Property values across Cape Coral dropped for the second straight year, falling more than 25 percent in 2007, according to a report released Monday by the property appraiser’s office.

In a phone interview, Lee County Property Appraiser Ken Wilkinson said the year over year drop in values countywide is a rare event.

“It’s the first time in my history, which is over 28 years,” he said, adding that he is not sure when the last time was that there was a decline in Lee County. “But I would guess that it hasn’t happened since the Depression.”

Cape Coral lost 26.4 percent of its just value, meaning the city saw more than $7.3 billion of its value dissipate.

After Wilkinson factored in Amendment 1 — a constitutional amendment that made the Save Our Homes provision portable, doubled the homestead exemption and provided for a commercial property exemption — Cape Coral’s taxable value declined by 26.6 percent.

The Cape’s drop was the most severe in the area though Lehigh Acres had a nearly comparable decline, losing about 23 percent of its value.

“Those were the areas where most of the markets were based upon, in my opinion, greed and speculation,” Wilkinson said. “Those who went up the farthest will come down the farthest.”

Though they were expecting a significant drop in values and millions in lost revenue, Monday’s report surprised city staffers as the Cape bled off more than $5.5 billion in taxable value.

“It definitely ended up being higher than we expected it was going to be,” said city spokeswoman Connie Barron. “If it stays the way that it is, it’s an additional $8 million in lost revenue that we didn’t anticipate.”

Financial director Mark Mason spent much of the day speaking with staff at the property appraiser’s office to figure out how it came up with the numbers that will be submitted to the state next month.

“I don’t know the reason for the difference,” said Mason. “We’re not the property appraiser’s office; we can only do what we can do.”

“We’ve done our job recognizing the market. Now it’s their jobs to figure out how they want to tax the properties,” Wilkinson said.

If millage rates stay the same, the city stands to bring in about $30 million less next fiscal year.

Mayor Eric Feichthaler pledged Monday night to hold the line on the millage though he did concede that budget reductions next year could hit residents.

“That very well could get into services,” he said.

With the massive drop in values, many property owners stand to pay far less in taxes next year. Residents who are homesteaded, however, would pay 3 percent more because of the Save Our Homes “recapture” clause.

But Feichthaler maintained that Amendment One would more than offset the recapture clause and still provide homesteaded residents with a tax break.

“If we keep millage constant, they would have to have a really expensive house to get hit by that clawback,” he said, adding that he welcomed the opportunity to reduce governmental spending.

Overall, Lee County lost more than 12 percent of its property value, with many municipalities seeing losses much higher than that.

Tax rolls countywide were reduced by about $15 billion, which is actually not as steep as it could have been because of $4.3 billion in construction that recently came on line.

“If we didn’t have the new construction, it would be closer to $20 billion,” said Wilkinson.

Two areas across the county that saw their values increase were Captiva and Boca, which jumped by 2.95 percent and 0.4 percent respectively.

Last year’s report showed the Cape losing 6 percent of its property value and more than 4 percent of its taxable value.

Those values were gathered prior to Jan. 1, 2007, because property taxes are paid in arrears. The housing market’s decline picked up steam in the second half of 2006, with the bottom dropping out over the course of this past year.

Property owners should be prepared for a similar decline next year, according to Wilkinson. He pointed to the massive rise in residential short sales that are moving homes off of the market at bargain prices.

Unlike foreclosures, short sales are considered arm’s length transactions and would be used in the formula to determine real property values.

“Realtors are going to be happier this year because there are going to be more sales. But the majority of those are going to be short sales,” he said. “Once that becomes the market, we use them obviously.”