1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 MARCH 20, 2012 9 10 BUSINESS TAXES COMMITTEE 11 12 13 14 15 16 17 18 19 20 21 Reported by: Juli Price Jackson 22 No. CSR 5214 23 24 25 26 27 28 1 1 2 P R E S E N T 3 4 For the Board Betty T. Yee of Equalization: Chair 5 Michelle Steel 6 Member 7 Jerome Horton Member 8 George Runner 9 Member 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller 12 (per Government Code Section 7.9) 13 Diane G. Olson 14 Chief, Board Proceedings Division 15 16 For Staff: Susanne Buehler Chief, Tax Policy 17 Division, Sales and Use Tax Department 18 Cary Huxsoll 19 Tax Counsel Tax and Fee Division 20 Legal Department 21 Kevin Hanks Chief, Sales and Use Tax 22 Administration/ Headquarters Operations 23 Division, Sales and Use Tax Department 24 Randy Ferris 25 Acting Chief Counsel Legal Department 26 27 ---oOo--- 28 2 1 INDEX OF SPEAKERS 2 ---o0o--- 3 Name Page 4 Christy Bouma 8 MuniServices 5 Eric Myers 9 6 MuniServices 7 Robin Sturdivant 12 The HdL Companies 8 Gus Rivera 65 9 Intel Corporation 10 Gina Rodriquez 65 California Taxpayers' Association 11 12 ---o0o--- 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 MARCH 20, 2012 4 ---oOo--- 5 MS. OLSON: Our next item is Business Taxes 6 Committee. Ms. Yee is the Chair of this Committee. 7 Ms. Yee. 8 MS. YEE: Thank you very much, Ms. Olson. 9 Members, we have three items on the Business 10 Taxes Committee agenda. 11 If I could start out with item 1, proposed 12 amendments to Regulation 1618, relating to the United 13 States government supply contracts. And I'll ask staff 14 to introduce the issue. 15 Good morning. 16 MS. BUEHLER: Good morning. I'm Susanne 17 Beuhler with the Sales and Use Tax Department. 18 We have three agenda items for your 19 consideration this morning. For agenda item 1, Cary 20 Huxsoll from our Legal Department is with me today. 21 Staff requests your approval and authorization 22 to publish proposed amendments to Regulation 1618, 23 United States government supply contracts. The proposed 24 amendments conform the regulation to the US Government 25 Federal Acquisition Regulation, also referred to as FAR. 26 In 2007 several government property clauses in 27 FAR were combined and the specific clause for special 28 tooling was deleted. Staff and interested parties agree 4 1 to the proposed amendments. 2 We would be happy to answer any questions you 3 may have. 4 MS. YEE: Thank you very much. 5 Good morning. 6 Did you want to say anything else on the issue? 7 MR. HUXSOLL: No. 8 MS. YEE: Okay. 9 MR. HUXSOLL: Sorry about that. 10 MS. YEE: All right, discussion, Members? 11 MR. HORTON: None. 12 MS. YEE: Okay, hearing none is there a motion? 13 MR. HORTON: Move adoption. 14 MS. YEE: Okay. We have a motion by Mr. Horton 15 to adopt the proposed amendments and authorize 16 publication. 17 Yes? 18 Okay, is there a second? 19 MS. MANDEL: Second. 20 MS. YEE: Second by Ms. Mandel. Without 21 objection, such will be the order. 22 Next item is proposed revisions to 23 Sections 901.000 through 906.000 of the Compliance 24 Policy and Procedures Manual, Chapter 9. 25 Ms. Buehler. 26 MS. BUEHLER: For agenda item 2, Mr. Kevin 27 Hanks from the Sales and Use Tax Department is joining 28 us. 5 1 MS. YEE: Okay. Let me -- before you proceed, 2 we have a couple of speakers on this item. I'll ask 3 them to come forward as the presentation is being made 4 to us. 5 Ms. Sturdivant, Ms. Bouma, and Mr. Myers, 6 please come forward. 7 Mr. Hanks, you want to just do an introduction 8 and then we'll hear from our speakers? 9 Ms. Buehler, sorry. 10 MS. BUEHLER: In agenda item 2, staff requests 11 your approval on proposed revisions to the Compliance 12 Policy and Procedures Manual Chapter 7 -- Chapter 9, 13 excuse me, to incorporate guidelines and procedures 14 related to local and district tax reallocations. 15 Staff and interested parties are in agreement 16 on most procedures as provided in action item 1. 17 However, staff and interested parties disagree on a 18 number of issues, including the requirement that a copy 19 of the contract between the jurisdiction and its 20 representative must be provided before the 21 representative is given access to BOE records; the 22 minimum threshold processing funds transfers, the due 23 dates for the Allocation Group to acknowledge 24 submissions and follow up on aged assignments; the CCPM 25 language and procedures for establishing a date of 26 knowledge; and the appropriate threshold for informing a 27 jurisdiction, as a courtesy, when pending refund or 28 credit in an audit results in a large deallocation. 6 1 To facilitate the discussion, we proposed that 2 after staff presents an action item, the speakers make 3 their presentation for that item. Staff can then 4 address any questions you may have and ask the Board to 5 vote on that action item before moving on to the next 6 item. 7 MS. YEE: Okay, thank you very much. 8 I -- if there's agreement, I think I would like 9 to take up Ms. Buehler's recommendations, go through 10 action item by action item, if that's appropriate. 11 Okay. So, action 1, looks like we have pretty 12 broad agreement on this? 13 MS. BUEHLER: Right. As agreed to with 14 interested parties, we ask the Board appr -- to approve 15 the rewrite of Sections 901 through 906 of the CCPM. 16 MS. YEE: Okay. Discussion, Members? 17 Okay. I think what I'd like to do is also take 18 action on each of them separately as well. That may 19 be -- 20 MS. BUEHLER: That would be great. 21 MS. YEE: -- appropriate to dispense with -- 22 MR. HORTON: Okay. 23 MS. MANDEL: What do you mean, each one 24 separately? 25 MS. YEE: Each action item. 26 MS. MANDEL: Oh, yeah, that's what I thought we 27 were doing. 28 MS. YEE: Yeah, okay, good. 7 1 May I have a motion on action item 1? 2 MR. HORTON: Yes, move approval and 3 authorization to move forward on publication. 4 MS. YEE: Okay. Motion by Mr. Horton, second 5 by Ms. Steel. 6 Without objection, that motion carries. 7 How about action item 2? 8 MS. BUEHLER: In action item 2 the requirement 9 that a designated person provide a copy of its contract 10 with the jurisdiction, we ask the Board approve either 11 staff's recommendation, that a copy of the contract 12 between the representative and the jurisdiction be 13 provided before repre -- the representative is given 14 access to BOE records or MuniServices' recommendation 15 that a designated person is not required to provide a 16 contract before it can access BOE records. 17 MS. YEE: Okay, let me have you stop there. 18 Do we have any testimony on this issue? 19 ---o0o--- 20 CHRISTY BOUMA 21 MUNISERVICES 22 ---o0o--- 23 MS. BOUMA: Madam Chair, Members, Christy Bouma 24 representing MuniServices. 25 I would just like to make a general comment. I 26 will defer to Mr. Myers on the specificity. 27 Just to thank the Board for their time and all 28 the staff investment on this process. As you know, this 8 1 was before you probably over a year ago and you sent it 2 to interested parties, which we appreciate, since really 3 -- as I heard earlier this morning all of the discussion 4 about providing good customer service. 5 Under this umbrella the local jurisdictions, on 6 behalf of whom you collect this taxes, are your 7 customers as well as the taxpayers that attempt to 8 comply with the tax laws. 9 So, we appreciate all the time and also the 10 opportunity to comment on these items where we might 11 disagree. 12 MS. YEE: Okay. On this particular action 13 item, any -- yes, Mr. Myers. 14 ---o0o--- 15 ERIC MYERS 16 MUNISERVICES 17 ---o0o--- 18 MR. MYERS: Thank you, Madam Chair, Members. 19 I think our comment is very simple on this 20 particular item. We have no objection to providing the 21 contract. We've been doing so for years. 22 We just don't think that Section 7056, the 23 statute, requires us to provide that contract before 24 data is allowed to be accessed by consultants on behalf 25 of the cities that have hired them. 26 Beyond that, we don't have a dispute with 27 handing over our contracts, as we've done repeatedly, 28 so -- 9 1 MS. YEE: All right, thank you very much. 2 Discussion, Members, on this particular item? 3 MR. RUNNER: Let me just go back to staff. 4 MS. YEE: Yes. 5 MR. RUNNER: Is this -- again I understand the 6 need and the potential of using contract in order to 7 insure dates of the agreements between the municipality 8 and the -- and the organization that they're dealing 9 with. 10 But the question regards to legislative 11 authority or statute authority, did it require that for 12 information that has been brought up, how do you see 13 that? 14 MR. HUXSOLL: Mr. Runner, it's necessary for 15 the administration of the statute as it's written for 16 staff to be provided a copy of the contract prior to 17 disclosing the records. The Section 7056 requires a 18 person that -- the jurisdiction pass a res -- provide a 19 resolution and that if the person is a -- is not an 20 officer or an employee of the jurisdiction, the 21 resolution must certify that the person has an existing 22 contract with the jurisdiction to examine the records, 23 is required by the contract to disclose information 24 contained or derived from those records only to an 25 officer or an employee of the jurisdiction who is also 26 authorized by the resolution to examine the records, is 27 prohibited by contract from performing consulting 28 services for a retailer during the term of the contract, 10 1 is prohibited by the contract from retaining information 2 contained in or derived from the records after the 3 contract has expired. 4 So, it's not just necessarily for the 5 resolution, but to have this existing contract. And 6 when staff has been provided these contracts in the past 7 12 months there have been 12 instances of contracts that 8 had either expired or contained clauses contradictory to 9 the limitations in Section 7056. 10 MR. RUNNER: So, you're -- at least what I'm 11 hearing you saying is even though the statute doesn't 12 specifically require the contract, that the 13 requirements within the statute point to the fact that a 14 contract needs to be shown? 15 MR. HUXSOLL: Correct. 16 MR. RUNNER: Okay, thank you. 17 MS. YEE: Thank you, Senator Runner. 18 Comments on this? Further comment? 19 MR. MYERS: No, thank you, Madam Chair. 20 MS. YEE: All right. Do we have a motion? 21 MS. MANDEL: I'll move the staff 22 recommendation. 23 MS. YEE: We have a motion by Ms. Mandel to 24 adopt the staff recommendation, second by Mr. Horton. 25 Without objection, that motion carries. 