BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT JANUARY 21, 2009 LEGISLATIVE COMMITTEE Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Committee: Betty Yee Acting Chair 5 Bill Leonard 6 Member 7 Michelle Steel Member 8 Marcy Jo Mandel 9 Appearing for John Chiang, State Controller 10 (per Government Code Section 7.9) 11 Joann Richmond 12 Committee Clerk 13 Board of Equalization 14 Staff: Margaret Shedd Legislative and Research 15 Division 16 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 2 1 2 3 4 5 INDEX 6 Page 7 ITEM 3-7 6 8 Speakers: 9 Bill Dombrowski 7 10 Frank Julien 7 11 Michele Pielsticker 13 12 ITEM 3-8 19 13 ITEM 4-2 25 14 ITEM 4-4 21 15 ITEM 5-2 27 16 Speakers: 17 Hellan Roth Dowden 28 18 Charles Spaeth 28 19 Bobbie Smith 30 20 ---oOo--- 21 22 23 24 25 26 27 28 3 1 Sacramento, California 2 January 21, 2009 3 ---oOO--- 4 MS. YEE: Good afternoon, Members. We'll call 5 the Legislative Committee to order. 6 Dr. Chu, the Chair of the Legislative 7 Committee, is not going to be with us today. She's 8 asked that I preside over the committee hearing. So, 9 let's begin. 10 We -- and excuse me for my voice. I'm trying 11 to get over a cold, so -- let's see, we have a number of 12 items on the agenda. Let me just be sure that we have 13 the latest updated agenda. 14 I believe item 2-2 has been pulled. Item 2-3 15 and 2-4 have been put over. And we also I believe now 16 can dispense with the items on Consent if there's no 17 objection, and that would include items 4-3, 4-4 and 18 4-5. 19 MR. LEONARD: So moved. 20 MS. SHEDD: 4-4 was taken off Consent. 21 MS. YEE: Oh, I'm sorry, okay. 4-4 is also 22 off. So, just items 4-3 and 4-5. 23 MR. LEONARD: So moved. 24 MS. YEE: On the Consent calendar, motion by 25 Mr. Leonard. Is there a second? 26 MS. MANDEL: Second. 27 MS. YEE: Second by Ms. Mandel. 28 Without objection. 4 1 Okay, that will be the recommendation. All 2 right. 3 And then I believe we have several items for 4 discussion and consideration by the Board. Ms. Shedd, 5 do you want to begin with item 3-7? 6 MS. SHEDD: Certainly. Thank you. 7 ---oOo--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5 1 ITEM 3-7. 2 MS. SHEDD: My name is Margaret Shedd with the 3 Legislative and Research Division. I just wanted to 4 note that one other item, 4-1, has been pulled from the 5 agenda. 6 MS. YEE: Okay. 7 MS. SHEDD: So, we will now begin with 3-7. 8 MS. YEE: Thank you. 9 MS. SHEDD: This has been brought forward by 10 Ms. Yee and it would eliminate the Sales and Use Tax 11 exclusion for separately stated charges for 12 transportation -- excuse me, thereby making all 13 transportation charges taxable. 14 Currently the law is very complicated regarding 15 whether or not transportation charges are taxable. In 16 fact, Board Regulation 1628 has an appendix with 14 17 different examples, clarifying how the tax would apply 18 to these transportation charges. 19 As a result, retailers and customers alike have 20 difficulty understanding the law and this is intended to 21 simplify that for both the customers and the 22 retailers. 23 MS. YEE: Very well. Thank you very much. I 24 believe we have some speakers on this item. Will they 25 please come forward. 26 Great. Good afternoon. 27 Please introduce yourselves for the record. 28 You each have three minutes for your comments. 6 1 MR. DOMBROWSKI: Bill Dombrowski, California 2 Retailers Association. 3 MR. JULIEN: Frank Julien, Macy's, Inc. 4 MS. PIELSTICKER: Michele Pielsticker, 5 California Taxpayers Association. 6 ---oOo--- 7 BILL DOMBROWSKI 8 MR. DOMBROWSKI: We have approached the Board 9 with an idea of simplifying the sales tax treatment of 10 deliveries. We think that it has advantages not just 11 for retailers but also for the BOE in its auditing 12 function. 13 And I brought Frank Julien in from Macy's 14 headquarters in Cincinnati. Frank's an operating 15 Vice-President in taxes and can address the specifics. 16 So, I would concede my time to him and let Frank just 17 explain what we're trying to do. 18 MS. YEE: Great. 19 ---oOo--- 20 FRANK JULIEN 21 MR. JULIEN: Thank you. Right now, and this -- 22 this is true not only for Macy's and Bloomingdale's, 23 which are our -- our stores in the State of California 24 but also for other retailers that deliver merchandise to 25 their customers. 26 When a customer comes into the store, whether 27 it's a big ticket item like a furniture item or a small 28 ticket item like a wedding gift or something, we 7 1 charge -- and I'll -- I'll just use big ticket for an 2 example, but the same concept for smaller dollars will 3 apply to small ticket. 