1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 REPORTER'S TRANSCRIPT 7 JANUARY 29, 2019 8 9 10 11 12 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 Ted Gaines Equalization: Chair 4 Honorable Malia S. Cohen 5 Vice Chair 6 Honorable Antonio Vazquez Third District 7 Honorable Mike Schaefer 8 Fourth District 9 Honorable Betty T. Yee State Controller 10 11 For the Board of Equalization Staff: Henry Nanjo 12 Chief Counsel Legal Department 13 Toya Davis 14 Board Proceedings Division 15 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JANUARY 29, 2019 4 ---oOo--- 5 MR. GAINES: Ms. Davis, what is our first 6 item? 7 MS. DAVIS: The Board Proceedings Division 8 was contacted by State Controller Yee with a request 9 to move Item L1, Board Governance Policy, to the 10 beginning of the meeting so that she will be able to 11 participate. 12 MR. GAINES: Without objection, Ms. Davis, 13 please call the item. 14 MS. DAVIS: The first item on the agenda is 15 L1, Board Governance Policy. 16 Ms. Yee. 17 MS. YEE: Thank you very much, Ms. Davis. 18 Thank you, Mr. Chairman and Members, for the 19 courtesy. 20 I'm excited about bringing before you a 21 draft Governance Policy that, I believe, reflects a 22 best practice of public boards where we can define in 23 a document the way in which we, as a body, will be 24 working and operating and functioning in the most 25 effective way. Certainly, as many of you already 26 said, in the most transparent and accountable way. 27 It really lays out, I believe, the 28 expectations of this Board so the public is under no 3 1 misguidance about what to expect with respect to how 2 we serve, our conduct, and certainly the competencies 3 that we should be possessing in doing our work. 4 This has been vetted with Mr. Nanjo, but I 5 understand this is new to many of you. And I know 6 that there have been some additional issues that have 7 been raised. But I put this before you because I 8 think we have the opportunity as a newly organized, 9 newly constituted body with four newly elected 10 members representing districts, to really take this 11 seriously and think about adopting a Governance 12 Policy at the earliest point possible to govern the 13 work that we do. 14 And also to, as I said -- probably more 15 importantly -- really lay out that we are a Board of 16 high integrity and high ethics and, more importantly, 17 high competency, as we continue to do the work for 18 the people of the state of California 19 MR. GAINES: Great. Wonderful. 20 Thank you, Controller Yee. 21 Members, discussion? Questions about this 22 item? 23 MR. SCHAEFER: I have no comment. 24 MS. COHEN: I have a couple of questions. 25 Maybe you can -- maybe you can kind of walk 26 us through some of the highlights of the important 27 parts of the Governance Policy that you are most 28 interested in. 4 1 MS. YEE: Sure. 2 So one of the things that I think is 3 important is to really have -- really ground our 4 roles and responsibilities. And many of us come from 5 different places in our backgrounds. This is not a 6 Legislature; this is not a legislative body. It is 7 something that I think is important for the public to 8 understand, with respect to the roles and 9 responsibilities of the Board current. 10 The way this is structured is just to give a 11 little bit of background about the importance of the 12 Governance Policy. 13 And I would say this is a -- becoming more 14 and more a best practice of public boards is to have 15 Governance Policy. Many public boards have a 16 Governance Committee. I'm not suggesting that we 17 move to that point yet, but I think as a newly 18 constituted body with many new just joining the 19 Board, and I, in addition to, this would be a great 20 place to start in terms of how we expect each of us 21 will work together individually and collectively. 