26 Okay, next section -- next item? 27 MS. BUEHLER: Agenda item 3 is threshold for 28 processing fund transfers. 11 1 We ask the Board approve either staff's 2 recommendation to set a minimum threshold for processing 3 fund transfers at $250 per quarter or HdL's 4 recommendation to set the minimum threshold at $100 per 5 quarter, or MuniServices' recommendation to set the 6 minimum threshold at $50 per quarter or $250 for the 7 entire period in dispute, whichever is less. 8 MS. YEE: Okay. Discussion? 9 Do we have testimony on this? 10 ---o0o--- 11 ROBIN STURDIVANT 12 THE HdL COMPANIES 13 ---o0o--- 14 MS. STURDIVANT: Good morning, Board Members. 15 I'm Robin Sturdivant with The HdL Companies. And we 16 currently represent over 300 local government agencies. 17 And staff is proposing to raise the current 18 threshold, which is $50, to $250 a quarter. That 19 represents a 500 percent increase. 20 One of the reasons staff has cited is workload 21 issues and they've described a very arduous process for 22 completing the smaller adjustments. However, during 23 recent BTC Committee meetings to amend Regulation 1807, 24 staff indicated that workload was not an issue and that 25 there was no change needed to the petition process. 26 We'd also like to note that the BOE is in the 27 process of updating their in-house software application. 28 So, we question how much longer the manual process will 12 1 actually be an issue. 2 And, finally, local government agencies do pay 3 the BOE to administer the local tax program. And these 4 agencies are your clients. And they deserve to receive 5 all the local tax money that's rightfully theirs. We 6 reluctantly agreed of raising the threshold to $100, but 7 submit that 250 per quarter is excessive. That can add 8 up very quickly. And if a petition takes a year to be 9 resolved, staff's proposal means that that agency will 10 not get $1,000 in local tax that rightfully belongs to 11 them. And this is money that's already been paid in by 12 the taxpayer and it's just simply gone to the wrong 13 jurisdiction. 14 So, what staff is saying is, we acknowledge the 15 money doesn't belong to that other jurisdiction, but 16 we're just going to let them keep it because our 17 workload won't allow us to put the money in the correct 18 spot. 19 MS. YEE: Okay, thank you very much, 20 Ms. Sturdivant. 21 Mr. Myers? 22 MR. MYERS: Thank you, Madam Chair. 23 We -- we agree in principle, although there is 24 slight differences between our proposal and HdL's. We 25 agree in principle that what we need to do here is look 26 at the benefit to -- to the cities that are paying for 27 administration. 28 So, we're open to changing our position, which 13 1 has been no increase at $50 with a $250 cumulative cap 2 or threshold. We'd be willing to move to the $100 and 3 the 250 cumulative, if that helps. 4 But we think the principle is what is important 5 here and that is that you have cities who are paying for 6 administration who are now being told, . 7 "You have to meet 250 a quarter in order 8 for us to look at your correction and get you 9 the money." 10 And we think that that shouldn't be the case. 11 MS. YEE: Okay, thank you very much. 12 Discussion, Members? 13 MS. MANDEL: Yeah -- 14 MS. YEE: Ms. Mandel. 15 MS. MANDEL: -- I had some questions. 16 MS. YEE: Yes, please. 17 MS. MANDEL: At first when I heard about this 18 issue I was kind of focused on the -- it doesn't take 19 much once you've figured out that the money should have 20 gone to Jurisdiction A instead of Jurisdiction B, that 21 it doesn't take much to do that. 22 And then as I read the paper, I realized, well, 23 that's not really what it's about. What it's about 24 is -- as I take it from the paper, tell me if this is 25 wrong -- is that unless -- unless the petition coming in 26 is at a 250 per quarter threshold, the petition won't be 27 worked at all. So, you wouldn't even get to the point 28 where you figure out, "Oh, yeah, it should have gone to 14 1 Jurisdiction A instead of Jurisdiction B." 2 It's just that workload -- it's like a 3 threshold for filing a petition, is that correct, the 4 way that you got it set up in the staff recommendation? 5 MR. HANKS: Ms. Mandel, our recommendation 6 is -- is for a $250 per quarter threshold. And, so, if 7 there is a deallocation that's recommended for $250, 8 then those are the amounts that we're proposing be 9 reallocated. Even if we've got amounts -- now, if we've 10 got amounts below that, let's -- let's say that we've 11 got ten different -- ten different allocations of the 12 $250. We've got a deallocation from one jurisdiction 13 and we've got a reallocation to ten other jurisdictions. 14 What we're proposing is that we would still 15 make that adjustment, because the one deallocation 16 totals $250. 17 MS. MANDEL: Okay. So, let me repeat this 18 because I always want to make sure I understand what 19 you're saying. 20 So, if a petition -- and I'm not familiar with 21 the petitions, I never did that kind of work -- so, if a 22 petition comes in from a jurisdiction that impacts ten 23 other jurisdictions, what you're saying is if one of 24 those ten has -- has a reallocation, deallocation that's 25 at or above the 250 threshold, then the other nine will 26 get it too, because it's -- 27 MR. HANKS: Correct. 28 MS. MANDEL: -- right? 15 1 MR. HANKS: Correct. 2 MS. MANDEL: But -- and -- but -- maybe the 3 consultants can help me out a little bit because here's 4 where I was going with that is I was -- I don't really 5 see -- I don't see an explanation of the workload impact 6 from -- they're willing to go now $100 from the 50 and I 7 don't really see an analysis of the workload impact from 8 $100 to $250. 9 And I kind of thought -- well, what I was 10 hearing at first was how hard is it -- now that you've 11 figured out that somebody's supposed to get the money, 12 how hard is it really to move the money? How much does 13 that really cost? 14 And that's why I -- in reading it again, I 15 thought, well, maybe what staff's saying is 16 jurisdictions don't even file with us 'cause they're not 17 all -- they're not all -- I mean, the one you're talking 18 about is on the back end. I'm a jurisdiction and I want 19 to get three grand and it impacts a bunch of other 20 places. 21 But it may be that a jurisdiction files because 22 they want to get -- and the jurisdictions have said this 23 makes a difference to them -- that they want to get 24 their $100 a quarter. Maybe it's worth it to them at 25 $100 a quarter to say, 26 "Hey, they paid it to the guy -- the co -- 27 the jurisdiction next door to me and it should 28 have come to me and I want my $100 a quarter, 16 1 because over the life of that business being 2 there, $100 a quarter is going to add up to a 3 lot to me. But my petition right now is only 4 for, you know, a few quarters. But once you 5 figure out that they should have been sending 6 it to me, you know, it's going to be a while." 7 And what I took then when I read the paper 8 again, trying to figure out about how bad is this 9 workload impact, that what was being said was if that 10 jurisdiction comes in, staff's not going to look at the 11 petition. 12 But I don't have a handle on whether that's the 13 case or, you know, how much -- you know, what is it that 14 we're really talking about in terms of -- of the 15 workload that wouldn't have to be done? 16 I can't get -- I couldn't gather that really 17 from the issue paper to see where -- where the dispute 18 lies. 19 And then that gets to the second point that I 20 can follow up with, which was the question about, you 21 know, who's -- who's really paying for the service 22 anyway? And I know we've had a little bit of that 23 discussion before, but can you help me out with -- 24 MR. HANKS: Absolutely, absolutely. 25 Ms. Mandel, some of the comments that we wanted 26 to share with the Board Members is -- is we're -- we're 27 mindful of the -- of the cost of the locals to 28 administer this program. 17 1 And ultimately what we're wanting to do is to 2 provide efficient operations to them for the service 3 that we're providing them for the reimbursements that 4 we're collecting from the local jurisdictions. 5 What -- what we're here to talk about are those 6 efficient operations. What we've analyzed and been able 7 to determine is that approximately 15 to 20 percent of 8 the cases, petitions that we're working in our 9 Allocation Group, relate to these lower dollar threshold 10 amounts, so, $250 and below. So, approximately 20 11 percent of that workload relates to -- to working 12 these -- these smaller assignments. 13 MS. MANDEL: And -- but let me just interrupt 14 you for a second. 15 But you -- you don't know what -- do you know 16 what it is between the 100 that they're willing to go to 17 and 250? Do we know where it is or we don't yet? 18 MR. HANKS: I don't know the -- the difference 19 between -- 20 MS. MANDEL: Okay. 21 MR. HANKS: -- that interval, but I know below 22 $250 we've got approximately 20 percent of the petitions 23 that -- that we're working in that category. 24 Now what we're mindful of is that there is an 25 opportunity cost to preparing these -- the work 26 associated with these reallocations. And to -- in the 27 sense that we reallocate resources to adopt these 28 reallocations, we're going to be pulling audit resources 18 1 or outreach resources or collection resources from other 2 parts of the Board's agency. 3 Now to do that equates to an opportunity cost 4 to the locals and to the State of approximately $350 an 5 hour for each and every hour that these individuals are 6 performing the reallocation work. The State and the 7 locals are not driving that $350 per hour tax change. 8 Now we're mindful too in reallocating the local 9 tax that we're talking about, there is no net increase, 10 of course, with the local tax to any jurisdiction, apart 11 from a shift of that local tax from one jurisdiction to 12 the next, let's say, from Sacramento to -- to West 13 Sacramento. There's -- it's a zero sum proposition 14 where you're just transferring those local funds. 15 So, we're mindful that -- that being efficient 16 in our operations that the opportunity cost to do this 17 type of workload impacts the locals indirectly in the 18 sense that we don't have collectors working these 19 assignments, collecting accounts receivables, we don't 20 have auditors conducting audits and bringing in that -- 21 that level of revenue to the State and to the locals. 22 Also we're mindful that -- that if we do an 23 audit of a taxpayer's business and develop a $500 24 deficiency in that audit, generally speaking, we don't 25 bill that because it's -- it's not efficient for us to 26 even bill at the $500 level. 