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 FEBRUARY 24, 2016 10 11 12 13 14 15 ORGANIZATION OF THE BOARD 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 Jerome E. Horton of Equalization: Chairman 4 5 Sen. George Runner (Ret.) Vice Chair 6 7 Fiona Ma, CPA Member 8 9 Diane L. Harkey Member 10 11 Yvette Stowers Appearing for Betty T. 12 Yee, State Controller (per Government Code 13 Section 7.9) 14 Joann Richmond Chief 15 Board Proceedings Division 16 Randy Ferris 17 Chief Counsel Legal Department 18 19 ---oOo--- 20 21 22 23 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 FEBRUARY 24, 2016 4 ---oOo--- 5 MR. HORTON: Ms. Richmond. 6 MS. RICHMOND: Our next item is the 7 Organization of the Board. 8 MR. HORTON: Members, I would make a motion 9 to appoint Diane Harkey as Chair of the Board. 10 MS. HARKEY: I will second. 11 MR. RUNNER: I will do a substitute motion. 12 MR. HORTON: Discussion, Members? 13 MR. RUNNER: Substitute motion. 14 MR. HORTON: Members, I suggest we take up 15 the motion, give every Member an opportunity to vote 16 on the motion. 17 MR. RUNNER: Well, I'm going a make a 18 substitute motion. Substitute motion will be that 19 the Board move to a rotation for the Chair. 20 MR. HORTON: The item of rotation is up. 21 Maybe we dispense with this and then we're able to 22 move forward and finalize it. 23 So the subsequent motion's on the table; 24 without a second, it dies. 25 Motion on the table. 26 Ms. Richmond, please call the roll. 27 MR. RUNNER: Then I have another substitute 28 motion. 3 1 MR. HORTON: I've -- I've -- I've requested 2 that we call the roll, so we'd have to withdraw 3 that. I don't plan on doing that. 4 Ms. Richmond, please call the roll. 5 MS. RICHMOND: Mr. Horton. 6 MR. HORTON: Aye. 7 MS. RICHMOND: Ms. Harkey. 8 MS. HARKEY: Aye. 9 MS. RICHMOND: Mr. Runner. 10 MR. RUNNER: No. 11 MS. RICHMOND: Ms. Ma. 12 MS. MA: No. 13 MS. RICHMOND: Ms. Stowers. 14 MS. STOWERS: No. 15 MS. RICHMOND: Motion fails. 16 MR. HORTON: My motion fails. 17 MS. STOWERS: Chairman, I would like to 18 nominate Ms. Ma as Chair. I believe her experience 19 as a CPA would be great at this time while we're 20 looking at the SCO audit findings. 21 MR. HORTON: I believe there's a second to 22 that, Member Runner? 23 MR. RUNNER: Second. 24 MR. HORTON: Member Runner seconds. 25 There's a motion and a second to nominate Ms. Ma as 26 Chair. 27 Ms. Richmond, please call the roll. 28 MS. RICHMOND: Mr. Horton. 4 1 MR. HORTON: No. 2 MS. RICHMOND: Ms. Harkey. 3 MS. HARKEY: No. 4 MS. RICHMOND: Mr. Runner. 5 MR. RUNNER: Aye. 6 MS. RICHMOND: Ms. Ma. 7 MS. MA: Aye. 8 MS. RICHMOND: Ms. Stowers. 9 MS. STOWERS: Aye. 10 MS. RICHMOND: Motion carries. 11 MR. HORTON: Congratulations to Ms. Ma. 12 MS. HARKEY: Congratulations. 13 MR. HORTON: I'm sure she'll do an awesome 14 job. 15 And to the -- to the other items on the -- 16 MS. STOWERS: One quick comment before we 17 move on to the next item. 18 MR. HORTON: Sure, mm-hmm. 19 MS. STOWERS: I want to say thank you to 20 you. You've been an excellent Chair, five years. 21 We've had some hard times dealing with some of the 22 issues facing the Department. 23 MS. HARKEY: He's been fabulous. 24 MS. STOWERS: I'd like to commend you on 25 the outreach you did with VITA and other rev -- I 26 mean property-reducing issues, TRaCE, on the Tobacco 27 License Act, and just your overall knowledge of the 28 Department and how you seem to bring us all back 5 1 together when we're out there sometimes. So, thank 2 you very much. 3 MR. HORTON: Thank you very much. Very 4 confident that Member Ma will continue in that line. 5 She's certainly demonstrated that in the 6 Legislature. 7 MS. HARKEY: I would like to say a word, 8 too. I want to thank you very much for your five 9 years of service, and especially this first year of 10 being on the Board, it was absolutely fabulous. You 11 were very, very helpful in keeping this Board 12 together. There was a lot of contention, primarily 13 over the reorg. 14 And I would just like to say that the 15 contention over the reorg has really created a bit 16 of a fracture up here. I would not have even 17 bothered to assert myself had it not been so 18 contentious. And one of the items of contention is 19 the most recent bill that just got put forward that, 20 quite honestly, puts everybody up here in the ditch. 21 It's AB 1828 that Ms. Ma has sponsored. And -- and 22 I would hope that now that she is Board Chair that 23 she would somehow see that this is, you know -- I 24 mean this is not in the best interest of the Board. 25 It's not in the best interest of future -- future 26 communication. 27 I think we all worked together really well 28 for the first six months, and I would like to see 6 1 that return. 2 So that was my reason for not supporting at 3 this time, but that doesn't mean we won't be 4 cooperative going forward. I appreciate everything 5 that she has done with the legislative agenda, even 6 though some of the bills I didn't appreciate. And 7 I'm -- I'm hoping that we can finally get this Board 8 rowing together and not picking things apart. 9 That's what I'd really like to see. I think we -- 10 we had a good six months, and I'd like to see it 11 continue. 12 MR. HORTON: Thank you. 13 Member Runner. 14 MR. RUNNER: You know, I'm sure we're going 15 to take time at the next meeting where there will be 16 some specific issues, you know, talking about the 17 Chair and long service. 18 And, you know, I think whenever you get 19 into obviously these public roles, you know, 20 sometimes public roles are easy and sometimes 21 they're hard. And, you know, the public roles 22 sometimes mean that you end up with disagreements. 23 But at the end of the day I think we've all been 24 around long enough to know that we all have a job to 25 do and we appreciate the hard work that each person 26 and Member does. And I think that we certainly need 27 to make sure that, as we come together next time, 28 that a part of our agenda includes then a thanking 7 1 of the Chair for leadership in this process. 