BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT APRIL 15, 2009 PROPERTY TAX COMMITTEE Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Committee: Michelle Steel Chair 5 Betty Yee 6 Member 7 Judy Chu Member 8 Bill Leonard 9 Member 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller (per Government Code 12 Section 7.9) 13 Joann Richmond Board Proceedings 14 Division 15 Board of Equalization Staff: Dean Kinnee 16 Special Taxes Department 17 Don Jackson State Assessed Properties 18 Division 19 Dave Yeung State Assessed Properties 20 Division 21 Michael Harris County Assessed Properties 22 Division 23 24 25 ---oOo--- 26 27 28 2 1 2 INDEX 3 Page 4 Item 1 4 5 Item 2 6 6 Speaker: Peter Michaels 9 7 ---oOo--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 ITEM 1 2 Sacramento, California 3 April 15, 2009 4 ---oOO--- 5 MS. RICHMOND: The next item for this 6 morning's agenda is the Property Tax Committee. Ms. 7 Steel. 8 MS. STEEL: I call the Property Tax Committee 9 meeting to order. 10 We have two items before us today. And the 11 first item on our agenda is the adoption of the 12 valuation factors, including classification descriptions 13 for non-production computers for inclusion in Assessors' 14 Handbook Section 581, Equipment Index and Percent Good 15 Factors. 16 And Mr. Dean Kinnee is going to explain about 17 that. 18 MR. KINNEE: Good morning, Board Members. Dean 19 Kinnee with the Property and Special Taxes Department. 20 Also with me is Michael Harris with County Assessed 21 Properties Division, Don Jackson and Dave Yeung with the 22 State Assessed Properties Division. 23 The first item, as Chair Steel introduced it, 24 was the valuation factors for non-production computers 25 that as the Board's aware staff's been working with 26 industry and assessors over the last couple years 27 developing valuation factor studies. 28 Today's staff's asking the committee to 4 1 recommend to the Board the adoption of the valuation 2 factors for non-production computers contained in the 3 issue paper 09002. 4 These factors were developed by a six-person 5 team consisting of two members from Assessors' offices, 6 two industry representatives and then two Board 7 representatives. The team has been gathering and 8 analyzing data over the last couple of years, working 9 out their differences. The factors before you today, 10 the team members are in complete agreement. 11 It's my understanding the factors were also 12 circulated amongst Assessors and we've heard nothing 13 back from them. And that Larry Hanig (phonetic) for the 14 industry representative on the team circulated the 15 factors to industry representatives and he's heard back 16 no concerns. 17 So as far as we know, everyone is in agreement 18 with these factors and we ask the committee to recommend 19 to the Board adoption. 20 MS. STEEL: It seems like we have one speaker. 21 MR. MICHAELS: I'm here for the next item. 22 MS. STEEL: Oh, okay. 23 MS. YEE: Madam Chair. 24 MS. STEEL: Yes. 25 MS. YEE: Thank you, Madam Chair. I am going 26 to move the staff recommended valuation factors but I 27 wanted to extend my thanks to the team. This has been a 28 great model in working through the valuation factors for 5 1 four different industry segments and particularly 2 Mr. Harris and Mr. Cruz have spent a lot of time on this 3 effort. 4 So, with that I'm happy to move the staff 5 recommendation 6 DR. CHU: Second. 7 MS. STEEL: Thank you. 8 The Member Yee made a motion and a second by 9 Ms. Chu. And motion passes. 10 MS. MANDEL: No objection. 11 MS. STEEL: Any comment? Sorry about that. 12 ---oOo--- 13 ITEM 2 14 MS. STEEL: Okay, we have a second item here, 15 and Mr. Kinnee is going to explain. 16 MR. KINNEE: Don Jackson, Principal Property 17 Appraiser with the State Assessed Properties Division 18 will introduce this item. 19 MR. JACKSON: Good morning, Members of the 20 Board. Don Jackson, State Assessed Properties Division. 21 Dave Yeung to my left for the Division. 22 The second item is the guidelines for 23 substantiating additional obsolescence for 24 State-assessed telecommunications property. This item 25 was first brought as an issue paper to the November 2008 26 Board meeting. 27 During that meeting interested parties 28 testified that due to the time constraints they were not 6 1 able to provide input during the interested parties 2 process. Accordingly, the Property Tax Committee 3 directed staff to restart the interested parties process 4 to allow additional comments and to address two other 5 concerns that were raised. One of these was how these 6 proposed guidelines related to County assessment. Also 7 how these guidelines relate to other State central 8 assessment practices. 9 I'm here to report that the PTC direction -- 10 under PTC direction, the State Assessed Properties 11 Division extended the interested parties process, 12 solicited additional comments and reached concurrence on 13 the language of the proposed guidelines. 14 With respect to how these proposed guidelines 15 relate to local assessment, the proposed guidelines 16 pertain only to State-assessed properties. The 17 concepts, issues and examples contained within are 18 consistent with the Board rules and existing guidance 19 given in all of the Board's Assessors' handbooks. 