27 Here we're talking a level -- a threshold level 28 that's half of that, $250. We're proposing that the 19 1 threshold be raised from $50 to $250, although, 2 arguably, one could say that $500 even might be a more 3 reasonable level from the sense that we don't even bill 4 these types of audits unless we have tax differences of 5 at least $500 an hour. 6 Now the other rationale, however, for 7 establishing a $250 threshold is in the audits that 8 we're currently conducting, for any local tax 9 reallocation recommendations we make within our audits, 10 we don't make those reallocations unless we're at the 11 $250 threshold, which is equivalent to the threshold 12 that we're proposing to the Board Members today. 13 And that's -- that's really the basis for our 14 recommending the $250 threshold, because it keeps it in 15 sync with what -- the threshold we're using when we 16 conduct our regular audits. 17 And also we're mindful of the opportunity cost 18 of directing more resources towards this reallocation 19 would ultimately cost the locals, not only in staff time 20 to produce the reallocation recommendations, that -- 21 that is costing the locals many dollars a year to 22 perform, but also they're not gaining any local tax in 23 the sense that we're shifting local tax from one 24 jurisdiction to the next. 25 Also it's been mentioned that some of the 26 cities would be negatively impacted if they weren't 27 receiving $50. We've looked at some of the Northern 28 California cities that are quite small, with small 20 1 populations and receiving only $29,000 in sales tax 2 revenue. $50 reduction to that city is -- is really 3 immaterial in terms of an adjustment to even a small 4 city in California, much less a larger city and a larger 5 metropolitan area. 6 Also we're mindful that -- in the sense that 7 we're working reallocations for one city where they're 8 going to derive an increase of $50. For another case 9 that we're working perhaps that $50 is removed from them 10 and placed in an -- in another jurisdiction. 11 So, you've got the monies coming to and from 12 each of these local jurisdictions. So, in the sense 13 that they're receiving $50, well, they might be losing 14 $50 in the next period when we find a reallocation that 15 is necessary for a subsequent period. 16 So, again, what we're finding is that these -- 17 these small, small adjustments that -- that we're 18 working currently at the $50 threshold, or anything 19 between $50 and $250, is requiring significant staff 20 resources to -- to manage that workload. We think would 21 be better spent by using those same resources, working 22 the cases that are $250 and higher, because ultimately 23 the jurisdictions are going to benefit from -- from more 24 of those higher dollar shifts of local tax money from 25 one jurisdiction to the next. 26 MS. MANDEL: Okay. On the costs, we had this 27 the discussion, I think, a while ago, maybe it wasn't in 28 terms with the reg, I don't remember when it was, about 21 1 how the costs are figured. 2 'Cause for the local jurisdictions it's kind of 3 a funny thing because the costs -- the costs are paid on 4 an aggregate basis because it's kind of off the top of 5 something, of what's -- I guess, I don't even remember 6 any more -- but I think it's like on an aggregate basis, 7 whereas on the petition side they're looking at it on 8 a -- on a, you know, a single basis of the -- of the -- 9 the tax revenue. 10 But as I remember the cost discussion it was 11 that the costs that are allocated is a share of the 12 entire cost of SUTD. Is that how it's done? Because 13 every little thing that SUTD does impacts how many 14 dollars overall come in the door. 15 MR. HANKS: That's correct. 16 MS. MANDEL: So, it's not like there's a 17 separate costing of the petition process, which, you 18 know, at one level the entire petition process benefits 19 only the local jurisdictions and if you could but 20 segregate it out, perhaps their overall costs would 21 actually go up, I don't know. 22 But that that -- that's -- that's the cost 23 methodology, is that -- 24 MR. HANKS: Correct. 25 MS. MANDEL: -- right? 26 MR. HANKS: Correct. There's a complex 27 calculation that's -- that's actually described in our 28 Revenue and Taxation Code that goes into the 22 1 mathematical analysis for calculating that cost. And 2 it's dependent on -- on various factors. Of course, the 3 primary one being the -- the amounts of dollars that 4 are -- that are given to each of the jurisdictions. 5 MS. MANDEL: Okay. And -- and part of why I'm 6 asking these questions is because the impression I had 7 from hearing what the local jurisdictions were concerned 8 about and I would just note, in my every detail queen 9 manner, that in the issue paper when staff states the 10 opposition for this item and they list the cities of 11 San Joaquin and San Diego, actually, the San Joaquin 12 opposition was the San Joaquin Council of Governments, 13 which lists a lot of member agencies and San Diego 14 opposition actually came in from -- and San Joaquin also 15 was for the -- on behalf of the San Joaquin County 16 Transportation Authority and the San Diego reference is 17 to the San Diego Association of Governments, which sent 18 an e-mail, and that, of course, also includes a lot of 19 -- I think it's like 18 cities and the County of 20 San Diego. So, for people who are reading fast and just 21 looking at the issue paper, you know, given all of the 22 time we should at least, you know -- I know you attached 23 the letters and you could look at them and see it was 24 really something else, but just -- if you can just watch 25 that kind of stuff in the future? 26 I didn't have the impression that this entire, 27 you know, cost discussion analysis -- maybe it was -- 28 maybe I missed the interested parties meetings, but I 23 1 couldn't -- like I said, I couldn't get it from the 2 issue paper. And what I was kind of hearing and getting 3 the impression of is, you know, it's our money and we 4 pay for this, and, so, we -- we're willing to go to 100, 5 but, you know, we've -- I got the impression that they 6 may have been -- maybe they just -- I got the impression 7 they were a little bit confused about it the way I was 8 confused about it. 9 Is this -- I don't know if this discussion 10 helps clarify that for them? 11 MS. YEE: Mr. Myers. 12 MR. MYERS: Thank you, Madam Chair. 13 We remain a little bit confused. The argument 14 seems to be that there is an opportunity cost. But we 15 recall that during the discussions on the changes to 16 Regulation 1807, when we were discussing the backlog 17 that the position of staff was they had enough staff to 18 handle the backlog. 19 Yet we're hearing here today that there's an 20 opportunity cost from auditors, who are not the people 21 working our petitions. So, I still remain confused. 22 Our original recommendation was to pull this 23 item off and handle it separately. And we'd be happy 24 with that as well. So, we have a chance to talk through 25 some more with staff, we have a good working 26 relationship with staff. We've been able to come to 27 some agreements on some other items. 28 As of yet, however -- excuse my voice -- as of 24 1 yet, we haven't heard an explanation as to why this is a 2 necessary step, given the background that I just 3 mentioned. So -- 4 MS. YEE: Thank you, Mr. Myers. 5 Miss Sturdivant. 6 MS. STURDIVANT: To address Ms. Mandel's point, 7 HdL represents over 300 hundred local government 8 agencies who oppose this. 9 And I understand that Mr. Hanks feels that the 10 $50 a quarter is immaterial to a smaller city. That's 11 his opinion and I respectfully disagree with that. 12 Some of the smaller cities are usually the ones 13 that have the smaller taxpayers. And they are usually 14 the ones that the smaller petitions will directly 15 affect. In those smaller cities, in this economic 16 climate, every single dollar counts, whether it's 50, 17 whether it's 250, it -- it all matters. 18 And again I'd like staff, if they could, to 19 address if this will continue to be an issue after 20 the -- your in-house software application is updated? 21 Because they talk about this is a manual process. And 22 I'm assuming that once the software rewrite's complete 23 that that will no longer be the case. So, I'd like them 24 to talk about and what the time frame is -- 25 MS. YEE: Yeah. 26 MS. STURDIVANT: -- as far as that's concerned. 27 MS. YEE: That was my question as to whether 28 that will make things improve. 25 1 MR. HANKS: I agree with Miss Sturdivant. I 2 believe that with the adoption of CROS we're certainly 3 going to be in -- in the arena where we're going to be 4 able to have a more automated process in calculating the 5 reallocations. 6 One of the subjects that we're going to talk 7 about in a few minutes, I think, is -- relates to 8 notification. And that's -- that's a very difficult 9 process for us to compute because IRIS simply doesn't 10 give us the information that -- that we can use to 11 readily determine if -- if a deallocation meets a 12 certain threshold. So, it's quite labor intensive for 13 us to do these calculations. 14 I think in the future, with the adoption of 15 CROS we will have more automated processes and queries 16 that we can use to assist us in facilitating these -- 17 these adjustments electronically rather than manually. 18 MS. YEE: Have you provided input to be sure 19 that capacity will be there? 20 MR. HANKS: We are discussing that, yes. 21 MS. YEE: All right. 22 MR. HANKS: Yes. 23 MS. YEE: Okay. I -- I want to jump in a bit 24 because I -- and I appreciate the dialogue that 25 Ms. Mandel and Mr. Hanks, you had. 26 I guess I'm troubled by the fundamental issue 27 here and that is really, you know, workload 28 considerations certainly on our minds if that, in fact, 26 1 is what is driving this particular change, but we have a 2 responsibility to be sure that jurisdictions receive the 3 right allocation of tax proceeds and -- that they are 4 otherwise entitled to receive. And what I need to see 5 happen is we adopt the change here that could be 6 facilitated in resolving, once we get CROS up and 7 running. 