1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 SEPTEMBER 13, 2012 9 10 11 12 ITEM P 13 OTHER ADMINISTRATIVE MATTERS 14 ITEM P4 15 PROPERTY AND SPECIAL TAXES DEPUTY DIRECTOR'S REPORT 16 1. FIRE PREVENTION FEE PROGRAM IMPLEMENTATION UPDATE 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 5 Michelle Steel Vice-Chairwoman 6 7 Betty T. Yee Member 8 9 George Runner Member 10 11 Marcy Jo Mandel Appearing for John 12 Chiang, State Controller (per Government Code 13 Section 7.9) 14 Joann Richmond 15 Chief Board Proceedings Division 16 17 For the Department: David Gau Deputy Director 18 Property and Special Taxes Department 19 20 ---oOo--- 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 SEPTEMBER 12, 2012 4 ---oOo--- 5 MR. HORTON: Ms. Richmond. 6 MS. RICHMOND: Our next item is P4, Property 7 and Special Taxes Deputy Director's Report; P4.1, Fire 8 Prevention Fee -- Fee Program Implementation Update. 9 MR. GAU: Good morning, Mr. Chairman and 10 Members, again. David Gau, Deputy Director of the 11 Property and Special Taxes Department. 12 What I have today -- this morning for you is 13 a -- an update on how we are doing with the 14 implementation of the Fire Prevention Fee Program. 15 Uh, as you'll recall, AB 29 from the first 16 extraordinary -- extraordinary session of 2011 imposed, 17 uh, the State Responsibility Fire Prevention Fee of $150 18 that was to be assessed on habitable structures located 19 within these, uh, State Responsibility Areas or SRAs. 20 Uh, there's also a $35 exemption or credit, uh, 21 prescribed by, uh, regulation which may be applicable to 22 habitable structures that are already covered by local 23 fire protection services. About, actually, 95 percent 24 of the, uh, structures are included in this -- with this 25 exemption. 26 Um, so annually, the assessment and collection 27 of the fees, uh, the Board is in cooperation or in joint 28 effort with the, uh, Department of Forestry and Fire 3 1 Protection, CalFire, and we are using the fire -- uh, 2 excuse me, the fee collection procedures law. 3 So what the Board's responsibilities are 4 are registration, account maintenance, uh, issuing 5 Notices of Determination, Notices of Redetermination, 6 statement accounts for miscellaneous -- miscellaneous 7 adjustments and then collections. While CalFire's 8 responsibility is to identify feepayers and the amounts 9 due, and then also to process appeals. 10 CalFire provided the Board with a list of 11 825,488 names and addresses of feepayers that are 12 identified as owing the Fire Prevention Fee and the 13 amount of the fees to be assessed. 14 We began issuing the billings for the fee on 15 August 13th. And the billings are being mailed 16 alphabetically, uh, in order by county. And all 17 billings include a, uh, CalFire insert that describes 18 the fee and some other information of frequently asked 19 questions format. 20 So as of last Friday -- the statistics that 21 I'll give you are of last Friday -- uh, we've mailed 22 130,000 billings. And that is through Fresno County. 23 We've also, uh, been mailing advanced notices, uh, to 24 advise feepayers that the fee's coming. And as of 25 last -- again, last Friday we had mailed 174,000 of the 26 advanced notices. 27 Um, at this time we have received about 28 $1.3 million, uh, in fee revenue. And, uh, CalFire has 4 1 acknowledged about 858 appeals; um, half of those are 2 for contention of whether the fee is -- whether it's a 3 fee or a tax. That's based on what they're telling us. 4 Then what we'd also like to do is start 5 informing the Board Members on a weekly basis. We will 6 be providing you a statistical report on, um, the, uh, 7 updates that will contain the information that's part of 8 the memo that was, uh, included with today's agenda. 9 And then one other extra effort that we took 10 to, uh, provide better customer services that we have 11 now a -- an ability to direct-transfer calls that come 12 into our agency and refer those directly over to CalFire 13 without having just to give the feepayer a phone number 14 and telling them to call that number. We're able to 15 directly connect them to CalFire on that same phone 16 call, which is really just a -- a -- 17 MR. HORTON: That's good. 18 MR. GAU: -- that extra effort that, uh, our 19 staff is taking to make this, uh, as best it can on the 20 feepayers that do call in. 21 That concludes my report, and I'd be happy to 22 answer any questions at this time. 23 MR. HORTON: Discussion, Members? 