4 If you come into one of our stores and you buy 5 a piece of furniture and you want it delivered to your 6 home, we have a set delivery fee, let's say it's $50, 7 to -- to deliver that piece of furniture to your home. 8 At the time the customer is in the store, we 9 don't know how much the delivery company is going to 10 charge us to deliver that piece of furniture to your 11 store, or to your home, rather. Under current law if 12 the delivery company charges us more -- equal to or more 13 more than the $50 that we charge to the customer, that 14 none of that $50 that we charge to the customer is 15 subject to sales tax. 16 However, if the delivery company charges us 17 less than the $50, let's say the delivery company 18 charges us $45 for your particular delivery, then the 19 differential between what we charge the customer, $50 in 20 this case, and what the delivery company charges us, $45 21 in this case, that $5 differential is subject to sales 22 tax. 23 And even though it's a tax that normally and 24 theoretically should be passed on to the consumer, the 25 retailer has no effective way to collect that tax from 26 the customer because you don't know at the time the 27 customer is in your store to what degree, if any, the 28 amount of the delivery charge is going to be subject to 8 1 tax. 2 So, as what happens it results in one of two 3 situations and -- and from the retailer's standpoint 4 neither of which is a good situation. The -- the one 5 situation is -- pardon me, that on audit the Board of 6 Equalization auditors will go in and find those 7 transactions where the delivery company charged less 8 than what you charge the customer and assess tax on that 9 differential. In a lot of cases the retailer will -- 10 will self-assess that tax, but it still is an audit 11 issue and results in assessments. It results in an 12 awful lot of time for both the retailer and the BOE 13 auditor to go in and -- and try to look at those 14 transactions because it's a very transaction specific 15 situation. 16 The alternative that some retailers utilize is 17 to simply charge tax on the entire amount. They may 18 call it a shipping and handling charge combined or they 19 may still call it just a shipping charge, but they 20 charge tax on the entire amount. That has led to a lot 21 of class action lawsuits against those retailers because 22 in some circumstances they are collecting tax from the 23 customers that is not due. If -- if you've got a 24 situation where the -- the actual delivery charge to the 25 delivery company is equal to or greater than what the 26 customer is charged. 27 So, it -- it leads to a no-win situation for -- 28 for the retailer. You either have to pay tax out of 9 1 your own pocket that really should be passed on to the 2 customer or it -- it leads to a situation where you 3 potentially are subject to class action lawsuits. 4 So, we're -- we're trying to find a way to 5 simplify this situation so that the retailer will be 6 able to know with a -- with a degree of certainty how 7 much, if any, tax they should charge to their customer 8 when the customer is in the store and that's the end of 9 it, and the retailer doesn't have to worry about 10 subsequent tax assessments, that the BOE auditor doesn't 11 have to spend an ordinate amount of time going through 12 these transactions on an individual basis, and you don't 13 have to worry about class action lawsuits. 14 We sent over some proposed legislation that 15 would simply repeal the current exemption and make all 16 delivery charges subject to tax. In -- in a pure 17 simplification and if you look at other states, right 18 now there are 29 states in the country that tax all 19 delivery charges. There are 17 States that exempt all 20 delivery charges. California is unique in the way it -- 21 it looks at it on -- in kind of a retrospective basis. 22 The initial proposal that we sent over would 23 have taxed -- just subjected all delivery charges to 24 sales tax. We understand that there are some problems 25 with that, particularly for -- what I'll say companies 26 in the purchaser community. These are companies that 27 don't have transactions where they're delivering 28 merchandise to consumers but they're purchasing a lot of 10 1 machine -- large machinery and equipment that's 2 delivered to their location. That would subject for the 3 first time delivery fees that heretofore have been 4 exempt. 5 So, we're trying to find a solution that solves 6 the problem on these consumer transactions but doesn't 7 create a problem for other segments of -- of the 8 industry. And we're -- we're looking -- really 9 looking -- looking to the Board and staff for -- 10 for assistance in ways to try to solve the problem. 11 One thought that -- that we had is perhaps 12 to -- if you take -- if you were to amend the law to say 13 that when there's a combined shipping and handling 14 charge, because to a large degree part of this other 15 amount is -- is really a handling charge and a lot of 16 retailers call it that now, anyway -- to clarify that a 17 combined shipping and handling charge, that entire 18 amount is subject to tax. 19 That would fix the problem for the retailers 20 on -- on the consumer side because they would know when 21 the customer is in the store what amount is taxable, and 22 if the statute were clarified to say that that is 23 taxable we think that that would eliminate the class 24 action lawsuits. It would maintain current law for the 25 purchasing community, so it wouldn't result in a 26 significant -- or any tax increase on the purchasers 27 that are buying large machinery and equipment for use in 28 their business. 