2 MR. HORTON: Thank you, Mr. Runner. Much 3 appreciated. 4 Members, it's been a long time. I mean 5 it's been five years serving as Chair of the Board, 6 and, quite frankly, it is time. 7 As we begin the transition, I believe every 8 Member should have an opportunity to serve as Chair 9 of the Board. It's a unique experience, even though 10 the responsibilities are rather limited, but it is a 11 position that allows you to provide some guidance 12 and some leadership on a number of different issues. 13 And it's been an extraordinary pleasure. 14 With over 35 years of public service, I've often 15 told people that this is the only -- one of the only 16 positions that I'm actually overqualified for. You 17 know what I mean? 18 And so under Member Ma's leadership I think 19 we have some issues that -- to deal with over the 20 next year and a half. I'm very confident in her 21 ability to do that. 22 And, Member Ma? 23 MS. MA: Yeah, thank you. 24 You know, I appreciate serving with 25 everyone here because I think we all bring different 26 perspectives to the Board. And one thing I try not 27 to do in the Legislature is try to take things 28 personally, because we all represent our 8 1 constituents, we all get elected by the people we 2 represent. We may not necessarily agree with each 3 other, but I hope that we can agree to disagree and 4 not take it personally. 5 So, I look forward to working with all of 6 you. I do especially look to the Chair on many of 7 the BOE appeal cases because I think, based on your 8 experience, like you said, you have been around and 9 you've been doing these audits and you've seen these 10 cases, and so I appreciate. And I do change my 11 mind, like the case today, listening to your 12 arguments. And so I think it's -- it's been very 13 helpful to have a healthy debate for each of these 14 cases. 15 I appreciate the dialogue. I think the 16 taxpayers appreciate the dialogue as well. And I, 17 you know, look forward to serving and working with 18 all of you. 19 MR. HORTON: Thank you. 20 Members, during my long term in office I 21 made a couple other recommendations; I'd like to 22 take those up. 23 You know, during this process, one of the 24 things I've sought to do, and I believe we will 25 continue to do, but I think there needs to be a 26 clear path so that -- clear path to Members to be 27 able to advance things on the agenda, and I'm sure 28 Member Ma would be supportive of that. 9 1 And so, I made basically two other 2 recommendations -- three actually. One was that 3 every Member have an opportunity to bring any issue 4 that they want to the Board, to have it discussed in 5 the public. I think it's healthy for the public 6 debate to have that. 7 There was one -- I think, in the five years 8 I've served, there was one misunderstanding as to 9 whether or not I was bringing -- was to bring the 10 organization of the Board to the table. The 11 unfort -- the fortunate thing about being the leader 12 or being the Chair as it relates to the agenda, 13 you're sort of privy -- you're sort of responsible 14 for trying to figure out what the consensus of all 15 the Members. And certainly consensus of these five 16 Members is not an easy thing to attain. And so in 17 that process it may appear as if though you're 18 denying one Member when you're actually taking into 19 consideration of what happens with the other 20 Members. 21 But a clear policy that simply allows 22 Members to advance things to the agenda with a 23 request, I think, would be appropriate. And I mean 24 I would make a motion that that be the policy. 25 Is there a second? 26 MR. RUNNER: Second. Is that -- just to 27 clarify. So on each agenda there would be an item 28 called, like, "Members items"? 10 1 MR. HORTON: No. 2 MR. RUNNER: Oh. 3 MR. HORTON: On each agenda any item that 4 the Members would want to bring forward -- there are 5 some -- there are some particulars that -- I mean 6 things that are under the jurisdiction of a 7 committee should go to that committee and be 8 respectful of the Chair of that particular committee 9 to process it. But they should be able to advance 10 that agenda. I mean, I don't think any of you had a 11 challenge with that, but some folks have expressed 12 concerns about whether or not SEIU, whether or not 13 they can continue to advance their agenda, and I 14 think it's important that we do that. 15 So the motion -- 16 MS. HARKEY: I'd like -- I'd like to offer 17 a little clear -- I think if an agenda item to the 18 Board comes by -- and by two, maybe two -- two 19 Members is maybe a little easier to handle from a 20 Chair position. Because then at least it has some 21 support. You know, I mean I'm just -- I'm just 22 thinking we could get really bogged down with items 23 here. 24 MR. HORTON: Well, the challenge with that, 25 Member Harkey, is that our Members, to their credit, 26 are advancing items in the Legislature. 27 MS. HARKEY: Okay. 28 MR. HORTON: And advancing items here. And 11 1 often times it is the process of debating it in the 2 public that allows us to get to a point of 3 consensus. We very well may not start out, may not 4 be able to establish that consensus. And the 5 inherent danger of having two Members agree on 6 anything is that there's always that third Member in 7 violation of Bagley-Keene. 8 MS. HARKEY: Well, you don't have to 9 violate Bagley-Keene to know that you've got an idea 10 and somebody else wants to support it. I -- I -- to 11 bring to an agenda. So but, you know, whatever you 12 want to do. 13 MR. RUNNER: Again, I -- I'm supportive of 14 the concept. I'm just trying to figure out what 15 that -- what that means right now from what you're 16 saying. Because if you don't have an agenda item 17 that says like "Members items," and a Member wants 18 to put something on the agenda, I'm not just -- I'm 19 not -- I'm trying to get what that means. 