BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT OCTOBER 6, 2009 ITEM P3c1 OTHER ADMINISTRATIVE COUNSEL MATTERS DEPUTY DIRECTORS REPORT ADMINISTRATION Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Board Betty Yee of Equalization: Chair 5 Jerome E. Horton 6 Vice-Chair 7 Bill Leonard Member 8 Michelle Steel 9 Member 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller (per Government Code 12 Section 7.9) 13 Diane Olson Chief, Board 14 Proceedings Division 15 Board of Equalization Staff: Liz Houser 16 Deputy Director, Administration 17 18 Robert Lambert Tax Counsel IV 19 Kristine Cazadd 20 Chief Counsel 21 22 ---oOo--- 23 24 25 26 27 28 2 1 2 INDEX 3 Page 4 ITEM P3c1a, HEADQUARTERS FACILITIES 4 5 ITEM P3c1b, UPDATE ON THE STANTEC 6 INFRASTRUCTURE STUDY 5 7 ITEM P3c1c, UPDATE ON THE SITE SELECTION 19 8 ---oOo--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 ITEM P3c1a 2 HEADQUARTERS FACILITIES 3 Sacramento, California 4 October 6, 2009 5 ---oOO--- 6 MS. OLSON: Our next item is P3c, Facilities 7 Update and Direction. 8 MS. YEE: Okay. 9 MS. HOUSER: Good afternoon, Madam Chairwoman 10 and Members. I'm Liz Houser, Deputy Director of 11 Administration. 12 My first item is an update on the ongoing 13 projects at the 450 N Street building. Remediation was 14 completed on the 11th floor, and it will now be used for 15 swing space as DGS continues work on the remaining 16 floors in the building. 17 The 11th floor is also available as a 18 cross-over between the high and low rise elevator banks. 19 The remaining work is proceeding on schedule. DGS 20 anticipates completing the work by December 2010. 21 ---oOo--- 22 23 24 25 26 27 28 4 1 ITEM P3c1b 2 UPDATE ON THE STANTEC INFRASTRUCTURE STUDY 3 MS. HOUSER: Next, Mr. Timothy Bow is here from 4 the Department of General Services to discuss the 5 findings of the Stantec infrastructure study, and DGS 6 has planned to address the needed building repairs 7 identified in the report. 8 MS. YEE: Okay. Very well. 9 MR. BOW: Good afternoon. 10 Timothy Bow, Chief of Building and Property 11 Management for the Department of General Services. 12 We received the Stantec report and the report 13 was essentially an infrastructure study to look at the 14 structural ability of the -- of the equipment -- of the 15 building and then also to identify what -- what updates 16 and -- to meet current code requirements. 17 It broke -- the report broke down into three 18 particular phases. A Priority 1, a Priority 2 and a 19 Priority 3 phase. 20 The Priority 1 phase was primarily fire -- any 21 deficiencies identified where fire/life/safety issues. 22 So, in other words, they were either fire -- fire code 23 changes, fire -- changes to the infrastructure that -- 24 to meet current codes. Infrastructure study on the 25 safety systems. 26 And the second phase was identified as urgent, 27 but something that can be completed over a three- to 28 five- and upwards to about seven-year period. 5 1 And then the third was what we would call 2 deferred maintenance, which is they're nice to do, but 3 if you didn't do it today, and it may be something that 4 is done six or seven or eight years down the road that 5 we should budget for and to consider. 6 What we've done is after receiving the report 7 we prepared a budget change proposal to address the 8 Priority 1 fire/life/safety systems first. And then 9 beyond that what we are also looking at is what are the 10 Priority 2s that we've already incorporated into a 11 five-year plan that we can take out of the mix and then 12 determine a plan to address the Priority 2 issues. 13 So -- you know I'll answer any questions you 14 have regarding the study. 15 MS. YEE: Okay. Ms. Steel. 16 MS. STEEL: Not for study but, you know, thank 17 you very much. I went back to my office and I'm 18 grateful for that but this morning that, you know, two 19 elevators were stopped out of five and people were 20 waiting downstairs. So I think that should go into 21 emergency that, you know, we have to fix it because 22 people were just lining up and certain emergency stuffs 23 has to be done right away. 24 MR. BOW: Absolutely. What we've done on the 25 elevator portion of it is we brought in a different 26 contractor to -- try to stabilize the elevator issue. 27 We've also -- we are in the midst of a 28 modernization project, which is to replace all the 6 1 components that drive the elevator. I just signed the 2 contract about a week ago. So that process is already 3 in place. 