11 1 And I'd be more than happy to answer questions, 2 but in a nutshell that's our problem. 3 MS. STEEL: I have a question. 4 MS. YEE: Thank you, Mr. Julien. Ms. Steel. 5 MS. STEEL: Why don't we just exempt all the 6 taxes for transportation charges? As is, it's very 7 confusing and why we have to charge taxes on it. 17 8 states. 9 MR. DOMBROWSKI: That's -- 10 MS. STEEL: And -- 11 MR. DOMBROWSKI: That's -- that's obviously one 12 possible solution. We just thought in this environment 13 with this budget, the State budget could not take a hit 14 to it. So -- 15 MS. STEEL: How much are we talking about here? 16 MR. DOMBROWSKI: I don't know. 17 MS. PIELSTICKER: I don't know what the revenue 18 would be if we were to exempt the delivery charges. We 19 only computed it based on this proposal which would tax 20 all the delivery charges, which would amount to about 31 21 million -- 33 million, somewhere around there. 22 MS. STEEL: But, you know, I think 23 Department -- the Board of Equalization always make 24 everything more confusing than it is. So, you know, I'd 25 rather go for exempt for all the taxes instead of just, 26 you know, charging taxes on this issue. So, -- 27 MS. YEE: Okay. Thank you, Ms. Steel. 28 Next speaker. 12 1 ---oOo--- 2 MICHELE PIELSTICKER 3 MS. PIELSTICKER: Good morning, Madam Chair -- 4 afternoon, excuse me -- and Members of the Board. 5 For -- many years we, as taxpayers, have complained 6 and -- 7 MS. YEE: Michele, can you identify yourself. 8 MS. PIELSTICKER: Yes. Michele Pielsticker, 9 California Taxpayers Association. 10 For many years taxpayers have complained and 11 rightly so that our tax laws are too complicated and -- 12 and this isn't new. 13 This complexity has served to increase costs to 14 business in various ways, spending time and money to 15 address complex tax audits and the cost of lawyers and 16 accountants to deal with lawsuits, as -- as Mr. Julien 17 mentioned. The cost of penalties associated with 18 non-compliance. 19 These costs in turn lead businesses to reduce 20 their investment in the State, whether it be through not 21 retaining jobs or not investing more in capital 22 equipment. 23 An alleged proposal like this or like it will 24 eventually be, which reduces the complexity, is an 25 opportunity for the Board to take just one piece of the 26 compliance burden away from the taxpayer. And for this 27 reason we would urge you to support the effort to move 28 forward on -- on the reducing -- or rather simplifying 13 1 delivery charges. 2 Thank you very much. 3 MS. YEE: Thank you. Questions or comments, 4 Members? 5 MS. MANDEL: So, where are we now? 6 MS. YEE: Let me propose this. And I 7 appreciate Mr. Julien and Mr. Dombrowski, you coming 8 forward, and I think as we hear your testimony that -- 9 and certainly as we look forward in terms of any 10 legislation that may be moving forward, that the issue 11 about addressing the effects on the purchasing community 12 seems to me warrants a further look. And I certainly 13 would like our Leg. Division to work with the Sales and 14 Use Tax Department with respect to the ability to 15 administer a system whereby we are looking at different 16 treatment for the purchasing community. 17 And I would suggest that perhaps maybe we 18 should look at a revised proposal that so reflects. We 19 have our next Sacramento Board meeting in just a couple 20 weeks, so what I'd like to do is to see whether we can 21 bring that proposal back for consideration by the Board. 22 Ms. Mandel. 23 MS. MANDEL: I think the public agenda goes out 24 for that -- 25 MS. SHEDD: This Friday. 26 MS. MANDEL: -- tomorrow -- day after tomorrow. 27 MS. YEE: Yes. 28 MS. MANDEL: So, and if that's -- we're 14 1 supportive of working with the retailers and getting 2 something that the retailers are -- 3 MS. YEE: Is that doable, Ms. Shedd? 4 MS. MANDEL: -- fixing. 5 I just don't know if they'll be able to -- what 6 they'll be able to do in -- 7 MS. SHEDD: I don't know what we'll be able to 8 do in a couple days. But that's just the public agenda 9 notice. I would certainly work with you and -- 10 MR. DOMBROWSKI: We would -- maybe procedurally 11 we could help. We can as an association go forward with 12 a piece of legislation we're sponsoring. And then if -- 13 if we could come back whenever you're ready with -- with 14 what the product is, and like to work with the Board to 15 draft that legislation, and then -- I don't know if that 16 procedurally helps you or -- 17 MS. YEE: It certainly would give us time, and 18 we certainly -- I would love to have our staff be 19 available to help with the drafting of what we've just 20 discussed. So -- and maybe not be under the constraints 21 of the next Sacramento Board meeting public agenda 22 notice. 