8 And I agree with Ms. Sturdivant, I mean, small 9 jurisdictions are just really hungry for dollars right 10 now and there's very little that they can do. This is 11 the one avenue and it -- and it could make a difference 12 in terms of some of the things that they are able to 13 fund or not fund. 14 But it just seems to me that if this is a 15 workload issue, if we kept the current threshold, it's 16 either going to be we keep the current threshold and all 17 of this takes more time or we change the threshold and 18 it becomes a little bit more efficient in terms of how 19 these petitions get processed. 20 MR. HANKS: Correct. 21 MS. YEE: Okay. 22 MR. HANKS: Correct. 23 MS. YEE: So, it's a tradeoff. 24 But, I mean, there was a little hope with CROS 25 on the horizon, so, that -- that's sometime out. 26 MR. HANKS: It is. 27 MS. YEE: But -- but I'm troubled by kind of 28 losing sight a little bit about our responsibility to be 27 1 sure that we are trying to arrive at the right 2 allocation of tax. 3 I understand this is a zero sum game and that 4 our costs aren't fully recovered with respect to what 5 local jurisdictions are -- are paying us, but I just 6 don't want us to lose sight of that. I think we have a 7 fundamental responsibility in that regard. So -- 8 MR. HANKS: We wholly agree. 9 MS. YEE: -- it's a balancing act. 10 MR. HANKS: We wholly agree. 11 MS. YEE: Senator Runner and then Mr. Horton, 12 I'm sorry. 13 MR. RUNNER: Yeah, just real quick. I am not 14 persuaded with this new amount. I'm -- let me just tell 15 you a couple of my observations. 16 One is, Mr. Hanks, the analogy is not a good 17 one when we say, "Gee, we don't -- we don't go and 18 collect anything less than $500 because of the cost." 19 There's a difference. No. 1, we're the State 20 dealing with the State's money. Here we're dealing with 21 somebody else's money. And to me this would be, you 22 know, like a bank deciding to write off a cost because 23 the bank wants to -- because it's going to cost them too 24 much to go do something. But I don't want the bank 25 writing off any of my money because it cost the bank too 26 much time. So, I think that's -- I have difficulty with 27 the idea that the threshold amount, you know, and what 28 we choose to do, to chase after an amount of money. 28 1 The other issue is we're talking about $250 a 2 quarter. Some of these disputes are more multiple 3 quarters, correct? 4 I mean, they might have an audit that might 5 be -- I don't know, could they be two years long? 6 MR. HANKS: Senator -- 7 MR. RUNNER: And so now you're talking about -- 8 now you're talking about not $250, but you're talking 9 about what could be just a shade under $2,000. 10 MR. HANKS: Yeah. 11 MR. RUNNER: And I can tell you I represent a 12 lot of those little communities and, yes, $2,000 makes a 13 big difference to them. 14 So, I guess my concern is -- I actually 15 wouldn't have much -- as much trouble with this if it 16 was a cumulative $250 as much as I have concerns with it 17 being $250 per quarter, which then could amount to a 18 much larger amount of dollars. 19 The other issue is, I guess I'm not convinced 20 of, and that is we're talking about workload and 21 efficiencies and -- and I guess if I'm the customer, 22 like these folks are -- then I need to hear from you 23 what you're going to get me then with these 24 efficiencies. If you're going to make it faster and 25 efficient, what are my -- what am I going to get? What 26 are my municipalities going to get? 27 MR. HANKS: Right. 28 MR. RUNNER: What's going to happen? What's 29 1 going to be the benefit from -- that they're going to 2 receive as a result of the fact that we're going to go 3 ahead and set this new higher limit? 4 MR. HANKS: Right. I think that's a great 5 question, Senator Runner. And I'd be happy to explain 6 that that I think what the locals are going to derive is 7 they're going to drive a shorter petition period in 8 which we've got time to make recommendations to grant 9 the reallocations that are necessary. 10 Believe me, we're 100 percent in agreement 11 with -- with everyone -- 12 MR. RUNNER: Can I stop you right there real 13 quick? 14 'Cause I was here at the hearing where we said 15 we had enough staff, that we did not have a staff 16 problem with driving petition issues. 17 I mean, I thought we -- I thought -- because we 18 talked about that, we talked about do we need to put 19 more people on it. And we said, no, we don't. 20 And, so, I guess I'm struggling now with what 21 we talked about a few months ago versus what we're 22 talking about today. 23 MR. HANKS: Right. And I'm looking at our 24 inventory of petitions. As you know the petitions come 25 in and they're worked as they come in. I think at the 26 last meeting that we had, we had a petition inventory 27 that was rising and approximately 5,000. Back in 28 September of 2011, actually, that number was as low as 30 1 4600. Since then, however, the number of petition 2 inventory has increased to 5400 and that's as of January 3 of '12. 4 So, we're mindful that we are actually 5 receiving an increased level of petitions. That volume 6 somewhat fluctuates over time, but -- 7 MR. RUNNER: And of that -- just to clarify 8 from what you had said earlier -- and of that 5400, we 9 said 15 to 20 percent of those are less than $250? 10 MR. HANKS: That's correct. 11 MR. RUNNER: Per quarter? 12 MR. HANKS: Per quarter. 13 MR. RUNNER: Not the -- not an aggregate amount 14 over time, but per quarter? 15 MR. HANKS: Per quarter, that's correct. 16 MR. RUNNER: Could some of those be, like, 17 lengthy, like two or three years in dispute? 18 MS. MANDEL: Meaning the length of the 19 petition -- 20 MR. RUNNER: Length of the petition -- 21 MS. MANDEL: -- from date of knowledge? 22 MR. HANKS: Oh, absolutely, absolutely. 23 MR. RUNNER: So -- 24 MR. HANKS: That includes all of our petition 25 inventory. 26 MR. RUNNER: So, you could be talking about 27 several thousand dollars to a local community? 28 MR. HANKS: We could, we could. And -- and I 31 1 think what we're attempting to do is the shorten that 2 petition period so that -- that we're able to -- to 3 effectively manage that increased workload as it comes 4 in, but process the reallocations in a shorter period of 5 time so that the locals get the advantage of those 6 reallocations sooner rather than later. 7 MR. RUNNER: Okay. 8 MR. HANKS: I think that's -- that's our 9 ultimate goal here. And I think increasing the 10 threshold to the $250 level would -- would achieve that. 11 MR. RUNNER: I guess -- the bottom line of this 12 is I guess we haven't sold the customer that they're 13 going to get a benefit from this yet, have we? 14 MR. HANKS: Correct. 15 MR. RUNNER: Thanks. 16 MR. HANKS: That's correct. 17 MR. HORTON: Madam Chair? 18 MS. YEE: Mr. Horton, please. 19 MR. HORTON: Question of the Department, is it 20 possible to -- to determine what the cost is attributed 21 to the reallocation process? 22 MR. HANKS: Yes. Actually, just in looking at 23 our Allocation Group and in connection with the 24 petitions that -- that they're working, the -- the total 25 cost for that effort is approximately a million dollars 26 a year -- just -- just for Allocation Group staff and 27 handling and processing this petition workload. 28 MS. MANDEL: That doesn't include Appeals, it's 32 1 just the Allocation Group, right? 2 MR. HANKS: Correct. That includes just that 3 group, it doesn't include our Local Revenue Section. 4 And as Ms. Mandel had indicated, there's a -- a 5 rather complex formula, actually, that accounts for the 6 reimbursement charges that -- that are made to the 7 locals. And it really encapsulates some of the work 8 that all of us are involved in because to a certain 9 extent, all of our work touches on the locals as well. 10 MR. HORTON: And, so, as the administrative 11 body, how is the Board -- is there indication that the 12 taxpayer actually pays for the service? How is that 13 accomplished? 14 MR. HANKS: Through reimbursements. 15 And, so, reimbursements are paid to the -- to 16 the Board or are adjusted through our budget section. I 17 am not sure of the detailed mechanics of that, but -- 18 MR. HORTON: Are these general reimbursements 19 or reimbursements specific to the allocation process or 20 deallocation process? 21 MR. HANKS: I don't know that. I would have to 22 talk someone from -- from budgets. I'd be happy to look 23 into that for the Members. 24 MR. HORTON: The $50, $100, $250, I think that 25 the concern for me is is that a $50 transaction can 26 actually amount to a $1,000 transaction if it's never 27 corrected. The company could grow. They could 28 purchase -- there could be transactions that take place 33 1 that causes the tax allocation to increase. And, so, 2 it's not just the $50 allocation that would concern me. 3 And there's a larger exposure to -- to the cities 4 because it's unknown as to what the ultimate exposure 5 will be to the city. 6 The question is, there -- is there a need to 7 correct the problem? And the answer should be yes, as 8 long as the funding is there allow the Board of 9 Equalization to accomplish that objective, we should 10 correct it because it's unknown what the allocation may 11 ultimately be. 12 We may conduct an audit and find in that audit 13 process that there is an additional liability that 14 actually reveals that it's far more than $50 that we're 15 looking at as far as the ultimate allocation. 16 My concern goes to the taxpayer. What is the 17 cost -- and this is a question of the consultants -- 18 what is the cost of the taxpayer putting forth a 19 reallocation and deallocation at a $250, $50 rate, 20 presuming that that's constant, that that stays the 21 same? 22 I mean I put forth the potential possibility 23 that it's the unknown and it could be more, but if they 24 go into saying, 25 "We see that there is a $50 problem here 26 that we need to correct, cities, in order for 27 you to pay us, the consultants, and for you to 28 accumulate this and do the work necessary in 34 1 order to justify this internally, it's going to 2 cost you X." 3 Any numbers in that regard? 4 MR. MYERS: Let me make sure I understand the 5 question first. 6 So, you're asking what the cost is for the 7 city? 8 MR. HORTON: In order -- 9 MR. MYERS: What we would charge the city to 10 submit? 11 MR. HORTON: I'm not -- I'm not asking you to 12 disclose what you would charge to submit. 13 MR. MYERS: Okay. 14 MR. HORTON: But I'm asking you to give me an 15 estimate as what the cost is attributed to the city, the 16 work that the city has to do, the work that you're doing 17 and so forth. And I'm trying to understand the 18 materiality of this as we look at costs. 19 There's a cost for the Board; there's a cost 20 for the city. I personally think that if there's an 21 error, we should correct it, as long as we have the work 22 force in order to accomplish that objective, 23 irrespective of the threshold. But I am concerned about 24 the materiality of this as it relates to the taxpayer. 