1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JANUARY 21, 2015 10 11 12 13 14 15 LEGISLATIVE COMMITTEE 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board of Equalization: Fiona Ma, CPA 4 Chair 5 Jerome E. Horton Member 6 Sen. George Runner (Ret.) 7 Member 8 Diane L. Harkey Member 9 Yvette Stowers 10 Appearing for Betty T. Yee, State Controller 11 (per Government Code Section 7.9) 12 13 Joann Richmond Chief 14 Board Proceedings Division 15 16 For the Department: Michele Pielsticker Chief, Legislative and 17 Research Division 18 19 ---oOo--- 20 21 22 23 24 25 26 27 28 2 1 INDEX OF SPEAKERS 2 SPEAKER PAGE 3 Peter Michaels 6 4 5 ---oOo--- 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JANUARY 21,2015 4 ---oOo--- 5 MR. HORTON: Ms. Richmond. 6 MS. RICHMOND: So our next item is the 7 Legislative Committee. Ms. Ma is the Chair of that 8 committee. 9 Ms. Ma. 10 MS. MA: Thank you, Ms. Richmond. 11 Okay. We are going to open up the 12 Legislative Committee and ask that -- 13 MR. HORTON: Staff. 14 MS. MA: -- staff please come to the 15 dais. 16 Ms. Richmond, do you -- do you open up? 17 MS. RICHMOND: Ms. Pielsticker. 18 MS. MA: Okay, Ms. Pielsticker. Would you 19 like to read all of the remaining items? 20 Well, okay. How about we start with the 21 items we're going to pull from the calendar first. 22 MS. PIELSTICKER: Yes. 23 MS. RICHMOND: And I know that we did have 24 speakers that signed up. I don't know if they're 25 still here or not. 26 MS. MA: Yes, we did get a list. 27 MS. PIELSTICKER: Thank you, Ms. Ma. 28 Michele Pielsticker, Legislative and 4 1 Research Division. 2 The matters that are being pulled are 3 Suggestion 2-1, 3-1, 4-2 and 4-3. Would you like me 4 to present on the items? 5 MS. MA: Any discussion, Members, on the 6 pulled items? 7 MR. HORTON: No. 8 MS. MA: Yes, please present on the other 9 items, remaining items. 10 MS. PIELSTICKER: Okay. 11 Suggestion 1-5 is an extension of sunset 12 for intercounty pipeline rights-of-way. The source 13 of the proposal is Property and Special Taxes 14 Department. 15 Existing law provides the methodology for 16 assessors to value intercounty pipeline 17 rights-of-way. The current methodology was enacted 18 in tax year 1984-85 and is scheduled to sunset on 19 January 1, 2016. 20 The methodology for determining value 21 applies a tiered dollars-per-mile schedule that is 22 based on the property's density classification and 23 annually adjusted for inflation. 24 The value derived by applying the statutory 25 methodology is rebuttably presumed to be correct, 26 precluding the property owner from challenging 27 either the right-of-way value or the assessment's 28 legality. The property owner may only negate the 5 1 presumption of correctness if the assessor declines 2 to use the statutory methodology. 3 The proposed law would extend the statutory 4 evaluation methodology for five years, until 5 January 1st, 2021. 6 This is a cost-efficient method of valuing 7 property that reduces the likelihood of protracted 8 litigation. And the statutory methodology also has 9 been in place for 20 years, originally enacted in 10 cooperation with assessors in industry to address a 11 lack of uniformity in assessment practices and 12 frequent appeals. 13 We have a speaker on this item. 14 MS. MA: Mr. Michaels. 15 ---oOo--- 16 PETER MICHAELS 17 ---oOo--- 18 MR. MICHAELS: Hi. Yes, thank you. 19 My name is Peter Michaels, and I'm here 20 today very, very briefly to urge support for 21 extension of Revenue and Taxation Code section 22 401.10 which has, as Ms. Pielsticker said, been in 23 effect since 1996. 24 I represent -- I was centrally involved in 25 the litigation that led to this code section and 26 continue to represent many companies that are 27 directly affected by the legislation. 28 During the 20 years this law has been on 6 1 the books, there has been no opposition whatsoever 2 from any county assessors. It's embraced by 3 assessors. It's embraced by industry. It's 4 embraced by the Board of Equalization, both the 5 State and County-Assessed Properties Division. 6 So, without exception, for the last 20 7 years there's been not a bump in the road. I think 8 widespread universal support. 9 MS. MA: Great. Any Members -- any 10 questions from Members? 11 MR. HORTON: Move approval of Board 12 sponsorship. 