1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JUNE 23, 2015 10 11 12 13 14 15 CUSTOMER SERVICES & ADMINISTRATIVE EFFICIENCY 16 COMMITTEE 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: Sen. George Runner (Ret.) 4 Chair 5 Jerome E. Horton Member 6 Fiona Ma, CPA 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: David Gau Chief Deputy Director 17 18 19 20 ---oOo--- 21 22 23 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 JUNE 23, 2015 4 ---oOo--- 5 MR. HORTON: Ms. Richmond, what is our next 6 matter? 7 MS. RICHMOND: Our next matter is the 8 Customer Service and Administrative Efficiency 9 Committee, Out-of-State District Offices. 10 MR. RUNNER: We will call that committee 11 together or to -- to -- to start. 12 MR. GAU: Good morning. I'm David Gau, 13 Chief Deputy Director. 14 For discussion by the Board Committee today 15 is the proposal to assign one out-of-state district 16 office to each of the four district-elected Board 17 Members for purposes of facilitating communication 18 of constituent concerns and also providing 19 assistance. 20 The discussion paper that was submitted to 21 the Board Members for consideration proposes the 22 assignment of the western states Sacramento office 23 to Chairman Jerome Horton; the Houston office to 24 Committee Chair George Runner; the New York office 25 to Board Member Fiona Ma; and the Chicago office to 26 Board Member Diane Harkey. 27 As noted in the discussion paper, although 28 one of the four district-elected Board Members will 3 1 be assigned to an out-of-state office, any Board 2 Member or their staff may be involved and interact 3 with taxpayers and their representatives at any time 4 as it relates to the administration of tax. 5 That concludes my opening remarks. I'm 6 available for questions. 7 MR. RUNNER: Yeah, let me just -- the -- 8 the proposal or the concept grew out of my 9 experience in going and meeting with each of -- in 10 going to each of the out-of-state offices and trying 11 to get a sense in terms of, A, the understanding and 12 the relationships that out-of-state offices have and 13 the role of the Board Member, but also, and again 14 where this really focuses in on, and that is the 15 relationship for taxpayers and the out-of-state 16 offices. 17 In each of those -- in each of those 18 meetings or each of those times I also spent time 19 meeting with -- with groups of taxpayers. And it 20 was interesting to me that even though they may be 21 in many cases large sophisticated taxpayer 22 organizations, because often times that is the size 23 of the folks that we deal with, California's unique. 24 And so you have a -- you may have this 25 state-wide tax staff that forgets the uniqueness of 26 California, that has these directly elected taxpayer 27 representatives. And as we -- we often times talked 28 about the difference because they're used to, often 4 1 times, dealing with the Department of Revenue or 2 somebody else and not necessarily the understanding 3 of that. 4 So that was one of the issues that kind of 5 said, hey, there's a unique role here that we play 6 that I think we could -- we could educate better on. 7 And so this -- this proposal really 8 doesn't, as far as I'm concerned in looking at it, 9 and I think we've had good, thorough discussions, 10 doesn't change any of the role of the Board Member, 11 doesn't change any of the role of the Board Member 12 in regards to any of the offices in the sense that 13 the ability to, you know, to -- to look at or deal 14 with an issue within any of these offices. 15 It basically creates a kind of a first 16 level go-to person of Member's office if -- if 17 indeed there's a desire to go to that office. I 18 think that, to me, is the key. It's just opens up 19 the door and hopes facilitate an opportunity in 20 communication. 21 So I think that's -- that's -- I -- that's 22 the purpose of this. You know, to me, I think 23 there's only upside. I appreciate CalTax and their 24 view because they certainly represent many of these 25 taxpayers and their view of seeing the benefit of 26 that. 27 So that's why it's here for consideration. 28 And certainly would think that it's one that can 5 1 only help in our relationship with taxpayers and 2 out-of-state offices. 3 MR. HORTON: Member Ma. 4 MS. MA: I actually support this idea. I 5 think we all represent districts right now. I mean, 6 in California we represent close to 10 million 7 people. I think we all take our jobs seriously in 8 terms of being available to constituents, even to 9 our own staff members. 10 I have found that very helpful to be able 11 to go and meet with them, to listen to what some of 12 their concerns are, to be the bridge to headquarters 13 in terms of what's working and what's not working. 14 And as I got elected to this position 15 knowing that there are four out-of-state offices out 16 there like who do they really go to or who do they 17 call if they have concerns? You know, who is paying 18 attention to them? 19 I know that we have health issues -- health 20 care issues in some of the other states because we 21 don't have the same robust health care system that 22 we have in California. But who is addressing those 23 on a daily basis and pushing, you know, for those 24 workers out in these offices? 