What is the purpose of the 103 Percent Test in property assessment?

The 103 Percent Test is designed to ensure that property assessments do not exceed a certain threshold relative to the property's real market value. Specifically, it helps to determine the maximum assessed value a property can have, which is limited to 103 percent of the prior year's assessed value. This test is essential in maintaining a fair and equitable assessment process by preventing property values from being artificially inflated due to market fluctuations or rapid changes in real estate conditions.

In essence, the test acts as a regulatory mechanism to stabilize assessment increases and ensures that property owners are not subjected to unexpected spikes in their property taxes as a result of market trends or evaluations that could misrepresent the property's true value. Its application helps to provide consistency and predictability for property owners regarding their assessed values and associated taxes.