25 MR. MYERS: Fair enough. 26 So, I would say two two things. No. 1, it is 27 no secret, certainly a matter of public record, that we 28 -- we're paid a contingency fee. So, there is no fixed 35 1 charge to the city for us to submit a small claim versus 2 a large claim. 3 However, in order for us to determine there's a 4 claim, there's always a level of work we have to do. 5 And that's true, I think, for the Department as well. 6 Unless this is going to be threshold that's 7 says it's not -- "It doesn't say, "250 in this box, 8 throw it out," they have to look at it as well and say, 9 "Well, is there a misallocation here in the 10 first place? How much is it going to be? How 11 many quarters are at issue here?" 12 We have to look at all of those. I would say 13 that the lower -- the lower the amount, the more likely 14 it is -- it's a -- that it's not a complicated error, 15 but that's not always true. You can get complicated 16 errors that take a lot of work on of our side to 17 investigate, a lot of work on the Department's side to 18 investigate at a low threshold. 19 So, you know, I would say that our proxy 20 measure would be complexity as opposed to number of 21 dollars, but they do follow somewhat roughly. 22 And I'll let Ms. Sturdivant comment as well. 23 MS. STURDIVANT: I would agree with Eric -- 24 Eric's assessment. 25 And I'd also like to point out that, you know, 26 to a larger city $50 or $250, you know, if their local 27 tax revenue is several million a quarter, that's not a 28 lot. But again to a smaller city, where their local tax 36 1 revenue is maybe $30,000 a quarter, that small petition 2 becomes that much more valuable. 3 You know, and it doesn't -- based on how our 4 contracts work with the city, they're not actually 5 putting any time in themselves prior to submitting the 6 petition. That's something that the consultant does. 7 And, again, as Eric said, the time varies, 8 depending on what type of misallocation it is, how much 9 research goes into it on our part. 10 But the bottom line is is that money belongs to 11 that city. Unfortunately, it went to the other city 12 and, basically, what staff's saying is it's too much 13 work for us, so, we're just going to let that other city 14 keep your money. And that's not right, that's not what 15 the cities pay for. 16 MR. HORTON: Okay. 17 MR. HANKS: If I could add one -- one comment 18 to this -- 19 MS. YEE: Mr. Hanks. 20 MR. HANKS: -- Mr. Chairman? 21 I wanted to note that any tax area code changes 22 that -- that are being recommended, certainly those are 23 being processed no matter what -- what threshold is -- 24 is identified. 25 So, if -- if there's new information that -- 26 that is supplied to the Board that indicates that the 27 allocation should be made going into the future 28 prospectively from a new jurisdiction, certainly 37 1 those -- those changes are processed, irrespective of 2 any -- any threshold level. 3 MR. HORTON: Okay. 4 MR. HANKS: So, it's not accurate that we're 5 not going to make adjustments and just cast aside 6 everything that -- 7 MR. HORTON: So, we'll -- 8 MR. HANKS: -- doesn't meet the $250 threshold. 9 MR. HORTON: -- so, we'll make those adjustment 10 irrespective? 11 MR. HANKS: Absolutely. 12 MR. HORTON: Okay. 13 MR. HANKS: Absolutely. 14 MS. MANDEL: So, the threshold's not a 15 threshold for them to file a petition, the thresh -- 16 you'll still -- they'll take -- you'll take petitions at 17 that lower amount because it might impact a future 18 change? You'll work the petition? 19 MR. HANKS: Correct, if it -- 20 MS. MANDEL: And it's just when you go, "Aha, 21 this -- they were right," you're only going to make the 22 change at these lower numbers and assuming nobody 23 involved in the petition gets hit for 250 or more, 24 you're just -- you're going to make the adjustment for 25 the future just not for the past? 26 MR. HANKS: Correct, correct. 27 MS. MANDEL: And -- 28 MR. HANKS: Within the time period -- 38 1 MS. MANDEL: Okay. That gets to the -- 2 MR. HANKS: -- specified. 3 MS. MANDEL: -- that gets a little bit to the 4 -- Mr. Runner's, you haven't sold the customer because 5 that's where it's hard to understand the workload 6 element of it and then -- and then, you know, CROS comes 7 in and we're okay. 8 And there've been some changes since the 9 discussion on the petition reg within this group and 10 personnel and all kinds of things that have been going 11 on in our world at BOE and whether there is 12 efficiencies -- I mean, I -- I know you said that it's 13 very complicated. 14 They just see it as, you know, one more tiny 15 step for man. So, I'm just not -- and because I don't 16 know the answer, really, except that I hear you say, 17 "Oh, it takes a lot." 18 I -- I'm not too -- I'm at a disjoint and not 19 that comfortable, knowing -- because if we say no now 20 and then it gets better later, you know, is there no 21 going back? You know, do we all forget about it and 22 it's just at this and we're never going to -- anyway, 23 I'm sorry, I just -- 24 MR. HORTON: That's okay. 25 MS. MANDEL: -- I feel discombobulated, I 26 guess, on where to be, really. 27 MS. YEE: Mr. Horton. 28 MR. HORTON: Yeah, it's a little -- it's a 39 1 little confusing. Why are we even having the 2 conversation? 3 I would think that the consultants would not 4 submit a petition that -- without giving some 5 consideration to the cost benefit to their clients as 6 well as to themselves. And, so, at $50 you're talking 7 -- if it's -- if it's a six-month adjustment, $300, a 8 year -- do you see where I'm going? 9 Sounds like if it's complex, even at $50 the 10 complexity is insignificant, I mean it's -- it's not the 11 measurement. The complexity can be there for a $50 a 12 month allocation as well as a $500 a month allocation. 13 It can be equally complex. 14 And the representatives are the ones in the 15 position to sort of make that determination. And it 16 seems to me that capitalism would sort of dictate the 17 work. In addition -- I mean I certainly appreciate the 18 sense of just getting it right, which is -- which is my 19 position at any time and than you for the service and 20 providing us the information so that we can get it 21 right. 22 But in measuring workload cost, benefit, 23 efficiencies and effectiveness is what we all sort of do 24 and maybe we ought to give this some time and kind of 25 figure that out so that there can be a true discussion 26 about, "Here's what the cost is to the State Board of 27 Equalization." It's been alluded to that that's a 28 million dollars, which is immaterial, necessarily, to 40 1 the customer, other than the fact of the opportunity 2 costs he made reference to, that that's a million 3 dollars worth of service that is no longer available 4 to -- to the constituents. 5 But if we spend a million dollars to make a 6 $200,000 adjustment, you know, there is some -- 7 some fiduciary responsibility concerns there as well. 8 And if the taxpayer is -- is spending -- as far 9 as their opportune time, their City Manager, their 10 Controller and so forth, to the extent that they're 11 participating, if that cost is in excess of $500 to make 12 a $250 adjustment, there might be some concern on both 13 ends. 14 So, it seems to me that we have a commonality 15 in trying to get to where this threshold number is 16 beneficial to all parties involved. And I don't -- and 17 I don't necessarily hear that we have gotten there. 18 Okay, Madam Chair. 19 MS. YEE: Thank you very much. 20 MR. RUNNER: In light of a long agenda, I'd 21 like to make a motion that -- 22 MS. YEE: Please. 23 MR. RUNNER: -- we put this over for further 24 review, this particular item. 25 MS. YEE: Okay. 26 MS. STEEL: I'll second that. 27 MS. YEE: Motion by Mr. Runner to put over 28 action item 3 for further review, second by Ms. Mandel. 41 1 Without objection, Members? 2 Such will be the order, thank you. 3 Okay, Ms. Buehler, next item? 4 MS. BUEHLER: Action item 4 is the time frame 5 to acknowledge submissions. We ask the Board approve 6 either staff's recommendation to allow 30 calendar days 7 for the Allocation Group staff to acknowledge the 8 missions intended as petitions or MuniServices' 9 recommendation to allow 7 calendar days. 10 MS. YEE: Okay. Do we have testimony on this 11 item? 12 MS. BOUMA: Madam Chair, Members, Christy, 13 MuniServices. 14 We would like to let the record stand on this 15 issue. We have no further comment. 16 MS. YEE: Okay, thank you. Discussion, 17 Members? 18 MS. MANDEL: Yeah. 19 MS. YEE: Ms. Mandel, please. 20 MS. MANDEL: Questions on this one. 21 Okay. This is sort both the time frame pieces 22 together; is that right? Or is this just one of the -- 23 wait a minute, let me get to the right place. 24 Oh, this is just the acknowledgement. 25 No, I don't have an issue with the 26 acknowledgement. 27 MS. YEE: Okay, very well. 28 Other discussion an action item 4? 42 1 MR. RUNNER: Move action item 4. 2 MS. YEE: Okay. 3 MR. HORTON: Second. 4 MS. YEE: Motion by Mr. Runner, second by 5 Mr. Horton. 6 Without objection, that motion carries. 7 Next item, action item 5, Ms. Buehler? 8 MS. BUEUHLER: Action item 5 is documenting a 9 date of knowledge. We ask the Board approve either 10 staff proposed explanation of when a date of knowledge 11 is operationally documented by BOE staff or 12 MuniServices' proposed language, which provides that 13 when establishing a date of knowledge, staff must 14 include the information required under Regulation 1807 15 that supports the probability of a misall -- 16 misallocation and should contact the taxpayer to 17 establish that there is a basis for questioning the 18 reported allocation unless circumstances do not warrant 19 contact. 20 MS. YEE: Okay. Testimony on this item? 21 MR. MYERS: Yes, Madam Chair. 22 MS. YEE: Mr. Myers. 23 MR. MYERS: Our -- I'll take the responsibility 24 here for maybe muddying the waters. Our basic point is 25 simply this, we all agree that there should be 26 sufficient facts, whether it's a operationally 27 documented date of knowledge or a petition. But there 28 should be sufficient factual information to support the 43 1 probability of a misallocation. The question is, what 2 does that mean? 3 We thought that a simple way to answer that 4 question would be to say, "Well, it means what we said 5 it meant in Regulation 1807." 