23 So, why don't we look to have you work with our 24 Legislative Division and our Sales and Use Tax 25 Department, and we will expect to see this back on a 26 future legislative agenda for -- for consideration. 27 MR. DOMBROWSKI: That would be perfect. Be 28 perfect. Thank you -- thank you very much. 15 1 MS. YEE: Very good. Thank you. 2 MR. LEONARD: Ms. Yee. 3 MS. YEE: Yes, Mr. Leonard. 4 MR. LEONARD: Just -- just a -- I guess maybe 5 not helpful, but I -- I'm opposed to the proposal before 6 us and very disappointed in the speakers that rather tax 7 their customers than simply follow the rules. 8 But the suggestion they make about creating 9 classes of taxpayers that big ones don't have to pay and 10 us little folks do, offends me. Offends me very much, 11 if that's your proposal. I not only oppose it, I will 12 fight it everywhere I can. 13 I understand the problems you've raised. But 14 that is no -- no, justification in a sales tax system to 15 create one system for the big guy and one for the little 16 guy. And I want to let you know that that puts me from 17 oppose to really strong oppose. 18 MS. YEE: Mr. Dombrowski. 19 MR. DOMBROWSKI: Just Board Member Leonard, 20 I -- we don't want to do anything to offend you or -- 21 MR. LEONARD: You already have. 22 MR. DOMBROWSKI: -- and we -- 23 MR. LEONARD: I mean, you just said it. 24 MR. DOMBROWSKI: We simply are circulating 25 something to see where we can -- where are the problems 26 and what do we need to work out. And if -- if we can't 27 come to a solution then we can't come to a solution. 28 But we just thought we'd put it on the table 16 1 and -- 2 MR. LEONARD: You've come to a solution. I'm 3 just not part of it. 4 MR. DOMBROWSKI: I'm -- we want to keep talking 5 to you. 6 MS. YEE: Okay. Other comments? 7 MS. MANDEL: No, I'm just confused about where 8 we are. So, they're -- they're not -- this -- the 9 proposal that's before us -- 10 MS. YEE: The proposal before us will be the 11 subject of further work between the retailers 12 association and -- 13 MS. MANDEL: Because they want to work on it 14 some more? 15 MS. YEE: Correct. And rather than have the 16 Board take a position at this time, I suspect that this 17 will be introduced in a bill that then will be on a 18 future legislative agenda. 19 MS. MANDEL: Okay 20 MS. SHEDD: So, this matter will be put over? 21 MS. YEE: This matter I believe now -- the 22 current proposal is no longer under consideration, I 23 believe. And the sponsors will now pursue an 24 alternative proposal that then will become the subject 25 of a bill that will be introduced and we can look at it 26 at a future Legislative agenda once that bill has been 27 introduced. That way we aren't under the constraints of 28 the public agenda notice for the next Sacramento Board 17 1 meeting. 2 MS. SHEDD: All right 3 MS. YEE: Okay. 4 MS. SHEDD: The next item -- 5 MS. YEE: Very well. Thank you very much. 6 MR. JULIEN: Thank you. 7 Thank you. 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18 1 ITEM3-8 2 MS. SHEDD: Next is suggestion number 3-8. 3 This provides that specified garment cleaning 4 establishments shall be regarded as consumers rather 5 than retailers of tangible personal property. This 6 would be collar stays and lint brushes, provided that 7 the sales of that -- that property does not exceed one 8 half of one percent of their total gross receipts for 9 the prior calendar year. 10 Right now dry cleaners who do dry cleaning and 11 provide alterations are not required to have a seller's 12 permit. However, with our education outreach program we 13 have identified some of these dry cleaning outfits that 14 do sell tangible personal property that would require 15 them to hold a seller's permit. 16 This proposal would simply say that if it's a 17 small percentage of their gross receipts then they'll be 18 treated as consumers of those items. 19 MS. YEE: Very well. Thank you. 20 Members, you may recall this issue came up as a 21 result of discussions in the interested parties meeting 22 relative to dry cleaners and alterations, and this is 23 the staff proposal that follows on to concerns that were 24 raised by the industry after the rule was adopted. 25 Ms. Steel 26 MS. STEEL: Thank you, Vice Chair. You know, 27 you really -- this is really important for all dry 28 cleaners owners because sometimes they just forget 19 1 that -- try to give those items as a gift and, you know, 2 they forget to pay, you know, sales taxes. 3 So, I think this is going to be perfect for 4 helping industries. And thank you very much for it. 5 MS. YEE: Yes. Thank you, Ms. Steel. 6 Other comments? Mr. Leonard. 7 MR. LEONARD: I was going to thank you for 8 making the law more complicated but serve a good 9 multipurpose. Not that much more complicated -- 10 MS. YEE: No. 11 MR. LEONARD: -- but it's a new rule. And it 12 does -- it does -- does respond to the -- the dry 13 cleaners who came before us with a real world situation. 14 So, thank you. 15 MS. YEE: Sure. 16 Okay. Hearing no other comments or questions, 17 is there a motion? 18 MS. STEEL: (inaudible). 19 MS. YEE: Motion by Ms. Steel to approve this 20 proposal, second by Mr. Leonard. 