20 MR. HORTON: Let me be helpful. The 21 process would be similar to the process of getting 22 any item on the agenda and ensuring that it has 23 been -- that it meets the timeline of the PAN. 24 MR. RUNNER: Right. I get that part, 25 right. 26 MR. HORTON: And so the Members -- what I 27 would recommend is that the Members would submit 28 their idea to be placed on the agenda to the 12 1 Executive Director, have it reviewed by Chief 2 Counsel to ensure that it's legal, have it reviewed 3 by the Department -- impact the Department, just so 4 that they sign off and give the Member some insight 5 into what their perspective is. And then move it to 6 the agenda. Then have the Executive Director simply 7 place it on the agenda. 8 MR. RUNNER: I'm actually okay with that. 9 The only trouble I have with it is it seems to me 10 that Members ought to be able to be the ones putting 11 it on. Again, I can't think of an example, but 12 maybe -- I'm just trying to think if -- I'd hate to 13 have -- 14 MR. HORTON: I can give you a number of 15 'em. 16 MR. RUNNER: No, no. I mean an example of 17 things to go. The idea of having the Department 18 sign off, that you just said, concerns me a little 19 bit. I'm not sure what that means. 20 MR. HORTON: Let -- let -- let me see if I 21 can be helpful. The review by Legal is -- 22 MR. RUNNER: I get review by Legal. 23 MR. HORTON: -- is simply to advise the 24 Member whether or not it is within the legal 25 authority of the Board. 26 MR. RUNNER: I -- I get review by Legal. 27 MR. HORTON: The review by the impacted 28 Department is to provide the Board Member with 13 1 insight into -- and arguably, based on my experience 2 with all of the Members here, they do this anyway. 3 MR. RUNNER: Right. 4 MR. HORTON: I mean I have not seen too 5 many ideas that have not gone to the Department and 6 the Department's done some analysis and provided 7 that Member with their best expertise. 8 MR. RUNNER: Right. 9 MR. HORTON: It is not an impediment to the 10 process. 11 MR. RUNNER: Okay. 12 MR. HORTON: It is just -- 13 MR. RUNNER: You're just saying that it 14 would be good to have them review the issues. 15 MR. HORTON: I'm saying that they should 16 review the issues. 17 MR. RUNNER: Yeah. 18 MR. HORTON: And then once the Member 19 receives that information, it's up to them whether 20 they want to advance it and move it forward. 21 MR. RUNNER: Okay. The Member, it's up to 22 the Member. 23 MR. HORTON: Up to the Member. 24 MR. RUNNER: I got it. Okay. That 25 clarifies for me. I just -- I just didn't want the 26 Members have to go through hurdles trying to get 27 staff permission. You know what I mean? But if 28 what you're talking -- I think what you're laying 14 1 out is a smart thing to do. 2 MR. HORTON: Okay. 3 MR. RUNNER: And that is, first of all you 4 want to make sure it's legal. Second thing, you 5 want to make sure what hurdles staff would have. 6 And then you -- and then you go on to the agenda. 7 So I -- I -- I get it. 8 MR. HORTON: Thank you. 9 MR. RUNNER: I'm fine. 10 MR. HORTON: So there's a motion and a 11 second to that effect. 12 Discussion, Members? Further discussion? 13 Hearing none, such will be the order. 14 Members, to the issue of the rotation, I 15 clearly believe that every Member should have an 16 opportunity to serve. This is a -- Member John 17 Chiang, who is currently our -- our -- what is John? 18 John's our Treasurer, saw the wisdom in that when he 19 served on the Board of Equalization. A number of 20 other Members have seen the wisdom in that. And I 21 certainly would be supportive of that and would make 22 such a motion if there was a second. 23 MR. RUNNER: Is that a motion? 24 MR. HORTON: It's a motion. 25 MS. MA: What's a motion? 26 MR. HORTON: It's a motion. It's a long 27 way to get there, but it's a motion. 28 MS. MA: What's your motion? 15 1 MR. HORTON: The motion is to have the 2 Chairmanship rotate. And I believe Chief Counsel is 3 here to kind of speak to the history if the Members 4 would like to hear that. 5 MR. RUNNER: I'll second that. 6 MR. HORTON: Okay. Second by Member 7 Runner. 8 I would ask Chief Counsel to come and just 9 brief us on the history pursuant to the request of 10 Mr. Runner. Mr. Runner made the request that Chief 11 Counsel would provide some guidance on how that has 12 happened historically. 13 MR. FERRIS: Yes. Randy Ferris, Chief 14 Counsel. 15 Yeah, there have been five instances where 16 the Chairship has rotated through the five -- the 17 four district elected Members within a given 18 four-year term. And it's been done in a variety of 19 ways. Sometimes there appears to have been a plan 20 to do it in some source of sequential order, and 21 other times it appears to be random. So -- 22 MS. STOWERS: Chair. 23 MR. HORTON: That's history? 24 Member Stowers. 25 MS. STOWERS: Mr. Ferris, when they did it, 26 did they do it at the start of the four-year term or 27 midway through the four-year term? Could you tell 28 from that data? 16 1 MR. FERRIS: Right. I -- for purposes of 2 the memo, I -- I focused on the five instances where 3 within a given four-year term -- 4 MS. STOWERS: Okay. 5 MR. FERRIS: -- you know, an elected term 6 of a Member -- 7 MS. STOWERS: Mm-hmm. 8 MR. FERRIS: -- that the Chairship rotated 9 amongst the four district-elected Members within 10 that given four-year term. 11 If you just expand it to a wider thing of 12 within any given four-year period that didn't 13 necessarily completely overlap with a term of a 14 sitting Board, where maybe two different Boards 15 rotated around through the four, there might be more 16 instances than these five. 17 But my understanding of what you all were 18 contemplating would be within your four-year term, 19 not necessarily binding future Boards as to what 20 they want to do. 21 MS. STOWERS: Right. 22 MR. HORTON: I would say, Members, that we 23 can't bind future Boards and so -- and I can share 24 historically what pretty well happened. 