4 MS. STEEL: How long it's going to take? 5 MR. BOW: The -- the process of modernizing an 6 elevator is a long process in that it takes anywhere 7 upwards to 36 months to modernize all the elevator cars. 8 However, with that said, the first cars should 9 be modernized after signing the contract about 18 -- 16 10 to 18 weeks. 11 The reason for that long delay is because the 12 cars, itself, you have to engineer and design the -- all 13 the components for the car specific to the building. So 14 they're in the process of doing that right now. And 15 then there's a long lead time to order the -- to 16 manufacture all the equipment that goes in to replacing 17 all the motors, the drives, the controllers and 18 everything else. 19 So, the -- we've already signed the contract 20 and Thyssenkrupp was awarded the contract and they're in 21 process already. 22 It's -- it's -- elevators are very complex 23 systems and unique -- and designed uniquely for each 24 individual building. 25 MS. YEE: Yeah. We've learned that. 26 MR. BOW: We certainly recognize the issue. 27 MS. YEE: Okay. Other questions, Members? 28 Mr. Horton, please. 7 1 MR. HORTON: Madam Chair, just -- this being my 2 first day and all, I'm just a little curious as to how 3 much all of the renovation, repairs, corrections is 4 going to cost and -- and how long it's going to take and 5 why not just cut our losses. 6 MS. YEE: Mr. Horton, can I help you rephrase 7 that question? I was going to actually reserve my 8 comments until we got to the budget change proposal 9 but -- 10 MR. HORTON: I defer to you, Madam Chair. 11 MS. YEE: No, you've raised it and I think I 12 would concur. We know we have an outstanding debt on 13 this building, and along with annual interest that 14 continues to accrue. 15 I -- Ms. Houser, are you able to tell us what 16 we've actually put into renovation and modernization so 17 far and -- I know we got a proposal for us for an 18 additional, I think, 2.4 million, just for the -- the 19 Priority 1 issues. 20 And then if General Services committee help us 21 fill in the gaps with respect to what you anticipate 22 Priority 2 and 3 to look like relative to cost and time 23 frame. 24 But what have we spent so far? 25 MS. HOUSER: I just happen to have it here with 26 me. So -- 27 MS. YEE: I bet you do. 28 MS. HOUSER: You all know how much I enjoy 8 1 numbers. So -- and I'll be happy to e-mail this out to 2 you. 3 Based on the numbers that we have to date 4 before us, on remediation, which is just to kind of 5 differentiate what we call different things -- 6 remediation refers to the floor-by-floor work and the 7 work in the elevator that DGS is working on with their 8 consultants to address prior water intrusion, visible 9 staining or any existing mold growth. 10 So that to be removed, cleaned and then 11 replaced with new construction product. 12 So, remediation to date about 3.4 -- it's 13 $3,432,700, but I'll roll them up here into higher level 14 numbers. If -- I can give you the exact, so -- 15 BOE also has costs associated with remediation 16 as we are required to move the staff floor by floor, so 17 we pay movers. We have to pay for some offsite storage 18 because everything doesn't fit as you're moving people 19 around. 20 We have some offsite swing space that we have 21 some folks in, some temporary space. So we've spent 22 about 5.7 million to date. 23 The curtainwall project, which kind of started 24 this whole thing, was a $15.5 million project, bringing 25 us to about 24.7 million spent to date. 26 Our estimates of future costs, and this is 27 based on rough numbers that DGS has -- has provided us, 28 we're estimating remediation costs at about an 9 1 additional 14.2 million. 2 Our BOE remediation cost for the nine-tenth 3 this school year we estimated about $3 million. We run 4 about 3 million a year. 5 Carpet and paint connected with remediation, 6 because the carpet and paint in this building is about 7 20 years old, so as we have a floor empty we felt it was 8 the appropriate time to replace the carpet and paint. 9 Even I can get my husband to replace carpet sooner than 10 20 years. So I thought it was time here. 11 Stantec -- our estimate on the Stantec, we've 12 estimated the hard costs based on some numbers we've 13 received from DGS and from the Stantec report to be 14 around 13.6 million. That's the -- 15 MR. BOW: The total. 16 MS. HOUSER: -- hard construction costs. About 17 18.8 for the total. 