1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 REPORTER'S TRANSCRIPT 7 FEBRUARY 26, 2019 8 9 10 11 12 ITEM I2 13 BOARD GOVERNANCE POLICY 14 15 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Jillian M. Sumner 28 CSR NO. 13619 1 1 P R E S E N T 2 3 For the Board of Honorable Malia S. Cohen Equalization: Chair 4 Honorable Antonio Vazquez 5 Vice Chair 6 Honorable Ted Gaines First District 7 Honorable Mike Schaefer 8 Fourth District 9 Yvette Stowers Appearing for Betty T. 10 Yee, State Controller (per Government Code 11 Section 7.9) 12 For the Board of Henry Nanjo 13 Equalization Staff: Chief Counsel 14 15 ---oOo--- 16 17 18 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 FEBRUARY 26, 2019 4 ---oOo--- 5 MS. DAVIS: Our next item is I2, Board 6 Governance Policy. 7 This matter may require a vote. 8 MS. COHEN: Okay. 9 Mr. Nanjo. 10 MR. NANJO: Yes. 11 Chair Cohen, Honorable Members of the Board, 12 the second item is the Governance Policy, which was 13 presented originally by Controller Yee last month. 14 What has happened is the Board has requested 15 that I provide a legal analysis. Under 16 attorney/client privilege, I have presented that 17 analysis to each of your offices, and you have that 18 for consideration. 19 You also have as attachments to that, and as 20 part of the PAN, two versions of the Governance 21 Policy. The first one being the one that was 22 attached to the PAN in January. And that had some 23 typographical errors and things of that nature. But 24 just to kind of set a point, that was the first 25 document that was associated with the PAN in January. 26 The second document is the Governance Policy 27 that includes the edits that were suggested by both 28 Legal and a couple of offices. 3 1 It is my understanding that the Controller's 2 Office has accepted those changes, which is why you 3 have in front of you a clean copy that you can 4 approve if you wish. 5 Again, since this is a policy, the Board 6 Members can accept the whole item, they can change 7 things, they can delete provisions. It's your 8 pleasure. 9 And I'm here to answer questions. 10 MS. COHEN: All right. Thank you very much. 11 Before we go any further, I just want to 12 recognize Ms. Yee and thank her for her leadership on 13 this matter during the tenure on the Board, and -- on 14 this Board, and also on the prior Board. 15 MS. STOWERS: Thank you. 16 MS. COHEN: Colleagues, any discussion on 17 the Governance Policy matter? 18 MR. GAINES: Yes. 19 MS. COHEN: All right. 20 MR. GAINES: I -- I guess I would like 21 clarification -- and maybe you can shed some light on 22 it, Ms. Stowers, in terms of moving forward on the 23 Board Governance Policy, when it looks like 24 Member Yee is in favor of shutting down the Board of 25 Equalization. I see a conflict there in vision. 26 Why are we moving forward with a Board 27 Governance Policy if, in fact, she is in favor of 28 shutting down the BOE based on what I read in the 4 1 Sacramento paper? 2 MS. STOWERS: I think we've all read that 3 article. ACA 2 is -- if the Legislatures do move it 4 forward, it will be presented to the residents of 5 California to decide whether or not the Board of 6 Equalization will continue in its current form. 7 But prior to that being presented and passed 8 by the residents of California, the Board of 9 Equalization will continue to operate. And we are of 10 the opinion that while -- while it is under 11 operation, we should have a Governance Policy. We 12 are still here. And we do not know whether or not 13 ACA 2 is going to move forward. 14 If that answers your question. 15 MR. GAINES: Well, it just seems ironic that 16 she would bring forward a Board Governance Policy 17 when, in fact, she's working at the same time in the 18 elimination of the Board. 19 And, you know, I'm in favor of trying to 20 make sure that we're representing taxpayers in the 21 state of California at the Board of Equalization. 22 And if it's a vibrant entity as described as 2.0 of 23 the BOE and operating in the right function with 24 transparency, then, in fact, I'd be in favor of 25 moving forward with a Board Governance Policy. 26 But I just find it ironic that Member Yee 27 seems to be going in two directions simultaneously. 