24 Member Runner. 25 MR. RUNNER: Uh, one of the items that -- that, 26 uh, we've talked about is the idea for those that are 27 looking for some kind of a -- you know, they're -- 28 they're -- they're having challenge with the payment, 5 1 and some kind of a payment plan that would be available 2 to them, in light of the fact that some of these people 3 are all of a sudden getting a bill for 150, $300 and 4 it's due in the next 20 days, um, and the idea about 5 potentially being able to waive penalty on that 6 particular issue. Uh, not outstanding interest that may 7 be there, but at least the penalty portion. 8 How -- have we found a path for that? Or 9 what's -- what's -- what's the options there? 10 MR. GAU: We are currently looking into that as 11 well because we would like to, uh, offer the installment 12 payment agreement, uh, ability. 13 Uh, and then as far as waiving fees, we are, 14 uh, coordinating with Legal on getting an opinion as to 15 what fees are -- 16 MR. RUNNER: Mm-hmm. 17 MR. GAU: -- hard, and those that -- that the 18 Board has discretion. 19 So, um, I will provide -- 20 MR. RUNNER: Okay. 21 MR. GAU: -- more detail on that as soon as we 22 get that finalized. 23 MR. RUNNER: Okay. 24 MR. GAU: But we are looking into both of those 25 areas. 26 MR. RUNNER: And -- and the other issue is, I 27 know -- and I'm -- I don't know what other folks are 28 getting, but we -- again, the data is very difficult to 6 1 get, um, in the sense that there wasn't -- nobody really 2 kept record of inhabitable structures on a particular 3 piece of property, um, assessors or -- you know, people 4 began to look at them in different ways. 5 So, I know I've gotten complaints from people 6 in regards to they got a bill on a house that never got 7 built, had a building permit but it never got built or 8 something that was burned down years ago. 9 Um, I know we had one that came in that was a 10 property owner that sold; so he got a bill, plus then 11 the person who has the property now got the bill, in 12 terms of double billing. 13 Um, how are we -- how are we -- what are we 14 finding in regards to those kind of issues and, um, 15 how -- how -- what's our path of resolution to some of 16 those? 17 MR. GAU: Uh, you're correct, we are having 18 some of those issues that have, uh, come to us as well. 19 We are trying to work with CalFire in identifying is 20 there a common or, uh, area that maybe we need to 21 examine. For example, I know, uh, we've had issues in a 22 couple areas where, uh, mobile homes, for example, have 23 been a -- an issue. And partly because those are also, 24 uh, registered with the Housing Community Development 25 Agency, the State Department, uh, and then also on the 26 assessor's books and records. And depending whether -- 27 how it's affixed to the realty -- 28 MR. RUNNER: Mm-hmm. 7 1 MR. GAU: -- it's a new issue. And so that -- 2 that actually has been a good percentage of the errors 3 that we've seen. 4 MR. RUNNER: Okay. 5 MR. GAU: And, you know, CalFire was working 6 with a vendor to extract this data for us. So, they 7 have given us some adjustment files. We continue to 8 have pretty much daily phone contact, and certainly 9 weekly conference calls, with CalFire to see if there 10 are recurring, uh, data issues or common errors that we 11 might be able to address. 12 MR. RUNNER: So the roll-out allows us to try 13 to identify what kind of issues could try to be 14 avoided -- 15 MR. GAU: It does. 16 MR. RUNNER: -- in the future mailings? 17 MR. GAU: Right. So far we've seen about one 18 percent error rate. Out of the 825,000 bill -- uh, 19 feepayers, about 11,000, uh, errors that we've been made 20 aware of. For a -- 21 MR. RUNNER: How do we -- 22 MR. GAU: -- brand new program -- 23 MR. RUNNER: How do we know that if we 24 haven't mailed -- we haven't mailed everybody. 25 MR. GAU: No, we haven't. What happened was, 26 uh, CalFire initially gave us a download of all 27 825,000 -- 28 MR. RUNNER: Uh-huh. 8 1 MR. GAU: -- feepayers. The number of 2 structures and the amount that we would bill. 3 MR. RUNNER: Uh-huh. 4 MR. GAU: So we have that loaded. And then 5 what happens is if they give us an adjustment file -- 6 MR. RUNNER: Okay. So there's been an 7 adjustment already -- 8 MR. GAU: Yes. 9 MR. RUNNER: -- on that one percent? 