25 Treasurer Chiang simply said that he 26 thought it was, that everyone should have an 27 opportunity to do this after his experience, and 28 provided that opportunity. And then what happened 17 1 was there was a dispute over a Franchise Tax Board 2 matter and the majority of the Members took that 3 back -- 4 MR. RUNNER: Mm-hmm. 5 MR. HORTON: -- and said, "Whoa, wait a 6 minute here." 7 But I think that was -- that was an unusual 8 action by an unusual Member which doesn't seem to be 9 reflective of the Members that we have here. 10 I've actually -- one of the things that I 11 had appreciated here is that -- is the nonpartisan 12 that primarily takes place when it comes to the 13 administration and the staff issues here and our 14 ability to discuss these items. 15 Member Ma and Member Runner have worked 16 together on a number of significant issues and have 17 advanced a number of issues here at the Board of 18 Equalization and so forth. I've had an opportunity 19 to work with other Members as well. 20 And so the role of the Chair is 21 facilitating these meetings. Whether you're Chair 22 or not, your ultimate vote is what you end up is 23 entirely up to you. The other role that I've sort 24 of adopted as Chair was not really to make motions 25 and to try to listen to the Members and allow as 26 much of the debate as we can; and then, to the 27 extent possible, bring some clarification to the law 28 without taking a position, unless I absolutely felt 18 1 I had to. 2 But everyone will handle this position 3 differently. 4 MS. STOWERS: Yeah, I understand what 5 you're saying, and obviously it doesn't affect me 6 at all. 7 MR. HORTON: Hey, hey, you know, we 8 could -- we could include you now. 9 MS. STOWERS: But I just think -- 10 MR. HORTON: Let me ask that question, if 11 you don't mind. 12 Could -- could -- could the Deputy serve? 13 Probably not. 14 MR. FERRIS: I don't know about that. 15 There have been times where the Controller -- in the 16 history of the Board, there have been times where 17 the Controller has been the Chair of the Board. 18 MR. HORTON: Yeah. 19 MS. MA: Oh, there you go. 20 MR. RUNNER: Now it's going to get 21 confusing. 22 MR. FERRIS: 1872. So before -- 23 MS. STOWERS: 1872. 24 MR. RUNNER: Precedent. 25 MR. FERRIS: Before it was a constitutional 26 office. 27 MS. STOWERS: Okay. 28 MR. HORTON: Well, there's -- 19 1 MS. STOWERS: Well, under the Constitution 2 she could not. 3 MR. HORTON: There's -- there's a -- 4 there's young lady by the name of Ms. White might 5 like to see that. Anyway. 6 MS. STOWERS: Anyway, my thought is that 7 rotation could be good. But I just think at this 8 juncture it's a little premature, and it's something 9 that the Board should consider at the start of the 10 next four-year term. 11 So, I can't do the math on that. That 12 would be two years, two and a half years from now. 13 MR. HORTON: It would be 2018. But I mean 14 that would -- 15 MR. FERRIS: January of -- January of 2019, 16 right. 17 MS. STOWERS: Yes. 18 MR. HORTON: Yeah, I mean that would -- 19 MS. HARKEY: Well, I'll be the only one 20 here. 21 MR. HORTON: Well, I was trying to figure 22 out a way to make that point, but -- but I think 23 that's clear enough. 24 Okay. I mean we got it. I still think 25 that my motion stands to rotate the Chairmanship. I 26 believe Mr. Runner has seconded it. 27 Ms. Richmond, please call the roll. 28 MS. RICHMOND: Mr. Horton. 20 1 MR. HORTON: Aye. 2 MS. RICHMOND: Ms. Harkey. 3 MS. HARKEY: Aye. 4 MS. RICHMOND: Mr. Runner. 5 MR. RUNNER: Aye. 6 MS. RICHMOND: Ms. Ma. 7 MS. MA: No. 8 MS. RICHMOND: Ms. Stowers. 9 MS. STOWERS: No. 10 MS. RICHMOND: Motion carries. 11 MR. HORTON: There is a -- now we have to 12 somewhat figure out how to do this. 13 Any thoughts, Members? 14 MR. RUNNER: Yeah, let me suggest a 15 rotation process. And maybe it might be a bit 16 logical even in that sense. 17 And since Ms. Ma right now is Chair, that 18 we start with the District 1 -- or, excuse me, we 19 start with District 2 as she is Chair. 20 MS. HARKEY: Okay. 21 MR. RUNNER: And got backwards 1, and then 22 we would go -- then we would go 4. 23 MS. HARKEY: We do this, and then we go 24 backwards. 25 MR. RUNNER: Then we go 4. Then we go 4. 26 MS. HARKEY: Oh, Mr. Runner, you are so 27 transparent. 28 MR. RUNNER: That -- that -- that, I think, 21 1 is a -- is a reasonable way to do it. 2 MS. HARKEY: Okay. Well, I -- 3 MR. RUNNER: I would also suggest that 4 because we're doing this in the -- in the mid-term 5 almost, in March, and normally organization is in 6 the -- is in the January. 7 MR. HORTON: Well, for the is last five 8 years organization hasn't existed. 9 MR. RUNNER: Well, right. But norm -- but, 10 again, it's going to be a new Board. It'd be a new 11 Board. 12 MR. HORTON: So -- 13 MR. RUNNER: I would suggest, and I would 14 be open to then going from March to March in this 15 first year with Member Ma. In the rotation to the 16 First District, I will be glad to take the shortened 17 term in order then to get us back on schedule for a 18 January reorg. 19 MS. HARKEY: You know what? I really -- 20 I'll be honest with you -- 21 MR. HORTON: Members -- 22 MS. HARKEY: -- I really don't care. Let 23 me tell you -- let me tell you why. Because 24 any time this Board doesn't want to reorg, it 25 doesn't have to. 26 MR. RUNNER: Right. 27 MS. HARKEY: So even if we say we're going 28 to reorg, we don't have to. 22 1 MR. HORTON: Members -- 2 MS. HARKEY: We've seen -- I mean that's 3 just the way it is. You got to have three votes. 4 You got to have three votes. 5 MR. RUNNER: Right. 6 MS. HARKEY: So -- 7 MR. HORTON: Okay. 8 MS. HARKEY: -- I don't really care. 9 MR. HORTON: Members, I don't necessarily 10 see the logic in going backwards and then forward 11 and then skipping. 12 What -- what -- what would happen is is 13 that you you're at 2, you would go back to 1, you 14 would skip 3 and jump to 4. 15 MR. RUNNER: Not if you're going backwards, 16 you're not. But that's fine. 17 MR. HORTON: You just roll backwards? 