28 MS. STOWERS: I -- that's -- you -- you have 5 1 that right to see it in two different directions. We 2 don't see it that way. 3 It's having strong governance for this 4 Board, and how this Board would operate. And at the 5 same time looking at property tax administration and 6 asking the question of whether it is best suited for 7 property tax administration and the valuable services 8 that the program stat provides. Should that remain 9 with state constitutional officers approving their 10 recommendation, or should it be done through a 11 different function, it's still, in our opinion, on 12 the same track. 13 MR. SCHAEFER: Madam -- 14 MS. COHEN: Yes, Mr. Schaefer. 15 Hold on. 16 Are you finished? 17 Okay. 18 MR. SCHAEFER: Well, we've been functioning 19 for a couple of months, and we have a policy whether 20 this is adopted or not. I mean, we are here. We are 21 functioning. 22 I share in Member Gaines view that maybe 23 this is something that we could get along without. 24 MS. STOWERS: That's -- that's your right as 25 well. 26 MS. COHEN: Okay. 27 Ms. Stowers, I don't want you to feel like 28 you need to respond to every single -- 6 1 MS. STOWERS: Okay. Thank you. 2 But let me say this, this -- this Governance 3 Policy, I do believe 99 percent of these items in 4 this policy is just restating existing law. 5 Am I correct, Chief Counsel? 6 MR. NANJO: Yes, it is very consistent with 7 state law. 8 MR. SCHAEFER: Madam Chairman. 9 MS. COHEN: Yes. 10 MR. SCHAEFER: I think government just tends 11 to create too much paperwork. And, you know, if we 12 can save a few trees from being knocked down, I would 13 be in favor of that. And not creating -- restating 14 what's already in place. 15 MS. COHEN: Okay. 16 So clearly this policy surfaced during the 17 prior Board. And I could understand why the 18 governance document was created. 19 However, the Board is committed to providing 20 the highest level of governance. And, you know, has 21 demonstrated this since we were sworn in. 22 In that spirit, I'm willing to support the 23 spirit of the policy. 24 I don't know what happens -- it sounds like 25 it may be a two/two vote. And I think that makes the 26 motion fail, if I'm not mistaken. 27 MR. NANJO: If you had a vote that was 28 two/two, that would fail. That's correct. 7 1 A couple -- if I may. I was asked in the 2 analysis to also look at other boards and similar 3 boards. And we found in Legal that a lot of -- there 4 are very many boards that have governance policies. 5 It's not a bad idea. 6 This isn't -- the Governance Policy that you 7 have in front of you is not merely a restatement of 8 the law, it's consistent with the law. But it also 9 has kind of -- for lack of a better term -- 10 courtesies and rules of conduct that are helpful for 11 Board Members to keep in mind. 12 If nothing else, you know -- I'm not 13 disagreeing with Member Schaefer or Member Gaines 14 that this Board has operated courteously and with 15 civility -- this new Board. I'm not speaking to any 16 prior Boards. But I will say that this Board has 17 operated in that manner. 18 And as an outward facing document, it's 19 not -- again, Legal's conclusion was this is 20 consistent with the law, and we would find -- we 21 would not have any objection to it, and we would 22 support it in that respect. 23 So it's really up to the Board whether they 24 want to have an outward facing document that kind of 25 shows that they're trying to maintain high levels of 26 civility and conduct. 27 MS. COHEN: All right. Well, I definitely 28 don't want to divide the Board on whether or not to 8 1 support a governance document or not. Why don't we 2 just continue to table this item and move forward 3 then? 4 MR. NANJO: Yeah. One item I would suggest 5 is, if the Chair so pleases, you could wait until 6 Mr. Vazquez is present. Since we have another item 7 we're holding open, we could hold this item open as 8 well. And maybe he might break the tie, for lack of 9 a better term. 10 MS. COHEN: Okay. 11 MR. SCHAEFER: I'd favor that. 12 MS. COHEN: Okay. 13 MS. STOWERS: I also -- as long as we do 14 take the item up before we adjourn today, I favor 15 that as well. 16 MS. COHEN: Okay. That sounds good. We 17 will table it to the end of the agenda. 