10 MR. GAU: That's correct. 11 MR. RUNNER: Gotcha. 12 MR. GAU: Yes. 13 MR. RUNNER: Okay. Thanks. 14 MR. HORTON: Further discussion? 15 Member Yee. 16 MS. YEE: Thank you, Mr. Chairman. 17 Um, I'm glad to hear that there's, uh, daily 18 coordination with CalFire. And, uh, just want to be 19 sure we're not doing anything to, um, slow down this 20 process. 21 Um, the original intent of the fee was 22 obviously to generate revenue that's much needed for 23 CalFire. So, any of these hiccups that we're 24 identifying, if we're having regular communication with 25 CalFire, hopefully can be resolved quickly and not 26 impinge upon the, uh, expected revenue from this. 27 MR. GAU: Yeah -- our -- yes. And our staffs 28 have been having that regular contact. 9 1 We are sending out, uh, 10,000 billings a day. 2 That is the agreed upon amount, and that's what are -- 3 we can handle internally. So this is a process that 4 will take, uh, several months to go through all 825,000 5 billings. 6 MS. YEE: And then, um, where are the, uh, 7 complaints being received? Are we getting call 8 center -- 9 MR. GAU: We are, a few. Not -- surprisingly, 10 not as many. 11 MS. YEE: Okay. 12 MR. GAU: We, uh -- in our program are, the way 13 the -- if they call into the 800 number, they -- they 14 tree off directly to our staff. 15 MS. YEE: Right. 16 MR. GAU: So we are handling some. And that is 17 where we, uh, develop that direct link over to the 18 CalFire triple eight number. 19 MS. YEE: Okay. 20 MR. GAU: So we can get, um, handled over 21 there. 22 And, again, now that they have got the bills -- 23 the -- the questions vary, and so, uh, especially in the 24 appeals area; that is the responsibility of CalFire. 25 So, um, as -- as they do have issues on questioning the 26 number of structures or "I didn't own it on the date 27 that is prescribed in the Notice of Determination," 28 those are all things that they need to address with 10 1 CalFire and in their, uh, petition -- 2 MS. YEE: Okay. 3 MR. GAU: -- if that they ought to appeal the 4 fee. 5 MS. YEE: Okay. Uh, but even, uh, in terms of 6 a policy relative to offering a payment plan, we're 7 in -- 8 MR. GAU: That is -- 9 MS. YEE: -- close communication with -- I know 10 that's -- 11 MR. GAU: Oh. 12 MS. YEE: -- in our purview -- 13 MR. GAU: Yes. 14 MS. YEE: -- that we're obviously communicating 15 with CalFire -- 16 MR. GAU: Uh, yes would. 17 MS. YEE: -- about any policy. 18 MR. GAU: We certainly would, yes. 19 MS. YEE: Okay. 20 All right. Thank you. 21 MR. HORTON: What percentage of the appeals 22 actually represent individuals that are, uh, concerned 23 about whether this is a tax or a fee? 24 MR. GAU: Um, I've been told it's about, um -- 25 let's see. Let's see. 26 We had 11,000 that were mobile homes. Of the 27 11,000, I was told we have about 60,000 with the mobile 28 home issue, um, 35 percent believe that they should get 11 1 credit for their local fire protection already. That's 2 the $35. 3 MR. HORTON: Mm-hmm. 4 MR. GAU: And then five percent is the 5 miscellaneous, which, um, that must fall into that 6 category. 7 But I was also told that, uh, what we -- what 8 we -- I think what it is, is -- and staff can correct me 9 if they -- I'm wrong -- but we do receive some of the 10 appeals with the payment indirectly and they should not 11 come here. And we do forward those over. 12 So it was really just an informal survey of 13 what we had received. It's not the formal ones that 14 CalFire had. But what we were seeing on our end with 15 the payment was a number of them were -- about half were 16 because they were saying it was an illegal tax. 17 MR. HORTON: Is it, uh, within our purview to, 18 uh, clear that up or -- 19 My -- my primary concern is that we protect the 20 taxpayer from any subsequent exposure of penalties, 21 interests and so forth, uh, because of their perspective 22 of the law at this particular juncture. 23 MR. GAU: Correct. So we -- we encourage, uh, 24 feepayers that they should pay, uh, or -- or timely file 25 their appeal in order to -- and even if they file the 26 appeal, there's the interest issue. 