18 MR. RUNNER: Yeah, just go backwards. 19 MR. HORTON: Yeah. 20 MS. HARKEY: Yeah. So George is next. 21 MR. HORTON: Cars don't do that very well. 22 But, anyway. I mean I appreciate, you 23 know, the desire to be next in line. 24 MR. RUNNER: Well anything we're going to 25 do is going to be arbitrary. 26 MR. HORTON: But I think if you just follow 27 the historical, you know, way of just -- we're at 28 District 2, we go 3, we go -- skip me, which I'm 23 1 cool with because I've served my term. But it would 2 be in order, and it would be in a logical order. 3 Then 4, and then back up to 1. 4 And the decision as to whether you split 5 the period, I don't think it really matters when we 6 can be consistent in doing the reorg. And then if 7 Member Runner's prepared to take the short period, 8 you got the short period. 9 MR. RUNNER: I'll take the short period. 10 If that's the way the Board wants to go, I'm willing 11 to go ahead and take the short period. 12 MR. HORTON: That would be my motion, that 13 we move in numerical order, 2, skip 3, go 4, go 1. 14 Presuming Member Harkey would second that. 15 And discussion, Members? 16 Hearing none, Ms. Richmond, please call the 17 roll. 18 MS. RICHMOND: Mr. Horton. 19 MR. HORTON: Aye. 20 MS. RICHMOND: Ms. Harkey. 21 MS. HARKEY: Aye. 22 MS. RICHMOND: Mr. Runner. 23 MR. RUNNER: Aye. 24 MS. RICHMOND: Ms. Ma. 25 MS. MA: No. 26 MS. RICHMOND: Ms. Stowers. 27 MS. STOWERS: No. 28 MS. RICHMOND: Motion carries. 24 1 MR. HORTON: One other item. Is there one 2 other? 3 MR. RUNNER: Let me assume then that the 4 incoming Board Member would serve as Vice Chair? 5 The upcoming -- the incoming -- the assumption would 6 be the incoming Chair or -- 7 MR. HORTON: Well, as -- as -- as Member Ma 8 has said today, and quite eloquently, let's not make 9 any assumptions here. So I would be supportive of 10 that -- 11 MR. RUNNER: I'm fine with that. I think 12 it makes logical sense. 13 MR. HORTON: -- Member Harkey being Vice 14 Chair. So there's a first and a second with her 15 being the Vice Chair. 16 MR. RUNNER: Well, actually, I'd like the 17 policy in place, you know. Not only -- 18 MS. HARKEY: Not me? 19 MR. RUNNER: No, no. No, that the 20 incoming -- that the Chair -- the incoming Chair the 21 following year would become Vice Chair. That way 22 you -- that way there's not a discussion every 23 year. 24 MR. HORTON: All right. 25 MS. STOWERS: Does that mean we won't vote 26 for Vice Chair now? 27 MR. RUNNER: Hmm? 28 MR. HORTON: We're going to vote now. 25 1 MS. STOWERS: We will vote for Vice Chair 2 now? 3 MR. HORTON: Vote for Vice Chair now. 4 Ms. Stowers, Vice Chair? 5 MS. STOWERS: Yeah, I nominate Mr. Runner 6 for Vice Chair. 7 MR. HORTON: Okay. 8 MS. MA: Second. 9 MR. HORTON: Well, Mr. Runner has nominated 10 Diane Harkey, so -- 11 MS. STOWERS: That's why I wanted to get 12 clarification. 13 MR. HORTON: Yeah. There's a motion to go 14 in the order of -- as articulated. Mr. Runner has 15 expressed his okay with that. Second by Mr. Runner. 16 And so, unless there's a subsequent motion 17 that would say that, you know, you disagree with 18 that. But it seems that there's a consensus. I 19 mean we got an opportunity to start out on a fair 20 and equitable stage here. And so I would suggest we 21 do that. 22 Ms. Richmond, please call the roll. 23 MS. RICHMOND: Mr. Horton. 24 MR. HORTON: Aye. 25 MS. RICHMOND: Ms. Harkey. 26 MS. HARKEY: Aye. 27 MS. RICHMOND: Mr. Runner. 28 MR. RUNNER: Aye. 26 1 MS. RICHMOND: Ms. Ma. 2 MS. MA: Aye. 3 MS. RICHMOND: Ms. Stowers. 4 MS. STOWERS: Aye. 5 MS. RICHMOND: Motion carries. 6 MR. HORTON: And the last item, and -- 7 MR. FERRIS: Just a point. There will be 8 an issue in the fourth year because there won't be 9 an incoming Chair. So you'll have to vote on Vice 10 Chair -- 11 MR. RUNNER: Oh, in that incoming year. 12 MR. FERRIS: -- in the last year. 13 MR. RUNNER: Yeah. 14 MR. FERRIS: So, just a point of 15 clarification. 16 MR. RUNNER: Right. Yeah. 17 MR. HORTON: Well, we -- we have -- we 18 would defer that to the incoming Members. 19 MR. RUNNER: You could assume -- you could 20 assume the rotation, I guess, and then let it happen 21 or not. 22 MR. FERRIS: In March of 2018 -- 23 MR. RUNNER: Right. 24 MR. FERRIS: -- Member Runner would 25 become -- move from Vice Chair to Chair. And for 26 the remainder of 2018, you would need to elect a 27 Vice Chair -- 28 MR. RUNNER: Right. 27 1 MR. FERRIS: -- if you want one. 2 MR. RUNNER: You could assume the rotation, 3 and then -- 4 MR. FERRIS: Right. 5 MR. RUNNER: Right. 6 MR. HORTON: All right. We'll figure that 7 out. 8 MR. FERRIS: Okay. 9 MR. HORTON: The last issue -- and, 10 Members, let me -- let me be clear here. I'm not 11 necessarily moving these issues, because I think 12 this is something that I -- my own personal opinion. 13 This is what I actually think is the consensus of 14 the Board. 15 In fact, I don't even see a need for the 16 second one. 17 Any other discussion, Members? There's 18 another item I recommended. If the Members want to 19 take it up, they can. If not -- 20 MS. HARKEY: What was that? 21 MR. HORTON: Well, the item was to -- 22 it's -- it's the way I currently do this, which is 23 the assignment of the Chairs of the various 24 different committees. 25 I am hopeful over the next two or three 26 years that we can figure out a way to do what Member 27 Ma has done with the Legislative Committee and 28 Member Harkey has done with the Business Tax 28 1 Committee; and that is actually have them involved 2 in more interested parties meetings and engaging in 3 changing, as a change agent, as these two 4 individuals have done. And certainly in the absence 5 of Chairing the Board, I look forward to that 6 opportunity. 7 But the recommendation was to have that be 8 a public discussion so that we have that public 9 sign-off of those Members becoming Chair of the 10 various committees. So, in this case that the Chair 11 would make the recommendation, be ratified by the 12 Board, which is the way I basically have done it to 13 the extent that I had restrictions of Bagley-Keene. 