20 Additionally, with respect to how these 21 proposed guidelines relate to other State Central 22 Assessment Practices, SAPD, I recently completed a 23 survey of the 13 western states and in -- in looking at 24 that survey we found regulations that only one state out 25 of those 13 had detailed regulations similar to what 26 California's are. 27 And we found out that our regulations are 28 consistent with that State's regulations, as well. 7 1 The other states we didn't find any 2 significant guidelines as to addressing additional 3 obsolescence. 4 With that we're here to answer any questions 5 you may have. We understand that there is a speaker. 6 MS. STEEL: We have one speaker. 7 MR. MICHAELS: Yes, we do. 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8 1 PETER MICHAELS . 2 MR. MICHAELS: Thank you. My name is Peter 3 Michaels, here on behalf of a number of the State 4 assessees, particularly the telephone companies that I 5 represent. And we've worked with staff, with Mr. Yeung 6 and Mr. Jackson and Mr. Thompson and are grateful for 7 their accommodations. 8 We've gotten an extreme amount of help from 9 Board Member Steel and her staff, for which we're also 10 grateful. And I support these guidelines, and what they 11 enable us to begin doing is to ask our appraisal 12 experts -- to give our appraisal experts some focused 13 guidance and instruction on what exactly those 14 appraise -- those appraisal reports should highlight and 15 how they should go about measuring obsolescence factors 16 and other cost-related components. 17 So, to the extent this now gives a taxpayer the 18 advantage, I suppose, which we didn't have before, of 19 giving clear guidance and establishing clear 20 expectations for the expert appraisers, who taxpayers 21 assist, this is very helpful to us. 22 Of course the devil's in the details and 23 yesterday we had a meeting with staff, our first 24 meeting, with the first report that would arguably be 25 covered by these guidelines and -- it ultimately does 26 come down to the quality of the report and the inputs 27 and the conclusions and the findings. 28 So these guidelines are very helpful to get us 9 1 to the point now of looking at the interpretation and 2 the application of those inputs and seeing where we 3 agree, disagree and why our perspectives differ. 4 So, I think it's definitely a step forward. 5 It's way better than what we previously had to work 6 with, although these guidelines are not applicable to 7 local assessees. I dare say this Board will not 8 develop -- or spend two years developing guidelines in 9 the near future for other State assessees. So, it would 10 seem that these guidelines, generally speaking, would 11 apply in principle to obsolescence that might be 12 suffered -- or extraordinary obsolescence by other 13 industries that are State assessed. 14 In conclusion I'm grateful that these 15 guidelines have been adopted and the companies that I 16 represent are likewise grateful. 17 Thank you. 18 MS. STEEL: Any comments, Members? 19 Thank you very much for industry and staff that 20 working very hard. Actually, we brought this up last 21 November and we had more ideas from industry. So, we 22 changed those -- you know, industry's ideas and we -- 23 you know, finally we made this to the right point. 24 And we are ready to move and hopefully that 25 this guideline is going to make it easier to assess 26 property tax at the end of the year. 27 And anyone? 28 MR. LEONARD: Question. 10 1 MS. STEEL: Yeah. 2 MR. LEONARD: Comment, actually. I want to 3 join you in thanking the staff for going back and making 4 sure what we're doing here is not inconsistent with 5 assessors and is consistent with other states. 6 This is really cutting edge description of an 7 appraisal methodology, as you know, and because it is 8 new it's -- it's -- it's going to take a lot to get it 9 really worked out as to what it means as we adopt it 10 today. I would appreciate from both the industry side 11 and the Department side as where -- where there's a 12 controversy that involves these guidelines that that be 13 noted on some of our appeals or documents that come to 14 us so that we could look as to whether the guideline 15 should be changed or whether that's just a natural give 16 and take within the guidelines if the guidelines are 17 fine but there's judgment calls to be made within them. 18 But thank you very much for going back and 19 doing that research 20 MS. STEEL: Thank you. 21 MS. YEE: I'll move adoption of the 22 staff-recommended guideline. 23 DR. CHU: Second. 24 MS. STEEL: Thank you. 25 This motion's been adopted. This is going to 26 conclude the business of the Property Tax Committee. 27 Thank you very much. 28 MR. KINNEE: Thank you. 11 1 ---oOo--- 2 REPORTER'S CERTIFICATE 3 4 State of California ) 5 ) ss 6 County of Sacramento ) 7 8 I, BEVERLY D. TOMS, Hearing Reporter for the 9 California State Board of Equalization certify that on 10 April 15, 2009 I recorded verbatim, in shorthand, to the 11 best of my ability, the proceedings in the 12 above-entitled hearing; that I transcribed the shorthand 13 writing into typewriting; and that the preceding 11 14 pages constitute a complete and accurate transcription 15 of the shorthand writing. 16 17 Dated: April 27, 2009. 18 19 20 ____________________________ 21 BEVERLY D. TOMS 22 Hearing Reporter 23 24 25 26 27 28 12