6 We think staff has raised a legitimate concern 7 about having to contact -- excuse me, about having to 8 contact the taxpayer in every case. We submit it's in 9 language suggesting that it wasn't necessary. We are 10 happy to take out any reference to that. 11 Our main point is simply to say that it would 12 be good for all parties involved to have a clear 13 standard about what it means to have facts sufficient to 14 support the probability of a misallocation. And 1807 15 does that pretty well. It's already be adopted for 16 petitions. That's really our point. 17 We're not hung up on making them contact the 18 taxpayer in every case, or even in most cases. If 19 they've got sufficient facts in their file, that's fine. 20 But we have experience that indicates that 21 we're -- you know, we're getting -- when we're reviewing 22 files as part of an appeal, we'll see the goldenrod with 23 a name and a question about whether there was a 24 misallocation being claimed as a DOK. And that's -- 25 that's what we want to try to avoid is further disputes 26 between us and the staff about what constitutes a DOK 27 when they put in down in their goldenrod. 28 We think 1807's a pretty good vehicle for that, 44 1 but we're open to other suggestions as well. 2 MS. YEE: Okay. Thank you, Mr. Myers. 3 Other testimony, Ms. Sturdivant. 4 MS. STURDIVANT: We're in agreement with 5 MuniServices, we think that staff should be held to the 6 same standards that the cities, the local jurisdictions 7 and the consultants are held to. 8 And it's not just enough to look at an 9 allocation and think that it looks strange -- you know, 10 in writing your name and the date on a piece of paper 11 and sticking it in a file and not doing anything with it 12 for a year or 18 months. We think that staff should be 13 held to the same -- same standards and actually have 14 documentation or probability that a misallocation occurs 15 before they secure their date of knowledge. 16 MS. YEE: Okay, thank you. 17 Ms. Bouma. 18 Okay, very well. Question of staff, can you 19 comment on the consultants' approach on this? 20 MR. HUXSOLL: Well, I think we're in agreement 21 with the consultants that the information necessary to 22 operationally document a date of knowledge matches that 23 of what's necessary for a petition that a jurisdiction 24 submits and the language in the CCPM that staff -- 25 staff's draft says that the operation and documented 26 date of knowledge must provide sufficient factual data 27 to support the probability that local tax has been 28 erroneously allocated and distributed. And that's 45 1 specifically the language for what is a valid petition 2 under 1807. 3 So, there may be question as to -- in specific 4 circumstances as to whether staff has adequately 5 documented a date of knowledge in a specific case. But 6 our position would be that the standards are the same 7 for both operationally documenting a date of knowledge 8 and a petition coming in. And we would not document a 9 date of knowledge with information that we would -- did 10 not -- for which we would not accept a petition. 11 And I think there may be concern about -- 12 MS. MANDEL: Well, perhaps -- 13 MR. HUXSOLL: -- specific instances. 14 MS. MANDEL: -- in the past, specific 15 instances? 16 MR. HUXSOLL: Yeah. 17 MS. MANDEL: So that maybe that's why you're 18 writing these words in the CCPM, to get away from 19 specific instances where there might have been a pending 20 fight -- may still be pending fights? 21 MS. BUEHLER: We do want to make it very clear 22 for staff what our expectations are. 23 MS. YEE: Is -- is the concern of the 24 consultants that the sufficient factual data is not 25 spelled out? Or is it -- I mean, I think we're all 26 trying to get to the same goal. And I'm a little 27 confused. 28 MS. STURDIVANT: Well, we had talked this 46 1 morning sometimes, you know, when we're up reviewing 2 files, whether it's -- you know, for an appeal, we'll 3 come across a goldenrod, which is what staff uses to 4 document and there'll be a name and a date and just 5 maybe a reference of, you know, a lot of money in this 6 Countywide pool. And that's used as the date of 7 knowledge. 8 That wouldn't fly for us as the date of 9 knowledge. We couldn't submit a petition just saying, 10 "Yeah, this money looks weird sitting over here." We've 11 got to identify who it belongs to, what happened in what 12 period. 13 So, sometimes what we're seeing in the file 14 doesn't seem to march the criteria that's laid out in 15 1807. 16 MS. YEE: Okay. Let me ask staff a question. 17 If -- if you were to be more explicit with respect to 18 the factual data that would be contained in the 19 explanation and pick up the language that's in -- what, 20 subdivision A of 1807 -- does that necessitate having to 21 contact the taxpayer -- any of those elements? 22 MR. HANKS: Ms. Yee, we don't believe that 23 that's necessary in all instances. 24 And it appears as though the consultants are in 25 agreement with that, that there isn't always a need to 26 contact -- 27 MS. YEE: Right. 28 MR. HANKS: -- the taxpayers. 47 1 MS. YEE: Okay. 2 MR. HANKS: Frequently, we do. 3 But I'd like to add too, with respect to 4 Ms. Sturdivant's comment, we agree with her that, I 5 think, in years past especially there were certain 6 goldenrods that were prepared that spoke in acronyms and 7 didn't exactly lay out what staff had found in doing 8 their research in connection with exploring whether 9 reallocation was -- was necessary. 10 MS. YEE: Uh-huh. 11 MR. HANKS: We're improving training with 12 respect to that element. We're mindful that we want to 13 have the goldenrods contain the same information 14 basically that we'd expect the consultants to provide to 15 us in their petitions. So, we're on evil -- even 16 footing. 17 MS. YEE: Okay. Can -- can we just kind of 18 tighten up the language maybe a little bit and have it 19 refer to "sufficient factual data consistent with the 20 requirements applicable to a petition," that is under 21 whatever that paragraph is, subdivision A of 1807? And 22 just be very, very clear that, you know, both sides same 23 factual requirements, so there's just no ambiguity? Can 24 we do that? 25 MS. BUEHLER: Uh-huh. 26 MR. HANKS: Absolutely. 27 MS. YEE: Okay, thank you. 28 Other -- discussion, Members? 48 1 MR. HORTON: No. 2 MS. YEE: Okay, hearing none is there a motion? 3 MR. RUNNER: I guess the motion would be move 4 as suggested. 5 MS. YEE: As amended, as proposed to be 6 amended, right? 7 MR. RUNNER: Yeah. 8 MS. YEE: All right, motion by Mr. -- 9 Senator Runner to -- 10 MR. HORTON: Second. 11 MS. YEE: -- move as proposed to be amended, 12 second by Mr. Horton. 13 Without objection, that motion carries. Thank 14 you. 15 Next item, Ms. Buehler. 16 MS. BUEHLER: Action item 6, the Allocation 17 Group supervisor follow-up time frames. We ask the 18 Board either staff's recommendation that the Allocation 19 Group lead follow up on assignments aged 180 to 270 days 20 and the Allocation Group supervisor follow up on 21 assignments aged greater than 270 days or MuniServices' 22 recommendation that the Allocation Group lead follow up 23 at 90 to 180 days and the Allocation Group supervisor 24 follow up after 180 days. 25 MS. YEE: Okay, thank you. Testimony on this? 26 MR. MYERS: Very brief. 27 MS. YEE: Mr. Myers, please. 28 MR. MYERS: We're -- we're okay. We -- first 49 1 off, I should say we very much appreciate this 2 recommendation in action 6. We think it's very much a 3 step stipulate in the right direction. It was something 4 that staff came up with and we can't give them enough 5 credit for it. 6 Our tweak was to say, 7 "Look, we have the right after 180 days 8 under 1807 to move to the next level. So, 9 wouldn't be it be better if your follow-up 10 preceded our trigger to pull it out of your 11 hands?" 12 That's all. It's not a big deal to us, we just 13 think it makes sense to follow up before the trigger 14 where we can pull it from their hands and move it to the 15 next level under 1807. 16 MS. STURDIVANT: We're in agreement with 17 MuniServices on this. 18 MS. YEE: Okay, thank you. 19 Ms. Mandel. 20 MS. MANDEL: That -- that was actually my sort 21 of question as, you know, somebody who has to manage 22 some level of workload and used to have to manage more 23 workload. 24 It did strike me as a little odd that -- that 25 there would be no follow-up. I mean I understand that 26 under the current procedures and in the past it's taken 27 some time for people to be able to work the cases. 28 Hopefully that improves over time, but -- 50 1 MR. HANKS: Right. 2 MS. MANDEL: -- if they -- if they can pull the 3 trigger to ask Allocation Group to issue a decision on 4 six months and one day that they haven't heard anything, 5 then why would that be the time -- the same exact time 6 that a guy's going to go down the hall and say, "Hey, 7 buddy, how you coming with your workload?" 8 And maybe there's something else that goes on 9 there, but it seemed like, you know, the goal would be 10 that you're not in the position of having them pull -- 11 be pulling the trigger because if they pull the trigger 12 and you only have 90 days then to finish, you know, are 13 they going to -- is that going to be the best product or 14 is stuff going to wind up going up the system into 15 Appeals that maybe could have been handled at Allocation 16 Group? 17 So, I was kind of curious for the same reason 18 as to why -- why follow-up formally in this thing wasn't 19 going to be until the trigger date. You guys said, 20 "Well, it matches the trigger date, so, it makes sense." 21 But that didn't make sense to me. So, maybe you can 22 explain it? 23 One of you. 24 MR. HANKS: Right, exactly. 25 MS. MANDEL: Kick each other under the table or 26 something. 27 MR. HANKS: Exactly. Ms. Mandel, we're -- 28 we're fully supportive of having the follow up dates and 51 1 we're mindful that they're critical to -- to insure that 2 the work is processed in a timely manner. 3 We're also aware the trigger dates that -- that 4 are incorporated in the regulation that allows for 5 them -- for the consultants to -- to mandate that we 6 produce a decision or a -- a statement concerning 7 misallocation. But we're just also mindful of the 8 existing inventory that -- that we have. 9 We're looking to see whether or not if -- if we 10 instituted the suggested follow up dates, whether or not 11 that would add value to this review process. And it's 12 been our -- our supervisors' determination in the 13 Allocation Group Section that it would not -- just in 14 sense that some of these cases haven't necessarily had 15 the requisite amount of -- of work -- work attributable 16 to -- to some of those cases. And, so, that person's 17 review of those cases might not add that much benefit to 18 -- to the case. 19 And that -- that's why they wanted the extended 20 deadlines. Of course, this -- this could change in time 21 if -- if the thresholds were increased, I think all of 22 this somewhat goes together. If those thresholds were 23 increased to the level that staff was recommending, 24 we're thinking that our inventory levels would drop down 25 to a lower level where probably those follow-up times 26 would be more in line with what MuniServices is 27 suggesting today. 