18 Thank you. 19 MR. NANJO: Thank you very much. 20 MS. COHEN: No problem. 21 (Whereupon a break was taken on this item.) 22 (Whereupon Vice Chair Vazquez was present.) 23 MS. COHEN: Let's get Mr. Schaefer back in. 24 MR. NANJO: Yes. 25 MS. COHEN: All right. So we will briefly 26 bring Member Vazquez up to speed. 27 MR. VAZQUEZ: Sure. 28 MS. COHEN: So as you know, Member Vazquez, 9 1 we were dealing with the Governance Policy. And we 2 thought that it'd be best to wait to hear your 3 opinion on the governance matter. 4 On the record, Member Gaines and Schaefer 5 expressed their feelings for not being in favor of 6 it. 7 Ms. Stowers shared her reasons on why she 8 thought it was important. 9 Mr. Nanjo shared his thoughts that board -- 10 it is not uncustomary that boards have a governance 11 policy. 12 I think I want to make sure that we give 13 Mr. Schaefer an opportunity to weigh in. Because I 14 thought his talking points were pretty -- pretty 15 compelling. 16 But before we -- as we wait for 17 Mr. Schaefer, I wanted to turn and see if Mr. Gaines 18 wanted to share anymore of his thoughts for 19 Mr. Vazquez' benefit. 20 MR. GAINES: I'd prefer to have Mr. Schaefer 21 back, and then we can start a discussion at that 22 point. 23 MS. COHEN: And, Mr. Vazquez, I don't know 24 if you have any initial thoughts. 25 MR. VAZQUEZ: Yeah, I just have one 26 question. 27 MR. NANJO: Sure. 28 MR. VAZQUEZ: And it's -- I think we stated 10 1 it -- I thought we stated it the last meeting. But I 2 just wanted to raise it again and just make sure that 3 this is a living document. Which means that it is 4 subject to change at any time. 5 MR. NANJO: Yes. 6 MR. VAZQUEZ: It's not like it's set in 7 stone. 8 MR. NANJO: Correct. 9 So this would be a policy of the Board. As 10 a policy of the Board, the Board, at any meeting, 11 could change any provision they want, change it 12 completely, delete it, or make any modifications. 13 (Whereupon Member Schaefer was present.) 14 MS. COHEN: So, Mr. Schaefer, we were just 15 bringing Member Vazquez up to speed on where we are 16 with our discussion on the governance policy. 17 And I wanted to give you an opportunity to, 18 again, just state for Mr. Vazquez' benefit your 19 position on the Governance Policy and some of the 20 comments that you shared with us earlier on the 21 record. 22 MR. SCHAEFER: Member Vazquez, I mentioned 23 earlier today that we've been serving the public for 24 over 100 years. We're not our grandfather's BOE. 25 We're the new Members and servants to the public. 26 And we've been doing pretty good for the last 60 27 days. 28 And we have new constraints, and new 11 1 policies, and new responsibilities, and new 2 recommendations of what we need to do for the people. 3 And I think we've done well. And I don't know that 4 we need to knock down another few hundred trees just 5 to create more paperwork to create additional printed 6 policy on something that's been working pretty well 7 based on the printed policies that are in existence 8 right now. 9 However, if there's something new that's 10 being brought up by Mr. Nanjo that perhaps we should 11 further put into writing that's not in writing right 12 now, I'm open to listening to it. 13 But you and I are business people, and we 14 don't want to create any additional paperwork. 15 And I sort of feel views of Member No. 1 on 16 this. And the advocate of all this has not been very 17 kind to our Board. And I don't know that we have any 18 obligation to follow our new pied piper. 19 MS. COHEN: Thank you. 20 Any thoughts? 21 MR. VAZQUEZ: What I'm hearing now from one 22 Member -- Madam Chair, I guess I'd like to hear 23 your -- 24 MS. COHEN: My thoughts? 25 So my thoughts were a mixed -- a mixed 26 emotion. I mean, I think that it is odd that we, as 27 an elected body, that it's been brought to us to sign 28 on and support a grievance policy. 12 1 But with that said, it's benign. It's, you 2 know, a statement of fact just saying that we will 3 behave in a nice, professional way. Which is 4 something that I personally adhere to. 5 So I'm prepared to vote in favor of it. 6 And -- but I -- I am very sensitive to Member 7 Schaefer's concerns. 