BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT FEBRUARY 23, 2011 ITEM P5 ADMINISTRATION DEPUTY DIRECTOR'S REPORT Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Board Jerome E. Horton of Equalization: Chairman 5 Michelle Steel 6 Vice-Chairwoman 7 Betty T. Yee Member 8 George Runner 9 Member 10 Marcy Jo Mandel Appearing for John Chiang 11 State Controller (per Government Code 12 Section 7.9) 13 Diane Olson, Chief Board Proceedings Division 14 15 Board of Equalization Staff: Liz Houser 16 Deputy Director Administration Department 17 18 Jeff McGuire Deputy Director 19 Sales and Use Tax Department 20 21 --oOo--- 22 23 24 25 26 27 28 2 1 2 INDEX 3 PAGE 4 ITEM P5 5 SUB-ITEM 1, FACILITIES UPDATE 4 6 7 SUB-ITEM 2, 2010/11 AND 2011/12 8 BUDGET UPDATE AND UNION 9 AGREEMENTS 7 10 11 ---oOo--- 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 SUB-ITEM 1, FACILITIES UPDATE 2 Sacramento, California 3 February 23, 2011 4 ---oOO--- 5 MS. OLSON: Our next item is P5, Administration 6 Deputy Direct Reports. P5.1, Facilities Update. 7 MS. HOUSER: Good afternoon, Chairman 8 Hortmon -- Horton and Members. I'm Liz Houser, Deputy 9 Director, Administration. 10 Remediation work at the 450 N Street 11 headquarters location continues. By next week 95 12 percent of the work will be complete in the building. 13 DGS estimates the project closeout date is April 26, 14 2011. 15 The elevator modernization continues and is on 16 schedule. Most of the work on the main elevators is 17 complete. Upgrading the mechanical systems is the next 18 step. DGS estimates the project will be complete in 19 October 2011. 20 My next item is an update on the design and 21 selection of replacement sites for the San Diego and San 22 Marcos offices. 23 BOE formed a work group that included district 24 administrators from all four equalization districts who 25 met on February 4th with DGS's space planner to 26 conceptually discuss the layout and technology 27 requirements for the new customer service center. This 28 design will be piloted in San Diego and we're very 4 1 excited to see it come to fruition. 2 On February 8th BOE provided DGS with its two 3 preferred sites for both the San Diego district office 4 and the service center. DGS will submit a formal 5 request for lease proposals to these lessors and start 6 negotiating immediately. Lease negotiations typically 7 take six to eight weeks to complete. 8 Are there any questions on the facilities? 9 MR. HORTON: Discussion, Members? 10 MS. YEE: Questions. 11 MR. HORTON: Ms. Yee. 12 MS. YEE: I'm sorry, I must have misheard or 13 misunderstood. So the site search is for the new San 14 Diego office location, which I'm glad we're finally 15 doing it. And then this customer service center, can 16 you speak to me a little bit more about what that is? 17 MS. HOUSER: Yeah, I may ask Mr. McGuire to 18 come up and expand on that. What we're doing is 19 piloting the new distri -- the office as part of the 20 Offices of the Future -- 21 MS. YEE: Okay. 22 MS. HOUSER: -- which would be a service center 23 that provides service to the entire region and then a 24 district office that has more of a back office with a 25 smaller customer service counter. 26 MS. YEE: Okay. 27 MS. HOUSER: But I'll have Jeff provide more 28 detail. 5 1 MR. McGUIRE: Yeah, basically it's kind of 2 looking at our design. In San Diego, you know, the -- 3 the public counter office will be more centrally 4 located. The other office will be a little bit further 5 north in -- in the part of San Diego. 6 But the public counter office we're trying to 7 redesign like for the future with -- as we move to more 8 technology of having kiosks for taxpayers to use, having 9 more of an open environment where we're working directly 10 with taxpayers, more self-service. 11 And that office is really just designed to be 12 kind of the public office. We will have a small walk-in 13 lobby for -- in -- in the north county area. It's not 14 all of the way in the north county, but north San Diego 15 office. But that one would be where we house all the 16 auditors and collectors now, instead of having them 17 bifurcated into two offices. 