The number of homeowners requesting lower property tax payments because of falling house values should approach record levels and add another strain to local budgets struggling with falling sales tax revenue, county and local officials said this week.

With 20,000 requests from homeowners for a reduction in the assessed value, which determines tax payments, the county could lose $27.5 million in property tax revenue, officials say, basing the figure on the average reduction granted to taxpayers last year. Local officials said that will deepen financial troubles for the state government and could create gaps in school district budgets.

Jeff Olson, division chief for the county's assessment services, said in a phone interview Thursday that the assessor's office typically receives a flood of requests near the Dec. 1 deadline. He said the number of reassessments might break the record of 28,000 set in 1996. Last year, the county received about 13,000 requests.

Olson said that during real estate recessions about 75 percent of requests are approved. State law requires county governments to reassess properties if the current market value falls below the assessed value.

Lower revenue will affect school districts, which receive the largest chunk of property taxes.

For example, Poway Unified could see its tax revenue drop by $730,000 from what was budgeted during the 2008-09 fiscal year. That's a relatively small part of its roughly $250 million budget, and the state is obligated to cover losses in revenue.

However, as the state's budget deficit approaches $20 billion, Sacramento's ability to cover reduced property taxes is in doubt, local officials said.

"It'll just make the state's problem even bigger," said Don Phillips, superintendent for Poway Unified, North County's largest school district, in a phone interview Friday. "The puzzle just gets harder. As every source of revenue dries up, that means the state's obligations grows and as their own revenues decline, they have to make bigger cuts."

Local municipalities also receive property tax revenues. North County city governments, especially Escondido, already have struggled to keep their budgets balanced as sales tax revenue has declined.

For Carlsbad, the lower property taxes would mean a reduction in revenue of about $240,000, if the average reassessment is comparable to last year's. Though it is a tiny portion of the city's $120 million budget, the dropping property taxes compound problems from declining sales taxes.

"Any loss of revenue is concerning," said Dawn Ortega, budget analyst for Carlsbad, in a phone interview Friday. "And we're seeing it across the board."

Real estate values across North County have plummeted 33 percent from a 2005 peak, meaning any homeowner who purchased after 2003, where values are now, might save money on property taxes by requesting a reassessment of property taxes.

And the problem is not going away. The county's assessor office values houses at Jan. 1, 2008 levels for taxes paid for the fiscal year beginning July 1. Real estate values have plummeted since January, meaning property tax revenue will probably stagnate during the 2009-10 fiscal year as well.

For Poway Unified, reduced tax revenues could mean layoffs for the next school year.

"This year we really cut back our budget in supplies," Phillips said. "We've trimmed that to the bare bones, so as we look to (budget) reductions next year, there's no way to not impact personnel when it's 85 percent of our budget."

Homeowners must pay the first installment of their property taxes by Dec. 10, with a second installment due April 10.

The county's assessor's office says it is still working through about 4,000 reassessment requests from last year, meaning most homeowners will probably have to pay this year's property taxes in full and receive a refund later if the reassessment is approved, said Olson, division chief at the assessor's office.

"If someone files an application right now, there's about 25,000 applications in front of them," he said.

Applications for tax reassessment can be found at www.sdarcc.com.

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com. Read his blog, "On the Realside," at bizblogs.nctimes.com.