25 And so I'm willing to give it a try. I 26 think, you know, more attention is better than less. 27 Better communication is going to help the agency 28 work better all around. And so I appreciate 6 1 Mr. Runner's creative thoughts on this issue. And 2 growing up in New York, always looking for ways to 3 connect more. I haven't been back too many times 4 over the last 25 years and so maybe this is an 5 opportunity for me to -- to do that. 6 So anyway, you know, I support the 7 resolution. 8 MR. HORTON: Member Harkey. 9 MS. HARKEY: Hi. Thank you. 10 I also support the resolution in that it is 11 very limited. I did not want to be having to manage 12 personnel, promotions, etcetera, out-of-state. We 13 have a tough enough time in our district. There's a 14 lot of folk, and I think we have very highly 15 qualified chief -- you know, between Larry Brammer, 16 Cynthia, we have -- we have very, very highly 17 qualified, I think, executive staff that can handle 18 that. 19 But I do think it's important that we have 20 a contact person for the out-of-state client. And 21 to the extent that I'm from Chicago, it seemed a 22 natural. You know, I haven't been back in about ten 23 years, so I will be traveling back and I'll -- I'll 24 enjoy it wholeheartedly. 25 But I just want to be sure that everybody 26 understands it's not like there's no big, massive 27 reorg. It's merely for our client services. And I 28 was -- I wanted to be sure it stayed that way so 7 1 that we would -- I understand that long after we are 2 gone, they'll still be BOE -- 3 MR. RUNNER: Mm-hmm. 4 MS. HARKEY: -- functioning as a whole, and 5 I don't want to really overturn an organization for 6 my short little blip on the radar screen. 7 MR. RUNNER: Mm-hmm. 8 MS. HARKEY: I think we need to have 9 consistency and continuity, and -- but I do think 10 that this will be very, very helpful for the clients 11 and even for the staff to see us out there once in a 12 while. You know, we can form relationships like we 13 have in California and keep them really tight 14 out-of-state. 15 So thank you very much for bringing it 16 forward. 17 MR. HORTON: Ms. Stowers. 18 MS. STOWERS: Okay. So I understand it's 19 just for communication with the out-of-state 20 businesses and as it does not involve personnel 21 matters or equipment or anything like that. 22 MR. RUNNER: That's correct. That's 23 correct, yeah. 24 MS. STOWERS: So with that being the focus, 25 and we have suggested locations with, like, Vice 26 Chair Runner taking the Houston office. Would that 27 be communicated to these various businesses that are 28 assigned to these locations? How would we 8 1 transition? 2 And, hypothetically, if you have a company 3 that's assigned to the Houston office, that's where 4 their headquarters is but the bulk of their 5 California nexus connections is in southern 6 California, let's say San Diego County, I'm just 7 wondering how -- if they're physically really 8 located in -- I'm getting my districts confused, I'm 9 sorry -- Ms. Harkey's district, shouldn't she be the 10 point of contact when that's where the records are? 11 And if we go out with the transitional plan 12 saying your -- your initial point of contract is 13 another Member, are we adding a layer of confusion? 14 MR. RUNNER: Yeah, let me -- can I answer 15 that for you? 16 MS. STOWERS: Yes. 17 MR. HORTON: Member Runner. 18 MR. RUNNER: Yeah. It's my -- I'm running 19 the committee. 20 MR. HORTON: Oh, that's right. 21 MR. RUNNER: Just clarifying. 22 MR. HORTON: My apologies, George. 23 MR. RUNNER: Just -- just to clarify that, 24 yes. Well, first of all, if somebody's records are 25 actually in -- in -- in the Member's district, then 26 that's clearly in a California issue. So, the fact 27 is these would be records that would be in -- in 28 another state. 9 1 No, and I do not believe that any 2 language -- and I think this is some -- some -- some 3 language that I think is pretty clear in -- I think 4 in the proposal itself, but we can clarify it even 5 more, that this is not a requirement for initial 6 contact. There's no requirement that says this is 7 your initial contact. 8 I'm more concerned about the folks that 9 didn't seem to know who, and -- in regards to this 10 objective. So I don't -- I think it does not add -- 11 and for that reason the confusion is often "Who do I 12 see" or "Who do I call?" Not -- not necessarily 13 between two. Because, again, I think probably all 14 of our offices right now are getting contacts from 15 folks in out-of-state offices. 16 MR. GAU: Sure. 17 MR. RUNNER: And they're doing it usually 18 because somebody in our office has a relationship 19 with somebody who works in that business, which 20 means that they have an advantage there. 