21 Without objection, such will be the 22 recommendation. 23 Thank you very much. 24 ---oOo--- 25 26 27 28 20 1 ITEM4-4 2 Present: Phillip Bishop 3 Fuel Taxes Division 4 ---oOo--- 5 MS. SHEDD: The next item is suggestion number 6 4-4. And this would clarify that the definition in 7 diesel fuel includes biofuels and other biomass-based 8 diesel fuel. Currently these suppliers of biofuels are 9 generally small and don't have enough product that goes 10 to the terminal rack and there is some confusion of 11 whether they're covered or not. This would simply 12 clarify it. 13 MS. YEE: Questions or comments, Members? 14 Hearing none, is there a motion? 15 MS. STEEL: Actually, I have a comment. 16 MS. YEE: Ms. Steel. 17 MS. STEEL: This is 4.4, right? 18 MS. YEE: Yes. 19 MS. STEEL: Are we working on it? 20 I think we have to encourage the industry to, 21 you know, having some industry that environmentally 22 friendly advancement in biodiesel technology, and I 23 don't think this is going to help. It's going to be 24 just more work. And I don't think that, you know, this 25 is really effective for the industry. So, I'm going to 26 vote no on this. 27 MS. YEE: Ms. Shedd, do you have a response? 28 MS. SHEDD: Well, this isn't a new tax. 21 1 These -- these biofuels are currently taxable. It's 2 just not crystal clear to the small producers in the -- 3 the code. This just kind of sunshines it, that they are 4 subject to tax. 5 MS. STEEL: Well, then this is another thing, 6 that we should make it exempt completely. 7 MS. YEE: Other questions? Mr. Leonard. 8 MR. LEONARD: I do have a question, now that 9 the debate's open. It's limited to biodiesel. Is -- 10 what about gasoline type fuels that fizzles their 11 internal combustion engines, is -- how -- is -- don't 12 they have a similar problem with the -- with the 13 biofuels? 14 MR. BISHOP: There are some other biofuels -- 15 Phillip Bishop with the Fuel Taxes Division. There are 16 some biofuels that are defined within the Motor vehicle 17 Fuel Tax law, but this is just addressing the biodiesel 18 within the diesel fuel tax law. 19 MR. LEONARD: And my question is, is how do we 20 treat biofuels in -- for internal combustion engines? 21 MR. BISHOP: Well, some of the alternative 22 fuels are taxed under the Use Fuel Tax law, so with -- 23 their rates are -- are half as of what the current motor 24 vehicle fuel tax is. But they're addressed -- anything 25 suitable for use in a -- in an internal combustion 26 engine is covered. We're just seeing more movement in 27 this area and some more confusion, and we'd like to 28 clarify that and -- 22 1 MR. LEONARD: But this -- this one is also 2 covered. 3 MR. BISHOP: It is. 4 MR. LEONARD: It's harder -- 5 MS. MANDEL: Is there -- 6 MR. LEONARD: -- to enforce because it's not -- 7 MS. MANDEL: -- is there confusion? 8 MR. LEONARD: -- a rack distribution system. 9 MS. YEE: Yeah. 10 MS. MANDEL: Is there confusion in the other, 11 is what you're -- 12 MR. LEONARD: Right. 13 MS. MANDEL: -- wondering. 14 MR. LEONARD: The confusion on the gas -- 15 MS. MANDEL: -- that requires a similar -- 16 MR. LEONARD: -- gasoline alternatives, and 17 I -- 18 MR. BISHOP: I don't believe so. 19 MR. LEONARD: And second question, all this 20 revenue goes to the transportation account? 21 MR. BISHOP: Correct. 22 MR. LEONARD: Yes or no? 23 MR. BISHOP: Yes. 24 MR. LEONARD: Yeah, I'm -- I -- I kind of like 25 the fairness and equity of it. I understand we're 26 trying to encourage some of these alternatives, but 27 we're going to get into a situation where everybody is 28 using these alternative fuels and our highways will not 23 1 exist any more. There will be nowhere to drive. 2 So, it's -- it's -- some -- some day we're 3 going to have to make the move and -- and tax all these 4 alternative fuels the same way we tax the old ones in 5 order to have the revenue in the transportation account. 6 Thank you. 7 MS. YEE: Thank you. 8 Other questions or comments, Members? 9 Hearing none, is there a motion? 10 MS. MANDEL: Move support. 11 MS. YEE: Motion by Ms. Mandel to support the 12 proposal. 13 Is there a second? 14 MR. LEONARD: second. 15 MS. YEE: Second by Mr. Leonard. 16 Please call the roll. 17 MS. RICHMOND: Ms. Yee. 18 MS. YEE: Aye. 19 MS. RICHMOND: Mr. Leonard. 20 MR. LEONARD: Aye. 21 MS. RICHMOND: Ms. Steel. 22 MS. STEEL: No. 23 MS. RICHMOND: Ms. Mandel 24 MS. MANDEL: Aye. 25 MS. RICHMOND: Motion carries. 26 MS. YEE: Okay. Thank you very much. Next 27 item. 28 ---oOo--- 24 1 ITEM 4-2 2 Present: Phillip Bishop 3 Fuel Taxes Division 4 ---oOo--- 5 MS. SHEDD: And the last proposal -- oh, that 6 was on consent. 7 MR. BISHOP: Was 4-2 on consent? 8 MR. LEONARD: Not on my list. 9 MS. MANDEL: I didn't -- 4-2 we already did, 10 unless my notes are screwy. My notes are potentially 11 screwy, yeah. Yeah, my notes are messed up. 12 We did 3-8, right? 13 MS. YEE: Yes. 14 MS. SHEDD: Right, I -- I think you're right, 15 I'm sorry. We took 4-1 off and we skipped over 4-2 16 inadvertently. 