18 Elevator modernization and including the 19 infrastructure we're estimating at the 2.3 million. For 20 a total to be spent of about 40.3 for a grand total of 21 about 65 million that the State will be investing in 22 this building. 23 The building has an $88 million loan from the 24 pooled money investment account. It accrues interest at 25 about three to four million dollars a year. Since it's 26 a PMIA loan, which is kind of a bridging loan while 27 we're waiting -- while the Treasurer is waiting to sell 28 the bonds on the building, there's really no provision 10 1 to pay that type of a loan down. It's -- it's kind of a 2 balloon payment loan. 3 So, the balance due on the building continues 4 to grow every year. This was around 81 million, I 5 believe, when we began this effort. 6 MS. YEE: Okay. So, we're looking at total 7 costs spent to date -- expended to date and future costs 8 at about 65 million? 9 MS. HOUSER: Yeah, spent to date about 24.7. 10 Total to be spent 40.3, for a total of 65 million. 11 MS. YEE: Okay. And, General Services, any 12 dispute in those figures? 13 MR. BOW: No, expect on the elevator -- 14 elevator modernization, that was funded internally 15 through General Services already. And also we -- we did 16 some analysis on the Stantec report and the repairs that 17 needed to be done. 18 MS. YEE: Okay. And I don't think we counted 19 the elevator -- 20 MS. HOUSER: Yeah. I did -- 21 MS. YEE: -- except for the future costs -- 22 MS. HOUSER: -- count the elevator here. 23 MS. YEE: Oh, for -- 24 MS. HOUSER: But to clarify, on -- on -- on, 25 when -- when I think Mr. Bow refers to internal funds, 26 unless there's some other pot of money I'm aware of -- 27 MS. YEE: It's still ours. 28 MS. HOUSER: -- that's generally a part that -- 11 1 money that we send over from BOE for special repair 2 funds. DGS is a reimbursable department, so if there 3 were grant funds or other -- other type of funds that 4 they were able to avail themselves to, that would be an 5 opportunity that -- that they could trigger those funds 6 to pay for a repair here that wouldn't actually cost BOE 7 money. But -- but it's -- it's kind of like having a 8 kid in college, okay. 9 It -- we still pay the costs. So they're -- 10 they're completely reimbursable. That's how they're -- 11 they're set up by design. 12 MS. YEE: Right. 13 MS. HOUSER: So that's an accurate description 14 of the -- 15 MR. BOW: Correct. That is correct. 16 MS. HOUSER: -- modernization. Yeah. 17 MS. YEE: Okay. Mr. Horton, further questions? 18 MR. HORTON: Is there any costs associated with 19 the liability of exposure to employees? 20 MS. HOUSER: Mr. Horton, I would like to defer 21 that to our Legal Counsel, if that would be all right. 22 MR. HORTON: Sure. 23 MS. HOUSER: Do you have -- here he comes. 24 Mr. Robert Lambert is here from our Legal office. 25 MR. HORTON: Anything that wouldn't violate 26 closed session, also. 27 MR. LAMBERT: That's a matter under litigation, 28 so we're not really privy to discuss it in an open 12 1 place. 2 MR. HORTON: All right. 3 MS. YEE: Okay. 4 MR. LAMBERT: But I think there's obviously 5 no -- no estimates outstanding, so I'm sure it's not 6 included in there. But that's not something we could 7 really discuss in public. 8 MS. YEE: Okay. 9 MR. HORTON: Can -- maybe this will rephrase it 10 a little bit, can our continued actions cause any -- can 11 you anticipate any future legal liability to the State, 12 to the Board, as a result of the delay in resolving 13 these issues? 14 MR. LAMBERT: That's not a question I'm 15 comfortable trying to answer, anyway. 16 MS. MANDEL: Should be sec -- closed session. 17 MS. YEE: Yeah. 18 MR. LAMBERT: It's a closed session matter. 19 MS. YEE: Yeah. Although on a -- on a 20 practical level I would say that, you know, something -- 21 I think we've underestimated, it's just the costs 22 associated with all of the disruption, and the multiple 23 moves. I mean, I've just got to think -- 24 MS. MANDEL: Productivity -- 25 MS. YEE: Right. 26 MS. MANDEL: -- issue. 27 MS. YEE: Right. 28 MS. HOUSER: Yeah, and if I could add to that, 13 1 one of the things -- I mean, we're just quantifying the 2 actual hard costs -- 3 MR. HORTON: The hard numbers. 4 MS. HOUSER: -- of money we pay to 5 subcontractors to do A, B and C. We have not quantified 6 the time lost -- I mean, when we're -- when we're 7 swinging these floors you lose five days of 8 productivity -- productivity when we move them up and 9 five days when we move them back. 10 So the way we're accomplishing this is we're 11 clearing -- in fact while we're sitting here it's 12 happening out there -- is we're clearing entire floors. 