be lower have until the middle of August to do so.

Ginsborg noted the easiest way to make such an appeal is on the assessor's Web site, http://www.sccgov.org/portal/site/asr/. The "assessment appeals" link includes a timeline of deadlines, and a step-by-step guide for filling out a one-page form requesting an appeal.