18 MS. YEE: Okay. I see. Thank you. 19 MS. STEEL: Thank you. 20 MR. HORTON: Further discussion, Members? 21 ---oOo--- 22 23 24 25 26 27 28 6 1 SUB-ITEM 2, 2010/11 AND 2011/12 BUDGET 2 UPDATE AND UNION AGREEMENTS 3 MS. HOUSER: My next item is an update on the 4 budget. The following items were addressed in the 5 Assembly and Senate Fiscal Committee hearings this 6 month. The Statewide Compliance and Outreach Program, 7 or SCOP, was created to identify and register entities 8 who are actively conducting business in California and 9 selling tangible personal property without a seller's 10 permit. 11 BOE's request to convert 147 limited term 12 positions to permanent effective July 1, 2011 was 13 approved by both the Senate and Assembly fiscal 14 subcommittees as well as the full budget committees. 15 BOE requested funding in the event the State 16 Treasurer sells bonds to pay off the loan on the BOE 17 headquarters building, thereby increasing our rent. 18 The Senate held this item open pending more 19 information from DGS and the State Treasurer's office on 20 the timing of the anticipated bond sale. 21 The Assembly denied this item without prejudice 22 and directed the administration to analyze BOE's 23 near-term facility needs and the impact and limitations 24 a -- a bond sale would place on the State. 25 MR. HORTON: Wow. 26 MS. HOUSER: BOE also requested resources for 27 the administrative costs for processing tax refunds to 28 eligible consumers as a result of the Dell Computers 7 1 case settlement. 2 Both the Senate and Assembly denied this item 3 without prejudice pending additional information in 4 implementation and time frame. 5 The Senate approved the adoption of trailer 6 bill language to direct BOE to develop a lookup table to 7 assist taxpayers in voluntary com -- voluntarily 8 complying with the current Sales and Use Tax law. 9 The Assembly held this item open and directed 10 BOE to bring back the lookup table for their review. 11 Sales Tax nexus was briefly discussed and held 12 open in both the Senate and Assembly fiscal 13 subcommittees. 14 The Legislature is again exploring providing 15 statutory authority to the Franchise Tax Board that 16 would require financial institutions doing business in 17 California to match FTB information on delinquent tax 18 and non-tax debtors against their customer records on a 19 quarterly basis. This record match would help FTB in 20 identifying bank accounts of customers who owe money to 21 FTB to assist in collection efforts to help reduce the 22 tax gap by using a methodology that has proven effective 23 in the child support system. 24 If the FTB records match were approved, there 25 would be an opportunity after FTB completes their system 26 programming for BOE to participate in the records 27 matching project by providing our ACMS file to FTB who 28 would perform the quarterly match on our behalf. 8 1 The Legislative consultants have asked that we 2 discuss this item with the Board to get general 3 direction and comments regarding this program. 4 Due to the Bagley-Keene notice requirements the 5 Board may only discuss this item today but cannot take 6 action until it's properly noticed on the Board's next 7 public agenda notice. 8 Jeff McGuire, Deputy Director of Sales and Use 9 Tax Department is here with me to answer any 10 programmatic questions. 11 MR. HORTON: Questions, Members? 12 MR. RUNNER: I assume then that there will be 13 some discussions on these items amongst -- as you -- as 14 we deal with these issues in the next few weeks and then 15 it -- they will be on agenda then for next month, is 16 that what -- 17 MS. HOUSER: Our -- our plan would be to put it 18 on the -- we can put it on the March agenda in Culver 19 City under Mr. McGuire's Deputy Director report. 20 MR. RUNNER: And at that point whatever is 21 presented then at that time is eligible to be taken up, 22 voted on and what not? 23 MR. McGUIRE: Right. 24 MS. HOUSER: My last item is an update on the 25 statewide hiring freeze and pending union agreements. 