28 MS. MANDEL: Okay. And I -- you know, I don't 52 1 want -- I don't want through the manual to be 2 micromanaging how supervisors conduct their management 3 of their teams because everybody's different and every 4 workload's different. But I -- it was curious to me. 5 And, so, you know, there's some people that 6 work very well independently and their supervisor's not 7 going to be coming by every few days or weeks or months 8 to say, you know, "What have you done for me lately on 9 your workload?" And then probably there is some 10 managers who are going to be checking on the workload 11 before six months because that's just -- you know, 12 they're managing their unit. 13 I don't want to micromanage it, but it -- it 14 just was -- so, I'm glad to hear that, you know, they 15 don't really -- it's not a biggie to the consultants, I 16 had the same curiosity, I suppose. 17 MS. YEE: Thank you, Ms. Mandel. 18 Other discussion, Members? 19 Hearing none is there a motion? 20 MR. HORTON: So moved. 21 MS. YEE: Motion by Mr. Horton to adopt the 22 staff recommendation. Is there a second? 23 MR. RUNNER: Second. 24 MS. YEE: Second by Mr. Runner. 25 Without objection, motion carries. 26 Okay, action item 7. 27 MS. BUEHLER: Action item 7 is informing 28 jurisdictions prior to processing a large deallocation 53 1 of local tax resulting from a refund or credit in an 2 audit. 3 We ask the Board approve either staff's 4 recommendation that informs jurisdictions when a pending 5 refund or credit in an audit results in a deallocation 6 of $100,000 or more in local tax to a jurisdiction or 7 HdL and MuniServices' recommendation to inform 8 jurisdictions when a pending refund or credit in an 9 audit results in a deallocation of $50,000 or more in a 10 local tax to a jurisdiction. 11 MS. YEE: Thank you. Testimony on this item, 12 please. 13 MS. STURDIVANT: This is a suggestion that was 14 originally introduced by HdL during the interested 15 parties process. And currently a local agency doesn't 16 receive any notification at all when there's going to be 17 a large local tax deallocation as a result of a refund 18 or a credit. And we know that sometimes that these 19 deallocations can be several hundred thousand dollars, 20 which -- which really can blindside a city. And again 21 with our current economic climate every dollar makes a 22 difference to local government agencies. 23 And we initially asked that staff use the same 24 threshold amounts for fund transfer notifications, the 25 five percent or $50,000 of that jurisdiction's local tax 26 revenue from the prior quarter. But staff immediately 27 rejected that suggestion and instead they asked for a 28 flat amount that would apply across the board to all 54 1 agencies. And again because the differences in, you 2 know, how much money a large city versus a small city 3 would receive, it's really difficult to come up with a 4 number that sort of fits all across the board. 5 You know, and again some local government 6 agencies, their entire local tax revenue for a quarter 7 might be $30,000. Because of that, we suggested 10,000. 8 Staff came become with 100,000. So, we sort of landed 9 somewhere in the middle at 50. 10 But we still question how a notification amount 11 this large will assist a smaller jurisdiction with their 12 budget and planning. $50,000, that's a staff salary. 13 And again this is another case where -- where 14 staff is concerned with workload but the local 15 government agency is concerned with how to best manage 16 the funds that they have to provide the services that 17 they need for the citizens in their community. 18 MS. YEE: Okay, thank you, Ms. Sturdivant. 19 Other testimony? Mr. Myers. 20 MR. MYERS: Yes, we would just like to -- we 21 support HdL and also appreciate staff being willing to 22 work us with in this new area. 23 So, we support HdL's position on this. 24 MS. YEE: Thank you. Senator Runner. 25 MR. RUNNER: Yeah, I mean I think it's a good 26 tool and is welcome by -- by the local governments at 27 that point. 28 And, so, now the the discussion is -- is with 55 1 something that's new, is the line better at 50 or 100? 2 Let me just, again, say I've got lots of little 3 communities out there in my district. And if you're 4 going to open up this as a -- because it has a -- if 5 this is a policy we're moving forward on because we 6 believe the local governments deserve and this will help 7 them operate better, then it seems to me we need to then 8 decide what that number is that makes sense. 9 And I think the $100,000 is too high. I -- we 10 asked for some additional background on this and found 11 that if you go from 100 down to 50 that there's twelve 12 additional contacts that would have had to have been 13 made in the last calendar year, I think. That's one a 14 month. I can't imagine that that is a big workload 15 problem. So, I'm compelled to feel like $50,000 is a 16 reasonable good policy if we believe that this is an 17 important policy to move forward with. 18 MS. YEE: Thank you, Senator Runner. Other 19 discussion? 20 MS. MANDEL: Sure. 21 MS. YEE: Ms. Mandel, please. 22 MS. MANDEL: Thanks for getting the information 23 in advance. 24 Yeah, I -- I was interested in the 50 to 25 100,000 split in terms of workload, and, so, thank you 26 for the information. 27 And we do -- you know, there was a -- a couple 28 of years ago when the Board delegation went to 100 -- to 56 1 the $100,000. We still have any refund or credit -- 2 there's supposed to be a public record of that kept, I 3 forget where that is, whether that's in the Executive 4 Office or Board Proceedings, I forget at the instant 5 moment. 6 But -- but -- so, those ones where that number 7 is happening, are being called out and -- at least if 8 you're doing what you're supposed to be doing and the 9 public record being kept somewhere. So, it's not like 10 you're going to go looking for what ones are at -- what 11 ones are at that level and that is just however many of 12 those there are, whether there's reallocation impact 13 which, by virtue of having to -- I would think by virtue 14 of having to pull that one to make the public record, 15 you would know, "Oh, yeah, this is one where we had some 16 level of reallocation." 17 'Cause it's a warning system, right, just so 18 they know it's going -- 19 MS. BUEHLER: A courtesy. 20 MS. MANDEL: -- come? 21 MS. YEE: Yeah. 22 MS. MANDEL: Yeah. 23 MR. HANKS: Right. Ms. Mandel, we're -- we're 24 certainly sensitive to the locals needing this 25 information and we're -- we're receptive to that. 26 We're -- we're in a position where we do 27 recommend the $100,000 threshold, however. We want to 28 supply that information to them because we recognize 57 1 that -- that that type of a deallocation can be 2 significant to any size city. It -- currently this 3 notification is not given to cities. 4 MS. MANDEL: No, we -- we understand that. 5 But I'm trying to justify the going from -- not 6 not doing 50 when every credit or refund that is, I 7 guess, over 50,000 -- so, it's not right at 50,000, it's 8 over 50,000 -- gets a public record made of it and kept 9 somewhere. Because the justification for 100 was those 10 are the ones that have to come to the Board now for 11 approval and, so, we're already doing something manual 12 by writing the little -- you know, whatever information 13 you give us for the Board meeting. 14 And my question was, but you have to pull out 15 the ones that are over 50, even if they're not the 100s, 16 but the over 50 to 100 to make the public record. 17 So, I was just curious why the same -- we're 18 already pulling it out, isn't -- to make the public 19 record, doesn't have the same -- we're already looking 20 at it for some manual purpose. 21 MR. HANKS: Ms. Mandel, in -- in terms of the 22 public record that -- that's maintained in Board 23 Proceedings, the information that's captured in those 24 public notifications isn't -- isn't detailed enough for 25 you to note that -- that there's going to be a 26 deallocation within a particular -- 27 MS. MANDEL: Not detailed enough for someone 28 who looks at the public record 'cause that's not the 58 1 purpose of that public record. 2 MR. HANKS: Correct. 3 MS. MANDEL: But maybe I don't know how you're 4 doing them. 5 Is it just something that's a computer run and 6 gets sent -- gets sent there or is something where 7 there's -- you know, the justification on 100,000 again 8 was that there's something manual that staff has to go, 9 "Oh, this one's 100,000, I have to pull it. 10 I have to, you know, do something for Board 11 meeting, therefore, it's not big deal for me to 12 also just send out a courtesy letter, if that 13 one involves a change in the allocation." 14 And 50,000 -- over 50,000 going to public 15 record, if those are -- if that's just a computer run 16 that's going, then nobody's pulling those to then put 17 them onto some type of typed up little thing that 18 goes -- you see what I'm saying? 19 I'm just -- I felt like we were -- you were 20 touching them already to send them to wherever they're 21 going for the public record and touching them already, 22 what -- what's so hard about a courtesy level -- letter 23 then if -- if a particular one involves a deallocation? 24 MR. HANKS: I see. Ms. Mandel, the cases that 25 get scheduled for Board consideration are in excess of 26 $100,000. So, that's -- that's going to be any -- any 27 refund, sales and -- and local tax and transactions tax. 28 So, we're -- in the proposal that we're 59 1 discussing this morning, we're talking about just 2 exclusively the $100,000 in local tax that -- that's 3 going to be deallocated or the $50,000 that's going to 4 be deallocated from a certain jurisdiction. 5 Now, we've got large taxpayers that -- that 6 would probably be the ones that -- that are triggering 7 either of those two thresholds. And what we typically 8 have is these large taxpayers reporting sales via the 9 sales locations of various locations throughout 10 California. And what they're going to be doing is 11 allocating the local tax to the Countywide pools. 