13 So, we have the 22nd and the 11th floor as 14 swing space. And the 15th floor is just completing 15 their move to the 11th floor. We will turn right around 16 and move the 14th floor back to their floor and the 16th 17 floor up to their floor. 18 So, all those people -- you got two, four -- 19 about 600 people, you know, they lose five days 20 productivity as -- and -- and the managers do a great 21 job trying to limit the lost time and our -- our 22 Technology Services Department and our move crew, 23 they're right there. They try to -- to schedule it in 24 quadrants so we -- we arrive, we shut their computers 25 down, we move them, we get them up and get their 26 computer back up. 27 But -- but, you know, when you're boxing your 28 office up and then unboxing it and then doing it again, 14 1 you know, I think it's -- it's fair to estimate we're 2 losing at a minimum three days of productivity on each 3 end of this. 4 MR. HORTON: Was the -- was the building 5 insured in any way? No? 6 MS. MANDEL: Way, way back. 7 MS. HOUSER: No, I -- I don't believe there was 8 any -- my understanding is that in the -- in -- when 9 they settled up on -- on all of the transfer of 10 ownership that the -- there was releases of liability 11 from all the prior contractors. But that -- I can bring 12 DGS in to provide more detail. It's not these folks 13 from DGS, it's a different department of them. I 14 don't -- 15 MR. BOW: Yes. It would be through the office 16 of Risk and Insurance Management that could ex -- 17 MS. HOUSER: Yes. 18 MR. BOW: -- explain the -- the building is 19 insured but to what extent it's not my area of 20 expertise. 21 MS. HOUSER: But if you're looking like for 22 construction insurance that we could default to a 23 contractor for construction defects, I -- I don't 24 believe that recourse is available, based on my 25 understanding of -- of how the deal was struck. 26 MR. HORTON: All right. 27 MS. YEE: Okay. Thank you, Mr. Horton. 28 Mr. Leonard. 15 1 MR. LEONARD: I wanted to respond to Mr. 2 Horton's question and since as Ms. Cazadd points out I'm 3 not a lawyer, whatever my opinion is on legal exposure 4 counts for nothing, but whatever exposure we might have, 5 this Board has been very aggressive in making this the 6 safest possible work place for our employees, and I and 7 the Chair and every Board Member here has been on the 8 back of General Services to do as much as possible. 9 We have spent money. We have -- we have -- we 10 have incurred obligations which we're not sure how we're 11 going to pay to General Services and other contractors 12 into the future. 13 We have found out things that all predate our 14 time and probably your guys' time from General Services 15 that the building was not built the way that we expected 16 a State building to be built. And that the general kind 17 of -- of maintenance activities, some of which are in 18 the Stantec report now, which were just general whatever 19 you do every few years regularly were never done. And 20 it's a pay me now or pay me later thing, and the later 21 is piled up, compounded with interest now. So we have 22 some larger obligations. 23 The elevator is a case in point. It was never 24 designed for the service in this building it was 25 intended to from day one, and now we're coming to that 26 realization. I didn't know it. I wasn't told about it. 27 And so we're moving as fast as we can in -- I wish the 28 building were empty, because we could get this thing 16 1 done and turn out and occupy a building very quickly, 2 but we're doing it with all of our people here trying to 3 do all of our full-time work at the same time. And it's 4 with great cooperation from our employees and with -- as 5 Ms. Houser points out, tremendous disruption that's 6 really hard to -- hard to gauge the actual cost. 7 The hard cost checks we know, but cases 8 delayed, collections not done, audit files on the wrong 9 floor at the wrong time, we'll never be able to add up 10 that kind of cost to how we answer the Legislative 11 budget committees and how effective we are for the last 12 few years. 13 MS. YEE: Mr. Horton, do you have a followup? 