17 This would redefine a terminal to include fuel 18 production facility with storage so that facilities 19 outside the bulk transfer system can have the same 20 licensing and reporting requirements as terminal 21 supplied by pipeline and vessels. 22 This is brought forward by the Fuels Taxes 23 Division. 24 MS. YEE: Questions or comments, Members? 25 MS. STEEL: So this more reporting requirement? 26 MR. BISHOP: It does add a reporting 27 requirement to the stand-alone production facilities. 28 MS. STEEL: You're not really helping 25 1 businesses at all. Try to make regulation tougher for 2 the businesses. I'm going to totally go against for 3 this because it's not going to really help, especially 4 bad economy. You cannot really make more regulations, 5 more reporting and more work for these industries. It's 6 not going to help at all. So, this is not really 7 good. 8 MS. YEE: Other comments? Hearing none, is 9 there a motion? 10 MS. MANDEL: Move support. 11 MS. YEE: Okay. Motion by Ms. Mandel to 12 support on 4-2. Is there a second? 13 MR. LEONARD: Second. 14 MS. YEE: Second by Mr. Leonard. 15 Please call the roll. 16 MS. RICHMOND: Ms. Yee. 17 MS. YEE: Aye. 18 MS. RICHMOND: Mr. Leonard. 19 MR. LEONARD: Aye. 20 MS. RICHMOND: Ms. Steel. 21 MS. STEEL: No. 22 MS. RICHMOND: Ms. Mandel 23 MS. MANDEL: Aye. 24 MS. RICHMOND: Motion carries. 25 MS. YEE: That motion carries. Thank you. 26 Thank you. Next item. 27 ---oOo--- 28 26 1 ITEM 5-2. 2 MS. SHEDD: The next item is 5-2. This would 3 amend the Vehicle Code to list the Investigation 4 Division staff as those public employees whose home 5 addresses are granted enhanced confidentially -- 6 confidentiality by the Department of Motor Vehicles. 7 Currently, since 1989 all home addresses, 8 people with driver's license and registered with DMV are 9 confidential and only be disclosed to Courts, law 10 enforcement agencies, other governmental agencies and it 11 allows a limited disclosure to financial institutions, 12 insurance companies, attorneys, vehicle manufacturers, 13 vehicle dealers and persons doing statistical research. 14 There is a group that's listed in the statute 15 that is allowed additional protection, and this would 16 limit the disclosure of those persons' home addresses to 17 a Court, law enforcement agency, the State Board of 18 Equalization, and any governmental agency which under 19 any provision of law authorizes or requires the DMV to 20 furnish such information. 21 The staff requests that the same -- that same 22 confidentiality standard which is currently applicable 23 to other public officers, that the Board, the -- the 24 Board of Equalization Investigation Division conducts 25 joint operations with these same people, that they be 26 afforded that same confidentiality protection. 27 MS. YEE: I guess a question. Other public 28 officers, other public Peace Officers? 27 1 MS. SHEDD: Public Safety Officers. 2 MS. YEE: Very well. Thank you. 3 We have several speakers on this item. Please 4 introduce yourselves for the record. You have three 5 minutes. 6 ---oOo--- 7 HELLAN ROTH DOWDEN 8 MS. DOWDEN: Hellan Roth Dowden from SEIU, 9 Local 1000. And we have been working with the 10 investigator since last year to try and resolve this as 11 an issue because we think there's a public safety issue 12 here for the protection of people who work for the 13 Board. 14 And with me is Charles Spaeth, an investigator 15 from Riverside. And so, I'd like him to address this 16 issue. And also Bobbie Smith from here in Sacramento -- 17 the BOE here in Sacramento. 18 ---oOo--- 19 CHARLES SPAETH 20 MR. SPAETH: My name is Charles Spaeth. I'm an 21 investigator in the Riverside office. The incident that 22 occurred to me that makes this come to light is that 23 several years ago I was investigating a used car dealer 24 in which the investigation had proceeded to the point 25 that the charges were filed by the District Attorney, 26 during a preliminary hearing, and also we were trying to 27 serve a subpoena to get some records. 28 I was called in as an expert witness as we go 28 1 to these preliminary hearings. It pretty much is a 2 standard protocol. 3 I was informed by the Deputy District Attorney 4 that a person was seen in the parking lot of the 5 courthouse taking license plates down, license plate 6 numbers down. 7 A detective who happened to be also involved in 8 this case pursued this person, called in reinforcements 9 as the person tried to evade him. They pulled the 10 person over. They found a list of plates written on 11 a -- on a notebook in the middle, and they identified 12 him as an employee of the person that we were actually 13 prosecuting. 14 The -- the Deputy District -- the Deputy 15 District Attorney told me that she was going to -- from 16 that point on when dealing with this case, was going to 17 have a police escort. From that -- from that point on I 18 had talked to different detectives and they had an 19 informant that was involved -- an ongoing informant as 20 the case was proceeding, and they had told me that I 21 need to take precautions just as a safety issue. 