27 So they need to -- we are encouraging them to 28 pay, uh, to avoid any additional interest or penalty 12 1 should their fee be due even after appeal. 2 MR. RUNNER: Yeah, I think any -- any of the 3 folks that are involved with any potential litigation, 4 as far as I know, have all clearly communicated, uh, 5 from their websites and mailings and whatnot that, uh, 6 the responsibility is to pay the tax to avoid -- 7 MR. GAU: Yeah. 8 MR. RUNNER: -- penalty and interest at that 9 point. 10 MR. GAU: That's correct. 11 MR. RUNNER: So I think everybody's been -- as 12 far as I know, everybody in that process. You know, you 13 always get somebody out there who's deciding that, you 14 know, let's throw the tea over the side of the boat. 15 But, uh -- but I think in terms of any kind of 16 responsible issues there, uh, I think that's been pretty 17 well communicated because we just don't want people to 18 get caught up in that unintentionally or thinking that 19 they're doing something heroic. 20 MR. GAU: That's correct. We are encouraging 21 payment. 22 MR. HORTON: Yeah. Let's, um -- I mean, in 23 addition to encouraging payment -- because saying you 24 should pay it, is not sufficient if you don't think you 25 owe it because you think it's -- it's illegal. 26 And so, um, I just would not want, uh, as 27 Mr. Runner's indicated, I would not want the taxpayer 28 caught up in that. And at the end of the day if in 13 1 fact, uh, the courts -- at the end of the day when it 2 goes to court -- 3 MR. GAU: Right. 4 MR. HORTON: -- uh, who knows what the court 5 might say at the end of the day. 6 MR. GAU: Mm-hmm. 7 MR. HORTON: But right now the law is such that 8 the -- it's due and payable. And we should do our best 9 to make sure that they are aware that what existing 10 law -- uh, because it is currently a law and it won't 11 change until such time that the courts conclude one way 12 or the other -- 13 MR. GAU: That's correct. 14 MR. HORTON: -- uh, and they're running a 15 risk -- 16 MR. RUNNER: Mm-hmm. 17 MR. HORTON: -- of penalties. 18 MR. GAU: That's exactly right. They're 19 running the risk, yes. 20 MR. HORTON: Okay. 21 MR. GAU: We will do what we can to continue to 22 encourage people. 23 MR. RUNNER: One of the issues, I think that -- 24 and I guess we'll know more quickly because we basically 25 just -- what, just this last week came across the 26 first -- end of the first 30-day billing cycle, right? 27 MR. GAU: That is correct because we did start 28 on August 13th. 14 1 MR. RUNNER: Right. So even though we -- I 2 mean we've mailed out 130,000, we only -- 3 MR. GAU: Yes. 4 MR. RUNNER: -- and I think of that we've 5 had -- my understanding -- I mean, we did a quick 6 estimate based upon what you gave me in terms of the 7 numbers. It looks like we've gotten somewhere around 8 maybe 8,000, 8500, uh, payments have been made, uh, 9 given the $1.3 million and doing some -- doing a little 10 bit of math. 11 MR. GAU: Okay. 12 MR. RUNNER: Um, so -- so, you know, at that 13 point we're -- an interesting number, maybe down the 14 line, will be if we -- how many folks actually do 15 create, in some way, protest. 16 MR. GAU: Mm-hmm. 17 MR. RUNNER: Say, "I don't want to pay," and 18 they don't pay, um, as opposed to those who protest 19 saying, "But here's my check," because that will give us 20 a little indication. 21 And you're -- and you're right. I think maybe 22 if indeed we start getting a number of those that are 23 protesting and not paying, I think we do need to be 24 pretty active in -- in -- in letter follow-up to those 25 individuals saying, "Regardless of how you may feel 26 about this, right now that is the law and you have an 27 obligation to go ahead and pay that," and we'll see 28 what -- what the future leads to it. 15 1 MR. GAU: Very good. We'll -- and we'll 2 coordinate with CalFire on that, try to ascertain that 3 data. 4 MR. HORTON: All right. Thank you very much. 5 MR. GAU: Thank you. 6 MR. HORTON: Appreciate it. 7 ---oOo--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, KATHLEEN SKIDGEL, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 September 13, 2012 I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 16 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: October 3, 2012 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 17