22 We talked about the history of the Board; 23 how it was established; the tax programs that remain 24 with the Board; and also our appellate functions with 25 respect to the types of appeals that we hear. 26 You know, the governance principles really 27 are pretty universe. They speak to what it means to 28 serve with the highest degree of ethics, how we serve 5 1 in an open and accountable manner. That we also can 2 look at that the statute does allow for us to take 3 disciplinary actions. And so we do have a section 4 there about that. 5 I think certainly with respect to the fact 6 that these are elected positions, to be very clear 7 about conflict of interest provisions and what that 8 means in terms of avoiding conflicts. And we do all 9 of our business in accordance with the Bagley-Keene 10 Open Meeting law. 11 And then also how we deal with issues around 12 accepting gifts or behested payments, what the 13 obligations are relative to that. Our own statement 14 of economic interest where we disclose where 15 different sources of -- of economic interest that we 16 may have. 17 But I think more importantly, because of the 18 reorganizations that took place that has us now the 19 current Board of Equalization, the roles and powers 20 of the Board. And I know there's been some confusion 21 about what that looks like after Assembly Bill 102. 22 Which did look to reorganize this Board and establish 23 the new California Department of Tax and Fee 24 Administration, as well as the independent Office of 25 Tax Appeals. 26 But this is, I think, a powerful statement 27 with respect to our roles and responsibilities, 28 because it really does zone in on what I believe are 6 1 our core duties. And the bulk of that within the 2 property tax administration space, that I should say 3 we share with the county assessors. I hope we can 4 have a robust relationship with the county assessors 5 going forward. 6 We will conduct and decide tax appeals. 7 But this is really to put in one place a 8 governance body. 9 We have expectations of what the role of the 10 Chair will be; the role of the Vice Chair. As I 11 said, the competencies that will make us more 12 effective Members that we each will commit to. And 13 then how we look at participating in other types of 14 activities relative to our role on this Board. 15 So it is not meant to be exhausted, but I 16 think it's meant to cover really some very, very 17 basic policies. 18 And I think what I would like to do -- and I 19 know there were some questions with some of the 20 provisions that may have come up with Mr. Nanjo who 21 we did have review this -- is to see, Mr. Chairman, 22 if there are specific concerns -- or maybe not 23 concerns. That might be a strong word. Because 24 we're seeing this for the first time and really 25 digesting this, see where there might be areas where 26 there might be further time needed to have Mr. Nanjo 27 either opine on the authority that we have, or -- and 28 I know the authorities are cited in most cases here, 7 1 and maybe even more surgically needed if that is 2 necessary for us to really round out this agency. 3 MS. COHEN: Thank you for the 4 acknowledgment. 5 MR. GAINES: Okay. 6 MS. COHEN: I think Mr. Vazquez has a 7 question. 8 MR. GAINES: Yes, Mr. Vazquez. 9 MR. VAZQUEZ: First, I want to thank 10 Controller Yee for setting the tone and taking the 11 leadership on this document. 12 Reading through it, I found it very helpful. 13 And I think it puts a lot of things that I was 14 reading from different documents in one place. So I 15 appreciate that. 16 The only thing that I found -- and I don't 17 know if you already looked at this -- but on page 10, 18 I guess it's Item C, which outlines the roles of the 19 Boards and Members involved and the BCP process. And 20 it's my understanding they're still -- they're 21 waiting for an opinion from the Attorney General on 22 that. And I would just ask that maybe if it's the 23 will of the Board as well, that maybe we put that on 24 hold until we get that ruling one way or the other. 25 Because I think that would impact -- 26 actually that specific Item under C. 27 MS. YEE: Okay. 28 MR. VAZQUEZ: And I don't know what your 8 1 thoughts are on that. 2 MS. YEE: I do believe an Attorney General 3 opinion is forthcoming. 4 Is that correct, Mr. Nanjo? Do we know the 5 timing of that? 6 MR. NANJO: Chairman Gaines, Members of the 7 Board, Controller Yee. 8 Henry Nanjo, Chief Counsel, Board of 9 Equalization. 10 Yes, I have been in contact with the 11 Attorney General's office. They have assigned it to 12 an attorney. We hope to have a response fairly 13 quickly. I can't give you an exact time frame. 