14 MR. HORTON: Yeah, I mean, may I commend the 15 Board for their diligence in addressing this matter. I 16 know that -- I served on the Budget Committee in the 17 Legislature and I would think that if the Legislature 18 was aware of these costs being possibly attributed to 19 things that are controllable, and the delays and so 20 forth, it might be a bit of concern. 21 So, I mean at this point I'll -- I mean, I'd 22 like to meet with the Department of General -- with the 23 individuals involved with this, with the Chair's 24 support, to just see if we can identify what the overall 25 cost both known and unknown, human and direct and so 26 forth just might be. 27 My concern at this point is just transparency. 28 Personally, I'd like the whole world to know that we've 17 1 got this issue and here's what the cost is, and so 2 forth, that others might need to participate in the -- 3 the deliberation of this process besides us here on the 4 Board. Maybe it's time to get the Legislature and the 5 Governor involved in this process, if as necessary -- if 6 there are things that can be done to sort of expedite 7 this. 8 I mean, this -- you've had $65 million. And 9 $88 million loan. And we don't know if that's the end 10 of it. And there are other costs that are not included 11 in the 65 million. I mean, it could very well be 12 upwards, you know 100 -- $150 million that we're talking 13 about. 14 So, without the benefit of all that information 15 I will postpone any future comments on this, and -- but 16 I would share that I'm very much interested in the 17 Legislature knowing what this problem is, having a 18 complete understanding of the exposure to the State of 19 California, especially given the challenges that we face 20 as a state. 21 And if all the decisions are being made, all 22 the proper decisions are being made, so be it. You 23 know, congratulations is in order. But if they're not, 24 then we need to rectify that. 25 MS. YEE: Thank you, Mr. Horton. I'm wondering 26 if we should proceed to the Budget Change Proposal since 27 it seems timely to consider that. 28 MS. HOUSER: Certainly. 18 1 (Whereupon Item P3c3 was heard and is 2 transcribed under separate cover.) 3 ITEM P3c1c 4 UPDATE ON THE SITE SELECTION 5 MS. YEE: Next item, Ms. Houser. 6 MS. HOUSER: Well, as you know, we have been 7 working with the Department of General Services to 8 locate additional space for the six to seven hundred 9 employees due to the capacity issues here at the 450 N 10 Street building. Since there isn't a single site in 11 Sacramento that can provide adequate space at a 12 reasonable price for all of these employees, we have 13 determined that at least three sites will be needed. 14 The IFTA site for the first group has been 15 selected by the program and provides adequate access and 16 parking for the large trucks driven by our taxpayers who 17 access this program. 18 DGS has also identified a site that can 19 accommodate the second group of employees, which 20 consists of our Legal Department, Investigations, Board 21 Proceedings and Media and Web Design Services. 22 DGS is working to finalize a site for the 23 remaining group, which consists of the County and State 24 Assessed Property Division, the training sections from 25 both SUTD and Administration, and the call center. 26 We were originally scheduled to move these 27 employees into their new location May 1, 2010, which we 28 hope to achieve for the IFTA group. Due to unexpected 19 1 delays for the remaining groups we are now looking at 2 October to December of 2010 to complete these moves. 3 In order to keep these projects moving forward 4 we are asking that the Board provide their approval for 5 DGS to negotiate and finalize these leases. Once they 6 are completed, copies of the executed leases will be 7 provided to your offices. 8 Mr. Patrick Foster and Mr. James Koerner are 9 here from DGS to request the Board's approval to 10 complete the leases to accommodate these 600 to 700 11 employees and answer any questions you may have. 12 MS. YEE: Okay. Thank you, Ms. Houser. 13 And I guess for Mr. Horton's edification on top 14 of the discussion we've just had, we mis -- we neglected 15 to also inform you that we've been at over-capacity at 16 this headquarters building for quite some time. 17 So -- you need an action from us to approve 18 General Services -- 19 MS. HOUSER: And I didn't know if you would 20 like the folks from DGS to go into more details on the 21 lease because I think they're prepared to do that at 22 this point. 23 MS. YEE: Do you have information? Okay, 24 please. 