8 MR. VAZQUEZ: I, too. As I was listening to 9 your comments earlier, and then in reading over the 10 document myself, that's why I was asking if this is a 11 live -- 12 MR. NANJO: Yes, it is. 13 MR. VAZQUEZ: -- basically a living 14 document. Because if it was something that was set 15 in stone, I'd definitely be voting against it. 16 But -- and then hearing your comments, 17 Madam Chair, while I think I'm kind of in the same 18 situation where to me, it's like a mixed bag, you 19 know. I could see why somebody would be voting 20 against it. 21 But at the end of the day, I have no problem 22 with it moving forward if, in fact, it is a living 23 document that we could change and alter at any 24 time -- 25 MR. NANJO: Yes, it is. 26 MR. VAZQUEZ: -- thereafter. 27 MR. NANJO: As long as you have three 28 votes. 13 1 MR. VAZQUEZ: Yes. 2 And I respect the comments that were made, 3 especially by my colleagues here on this issue. 4 Because I can see where I could also take that 5 position as well. 6 MS. COHEN: I think that what is interesting 7 is that I don't want to give too much voice in -- 8 voice to -- to the Governance Policy. I think that 9 ultimately we're all in favor. We've all served the 10 public. 11 And I'd like -- I'd like a unanimous vote if 12 that's possible. I don't know how people -- how 13 strongly people feel. I don't want to persuade 14 anyone to feel uncomfortable. But I think it's 15 important for us to be united in our front on this 16 policy. 17 And I also would like to point out there 18 that in addition, as we discuss the Governance 19 Policy, I would like to bring into the discussion 20 committee structure back to -- for the Board to also 21 consider. I think that this would also enhance our 22 governance structure as well. 23 I've had some preliminary conversations with 24 the Controller about this. And it was actually an 25 idea that she was supportive of at the time. So we 26 can also discuss that in addition to the Governance 27 Policy. 28 Is there anything else that you wanted to 14 1 add? 2 MS. STOWERS: I definitely agree with you on 3 both fronts, especially on the committees. Because 4 without them -- Chief Counsel has already concluded 5 that only two Board Member staff can attend certain 6 meetings because of the Bagley-Keene Act. 7 MS. COHEN: Mm-hm. 8 MS. STOWERS: But if we have standing 9 committees, all staff members can attend. 10 MS. COHEN: And also, most importantly, with 11 a committee structure, it further allows us to be out 12 connecting to taxpayers. Which is, again, our 13 constitutional function. 14 So I don't -- seeing if there are -- 15 Senator Gaines. 16 MR. GAINES: If I can just comment. 17 I appreciate the comments by Member Vazquez 18 in terms of it's really going to be our document. 19 It's a living document that could be adjusted or 20 amended as we see fit in the future. 21 And so I'd be willing to move forward given 22 those comments. 23 MS. COHEN: Thank you. 24 Mr. Schaefer. 25 MR. SCHAEFER: Chair Cohen, I respect our 26 Controller's views on the old Board and what she 27 thinks of the new Board. That really has nothing to 28 do with our Governance Policy. 15 1 Our Governance Policy is showing the good 2 that we're doing. And I can see reason for 3 supporting that, knowing we can change it every 30 4 days if we want to. 5 MS. COHEN: We have bigger fish to fry, but 6 I see your point. 7 Okay. I'll make a motion to accept the 8 governance. 9 MR. VAZQUEZ: I'll second. 10 MS. COHEN: All right. Motion made by Chair 11 Cohen, seconded by Vice Chair Vazquez. 12 And if we can take that without objection, 13 folks? 14 Without objection, the motion passes 15 unanimously. 16 Thank you. 17 MR. NANJO: Great. Thank you very much, 18 Chair and Members. 19 MS. COHEN: And thank you to the Controller 20 and Ms. Stowers for the policy discussion. 21 --o0o--- 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, Jillian Sumner, Hearing Reporter for 8 the California State Board of Equalization, certify 9 that on February 26, 2019 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 17 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: March 8, 2019 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 17