14 Quite frankly, I just ask Member Ma, What 15 do you want do you? And she says legislation. I 16 said, What do you want to do? She said Business 17 Tax. Mr. Runner, said, What do you want to do? 18 Customer Service. And I just take whatever's left, 19 you know, which is Property Tax. Which is another 20 one of the roles of leadership, is to submit to the 21 other Members and what their desires is. 22 So I make a motion to that effect. Is 23 there a second? 24 MR. RUNNER: No, I'm not going to second. 25 I have a question on it. 26 MR. HORTON: Question? 27 MR. RUNNER: I don't know how that actually 28 works. I guess, you know, I don't know how that 29 1 actually works. 2 MR. HORTON: It -- the Chair would 3 recommend the Chair of the various committees. This 4 is the way it currently works. And then that 5 recommendation would come before, to the Board and 6 the Board would ratify it. 7 MR. RUNNER: No, that's not the way we're 8 currently doing it, is it? 9 MR. HORTON: Well, that's the informal way 10 that we currently do it. I mean currently, I don't 11 do much without -- 12 MR. RUNNER: Right. 13 MR. HORTON: -- having the consensus of 14 what the other Members -- 15 MR. RUNNER: I guess my question is, why 16 don't we keep doing it the way we're doing it then 17 if that's -- 18 MR. HORTON: I'm good with that. 19 MR. RUNNER: That would be my issue. 20 MS. HARKEY: I think -- I think what Mr. 21 Horton is saying is that he's concerned for 22 potential Bagley-Keene because it's -- you know, 23 he's -- he's circulating around Members. And I -- I 24 don't think he's had that problem because we -- 25 nobody really wanted to do a whole lot with these 26 Board -- the Chairs before, or these committees 27 before, and now we're all very active. 28 So, I think that's what he's trying to 30 1 avoid. But I don't know that we will have a problem 2 with that. 3 MR. HORTON: Yeah, I'm just -- I'm just -- 4 I think Member Harkey has articulated it. I'm 5 trying to get it into the public, public purview so 6 that there's a discussion, so that we don't have to 7 try to figure that out. 8 I'm also saying that it doesn't have to be 9 figured out at all, you know what I mean. Nobody 10 has to discuss it. We just roll with it because the 11 unfortunate inherent nature of these positions -- I 12 don't know if anybody really -- well, I don't know 13 how much Members actually serve on these committees 14 currently. 15 MS. HARKEY: We do. Our staff does. 16 MR. HORTON: And so I think staff does a 17 yeoman's job in that regard. But I got a suspicion 18 that Member -- Members will begin to serve more if 19 we begin to structure it differently. And, quite 20 frankly, I'm looking at, not necessarily this term, 21 but as we go forward, it's just a good message to 22 the general public that it is something to discuss. 23 But that's -- I mean I get the -- 24 MS. HARKEY: What does Ms. Ma -- 25 MR. HORTON: Member Ma. 26 MS. MA: Can I -- can I ask, I brought this 27 up late last year that I wanted to form a standing 28 committee for audit and budgets, to go over the 31 1 audits, and also during budget time especially. 2 And, you know, we never had a discussion publicly 3 about this. 4 And I know that Ms. Stowers and I formed 5 kind of a subcommittee to review the RFP. I still 6 think that we, as a Board, need more oversight in 7 terms of what's happening internally with the audit, 8 you know, and -- 9 MR. HORTON: Those -- 10 MS. MA: -- and also the budgets. As we 11 approach, you know, the Assembly Sub 4 coming up, I 12 think that is important that Members get engaged and 13 not just let it go like, you know, without some sort 14 of oversight from our Board. 15 I just see with the last audit that the 16 Controller did, that that is a need. And 17 whatever -- you know, I've been on the Board of 18 Supervisors, I've been in the Assembly. I've been 19 on nonprofit boards, and there's always a Budget and 20 Audit Committee. They take that very, very 21 seriously. 22 And so, I don't know how we want to address 23 this. 24 MR. RUNNER: Let me -- 25 MR. HORTON: I think -- 26 MR. RUNNER: Let me ask -- let me ask the 27 Chief Counsel a quick question on that. 28 What -- there's nothing that would prohibit 32 1 us from having -- in fact, we've done it -- 2 assigning two committees -- two Members to a 3 subcommittee with a subject then that they work on 4 and then report back to the Board. 5 MR. FERRIS: No, there's nothing that 6 prohibits that. 7 MS. HARKEY: Because that might not be a 8 full-time job. 9 MR. RUNNER: So -- yeah, so I mean if 10 indeed we felt that there was a need for a 11 subcommittee, a subcommittee could identify, for 12 instance, the committee that laid out here, that 13 Fiona was just talking about, a Budget and Audit 14 Committee could be the subcommittee of two Members 15 who would then work with appropriate roles at that 16 point. And then would come back and report to the 17 Board as a whole for any actions that needed to take 18 place. 19 MR. FERRIS: Yes. And the Board can also 20 just tell the Executive Director or Chief Deputy -- 21 MR. HORTON: -- to do it. 22 MR. FERRIS: -- that that's on the agenda 23 every month to -- and here are the questions we want 24 you to be addressing before us this month. 25 MR. RUNNER: Yeah. 26 MR. FERRIS: Yeah, so you have mechanisms 27 in place to have oversight. 28 MR. RUNNER: Let me ask -- my question, I 33 1 guess then, is to -- to Chair Ma. Then, I mean are 2 you looking for something like that? Or are you 3 looking for actually a -- which would be a committee 4 as a whole, which I'm not sure I'm supportive of a 5 committee as a whole to deal with that issue. 6 MR. HORTON: Members. 7 MR. RUNNER: Can I -- 8 MR. HORTON: One second. We would have to 9 maybe put -- we can discuss whether or not, because 10 it's on the agenda, we can discuss whether or not we 11 should take the item -- the assignment of committees 12 up for ratification by the Board. We cannot discuss 13 the -- whether we're going to establish any other 14 Board. 