Prop 2 1/2 directs the Department of Revenue to annually adjust each community's levy limit by applying two statutory increases. Which description correctly identifies these increases?

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Prop 2 1/2 uses a two-part approach to adjusting the levy limit each year. There is a baseline automatic increase (a small, built-in rise) and a separate growth component tied to increases in the tax base from new construction and improvements that add value, not from revaluations. The correct description matches this structure: an automatic increase of 2/5 percent coupled with a separate growth amount based on new construction in the community, including additions and alterations of real property that did not result from property revaluation. This captures both the automatic baseline adjustment and the growth that comes from actual increases in property value due to construction and improvements, while excluding value changes caused by revaluations.