1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 MAY 25, 2011 9 ---o0o--- 10 ITEM P5 11 ADMINISTRATION DEPUTY DIRECTOR'S REPORT 12 ---o0o--- 13 ITEM 2 14 2010/2011 AND 2011/2012 BUDGET UPDATE, 15 GOVERNOR'S EXECUTIVE ORDERS AND UNION AGREEMENTS 16 ITEM 3 17 2012/2013 BUDGET CONCEPTS 18 ---o0o--- 19 20 21 22 23 24 25 26 27 Reported by: Juli Price Jackson 28 No. CSR 5214 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 13 Government Code Section 7.9) 14 15 Diane G. Olson Chief, Board 16 Proceedings Division 17 Kristine Cazadd Executive Director 18 19 Liz Houser Deputy Director 20 Administration 21 22 23 ---oOo--- 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 MAY 25, 2011 4 ---oOo--- 5 MS. HOUSER: My next item is the budget. There 6 are no updates on the budget at this time. However, the 7 labor agreements for Bargaining Units 2 and 9, which 8 impacts our attorneys and our engineer, have been 9 approved by both the legislature and the Governor and 10 went into effect immediately. 11 My last item is a presentation of two budget 12 concepts, on which we would like to receive your input 13 before they're developed into full BC -- Budget Change 14 Proposals. We plan to present the full proposals for 15 your approval at the August meeting. 16 The first concept is the headquarters facility 17 consolidation, which requests $500,000 in the '12-'13 18 fiscal year to begin the process to consolidate BOE's 19 headquarters and annexed facilities into one location. 20 Since the project will take three to four years 21 to complete, we will not incur the full rent increase of 22 approximately 5.6 to $14.6 million per year until the 23 '14-'15 fiscal year, at the earliest. The chart we've 24 included reflects the costs over a three to four year 25 time period. 26 Are there any questions or comments on this 27 concept? 28 MR. HORTON: Members? 3 1 Ms. Mandel and Ms. Yee? 2 MS. MANDEL: That's a large spread of money, 3 but my understanding is that -- that that's just a 4 dollar a square foot for a year makes that much of a 5 difference. 6 MS. HOUSER: Correct. We're talking about a 7 facility that would be approximately 750,000 square feet 8 and the $9 million difference is $1 a year over 12 9 months for 750,000. 10 MS. MANDEL: $1 a square foot, you mean? 11 MS. HOUSER: $1 per square foot, correct, not 12 $1 a year. 13 So, it's imperative that we have AB 1143 moving 14 now to try to get authority to move forward to begin the 15 site search. It is imperative that if we want to try to 16 save money in the long run, we locate a site now and try 17 to secure it, because the commercial market, we expect 18 it to return to strength. And when it does, for every 19 dollar per square foot additional that will be charged 20 on a lease, that's $9 million per year additional cost 21 to the State. 22 MS. MANDEL: Okay, thank you. 23 MR. HORTON: Member Yee? 24 MS. YEE: Actually, Mr. Chairman, I don't have 25 any questions on this, I wanted to return to the prior 26 item, but I'll wait. 27 MR. HORTON: Okay. 28 MR. RUNNER: I just have a quick question -- 4 1 MR. HORTON: Sure. 2 MR. RUNNER: -- in regards to this particular 3 issue. 4 Again when it talks about the additional cost, 5 this is a rent to rent comparison, correct? This is the 6 additional rent that we currently are paying versus what 7 the new rent with the additional space? 8 MS. HOUSER: Correct. That's the difference 9 between what we pay here and our other -- 10 MR. RUNNER: And the other places. 11 MS. HOUSER: -- four leases -- 12 MR. RUNNER: Right. 13 MS. HOUSER: -- is about $16.9 million 14 currently per year. 15 MR. RUNNER: It doesn't include the large 16 amounts of money that the BOE has paid out -- 17 MS. HOUSER: No. 18 MR. RUNNER: -- in regards to keeping the 19 building that we currently have? 20 MS. HOUSER: No, it does not include the 21 $30.9 million we've spent over the last four years for 22 the repair of this building. 23 MR. RUNNER: Okay, thank you. 24 MR. HORTON: Maybe you should. 25 MS. HOUSER: I regularly remind Finance and 26 anyone else who will listen of that number. 27 MR. HORTON: I mean for the document, for those 28 who are interested and our objection to having been 5 1 forced -- I am just kidding -- to do this. 2 Member Yee would like to return to the -- 3 MS. YEE: I wanted to -- I know Ms. Houser 4 didn't have a budget update, but I wanted to raise 5 something because I think it potentially could wreak 6 havoc if we're not clear. 7 And this has to do with the -- on July 1st, the 8 sales tax rate going down by 1 percent. I know that 9 we've been putting out press releases and letting people 10 know about that. There are varying points of view with 11 respect to the status of that particular proposal and 12 whether it ends up on the ballot, whether the 13 legislature decides to extend it. 14 I guess I'm just -- I just want to kind of put 15 ourselves in the taxpayer's shoes because this is really 16 a mess. And I hope that we're communicating kind of 17 practical effects to the legislative leaders about what 18 the impacts are going to be. 19 I almost feel compelled to put something in 20 writing just to kind of speak to -- under the different 21 scenarios that are being considered what would happen. 