15 I think we can have clarification, the 16 Board has established committees before. We 17 recently established a committee by a vote of the 18 Board to oversee the -- the audit process where -- 19 of which Member Ma and Member Stowers was on the 20 Committee. We can do that. 21 The committee assignment process is open to 22 the Board, open to the interpretation of the Board 23 as to how we accomplish that. 24 Relative to the request of if -- if part -- 25 let me see if I can frame this. If part of -- if, 26 hypothetically, a matter was to come before the 27 Board on a -- on any committee, that's one of the 28 recommendations -- one of the reasons I recommended 34 1 it, as articulated by Member Ma, that I think it 2 gives the Board to have all the input that they need 3 to have and in the public so that they can establish 4 those committees. So if any Member wants to bring 5 that before to the Board, they can. And you provide 6 for ratification. 7 Just by way of process -- I guess I can 8 discuss this -- is that the recommendation was to 9 establish an internal audit committee. And, quite 10 frankly, I thought that was a violation of a number 11 of different laws and would have put the risk -- the 12 organization at huge risk. And so the desire at 13 that point was to shift it back to maybe a potential 14 budget committee, which is something I would be 15 supportive of. 16 So this discussion itself is why I made the 17 recommendation and why I think it's of value that we 18 have these types of discussions in the public about 19 committees -- that committees can be recommended by 20 any Member and then ratified and discussed in the 21 public, and then ratified by the Board. 22 And when it goes through the legal process, 23 Legal will certainly counsel us as to whether or not 24 that's a workable thing. So again -- 25 MR. RUNNER: I'm not sure if Member Ma got 26 an answer. 27 MS. HARKEY: I think -- I think -- I think 28 that -- 35 1 MR. HORTON: The answer's yes. 2 MS. HARKEY: -- Member Ma will have her 3 opportunity to bring anything forward that she 4 wants. 5 MR. FERRIS: The tradition of the Board is 6 that the Chair has the authority to establish ad hoc 7 committees at the Chair's discretion. 8 MS. HARKEY: So she can establish one. 9 MR. RUNNER: Ad hoc by definition is less 10 than -- is two? 11 MR. FERRIS: What? 12 MR. RUNNER: An ad hoc committee is a 13 minority? 14 MR. FERRIS: No. I think an ad hoc 15 committee is a committee in addition to the four 16 regular committees of the Board, for whatever 17 special purpose is within the purview of the 18 Board. 19 MR. RUNNER: Okay. 20 MS. MA: So then how do we do that without 21 violating Bagley-Keene? So last year Senator Runner 22 and I, you know, went to the Assembly and 23 represented our agency in front of the Assembly or 24 Joint Budget Committee. 25 I thought it was helpful for us to be 26 there, but realistically we were not involved in the 27 presentation, nor did we really know what the staff 28 was going to present. I thought that was not 36 1 helpful for us and I would like to see Members more 2 engaged if we are going to do things like that. 3 Like we need to be briefed. We need to be, you 4 know, part of it, not just sitting there listening 5 to someone give a report where we didn't really know 6 what was going to come out on the report. 7 So I'm just saying to the Board Members, I 8 think we need to have more input. We do need to 9 take more oversight if we are going to really, you 10 know, ensure that, you know, the integrity of the 11 Board as well as, you know, the audit gets finished. 12 I'm okay with having an ad hoc. I don't 13 know how we can do it without violating 14 Bagley-Keene. Do we kind of volunteer to be on an 15 ad hoc committee? Or, you know, I know the Chairman 16 kind of said, Who wants to work on it? We worked -- 17 Ms. Stowers and I worked on the RFP for the CPA 18 firm. 19 So, what would you suggest? 20 MR. FERRIS: Well, in order to avoid 21 Bagley-Keene problems, you would only want to have 22 two Members working together and then reporting in 23 public session to the other three Members what 24 your -- what your committee is doing and whatever 25 actions you're recommending. 26 MR. HORTON: Members, I would -- I would 27 suggest -- I mean, first, to being able to get any 28 information that any Member wants before appearing 37 1 before a committee, I think they simply have to ask. 2 It does not need to be a committee. You just simply 3 ask and -- 4 MR. FERRIS: The mechanism exists 5 presently. 6 MR. HORTON: This exists to do that. 7 Second, I mean I think the discussion -- 8 having that discussion in the public is of value, as 9 we have demonstrated here and why, you know, I've 10 made the recommendation. 11 Absent of having it -- having two Members 12 serve on a committee is inherently challenging 13 because the issues that may be discussed in the 14 committee, those two Members would be prohibited 15 from being able to shift around and have discussions 16 with other Members that they think they need to have 17 discussions with, being cognizant of the fact that 18 the two Members on that committee may not always 19 agree. And when they don't agree, if they were not 20 on the committee, they would have privy to the 21 information and be able to go to another Member 22 that's not on the committee and have that discussion 23 without violating Bagley-Keene. 