21 The problem is that many of those 22 businesses out-of-state don't have that kind of 23 relationship. They don't know who to call because 24 they never worked with whoever in our office might 25 be their -- their -- their person of knowledge that 26 they have. 27 So that's all this creates. And so I think 28 that -- I think the clarifying issues that would go 10 1 out to these businesses would be that there is this 2 opportunity for a point of contact. However, I 3 think it needs to be very clear that their contact 4 is certainly not limited at all by who it is. 5 And in fact I think our communication can 6 even say, you know, depending upon the business, if 7 you've got a -- you know, a large part of your 8 business is in a specific district, then -- then we 9 encourage you to use your -- use your contact 10 through that -- through that -- through that 11 district office. 12 MS. HARKEY: Assuming you have a 13 relationship. 14 MR. RUNNER: Yeah, assuming you have a 15 relationship, right. 16 So that would be -- that would be -- so, 17 no, there's not the intent to do -- it's not the 18 intent to create an initial contact -- 19 MS. STOWERS: Okay. 20 MR. RUNNER: -- only. Because I think -- 21 and I think in our proposal, I think, we even spell 22 that out in the end of it where we talk about the 23 fact that it doesn't change any relationship in 24 regards to any -- any Member has with any -- with 25 any particular district office. 26 Okay. Does that answer the question? 27 MS. STOWERS: Yes. 28 MR. RUNNER: Mr. Horton. 11 1 MR. HORTON: Thank you, Mr. Runner. 2 I appreciate Mr. Runner's leadership in 3 this and his engagement over the last four years. 4 He has been instrumental, I think, in addressing 5 many of the issues in the out-of -- that exist in 6 the out-of-state district. 7 After, I guess, 30-some years with the 8 Board of Equalization, a number of individuals have 9 sought to sort of begin to take a look at the 10 out-of-state district, in some cases actually 11 eliminating the out-of-state district and 12 incorporating it within the State of California's 13 operation. 14 Historically, I don't necessarily see that 15 there's a particular problem that exists. But there 16 is a benefit, I believe, in having the Members 17 engage proactively in the -- in the -- in the 18 various different offices. I believe there is some 19 benefit there. 20 I also believe that there could be some 21 confusion and that we need to bring a level of 22 clarity as it relates to what the initiative 23 actually -- the intent, the clear intent of the 24 initiative. 25 After having the discussion with Mr. Runner 26 and our Chief Counsel, we've developed what I 27 believe is a clear delineation of what the intent 28 and what the authority of this resolution is, based 12 1 on legal counsel's interpretation, and would 2 encourage that we incorporate that into whatever 3 communications and whatever direction that we 4 ultimately provide to staff as well as the 5 taxpayer. 6 There are a number of other issues that I 7 think we might want to take a look at, and those -- 8 that relates to Member Stowers' question wherein 9 the -- I believe it's the Constitution provides for 10 one vote per person. And so the constituencies that 11 exist within the district that also have a location 12 outside of the district, how do we establish the 13 priority relative to those constituencies? 14 For example, a constituency that's located 15 in San Francisco but also has locations outside of 16 the state, let's say, in Chicago or Nevada or some 17 other place. In that these constituencies over the 18 last few years have been accustomed, actually, to 19 engaging with all of the Members or engaging with a 20 particular Member that they have been working with 21 by virtue of their nexus in the State of California, 22 does that priority change? 23 MR. RUNNER: Hm-mm. 24 MR. HORTON: And I don't believe it does. 25 I don't believe that's the intent of Mr. Runner. 26 And I think -- but I think it needs to be clarified. 27 I think that any document that goes forth 28 needs to be clear so that everyone understands what 13 1 the intent of the initiative is. And then, to some 2 degree, we might want to put forth an effort to 3 identify the specific problems that exist to the 4 extent that those problems are germane to one of the 5 existing committees. 6 For example, if it's a customer service 7 matter, how do we direct those issues directly to 8 the Customer Service Committees that have already 9 been established or the Business Tax Committee or 10 the Property Tax Committee or Legislative Committee 11 and so forth. And so, I think we need to give that 12 some thought as we begin to formulate this as a 13 policy. 14 I think the resolution itself is -- is -- 15 is good because it encourages us as Members to 16 engage. Quite frankly, although I think the Members 17 have the authority to do so, but this certainly 18 gives us a little more incentive in that regard. 19 But it does not limit the Members from engaging in 20 New York, Chicago, or any of the other out-of-state 21 offices other than the courtesy that's currently 22 provided as we engage in each other's districts. 