Approved Public Meeting Minutes - Tuesday, December 12, 2000

Tuesday, December 12, 2000

The Board met at the Holiday Inn, Capitol Plaza, 300 J Street, California Room, Sacramento, at 9:40 a.m. with Chairman Andal, Vice Chairman Parrish and Mr. Chiang present.

BOARD/ASSESSORS’ MEETING

Mr. Andal opened the annual meeting between the Board and county assessors required under Section 15607 of the Government Code to study and discuss problems of administration of assessment and taxation laws and to promote uniformity and tax procedural matters throughout the state. Mr. Andal welcomed the county assessors to the meeting.

OPENING REMARKS

Mr. Parrish thanked the county assessors for coming and welcomed the county assessors to ask questions. Mr. Chiang welcomed the county assessors to visit his offices. Mr. Andal discussed the subject of campaign contributions. He stated that the Assessment Appeals Board has no limitation on the amount of contributions however the Board of Equalization members do have a contribution limit of $250. The Board acts as both the assessor and the Assessment Appeals Board in the event of an appeal after the May value settings. Mentioning the controversy between the assessors and the Board, Mr. Andal indicated that the public could only comment during the Board’s public comment period but the public cannot do so before the assessors. Mr. Andal said that he would prepare a reform proposal to share with the County Assessors’ Association regarding this issue. Ms. Mandel entered the Boardroom on behalf of Dr. Connell in accordance with Government Code Section 7.9. Ms. Mandel commented that she was glad to be at the Board/Assessors meeting and glad to see everyone.

David Gau, Chief, Policy, Planning & Standards Division, Property Taxes Department, thanked everyone for coming to the meeting and thanked the Board Members for providing the refreshments.

Larry McCarthy, California Taxpayers Association, Dave Peets, Alpine County Assessor and President of the California Assessors’ Association, and John Winner, El Dorado County Assessor and President-Elect of the California Assessors’ Association provided opening remarks and discussed the appeals process.

PANEL DISCUSSION ON RESIDENT-OWNED MOBILEHOME PARKS

The panel discussion on resident-owned mobilehome parks consisted of Bob Petersen, Santa Cruz County Assessor, Larry Kurmel, Member, Advisory Council to the Santa Cruz County Association and Dan Nauman, Board’s Senior Legal Tax Counsel. Mr. Andal left the Boardroom.

The Board recessed at 11:00 a.m. and reconvened at 11:10 a.m. with Vice Chairman Parrish, Mr. Chiang and Ms. Mandel present.

VALUATION OF SECTION 515 HOUSING

Steven D. Jorgensen, Review Appraiser, U.S. Department of Agriculture, expressed his appreciation in being able to address such a distinguished on the valuation of Section 515 Housing. (Exhibit 12.10).

Exhibits to these Minutes are incorporated by reference.

PUBLIC COMMENTS

Bill Martin, Central Pacific Housing Development

Mike Middleton, President, Protax

The Board recessed at 12:00 p.m. and reconvened at its offices at 450 N Street, Sacramento, at 1:30 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang present. Mr. Klehs stated that he was not participating in the appeal of Edison International, 53591 and left the Boardroom. Ms. Mandel entered the Boardroom on behalf of Dr. Connell and in accordance with Government Code Section 7.9.

FRANCHISE AND INCOME TAXES HEARINGS

Edison International, 53591

12-31-88 to 12-31-90, $16,049,987.00

For Appellant: Frederick A. Richman, Attorney
Christopher W. Campbell, Attorney
Tom McDaniel
Tony Smith, Vice President
For Franchise Tax Board: Fred Campbell-Craven, Tax Counsel
Will Weissman, Tax Counsel
Larry Bobiles, Supervising Tax Counsel
Mike Brownell, Tax Counsel
Professor Alan Shapiro, Witness
Dr. Mukesh Bajaj, Witness
Michael Maher, Professor
Brad Cornell, Professor of Finance
Michael Nester, Bank of America
Robert Vass
Randy Lisban
Elizabeth LaCour
James Kelly
Gary Wiggins, Tax Director
G. M. Wilk, Consultant
Dolores Sandler
Greg Turner, General Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No disqualifying contributions were disclosed.

Issue: Whether appellant has established unity for the period subject to this appeal between SCEcorp and Southern California Edison, together with their subsidiaries, on the one hand and Mission First Financial (MFF) and its subsidiaries, on the other.

Whether appellant has established its entitlement to the presumption of unity under California Code of Regulations, title 18, (Regulation) section 25120, subdivision (b)(3), due to the existence of strong central management and centralized departments.

Alternatively, if unity is found, whether MFF’s passive investments give rise to non-business income.

Appellant’s Exhibit: Franchise Tax Board Regulation 25120 and Multiple Flows of Value Chart (Exhibit 12.11)

Respondent’s Exhibit: Miscellaneous Charts (Exhibit 12.12)

Action: Upon motion of Mr. Chiang, seconded by Ms. Mandel and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs absent, the Board ordered that the appeal be submitted for decision. Mr. Klehs entered the Boardroom.