13 MS. STOWERS: Second. 14 MR. RUNNER: Second. 15 MS. MA: Moved by Chairman Horton, seconded 16 by -- 17 MS. STOWERS: Ms. Stowers. 18 MS. MA: Ms. Stow -- Sowers? 19 MS. STOWERS: Stowers. 20 MS. MA: -- Stowers. 21 Do we take a vote or just -- no? Okay. 22 MR. HORTON: Without objection -- 23 MS. MA: Without objection, so be it. 24 Okay. Ms. Pielsticker. 25 I haven't come up with my little acronym 26 yet. 27 MR. RUNNER: That'll work. 28 MS. MA: Okay. 7 1 MR. RUNNER: So be it always works. 2 MS. MA: So be it. 3 Ms. Pielsticker. 4 MS. PIELSTICKER: Yes. The next item is 5 Suggestion 1-6 related to the private railroad car 6 tax revised methodology. The source is the 7 Honorable George Runner. 8 Under existing law, we impose a property 9 tax on privately owned railroad cars operating on 10 the railroads in the state. Existing law specifies 11 the methodology that BOE must use to value these 12 railroad cars. And this methodology is based on 13 acquisition cost less depreciation for each railroad 14 car class in the owner's fleet and time in this 15 state measured by the number of "car days" each car 16 class spent in the state during the preceding 17 calendar year. 18 The proposed law converts the way physical 19 presence is measured from car days spent in 20 California to car miles traveled. It eliminates the 21 car class distinction for purposes of determining 22 presence in the state due to the fact that mileage 23 is not recorded by car class. 24 The revenue impact is $1.2 million revenue 25 loss annually with a one-time cost savings of 26 $500,000 which would offset the revenue loss by 27 avoiding a costly computer software replacement 28 needed to continue measuring presence under a 8 1 car-day system. 2 Mileage-based system is less complex to 3 administer and is less burdensome to taxpayers 4 because it conforms to the way other states that 5 impose a private railroad car tax measure 6 presence. 7 MR. HORTON: Move approval for Board 8 sponsorship. 9 MS. HARKEY: Second. 10 MR. HORTON: Madam Chair, if I may. 11 MS. MA: Yes. 12 MR. HORTON: Members, this item made it all 13 the way to Appropriations but did not get out of 14 Appropriations. Starting it on the Assembly side 15 certainly presents us with similar challenges. We 16 encourage that we take a look at some resolution in 17 addressing those issues. 18 MR. RUNNER: Yeah, I've -- in conversations 19 with the folks that -- with the railroad folks in 20 this issue, you know, I've encouraged them to try to 21 find a way to kind of create a revenue neutral 22 issue -- 23 MR. HORTON: Mm-hmm. 24 MR. RUNNER: Because that's where it got 25 hung up. So I think that that's kind of their job 26 to help figure it out or get it off of -- off of 27 suspense. 28 MR. HORTON: Yeah. 9 1 Madam Chair, we could put language in there 2 that kind of indemnifies the state from any expenses 3 whatsoever but shifts it back to the parties that 4 are participating. 5 The other issue that -- I don't think they 6 took into consideration the cost savings that is 7 addressed. You know, the $500,000 certainly is part 8 of that, but there's a cost savings. And maybe the 9 Board itself, with the permission of Madam Chair, 10 could take a look at trying to come up with a way of 11 quantifying if we're saving anything as a result, 12 minimizing the burden on the State of California. 13 MS. PIELSTICKER: Yes, sir. 14 MS. MA: We did just discuss some 15 possibilities and we'll be working with Ms. 16 Pielsticker and the legislative author to try to see 17 how we can get it through to the governor's desk. 18 MR. RUNNER: Yep. 19 MS. MA: All right. 20 So this proposal was supported by Mr. 21 Horton, seconded by Ms. Harkey. And we can move to 22 the next item. 23 MS. PIELSTICKER: Okay. The next item is 24 Suggestion 4-1 related to the oil spill prevention 25 fee cleanup. 26 Related to this item, we also have a 27 support letter from Western States Petroleum 28 Association, from Mr. Brian White of KP Public 10 1 Affairs. He was unable to make the meeting. 2 Under -- the source of this proposal is 3 Property and Special Taxes Department. 4 Under existing law, we impose an oil spill 5 prevention fee on the owners of crude oil and 6 petroleum products received at a marine terminal or 7 refinery, whether from within or outside the state 8 if the oil or petroleum products pass over, across, 9 under or through the waters of the state. 