24 So having two Members in this environment 25 is relatively challenging. It works on the City 26 Council when the council is made up of nine members, 27 because establishing a quorum is a little more 28 complicated. So -- 38 1 MS. MA: So -- 2 MR. RUNNER: Can I just clarify though in 3 terms of a path that I think -- 4 MS. MA: One other thing. So I'd like to 5 go back to my recommendation last year to form an 6 audit and budget standing committee, so that we all 7 can sit on it, like we do for Leg., like BP, like 8 property taxes. That's what I initially, you know, 9 threw out there and haven't really had the 10 opportunity to discuss it. But now seems to be the 11 time, and maybe we can agendize it and talk about 12 it. 13 MR. HORTON: Before any Members discuss 14 that, Madam Chair, if that's your desire, I would 15 suggest that you express that to the -- to the 16 Executive Director, and have it placed on the agenda 17 and would suggest that it be placed on the agenda 18 for an open discussion. 19 And I would probably say, without even 20 hearing or saying my opinion on that, I would say 21 that there probably would be some consensus to that 22 regard. 23 MR. RUNNER: And -- and -- and kind of 24 following up on a more practical path, because I 25 think the example you used was all of a sudden we 26 were -- they were -- the Legislature was meeting, 27 there were hearings going on, there were concerns in 28 regards to some aspects of the BOE budget and 39 1 whatnot. It seems like what I'm hearing right now 2 is that a Chair has the ability to then work with 3 staff and bring up -- and, again, work with them in 4 regards to that presentation, can call another 5 Member in to be a part of that I guess -- I'm sorry, 6 you called it a -- 7 MR. FERRIS: Ad hoc. 8 MR. RUNNER: An ad hoc committee, to go and 9 represent the Board then on those issues, working 10 along with the staff on that presentation. Is that 11 what -- I mean that would be -- 12 MR. FERRIS: Right. 13 MR. RUNNER: We have a path to do that 14 now. 15 MR. FERRIS: Yes. 16 MR. RUNNER: Okay. 17 MR. HORTON: I mean -- 18 MR. FERRIS: You also can talk about it, 19 the five of you, with a fifth committee that you 20 established. 21 MR. RUNNER: Right. 22 MR. FERRIS: That would follow the same 23 normal rules -- 24 MR. HORTON: Five of us. 25 MR. FERRIS: -- that all the other 26 committees are following and get agendized. 27 MR. RUNNER: Yeah. 28 MS. HARKEY: Okay. 40 1 MR. HORTON: And the reality, Members, 2 these Members aren't restricted. They can show up 3 any time they want, anywhere they want, and I think 4 they all know that. 5 MR. RUNNER: Yeah. 6 MR. HORTON: So, I think you guys have all 7 made the case for the necessity to have this and to 8 have a public discussion. So I would -- and I 9 thought that was the consensus when I put it on the 10 agenda. So, I would -- 11 MS. HARKEY: Agendize. 12 MR. HORTON: -- return to the motion to 13 have committee assignments discussed in the public 14 and ratified in the public under the direction of 15 Madam Chair. 16 Is there a second? 17 MS. HARKEY: Second. 18 MR. HORTON: There's a second. 19 Ms. Richmond, please call the roll. 20 MS. RICHMOND: Mr. Horton. 21 MR. HORTON: Aye. 22 MS. RICHMOND: Ms. Harkey. 23 MS. HARKEY: Aye. 24 MS. RICHMOND: Mr. Runner. 25 MR. RUNNER: No. 26 MS. RICHMOND: Ms. Ma. 27 MS. MA: Aye. 28 MS. RICHMOND: Ms. Stowers. 41 1 MS. STOWERS: I'm sorry. It's late. 2 What was the motion? 3 MS. HARKEY: To have the -- have the -- 4 have the committee discussed at the Board and 5 decided by the Board. 6 MS. STOWERS: Oh, aye. 7 MS. MA: Tonight or -- 8 MR. HORTON: No, no, no. We can't do it 9 tonight. We can't do it tonight. 10 MS. HARKEY: I would like -- I would like 11 to offer one more thing, Mr. Chair. 12 MR. HORTON: We're voting, and the last 13 thing I want to do is exit out of here with a 14 violation of Bagley-Keene, anything like that. 15 There's a -- so the vote is taken. 16 Ms. Richmond, please. 17 MS. RICHMOND: The motion carries. 18 MR. HORTON: Motion carries. 19 General discussion of any item on the 20 agenda? 21 MS. HARKEY: Not -- this is just -- 22 MR. HORTON: Well, let me do this. Let me 23 do this. The meeting of the Board of Equalization 24 is -- 25 Well, I can't do that either. That still 26 creates the same problem. 27 Let me just hear what you want to say. 28 MS. HARKEY: Yeah. It's pretty simple. 42 1 I've just -- you were saying some of the items that 2 you'd like to see and this is not really necessarily 3 for a vote, but for a consideration. 4 MR. HORTON: Even consideration, you might 5 want to -- 6 MS. HARKEY: Something -- 7 MR. HORTON: If it's not on the agenda, I 8 might suggest we just bring it back. 9 MS. HARKEY: Well, because it's based 10 with -- it's based with the reorg and everything 11 else. And it's just the order of the agenda. I 12 think -- I think the agenda that we see each week, 13 probably I'd like to see more of the -- more of the 14 items where the taxpayers get in a little bit 15 quicker and maybe we rotate that. 16 I'm just -- I'd like to have the Chair 17 consider such an item. I think it's real hard for 18 me to sit here and take half a day with people 19 sitting and waiting. And so that's something I'd 20 like to see. 21 MR. HORTON: I think that's a -- that's a 22 question of Chief Counsel. 23 MR. RUNNER: Don't -- 24 MR. HORTON: Without discussion, Members, 25 if we may. 26 MR. RUNNER: Don't we have the ability 27 though? Just -- I think we can -- we can discuss 28 this. 43 1 MR. FERRIS: The Chair has the discretion 2 to take items in any order. 3 MR. RUNNER: Yes. 4 MR. HORTON: There you go. 5 MR. RUNNER: There you go. See, I think we 6 can -- right. 7 MR. HORTON: I think Chief Counsel can 8 handle it. 9 Chief Counsel? 10 MR. FERRIS: Yeah. 11 MR. HORTON: Okay. 12 MR. FERRIS: We're good. 13 MR. HORTON: All right. 14 MS. HARKEY: No violations. 15 MR. FERRIS: No violations. 16 MS. HARKEY: It's all out in public if it 17 was. 18 MR. FERRIS: We're talking about a 19 procedure. 20 MR. HORTON: Members, the meeting -- 21 MS. HARKEY: So it's done. 22 ---oOo--- 23 24 25 26 27 28 44 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 February 24, 2016 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 44 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: March 25, 2016 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 45