14 Unfortunately, as with many organizations, 15 the Attorney General's office has to go through an 16 approval process for their opinions. So that takes a 17 little bit of time to go through their channels, if 18 you will. 19 But it is my understanding that they are -- 20 they have received it. They have some preliminary 21 thoughts. They have not really shared the entirety 22 of those thoughts with me, but they said they hope to 23 be able to wrap it up fairly quickly. 24 MS. YEE: Okay. All right. 25 Mr. Chairman, if I may. 26 I'm happy if it is the will of the Members 27 to act on this policy today to put that particular 28 provision on hold pending the Attorney General's 9 1 opinion. 2 I do think it will be favorable to have the 3 provision currently reads -- and this was a policy 4 statement that was derived from a Government Code 5 section that was amended by AB-102. So I'm happy to 6 wait for the opinion and to have that developed by 7 the the Attorney General's office. 8 MR. GAINES: Okay. All right. 9 More questions? 10 MR. VAZQUEZ: I appreciate that. 11 And then lastly on page 12, Item 9, although 12 it addresses each Member's Sacramento office, it does 13 not address the Member's individual district office. 14 MS. YEE: Yeah. 15 MR. VAZQUEZ: And I was thinking we should 16 also include that in there. 17 MS. YEE: I think we need to add "one 18 district office" in that paragraph, yes. 19 MR. VAZQUEZ: That would be great. 20 MR. GAINES: Mr. Vazquez, any more 21 questions? 22 MR. VAZQUEZ: That's all I have. 23 MR. GAINES: Okay. Good. 24 Members, any more questions? 25 MS. COHEN: I do want to say something. I 26 just want to, I guess, go on the record and, just for 27 clarification, I understand this document came before 28 the prior Board with directions to staff for review. 10 1 This is a draft document that's been presented to us. 2 So I guess my question specifically is that if -- if 3 staff hasn't made a recommendation to us one way or 4 the other -- I mean, this is something that you're 5 presenting to us. 6 And then my question also lies, are there 7 inconsistencies or is everything consistent? I don't 8 know -- 9 Mr. Nanjo, when we spoke almost two weeks 10 ago I think you hadn't had a chance to go through it. 11 So perhaps you could add some context if this is the 12 staff's recommendation. 13 MR. NANJO: Sure. 14 Chairman Gaines, Ms. Cohen -- Vice Chair 15 Cohen, Members of the Board, the -- as an L Item, the 16 practice had been with L Items that there isn't a lot 17 of staff work put into place on this. This is an 18 opportunity for the Board Members to kind of 19 brainstorm ideas that they want to bring in front of 20 their fellow Board Members and discuss it. 21 That being said, I was given an advance copy 22 by the Controller's office, and I was asked if there 23 were any concerns I had. 24 Again, I'm not reading it in detail. I'm 25 looking for something that may be a red flag or 26 contrary to a provision of law or what have you. I 27 did not see any of those. And that's the message I 28 gave to the Controller's office. 11 1 As to your comment about this policy being 2 presented before, I'm aware that under BOE 1.0, the 3 concept of Governance Policy came up. I don't recall 4 this -- a policy like this that was ever presented to 5 BOE 2.0. 6 So from that standpoint, staff does not have 7 a recommendation. We await the direction of the 8 Board. 9 MS. COHEN: May I -- Mr. Chair, may I speak? 10 MR. GAINES: Sure. 11 MS. COHEN: I'd like to make the 12 recommendation that you now, you and your staff, 13 thoroughly just go through the policy and make a 14 recommendation to us as a body. 15 MR. NANJO: Absolutely. 16 MS. COHEN: I appreciate that. Thank you. 17 MR. NANJO: If that's the will of the Board, 18 we're more than happy to do that. 19 MS. COHEN: I don't know if that's something 20 that requires us to take action on. You're the 21 attorney -- yes. Is there? 22 MR. NANJO: So what I would recommended is 23 as long as there's consensus by the Board, you don't 24 have to necessarily take a vote. But as long as I'm 25 not seeing any objections to that, I'm more than 26 happy to have my staff do that for the next 27 meeting. 