25 MR. KOERNER: Good afternoon, Madam Chair and 26 Members of the Board, as Liz has mentioned, we're here 27 to get approval on these leases. Let me go over them 28 just briefly. 20 1 The first one is for 1030 Rivers -- Riverside 2 Parkway in West Sacramento, for approximately 14,274 net 3 usable square feet, for 67 employees. The commencement 4 should be May 1, 2010. 5 The benefits of this facility. The facility is 6 conveniently located in close proximity to Interstate 80 7 and Interstate 5. It's an industrial site that 8 accommodates the semi trucks and provides parking in 9 front of the facility. 10 This proposed location is is in close proximity 11 to other BOE facilities in West Sacramento, such as the 12 Administrative Department, Tax Records Unit, which is on 13 Industrial Boulevard in West Sacramento, approximately 14 three miles away. 15 Right. And this is for the Fuel Tax Division 16 and the Motor Carrier section called IFTA. 17 The other location that's in West Sacramento is 18 the Legal Department. The Investigations Division 19 warehouse is over on the Riverside -- Riverside Parkway, 20 and it's less than .3 miles away from this location. 21 The second lease that we're looking for 22 approval from is for the Legal, Board Proceedings, Media 23 and Web Services, Legal Investigations. The proposed 24 location is 621 Capitol Mall, approximately three blocks 25 away from this building. It's for approximately 61,619 26 usable square feet for 333 employees. Hopefully the 27 tentative commencement of that lease can start July 1 in 28 2010. 21 1 This facility, like I said, is three blocks 2 away. It is -- the close proximity is convenient and 3 and is going to be time saving the employees and for BOE 4 in general. 5 The third lease agreement is for the following 6 programs; the County and State Assessed Properties, 7 Training Department, Sales and Use Tax Department, Tax 8 Policies and Business Tax, External Affairs 9 Communications, Customer Service Outreach, for 10 approximately 53,096 net usable square feet, for 282 11 employees. 12 We have identified viable sites and are 13 providing BOE staff final terms to make a final 14 determination. 15 MS. YEE: Okay. 16 MR. KOERNER: The proposed buildings will 17 provide BOE the necessary space to administer its 18 programs in a convenient location for taxpayers and at 19 economic market rates. Once the leases are executed, we 20 will provide copies to your offices. 21 MS. YEE: Okay. Thank you very much. 22 Mr. Leonard. 23 MR. LEONARD: I'm happy to -- 24 MS. YEE: Then Mr. Horton. 25 MR. LEONARD: -- make the motion, the -- this 26 transfer out of the overcrowded building is long overdue 27 and particularly our -- our IFTA unit that serves 28 truckers, forcing truckers to drive into downtown 22 1 Sacramento is -- wasn't a good at the time, and getting 2 them into a location in West Sac. where they can 3 actually park their rigs and come in and get their 4 permits is -- is smart. 5 MS. YEE: Okay. We have a motion by Mr. 6 Leonard. Let me second that for purposes of discussion. 7 Mr. Horton. 8 MR. HORTON: Who owns these buildings? 9 MR. KOERNER: Harsch Investments is the owner 10 of the one in West Sacramento. David Taylor is the 11 owner of the building at 621 Capitol Mall. The other 12 two buildings are owned by two separate owners that 13 we're looking at. One's owned by the Kelly family. The 14 other one's owned by the Wong family. 15 MR. HORTON: Any -- they have all the adequate 16 insurance? 17 MR. FOSTER: There's also other ones that we're 18 looking at besides those two. 19 MR. KOERNER: Yeah, we have -- 20 MR. HORTON: Part of the process -- 21 MR. KOERNER: -- other State properties. 22 MR. HORTON: -- is sort of make sure that we're 23 not faced with -- we've learned from this mistake and 24 we're not making that same mistake in these transactions 25 relative to the liability of the owner, whether they 26 have the right -- whether these lease agreements protect 27 us, if something goes wrong with the building we can get 28 out of the lease and so forth. 23 1 And then lastly what's the term of the lease? 2 MR. KOERNER: Well, let's start with the 3 ability to get out of the lease. 4 MR. HORTON: To not get out of it, but I 5 mean -- 6 MR. KOERNER: But if it were destroyed or some 7 portion of it was damaged. 8 MR. HORTON: No, if there were mold there, 9 what -- that we're protected. 10 MR. KOERNER: They're brand new buildings at 11 this point. To answer your question, yes, we are 12 protected. The lessor -- we have ramifications to go in 13 and have them fix it, terminate the lease, or fix it 14 ourselves. 