26 Earlier this month Governor Brown issued Executive Order 27 B311 calling for a statewide hiring freeze. The freeze 28 provides exemptions for revenue-generating departments, 9 1 such as BOE. As a key revenue-generating department BOE 2 plans to continue filling our vacancies to ensure all 3 necessary services are provided to California's 4 businesses to assist them with the complying -- in 5 complying with tax laws to secure vital revenues that 6 are needed by the State. 7 As an elected constitutional agency we do not 8 need to seek the formal exemptions outlined in the 9 Executive Order. We have instructed our hiring managers 10 and supervisors to continue to fill vacancies to conduct 11 their outstanding work to educate tax -- educate and 12 service California's businesses who provide over 13 one-third of the State's revenues through the Sales and 14 Use taxes they generate. 15 We received last -- word last week that CASE, 16 the exclusive representative for the State's attorneys, 17 have reached a tentative agreement with the Department 18 of Personnel Administration that they hope to finalize 19 and distribute to their membership in March. Since the 20 agreement is in the tentative phase, details cannot be 21 released, but I will provide updates when more 22 information is available. 23 This concludes my presentation. I'll be happy 24 to answer any questions you may have. 25 MR. HORTON: Ms. Houser, on the SCOP program do 26 you have the numbers as far as revenue on that? 27 MS. HOUSER: I do. 28 MR. HORTON: Oh, okay. Can you share that with 10 1 us? 2 MS. HOUSER: It was 147 positions at a cost of 3 $14.1 million, estimated revenues of 68.2, for a benefit 4 to cost ratio of 4.8 to 1. 5 MR. HORTON: The -- the reason I asked her 6 to -- to share that because going back to the CROS 7 project, this is an area that we could arguably say that 8 we can increase the efficiency of this program. We can 9 actually work with current employees and through the 10 data matching, by matching the Sales Tax returns to the 11 business tax licenses of the various different cities 12 we -- we can -- we can identify discrepancies, red 13 flags, individuals who are registered with the 14 Department of Corporation, registered with the cities, 15 counties and so forth, but may not have -- for 16 legitimate reasons may not have permits with the Board 17 of Equalization and we can assist them and educate them 18 on what needs to happen and what they need to do in 19 order to have a permit. 20 So -- but it is that type of information that 21 staff has to come forth with because in and of itself 22 the CROS project alone will not necessarily generate 23 those revenues, but when you begin to -- to use it as a 24 tool to -- to -- to accelerate some of the activities 25 that we're currently doing we can be very effective in 26 educating and enhancing compliance for our taxpayers and 27 thereby increasing revenues to the State. Not to 28 mention the underground economy which is a whole other 11 1 issue. 2 So thank you very much for your presentation. 3 Ms. Olson, what is the next scheduled matter? 4 MS. YEE: Oh, can I ask a question before Ms. 5 Olson -- 6 MR. HORTON: Well, strike that. 7 MS. YEE: That's all right. 8 You had mentioned the FIRM program -- 9 MS. HOUSER: Yes. 10 MS. YEE: -- earlier. Are you looking for any 11 direction from us on that or -- 12 MS. HOUSER: We're going to be bringing that 13 back in March as a separate -- 14 MS. YEE: Oh, it's a separate -- 15 MS. HOUSER: -- agendacized item. 16 MS. YEE: Okay. So that -- 17 MS. MANDEL: There's a Bagley-Keene issue. 18 MS. YEE: Okay, all right. 19 MS. HOUSER: Bagley-Keene issue. 20 MS. YEE: I'm sorry, I missed that. Thank you. 21 MS. HOUSER: That's okay. 22 MS. YEE: I was making notes to myself. 23 MR. HORTON: Thank you. 24 MS. HOUSER: Thank you. 25 MS. MANDEL: We've all been there. 26 MS. YEE: Okay. 27 ---oOo--- 28 12 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 February 23, 2011 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 12 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: March 11, 2011. 17 18 19 ____________________________ 20 BEVERLY D. TOMS 21 Hearing Reporter 22 23 24 25 26 27 28 13