28 MS. COHEN: Thank you, and I appreciate 12 1 that. 2 And I, first of all, just want to also go on 3 record -- 4 MS. YEE: Can I get clarification on that? 5 MS. COHEN: Oh, okay. 6 MS. YEE: So, Mr. Nanjo, in terms of your 7 making a recommendation to us whether to adopt the 8 policy or not, what would you be looking for that 9 would be the basis of your recommendation? 10 MR. NANJO: We would be taking a more 11 thorough look at the policy, and just essentially 12 advising whether we had any objections to it at a 13 legal standpoint. 14 MS. YEE: Okay. So whether we have the 15 proper authorities backing the provisions. 16 MR. NANJO: Correct. 17 MS. YEE: Okay. 18 MR. NANJO: And of course we're willing to 19 work with your office if you have any edits or 20 anything along those lines. 21 For example, with Item No. 9 on page 12, 22 we'll add the district office. 23 And then the Item on page 10, we'll put 24 brackets around the C provision or something like 25 that, and probably note that it's pending AG 26 approval. 27 MS. YEE: Right. 28 MS. COHEN: And I just -- in close, I just 13 1 want to thank Controller Yee for presenting the 2 governance document for consideration for this body 3 today. 4 Thank you very much for being a steady hand 5 to help guide us as we continue to go forward. 6 MS. YEE: We'll be guiding each other. 7 MR. GAINES: Wonderful. Thank you. 8 And if I could just follow up with a couple 9 questions of clarification. 10 Because our current Board policy calls for 11 rotation of Chair and Vice Chair. And it doesn't 12 look like it's addressed in this Governance Policy. 13 So I'm wondering if we can, you know, review that. 14 We do have it on our agenda here to discuss. 15 MR. NANJO: Correct. 16 MR. GAINES: But that would be an item that 17 I would like clarity on. 18 And then also another issue is the role of 19 powers of the Board. And that's Section 7, 20 paragraph F, that Government Code 15606(a) is cited, 21 any rule adopted by the Board to cover Board Member 22 discipline would have to be in accordance with APA 23 Government Code 11340. 24 Adopting such a role -- rule or regulation 25 in accordance with the APA is difficult and time 26 consuming. And so is that really the direction we 27 want to go in? 28 And I'd just like that kind of flushed out 14 1 and have some clarity, if we could. 2 MR. NANJO: Okay. 3 MR. GAINES: And then another issue, the 4 Conflict of Interest Act of 1990 addresses proposed 5 Governance Policy. It states that the Board Members 6 cannot participate in any way if there's a 7 disqualifying contribution. Our statute does include 8 an exception as specified in Government Code 9 15626 (i)(5) and Regulation 7008(c) and (d), from 10 making or participating in making a governmental 11 decision to the extent that the Board Members 12 participation is legally required. 13 Apparently our procedure had been used 14 historically. 15 (Whereupon there was mic static.) 16 MR. GAINES: Do we know what that is? 17 MS. BAETGE: I have to turn off the mics to 18 stop it. 19 MR. GAINES: There was a procedure having to 20 do with drawing of law. It's been in place since 21 1994. And very special, narrow circumstances. So I 22 think that's something that we need to at least have 23 clarity on. 24 MR. NANJO: We'll look into that. 25 MR. GAINES: I support working forward. I 26 think there's a lot of good material that we all want 27 to live by. But I'd like to have a little clarity. 28 And hopefully we get those questions answered and 15 1 bring them back next month for -- at the February 2 meeting. 3 MS. YEE: Absolutely. 4 MR. NANJO: All right. If there's no 5 objection by the Board Members, I will go ahead and 6 focus on those issues and be prepared to address them 7 at the next Board Meeting. 8 And as Vice Chair Cohen has requested, we'll 9 make a recommendation. 10 MS. COHEN: Thank you. 11 MR. NANJO: Thank you. 12 MR. GAINES: Wonderful. 13 Thank you, Mr. Nanjo. 14 ---o0o--- 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, Jillian Sumner, Hearing Reporter for 8 the California State Board of Equalization, certify 9 that on January 29, 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 16 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: February 8, 2019 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 17