15 MR. HORTON: All right. 16 MS. OLSON: May I -- 17 MR. HORTON: I was just curious if we have the 18 same as this one. 19 MS. OLSON: May I ask the speakers to introduce 20 themselves for the record. 21 MR. KOERNER: James Koerner with the Department 22 of Real Estate. 23 MR. FOSTER: I'm Patrick Foster with the 24 Department of General Services, Real Estate Leasing and 25 Planning Services. 26 I also wanted to state that on the -- the third 27 building that we've not made a decision on, there are 28 more than two options. There's also the USA building 24 1 and Opus of -- in North Natomas. So those would be the 2 four ownerships that we're looking and buying for the 3 last 53,000 square feet of your overcrowding. 4 MS. HOUSER: And -- Madam Chair. 5 MS. YEE: Yes, Ms. Houser. 6 MS. HOUSER: If I may, Mr. Horton, I did want 7 to let you know that after our experience here in 8 addition to the normal questions that DGS asks of all 9 landlords, DGS -- or BOE has prepared a ten-page 10 questionnaire that we require any space we are going to 11 be looking at, that the landlord answer all the 12 questions. 13 And it basically is a lessons learned from this 14 building, so it asks questions about everything we've 15 experienced here to make sure that that building hasn't 16 experienced something similar. 17 So, we've -- we've covered some of our bases 18 with the up front questions. Any landlord who's unable 19 to successfully -- any owner who can't answer the 20 questions in a manner that ensures us that we won't be 21 experiencing another building that's had a lot of water 22 intrusion, we won't even look at that site. 23 MS. YEE: Yeah. 24 MR. HORTON: Just out of curiosity, since 25 this -- this is kind of like a hypothetical situation 26 not germane to our current situation, what if the 27 landlord was a State agency and we were the tenants, and 28 there was -- we were to experience some challenges there 25 1 that would cause us to have to consider our options? 2 MS. HOUSER: I'll give that to you. 3 MR. FOSTER: I'm not sure I understand the 4 question. 5 MR. HORTON: You don't have to -- sure. 6 MR. FOSTER: I'm just -- 7 MR. HORTON: Very well. 8 MR. LAMBERT: That -- that's a rhetorical 9 question. 10 MR. LEONARD: But a good one nevertheless. 11 MR. HORTON: Thank you. 12 MS. YEE: Okay. Mr. Leonard, anything else? 13 MR. LEONARD: No, my motion is on the table, 14 unless you want to consider an amendment to raise the 15 700 employees be moved out to the 2,400 employees. 16 MS. YEE: Yeah. 17 MS. HOUSER: I need 2900. 18 MR. LEONARD: 2900, excuse me. 19 MS. YEE: Okay. 20 MR. LEONARD: Is it 2900 in this -- oh, plus 21 FTB, yeah, okay. Well -- 22 MS. YEE: Okay. All right. We have a motion 23 and a second on the table with respect to the 24 authorization for General Services. 25 Without objection, that motion carries. 26 Thank you. 27 Thank you very much, gentlemen. 28 ---oOo--- 26 1 (Whereupon Item O2 was heard and is transcribed 2 under separate cover.) 3 ---oOo--- 4 MS. OLSON: Okay. We need clarification on a 5 motion that Mr. Leonard made. 6 MS. CAZADD: The motion on the relocation of 7 the employees, Mr. Leonard, you indicated the IFTA site. 8 Did you also intend to include in that motion the two 9 other sites -- or the two lo -- relocations? 10 MR. LEONARD: Yes, that was -- 11 MS. CAZADD: We thought so. We just wanted to 12 make sure that that was the -- 13 MR. LEONARD: Staff recommended. 14 MS. YEE: It was -- it was overall 15 authorization based on the staff recommendations. 16 MS. CAZADD: Okay. 17 MS. YEE: Okay. 18 MS. CAZADD: Okay. Great. Thank you very 19 much. 20 MS. YEE: All right. Thank you. 21 MR. LEONARD: I wouldn't leave out Legal. I 22 just mentioned IFTA. 23 ---oOo--- 24 25 26 27 28 27 1 2 REPORTER'S CERTIFICATE 3 4 State of California ) 5 ) ss 6 County of Sacramento ) 7 8 I, BEVERLY D. TOMS, Hearing Reporter for the 9 California State Board of Equalization certify that on 10 October 6, 2009 I recorded verbatim, in shorthand, to 11 the best of my ability, the proceedings in the 12 above-entitled hearing; that I transcribed the shorthand 13 writing into typewriting; and that the preceding 27 14 pages constitute a complete and accurate transcription 15 of the shorthand writing. 16 17 Dated: October 21, 2009. 18 19 20 ____________________________ 21 BEVERLY D. TOMS 22 Hearing Reporter 23 24 25 26 27 28 28