10 This fee is to be collected by the owner of 11 the refinery or marine terminal operator. 12 The proposed law clarifies that either the 13 marine terminal operator or the refinery operator is 14 required to collect and pay the fee to the BOE, not 15 the owners of crude oil or petroleum products. 16 It excludes from fee collection and 17 imposition the petroleum products derived from fee 18 paid crude oil. It deletes unnecessary pipeline 19 operator registration requirements and revises 20 certain Revenue and Taxation Code definitions. 21 There is no revenue impact to this 22 proposal. And it would reduce confusion and clarify 23 the intent of the legislation -- the original 24 legislation, which was enacted in SB 861, a budget 25 trailer bill last spring. It also eases 26 administration for both the BOE and industry. 27 MR. HORTON: Move approval for Board 28 sponsorship. 11 1 MR. RUNNER: Second. 2 MS. HARKEY: Second. 3 MS. MA: Okay. Moved and second. 4 Without objection, such will be the order 5 of the Board. Okay. 6 And the last item. 7 MS. PIELSTICKER: Thank you. Suggestion 8 4-4 relates to E911 notification and MTS surcharge 9 seller debt provisions. It's a cleanup to AB 1717 10 enacted into law this last fall. 11 With regard to the first provision E911 12 notification, existing law requires the Office of 13 Emergency Services to determine on or before 14 October 1 of each year a 911 surcharge rate that 15 will cover the 911 programs cost for the current 16 fiscal year. 17 The law is silent regarding the date that 18 OES should notify the BOE of the new rate. The MTS 19 Surcharge Act enacted in -- on September 30th, 2014 20 requires that OES notify the BOE of the surcharge 21 rate by October 15th of each year. 22 The existing law also requires the BOE to 23 fix the 911 surcharge rate each year after 24 notification from OES of the rate for the following 25 calendar year and to publish that rate in its 26 minutes by November -- by November 15th and notify 27 by mail every BOE registered service supplier of the 28 new rate. 12 1 The proposed law revises the date by which 2 the OES must notify the BOE of the new 911 surcharge 3 rate from October 15th to October 1st. It also 4 deletes the requirement to notify service suppliers 5 by mail and, instead, requires notification by any 6 means available, including mail, electronic mail, or 7 website postings. There's no revenue impact to that 8 provision. 9 The E911 notification provision provides 10 the BOE necessary time to publish the new rate in 11 its minutes and allows for a more timely and 12 efficient rate change notification to service 13 suppliers. 14 The second piece of this proposal relates 15 to seller debt provisions. Under existing law we 16 impose a prepaid MTS surcharge and local charge on 17 each prepaid consumer as a percentage of sales price 18 of each retail transaction, and that takes effect 19 January 1, 2016. 20 Existing law requires prepaid sellers to 21 collect the surcharge and local charge at the time 22 of the retail transaction. The provisions governing 23 the state level surcharge consider amounts that are 24 required to be collected and amounts collected but 25 not owed and not returned to the consumer as the 26 seller's debt to the state. 27 The local charge provision is not 28 consistent with the provisions governing the state 13 1 level charge. The proposed law would make 2 conforming technical changes and incorporate an 3 urgency clause to allow for its provisions to become 4 operative immediately. 5 The revenue impact to this piece of the 6 proposal is none. 7 MR. HORTON: Move approval for Board 8 sponsorship. 9 MS. HARKEY: Second. 10 MS. MA: Okay. It's been moved and second. 11 Without objection, such will be the order of the 12 Board. 13 The meeting of the Leg. Committee is hereby 14 adjourned. 15 MS. PIELSTICKER: Thank you. 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 14 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on January 21, 2015 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 14 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: January 29, 2015 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 15