12 Now, what we would have in the information that 13 we've got is -- is just the run number that was 14 allocated to that -- that County pool. Let's say it's 15 Los Angeles County. We've got numerous cities within 16 Los Angeles County. So, what staff would have to do is 17 to look at the proportionate share of local tax that's 18 being given to the City of Los Angeles, the City of 19 Azusa, I mean, every city within Los Angeles County to 20 determine where -- where that -- where those amounts 21 lie. And then we would have to compare the refund sum 22 against those -- those amounts to see if we have 23 exceeded a $50,000 threshold or $100,000 threshold. And 24 all of these calculations would have to be done 25 manually. 26 In the future, certainly, this could be 27 something that -- that we could probably incorporate 28 into CROS, but currently it is a manual process. 60 1 MS. MANDEL: Okay. Maybe -- I guess then I was 2 confused by focusing on the 50,000 refund because the 3 50,000 refund is all tax together, not just -- 4 MR. HANKS: All tax. 5 MS. MANDEL: -- not just the 1 percent -- 6 MR. HANKS: Correct, correct. 7 MS. MANDEL: -- local. So, you are talking 8 about a -- and I'm sorry then I got confused because you 9 referenced in the paper the 100,000 threshold that's for 10 the Board and that is total -- 11 MR. HANKS: Total tax. 12 MS. MANDEL: -- total tax. So -- so, every 13 single one of -- okay. 14 So, it -- so, so -- so, it would necessarily, 15 even at a $50,000 limit, it would necessarily then be 16 ones where the -- where it's going to, under our current 17 delegation, it would -- it would necessarily be one 18 that's on a Board agenda? 19 MR. HANKS: Correct. 20 MS. MANDEL: Because it's only the local tax 21 portion? 22 MR. HANKS: Correct. 23 MS. MANDEL: So, now you're talking about we're 24 going to pull all the ones that are on the Board agenda, 25 but then only send a courtesy letter if -- to any 26 particular jurisdiction that's 100,000? 27 MR. HANKS: Correct. 28 MS. MANDEL: And in the situation where you 61 1 have a Countywide Pool, is the issue is -- your example, 2 it would seem to me that rather than doing -- 3 necessarily doing every single one if it's going from 4 Countywide to a place, I would think you'd start with 5 whoever gets the biggest nut out of the Countywide Pool. 6 And if it doesn't -- if they don't hit the threshold, 7 you're not going to do all the other guys. You're just 8 going to go, "Oh, well, it's -- " 9 Again I'm having trouble understanding what the 10 workload impact really is, I mean, how big it really is 11 to do it. 12 MR. RUNNER: Again, for the sake of a long 13 agenda, I would like to -- 14 MS. MANDEL: Sorry I'm talking so much. 15 MR. RUNNER: -- no, no, it's all of us, it's 16 okay. 17 I'd like to make a motion that we -- 18 MR. HORTON: Second. 19 MR. RUNNER: -- that we -- that we create the 20 threshold at $50,000. 21 MS. YEE: All right. Motion by Mr. Runner to 22 establish the threshold -- essentially the HdL's and 23 MuniServices' recommendation then at $50,000. 24 Is there a second? 25 MR. HORTON: Second. 26 MS. YEE: Second by Mr. Horton. 27 Without objection, motion carries. 28 MS. YEE: Okay. Ms. Buehler, I think that 62 1 dispenses with this item, yes? 2 MS. BUEHLER: Yes, it does. 3 MS. YEE: Or this agenda item, okay. 4 Our next issue? Thank you. 5 MS. BUEHLER: Agenda item 3, Randy Ferris from 6 our Legal Department will be joining me. 7 MS. YEE: Okay, we have two speakers on this 8 item, if Miss Rodriquez and Mr. Rivera would come 9 forward? 10 Okay, good afternoon, Mr. Ferris. 11 MR. FERRIS: I think Susanne has some 12 introductory comments. 13 MS. BUEHLER: I do. 14 MS. YEE: Please. 15 MS. BUEHLER: We would like to provide an 16 update on the software technology transfer agreement 17 study with industry that the Board approved at the 18 August 2011 meeting. 19 In cooperation with industry, the study was to 20 determine the feasibility of adopting an optional 21 percentage that can be applied to the technology 22 transfer agreements lump sum sales price to estimate the 23 amount paid for the tangible personal property 24 transferred under the technology transfer agreement. 25 In regard to the the study, staff sent an 26 invitation to approximately 300 prospective participants 27 and interested parties asking them to participate in the 28 study. We posted information about tech -- software 63 1 technology transfer agreements on the Board of 2 Equalization website. 3 To date, one company has volunteered to 4 participate in the study. Although the participant 5 could provide valuable information, we do not believe it 6 would be appropriate to establish an industry standard 7 based only on one company's data. 8 Staff has contacted a number of companies to 9 determine if there were specific reasons they were not 10 willing to participate in the study. Based on these 11 discussions it appears many potential participants are 12 reluctant to have Board staff review their records 13 without specifics on what will be reviewed. 14 Because of the lack of interest by industry in 15 completing the study, we are requesting your approval to 16 begin an interested parties process to discuss whether 17 it is necessary to amend Regulation 1507 to explain when 18 an agreement involving the transfer of software on 19 tangible storage media qualifies as a technology 20 transfer agreement and how tax applies to the sale of 21 tangible personal property transferred in a software 22 technology transfer agreement. 23 MS. YEE: Thank you very much. Let's hear from 24 our speakers and then we'll open it up for discussion. 25 Good afternoon. 26 ---o0o--- 27 28 64 1 GUS RIVERA 2 INTEL CORPORATION 3 ---o0o--- 4 MR. RIVERA: Good afternoon, Madam Chair and 5 Members. 6 My name's Gus Rivera. I'm with Intel 7 Corporation and also representing the Silicon Valley 8 Leadership Group. 9 I'm actually here to strongly support the 10 staff's request for the interested parties process for 11 this particular issue. And that's about it. 12 MS. YEE: Okay, thank you very much. 13 Miss Rodriquez. 14 ---o0o--- 15 GINA RODRIQUEZ 16 CALIFORNIA TAXPAYERS' ASSOCIATION 17 ---o0o--- 18 MS. RODRIQUEZ: Thank you. Gina Rodriquez with 19 California Taxpayers' Association. 20 Ditto what Gus said. We are in strong support 21 of moving forward with the interested parties process. 22 I do want to note that Susanne stated that 23 there's a lack of interest in completing this study and 24 there really isn't a lack of interest. We are fully 25 committed to completing the study. We just need to have 26 the right questions posed. And, so, maybe through an 27 interested parties process we can have that -- have that 28 happen. 65 1 Thank you. 2 MS. YEE: Thank you. 3 Discussion, Members? Ms. Mandel. 4 MS. MANDEL: Sure. I -- I mean I appreciate 5 staff's sending out letters and making follow-up calls, 6 but it's -- you know, it's a complicated area. The 7 letters can sometimes be dense. They can get lost on 8 people's desks and they may not realize they even 9 received one or that it was what they were supposed to 10 be looking for. 11 So, I think talking -- you can tell I like to 12 talk sometimes -- but it's -- it's often underrated in 13 this era of, you know, e-mails, et cetera. It -- it is 14 a -- it is our earliest and sometimes our best 15 communication device. 16 So, I look forward to the interested parties 17 process. 18 MS. YEE: Okay. Thank you, Ms. Mandel. 19 Other -- Senator Runner. 20 MR. RUNNER: Move to move forward with the 21 interested parties process. 22 MS. YEE: Okay. A motion by Mr. Runner to move 23 forward with the interested parties process, is there a 24 second? 25 MR. HORTON: Second, but Madam Chair -- 26 MS. YEE: Yes, please, Mr. Horton. 27 MR. HORTON: -- you know, I just wanted to 28 first say to the Department that they -- they actually 66 1 did a -- they did a good job in reaching out to the 2 industry. There was conversation that occurred and 3 communications to the industry relative to the desire to 4 address this issue. And, so, it's good that we are 5 coming forward. 6 And it was was that conversation and the 7 ultimate communications that actually ignited or was the 8 the catalyst for the discussions that are occurring now. 9 And certainly I want to encourage the -- well, 10 not encourage because they are at a point that they've 11 -- as I've suggested in the past, and many of us as 12 well, is that they're at a point where they've 13 consolidated their -- their efforts into one organized 14 body that can speak on behalf of that entity. And I 15 think that a -- that that would be very helpful. 16 But it is the process that we've gone through 17 thus far that's gotten us to this point. And, so, both 18 parties -- I want to thank both parties for their 19 participation to the extent that that did exist. 20 MS. YEE: Yeah. 21 MR. HORTON: Thank you very much. 22 MS. YEE: Thank you. I'll add my 23 acknowledgement of the staff as well. 24 I'd like to make an additional request. I know 25 we have a motion and a second on the table, but with 26 respect to, I guess, the sensitivity of this issue, I'd 27 like to actually see an update to the Board or maybe a 28 status report after the first interested parties 67 1 meeting, just so we get a sense of where we're headed, 2 sensitive to, obviously, because there are other moving 3 parts that are not going to be subject, I hope, of that 4 interested parties discussion. 5 MR. FERRIS: That's correct. 6 MS. YEE: Okay, thank you. 7 MS. BUEHLER: Yes. 8 MS. YEE: Okay. We have motion and a second, 9 without objection? 10 Motion carries. Thank you much, 11 I think, Ms. Olson, that concludes the Business 12 Taxes Committee. 13 MS. OLSON: Thank you. 14 MS. YEE: Thank you, Members. 15 ---O0O--- 16 17 18 19 20 21 22 23 24 25 26 27 28 68 1 REPORTER'S CERTIFICATE. 2 State of California ) 3 ) ss 4 County of Sacramento ) 5 6 I, JULI PRICE JACKSON, Hearing Reporter for the 7 California State Board of Equalization certify that on 8 MARCH 20, 2012 I recorded verbatim, in shorthand, to the 9 best of my ability, the proceedings in the 10 above-entitled hearing; that I transcribed the shorthand 11 writing into typewriting; and that the preceding pages 1 12 through 68 constitute a complete and accurate 13 transcription of the shorthand writing. 14 15 Dated: April 10, 2012 16 17 18 ____________________________ 19 JULI PRICE JACKSON 20 Hearing Reporter 21 22 23 24 25 26 27 28 69