The "tax assessment values" don't rise and fall by themselves. Values are set by the sale prices of each property under Prop 13. They go up by 2% per year unless the enrolled value is challenged by the taxpayer under Prop 8.
Since you're in California you can access the BOE's Assessor Handbooks at
http://www.boe.ca.gov/proptaxes/ahcont.htm. Check out AH 501 and AH 502. They are the basic and advance procedures for the valuation of property. Some of it specific for ad valorem purposes but there is a ton of very good appraisal methods.
Here's the land section from AH501.
METHODS OF LAND APPRAISAL
Land or site value can be estimated using the six methods of land valuation discussed below.
These methods are: (1) comparative sales; (2) allocation; (3) extraction; (4) subdivision
development; (5) land residual; and (6) ground rent capitalization.
Comparative Sales
The comparative sales approach is used to value land that is vacant, or that is considered vacant
for appraisal purposes. There must be a sufficient number of comparable vacant land sales in
order to use this approach. The appraiser should select comparable sales that are similar to the
subject in regard to the primary elements of comparison (i.e., property rights conveyed, terms of
the sale, market conditions, and locational and physical characteristics). The comparables must
have the same highest and best use as the subject. Comparable sales are analyzed and adjusted
for differences compared to the subject property in order to arrive at an indicator of value for the
land being appraised. The comparative sales approach produces the best indicator of value when
a sufficient number of recent sales of comparable properties exist.68
Comparable sales prices (pre- or post-adjustment for the elements of comparison) are often
converted into units of comparison in order to derive indicators of value. Units of comparison are
components into which a property may be divided for purposes of comparison and should be
selected by the appraiser based on what is typically used by market participants. Five units of
comparison used in the appraisal of vacant land are: sale price per front foot; sale price per
square foot; sale price per acre; sale price per building site; and sale price per units buildable.
Comparison by sale price per front foot assumes that frontage is a primary determinant of value.
A front foot is a strip of land one foot wide that fronts a street, freeway, or body of water. This
unit of comparison is useful in the appraisal of commercial sites that benefit from drive-by or
other visibility. It is infrequently used in the appraisal of residential properties. Comparison by
sale price per square foot is applicable in industrial and commercial properties in which square
footage is a good measure of development potential and frontage is not the dominant factor.
Comparison by sale price per acre is typically used in the valuation of large industrial or
commercial sites, subdivision land, and rural and farm properties. Comparison by sale price per
building site assumes that buyers purchase a site with limited concern for small differences in
front footage or square footage, and are instead primarily concerned with the site's overall
desirability (e.g., views or exposure) for residential purposes. Finally, comparison by sale price
per units buildable assumes that market participants value land based on its development
potential on a units-buildable basis, for example, sale price per apartment unit, condominium
unit, or single-family lot.
Allocation
In the allocation method, a portion of total property value is allocated to the site. This method is
based on the principles of balance and contribution, which hold that a typical ratio between land
value and total property value exists for similar types or classes of property, in comparable
locations, at a given period of time. The allocation method is typically used to estimate the site
value of an improved property, but it can also be used to estimate the value of a vacant site.
To apply this method, it is necessary to estimate a ratio between land and building value. This
can be done by analyzing ratios of site value to total property value in comparable neighborhoods
where sales of vacant and improved properties have occurred. This ratio is then applied to the
subject property to estimate its site value.
Extraction
The extraction method is a variation of the allocation method. In this method, site value is
estimated by subtracting the value contribution of the improvements from total property value.
The contributory value of the improvements is typically based on an estimate of depreciated cost
(i.e., replacement cost new less depreciation). This method is most reliable for properties with
limited improvements, and it may be used to derive site value indicators for vacant sites or
improved properties.
Subdivision Development
The subdivision development method is also known as the land development or anticipated use
method. It is primarily used to value vacant land that is ready for development to a higher use, for
example, land changing from agricultural to residential or commercial use.
This method involves the hypothetical development of land. First, the appraiser estimates the
number of lots or sites that can be produced and their market values. This allows an estimate of
the gross market value of the project as if developed. Second, the appraiser estimates the total
development cost for the project. Total development cost includes all direct and indirect costs of
development: the cost of construction (i.e., labor and materials, contractor's overhead and profit);
land planning, engineering, and other professional fees; property taxes and financing charges
during construction; entrepreneurial profit; anticipated sales marketing expenses; and other
applicable costs. Finally, total development costs are subtracted from the projected gross sales
prices of the developed lots to derive an estimated value for the vacant land.69 The subdivision
method should generally be used only when the comparative sales method cannot be used, or in
conjunction with other methods.
Land Residual
The land residual method is similar to the subdivision method in that it hypothesizes a highest
and best use of the site upon which the indicator of land value is premised. It requires: an
estimate of building value under the premise of highest and best use; an estimate of annual net
operating income under the premise of highest and best use; and market-derived capitalization
rates for the land and building.
To apply the method, the appraiser first estimates the highest and best use of the site as though
vacant. Second, based on this hypothetical use, the appraiser estimates the annual net operating
income of the property. Third, the appraiser estimates, using the building capitalization rate, the
portion of total property income attributable to the building, and subtracts this amount from the
net operating income. What remains is the income attributable, or residual, to the land. Finally,
the appraiser capitalizes this residual income into an estimate of land value using the land
capitalization rate.
Ground Rent Capitalization
The ground rent capitalization method is also an application of the income approach. Ground rent
is the rent paid for the use of land. In this method, the appraiser capitalizes the ground rent into
an indicator of land value. The method can be used to estimate the value of vacant land or to
estimate the site value of improved property. The method requires: an estimate of the market rent
for the subject land; an estimate of any expenses paid by the landowner; and a market-derived
capitalization rate for the land.
To apply the method, the appraiser capitalizes the estimated market rent, less any anticipated
expenses of the owner, into an indicator of value using the land capitalization rate. Since ground
rent by definition is income imputable only to the land, an income attributable to improvements
is not subtracted as in the land residual method.