22 And, basically, you know, these -- I was told 23 by the District Deputy Attorney and by the different 24 detectives that were handling this case that these 25 people were not -- that I needed to watch my back. 26 MS. YEE: Thank you. Next speaker. 27 ---oOo--- 28 BOBBIE SMITH 29 1 MS. SMITH: I actually wasn't going to say 2 anything, I was just up here. But I would like to point 3 out that this has to do with the health and safety of 4 BOE employees who are out there sometimes working 5 undercover, sometimes not undercover, and are not with 6 the best elements of society, which can put them and 7 their families at risk. And ask for support. 8 MS. YEE: Thank you very much. Questions or 9 comments, Members? Mr. Leonard. 10 MR. LEONARD: Yes. I'm very sympathetic to the 11 risks that our investigators are under and I'm trying to 12 figure out how we best address that. 13 In the situation you described, the allegation 14 is, is this employee by taking down the license numbers 15 could have accessed the database which is now much more 16 difficult to do. 17 MR. SPAETH: Being in the used car dealer type 18 business, he would have -- 19 MR. LEONARD: He would have access that others 20 don't have. 21 MS. DOWDEN: Instant. 22 MR. LEONARD: And in doing so, he would have 23 recognized your name because he knew who was 24 investigating? 25 MR. SPAETH: Because I was the person that -- 26 well, had filed the prosecution package. I was the 27 person that filed -- 28 MR. LEONARD: By that way would get your home 30 1 address. 2 MR. SPAETH: He would not know my name because 3 I -- all the Court records -- 4 MR. LEONARD: Right. He already had your name. 5 MR. SPAETH: Yes, correct. 6 MR. LEONARD: What he was trying to find out 7 was your home address. 8 MR. SPAETH: Correct. As a side note, I forgot 9 to mention that -- 10 MR. LEONARD: Yeah. 11 MR. SPAETH: -- that the District Attorney also 12 told me that the financial loss and the felony case that 13 we had -- this person we ended up seizing all of his 14 vehicles and so we -- through a jeopardy determination. 15 So, there was an added element to that. He was 16 basically not -- it was more devastating than her case. 17 MR. LEONARD: Yeah. I -- I agree with the 18 principle that our investigators' home addresses and the 19 home of their families should not be readily available 20 to the public. However, since I first voted for the 21 1989 statute I've come to regret it because there have 22 been a selected few individuals in the law enforcement 23 community that have abused that privilege, and used the 24 masking to evade civil responsibility for themselves. 25 And that's -- that's what bothers me. I don't 26 think this will be an easy legislative proposal to get 27 passed because I think the Legislature is well aware of 28 this, and there are a number of groups I think who would 31 1 show up to -- to oppose it. 2 My suggestion that I haven't had a chance to 3 explore with General Counsel or Executive Director would 4 be to offer to all of our investigators that we will 5 help them re-register their vehicles and -- and register 6 their driver's licenses at their office. So that if 7 somebody obtained their license plate or saw their 8 driver's license, the address they would have would be 9 the office where they could accept civil service if it's 10 that kind of matter but, you know, we were all at risk 11 at the office anyway because he already had your name 12 and he knew you were out of the Riverside office. So I 13 can't protect you from that other than the general kind 14 of protection we try to do for all our employees. 15 But I certainly agree that your home address 16 should not be used against you because you're an 17 investigator for the Board of Equalization. 18 So I'd like to offer that as an alternative. I 19 believe it's -- it's legal. I know it's doable because 20 I've done it. But I -- I never really asked my 21 employer -- well, I guess I did, I was self-employed. 22 But I mean to me it's a much better way for 23 that to be done, particularly recommended for women at 24 risk, that they use their business address so that 25 nobody sees their driver's license and knows where they 26 live. 27 So, I think we ought to go that direction 28 rather than fight what I think will be a tough fight, 32 1 and maybe not a winnable one. 2 The other part, of course, is in this internet 3 age my guess is your home address is probably available 4 in a number of other public databases or with other 5 internet searches that -- that we'd have to -- we'll 6 have to do a lot to help make sure that you and your 7 family are protected. Masking the Department of Motor 8 Vehicles database alone wouldn't be enough. 9 So, I think this is a first step but it's -- 10 this legislation won't do it. We need to take a first 11 step in other ways and then look at other public records 12 and to see how we -- how we best deal with those. 13 MS. YEE: Thank you, Mr. Leonard. 14 Any response to the alternative? 15 Ms. Dowden. 