23 That brings to mind another benefit, I 24 think, of the initiative, that it brings forth a 25 discussion or maybe the clarification that as it 26 relates to constituencies, that the businesses 27 located in the State of California or anywhere in 28 the nation are actually the constituencies of this 14 1 entire Board. And our constituencies are generally 2 defined from a political perspective or 3 constitutional perspective as constituencies, as 4 those individuals who actually vote or live in our 5 district. 6 So, often times we have -- especially here 7 in Los Angeles, I have the benefit of visiting 8 Members visiting southern California to engage with 9 the taxpayers; and I think that's a good thing. 10 I think at the end of the day we're all 11 trying to get to what the -- the correct answer. So 12 I think it's appropriate for the Members to visit 13 Los Angeles, my district, and so forth and engage 14 directly with the constituencies, the taxpayers, the 15 businesses that operate in the various district as 16 it relates to matters that are under adjudication 17 and other issues that are germane to the Board 18 itself. 19 So to the extent that that information 20 provided by legal counsel is incorporated in 21 whatever we decide to do, I think we are -- I think 22 it's -- you know, I think it's rather harmless. But 23 I think it can serve as an incentive, I think, to 24 the Members who -- who need the incentive in that 25 direction. 26 MR. RUNNER: Thank you. Thank you, and I 27 think -- I appreciate the comment in regards to 28 committees. Especially I know on our last trip that 15 1 I did to Houston, there was a very specific 2 conversation that came up in that regards that some 3 of the auditors were dealing with in regards to 4 medical implants. And at that point then we 5 immediately passed that on over to the appropriate 6 committee for them to be able to deal with that. 7 But, again, it's the idea of being there 8 that helps us here in order then to make that -- 9 make that transaction. So I think that's the key. 10 And I think at this point the staff has 11 understood well the need for full communication of 12 some of the background materials. 13 MR. GAU: Yes. I was just going to add 14 that we will work with the committee Chair and the 15 Members to clear any kind of notifications that we 16 are going to put out, whether it be in a tax 17 information bulletin or our "How are we doing" 18 survey as far as the point of contact. 19 MR. RUNNER: Okay. 20 MR. GAU: And we'll run that language, 21 whatever we're going to use, through the Board 22 Members. 23 MR. RUNNER: Okay. Okay. 24 MR. HORTON: What I might suggest, Members, 25 is that we have staff develop this information, 26 develop what will ultimately go into being. Develop 27 what will ultimately be part of the communication to 28 staff as well. And then allow the Members to review 16 1 it and then bring it back to the Board for -- for 2 approval. 3 The challenge always is for legislative 4 bodies or anyone that's providing direction is 5 clarity, transparency and clear intent. And often 6 times, as we know, because we have many former 7 legislators up here, if the Legislature intended it, 8 it would be incorporated in the legislation, either 9 in intent form or direct language. Otherwise, it's 10 left for interpretation, as Member Harkey indicated. 11 Upon my retirement, I will return and 12 interpret this quite differently, depending on -- on 13 who I happen to be engaged with at that particular 14 time. 15 So in order to avoid misunderstanding or 16 any ambiguity, I think that we should -- the Members 17 should have the benefit, after the Committee has 18 reviewed it, taken a look at it, and then submitted 19 it to the body for -- 20 MR. RUNNER: Can I -- I would -- can I 21 suggest that we do that on a three-day? Because I 22 think at that point -- I mean the assumption is -- 23 could be, that there's no controversy in regards to 24 that point of communication. And then in a 25 three-day, if any Member withholds, then it would 26 end up being with the Board. 27 MR. HORTON: Okay. 28 MR. RUNNER: Right? I mean that's what I 17 1 would suggest. Because, again, rather than -- 2 MS. HARKEY: (Inaudible.) 3 MR. RUNNER: Yeah, yeah. I'd hate to see 4 us then spending some more time in a Board meeting 5 trying to wordsmith a letter -- 6 MR. HORTON: I agree. 7 MR. RUNNER: -- that everybody already 8 agrees with. 9 MR. HORTON: I -- I -- 10 MR. RUNNER: So the assumption would be 11 we'd do it on a three-day? Okay. 12 MR. HORTON: I agree. 13 MR. RUNNER: So all's we need is a motion 14 and we can move on. 15 MS. HARKEY: So move. 16 MR. HORTON: Second. 17 MR. RUNNER: Okay. Any objections? 18 Okay. So be it. 19 MR. GAU: Thank you. 20 MR. RUNNER: I guess we -- I guess we 21 should adjourn that part of the meeting. The 22 Customer Service Committee will now be adjourned. 23 ---oOo--- 24 25 26 27 28 18 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 June 23, 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 18 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: July 27, 2015 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 19