The Board recessed at 2:55 p.m. and reconvened at 3:05 p.m. with Mr. Andal, Mr. Parrish, Mr. Klehs, Mr. Chiang and Ms. Mandel present.

FINAL ACTION ON APPEALS HEARD DECEMBER 12, 2000

Upon motion of Mr. Chiang, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs not participating, the Board ordered that the appeal of Edison International, 53591, be granted with respect to the unitary status issue.

Upon motion of Mr. Andal, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Klehs not participating, the Board ordered that the appeal be granted with respect to the business income status issue relating to the power plants.

Upon motion of Mr. Parrish, seconded by Ms. Mandel and duly carried, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal voting no, Mr. Klehs not participating, the Board ordered that the appeal be granted with respect to the business income status issue relating to low income housing.

Upon motion of Ms. Mandel, seconded by Mr. Parrish and duly carried, Mr. Parrish, Mr. Chiang and Ms. Mandel voting yes, Mr. Andal voting no, Mr. Klehs not participating, the Board ordered that the appeal be granted with respect to the business income status issue relating to aircraft leasing.

PROPERTY TAXES HEARINGS

MCI Metro Access Transmission Services, LLC (2372), SAU 00-019; 75860

2000, $676,900,000.00

For Petitioner: Rafael Garces, Director Property Tax
For Property Taxes Department: Robert Lambert, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Issue: Whether or not the petitioner has met its burden of proof and established that it has lost over 50 percent of the fair market value of its property – as measured by replacement cost – through economic obsolescence.

Action: Upon motion of Mr. Klehs, seconded by Mr. Parrish and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel not participating in accordance with Government Code Section 7.9, the Board adopted the revised staff recommendation reducing the unitary value from $686,700,000.00 to $642,400,000.00.

SFPP, L.P. (461), SAU 00-064; 76471

2000, $330,700,000.00

For Petitioner: No Appearance
For Property Taxes Department: Robert Lambert, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: No contributions were disclosed.

Action: Upon motion of Mr. Klehs, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish, Mr. Klehs and Mr. Chiang voting yes, Ms. Mandel not participating in accordance with Government Code Section 7.9, the Board adopted the staff’s revised recommendation ordering that the unitary value be reduced from $340,200,000.00 to $330,700.000.00 and denied the remainder of the petition. Mr. Klehs left the Boardroom

AT&T Communications (2310), SAU 00-017; 75816

2000, $1,519,500,000.00

For Petitioner: David Colker, Attorney
Jerome C. Weinert, Vice President
Gary Wiggins, Tax Director
For Property Taxes Department: Robert Lambert, Counsel

Contribution: Disclosures pursuant to Government Code Section 15626: A disqualifying contribution to Mr. Klehs was disclosed. No other disqualifying contributions were disclosed.

Issue: Whether or not the Board should adopt the Replacement Cost New Less Depreciation study submitted by the petitioner in calculating the fair market value of the petitioner’s unitary property even though that study excludes from valuation substantial properties that the petitioner owned or used as of the lien date – including land, improvements, equipment and construction in progress.

Petitioner’s Exhibit: Miscellaneous Documents & Network Equipment Value

Worksheet, (Exhibit 12.13)

Action: Upon motion of Mr. Parrish, seconded by Mr. Chiang and unanimously carried, Mr. Andal, Mr. Parrish and Mr. Chiang voting yes, Mr. Klehs absent, Ms. Mandel not participating in accordance with Government Code Section 7.9, the Board ordered that the petition be submitted for decision.

Bay Area Teleport, Inc. (2131), SAU 00-011; 67035

2000, $110,100,000.00

For Petitioner: No Appearance
For Property Taxes Department: Daniel Nauman, Counsel

Action: The Board took no action.

ICG Telecom of San Diego, L.P. (2433), SAU 00-009; 67033

2000, $37,700,000.00

For Petitioner: No Appearance
For Property Taxes Department: Daniel Nauman, Counsel

Action: The Board took no action.

ICG Telecom Group, Inc. (2462), SAU 00-010; 75683

2000, $181,000,000.00

For Petitioner: No Appearance
For Property Taxes Department: Daniel Nauman, Counsel

Action: The Board took no action.

FINAL ACTION ON PETITIONS HEARD DECEMBER 12, 2000

Upon motion of Mr. Andal, seconded by Mr. Parrish and duly carried, Mr. Andal and Mr. Parrish voting yes, Mr. Chiang voting no, Mr. Klehs not participating, Ms. Mandel not participating in accordance with Government Code Section 7.9, the Board ordered that the petition of AT&T Communications (2310), SAU 00-017; 75816, be granted with respect to the building value issue at $58,526,999.00.

The Board deferred issues 2 and 3 (construction work in progress and network equipment value) to December 13, 2000.

The Board adjourned at 5:40 p.m.

The foregoing minutes are adopted by the Board on March 29, 2001.