16 MS. DOWDEN: Yes, if I could address that. We 17 did in fact -- Mr. Spaeth might want to address that, 18 too. We did discuss this with the investigators, and 19 what they said is that if you look, your insurance is 20 based on where you live. And so, what you're 21 basically -- and some of the -- the ratings are done. 22 So, you're asking people to basically increase their 23 insurance costs because a lot of the places that the 24 offices are located are not in places like a suburban -- 25 you know, where you might live where your rates might be 26 actually lower. 27 So, you're basically asking them to pay a lot 28 more for their car insurance. 33 1 And -- and I think there might also be --- 2 MR. LEONARD: Well, not everybody. Could be 3 the other way around. 4 MS. DOWDEN: Not everybody. But in many -- but 5 in many cases if we take a look at where these offices 6 are, they have a much higher insurance rate than if 7 you're located in a suburban area. 8 So I would -- you know, I'm not sure that we 9 should make the employees now pay a higher insurance 10 cost because of the lack of safety in the job that they 11 have chosen to do for the State. 12 So, that even though we -- we appreciate the 13 suggestion, we worked on this last year putting in 14 another bill and, frankly, we think that the best way of 15 doing this is to have a BOE-sponsored bill where you 16 would only have these 99 people in it. 17 What happened before is these bills tend to get 18 loaded up. If you are the sponsor, the agency is the 19 sponsor, rather than an individual group. Then what 20 happens is you're much more likely to get 99 people 21 through than you are by having everybody add on. And we 22 know if everyone else does add on it won't -- it won't 23 go through. 24 But we feel that if you take a look at the list 25 now and you take a look at who these folks actually 26 interact with on the list, they -- they interact with 27 probably everybody that's on the list that's already 28 exempt. So, it is sort of a -- a glaring lack of -- of 34 1 protection for these folks. And that's why we would 2 encourage you to support this and we would certainly 3 work with you on it. 4 MS. YEE: Other questions or comments? 5 MR. LEONARD: I guess in the meantime if the 6 Board chooses to sponsor such legislation, I -- I think 7 we should begin now facilitating our investigators to -- 8 to re-license. 9 You know, especially if they save money doing 10 it. But -- because this law won't take effect for more 11 than a year if it succeeds through, which I doubt if it 12 will. 13 So, I -- I would recommend we pursue my 14 alternative at the same time. 15 MS. YEE: Okay. Thank you, Mr. Leonard. 16 Other questions or comments? 17 Ms. Mandel. 18 MS. MANDEL: I would support the Controller's 19 proposal. We do. So -- 20 MS. STEEL: Okay, is that a motion? 21 MS. MANDEL: Yeah, that sounds like a motion to 22 me. 23 MS. YEE: Okay. I will second. 24 MS. MANDEL: A little rusty. We haven't had a 25 meeting in a while. 26 MS. YEE: I will second that motion, but I also 27 would direct staff to look at the alternative that Mr. 28 Leonard has suggested, just to see if there is any 35 1 opportunity there. We certainly do care about the 2 safety of our employees. And to the extent that that is 3 also a viable option we'd like to pursue that, as well. 4 Okay, please call the roll. 5 MS. RICHMOND: Ms. Yee. 6 MS. YEE: Aye. 7 MS. RICHMOND: Mr. Leonard. 8 MR. LEONARD: No. 9 MS. RICHMOND: Ms. Steel. 10 MS. STEEL: No. 11 MS. RICHMOND: Ms. Mandel. 12 MS. MANDEL: Aye. 13 MS. RICHMOND: Motion does not carry. 14 MS. YEE: Okay. Let's put this over. Could 15 I -- Mr. Haas, can I direct you to perhaps look at 16 Mr. Leonard's alternative? 17 Yes. Can you have a discussion with Mr. Hirsig 18 and others, maybe our Legal Department, with respect 19 to -- I'd like to have this come back, but also -- 20 MS. MANDEL: Can we have it -- I mean, can we 21 vote on it tomorrow? 22 MS. YEE: We can. We can, but between now and 23 tomorrow if there's any other information about Mr. 24 Leonard's alternative, that may -- 25 MS. MANDEL: Okay. So, do you want to continue 26 the committee meeting till tomorrow or -- 27 MS. YEE: Yes. Yes. 28 MS. MANDEL: -- or do you want to do it as part 36 1 of the minutes or -- 2 MS. YEE: No, let's recess the committee -- 3 let's recess the committee till tomorrow, but I would 4 like to see if we can do some work on Mr. Leonard's 5 alternative between now and tomorrow. 6 MR. HAAS: Sure. 7 MS. YEE: Okay. So, I'd like this proposal to 8 come back tomorrow. We'll recess the committee until 9 tomorrow for that purpose. 10 Very well. Thank you very much. 11 ---oOo--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 37 1 REPORTER'SCERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 January 21, 2009 I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding 37 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: March 2, 2009. 17 18 19 20 21 ____________________________ 22 BEVERLY D. TOMS 23 Hearing Reporter 24 25 26 27 28 38