22 And I kind of want to be public about this 23 because the retailers and other taxpayer community that 24 has to comply with this, is -- it's going to be a very 25 chaotic situation. 26 But I wanted to just put that out there and see 27 if there any other interest in having any communication 28 with the legislative leaders? 6 1 MR. RUNNER: Just to that issue -- 2 MR. HORTON: Mr. Runner? 3 MR. RUNNER: -- again if what I'm hearing the 4 concern is is the fact that right now we have retailers 5 who are anticipating what it is that they're going to 6 have to charge and how they're going to do that and the 7 adjustments they have to make and helping the 8 legislature understand that -- that they're creating a 9 discussion of it -- of it -- if the ongoing discussion 10 about the fact that the current law may be extended 11 certainly creates a great deal of concern out there, I 12 think, for the individual taxpayer. 13 MS. YEE: Yeah, I mean extension, when? You 14 know, is it before the fiscal year? After the fiscal 15 year? It could be that the rate goes down, it goes 16 back up again, you know, after a period of time. 17 So, I just -- oftentimes -- and this is with 18 due respect to the Chair and Mr. Runner, Senator Runner, 19 oftentimes we're consulted after the fact and immediate 20 compliance with what's enacted. 21 And we have an obligation to our taxpayers to 22 really put the best information out there right now. I 23 feel like with the various scenarios that are being 24 debated, whether it's no extension, whether it's 25 extension by an act of the legislature, whether the 26 question goes before the voters, I think under those 27 scenarios there are some practical considerations with 28 respect to what we have to do in terms of communicating 7 1 with taxpayers and retailers. 2 And also I just want the legislature to be 3 aware of kind of what the real world effect is going to 4 be. 5 So, Mr. Chairman, I don't know how best to 6 communicate that, but I am not opposed to memorialize 7 that in writing in some way because I do think, you 8 know, our customers really need to understand this. 9 MR. HORTON: I mean, I would say, Members, 10 every effort we can make -- I mean, issuing the press 11 release and certainly sending -- that's been sent over 12 to each of our colleagues in the legislature as to what 13 the anticipated dollar amount would be if, in fact, it's 14 not enacted, and the dates and times and the exposure as 15 it relates to excess tax reimbursement if, in fact, the 16 retailers continue to collect tax after the sunset of 17 this, which causes -- it could cause an enormous burden 18 on those who have -- big box operators that are dealing 19 with a lot of customers. 20 I mean, how do you return excess tax 21 reimbursement when you have 20,000 customers? So, it's 22 a real really challenge in doing so. 23 So, anything that we can do along those lines 24 with just educating and so forth about the potential 25 impact from a factual perspective, not a policy 26 perspective -- leave it up to the legislators to make 27 that decision -- but from a factual perspective. 28 So, possibly, Ms. Houser, you can -- 8 1 MS. YEE: I think it should come from the 2 Executive Director. 3 MR. HORTON: -- and Legal and Ms. Cazadd can 4 kind of draft a letter. 5 Members, is it your desire to come from the 6 Board or to come from the Executive Director or the 7 Legal? 8 Any input? 9 MS. YEE: Legislative leaders. 10 MS. MANDEL: Well, the Legislative Division 11 certainly ought to be involved. 12 MS. YEE: Yeah. 13 MS. MANDEL: That's our usual contact. 14 MS. YEE: But in terms of -- 15 MS. MANDEL: Depending how you feel the 16 elevation needs to be. 17 MS. YEE: -- yeah, I mean -- 18 MS. MANDEL: And, actually, I think the 19 Executive Director may sign some of those letters that 20 go to legislators -- 21 MS. YEE: Yeah. 22 MS. MANDEL: -- go over there on bills. 23 MR. HORTON: Okay. 24 MR. RUNNER: I'm fine with that. 25 I just want to make sure that we have our 26 normal three-day review. I want to be careful of 27 what -- 28 MS. YEE: Exactly. 9 1 MR. RUNNER: -- just an information contact is 2 great. 3 MS. YEE: Exactly. 4 MR. RUNNER: And appropriate. 5 MS. YEE: Yeah. Ms. Cazadd, do you have a 6 comment? 7 MS. CAZADD: Yes. We can certainly prepare a 8 draft, we'll work with Margaret Shedd and put in all of 9 the factual information, any law that's relevant, and 10 submit it to you as a draft for your review. 11 MS. YEE: Yeah. And I'm thinking this is a 12 pretty urgent thing because we've got the rate about 13 ready to go down July 1st. 14 But I think given them all of the scenarios 15 that are out there, we can comment as to what would 16 happen under each of those scenarios without prejudice 17 as to, you know, which one -- 18 MR. HORTON: Okay. 19 MS. YEE: -- ultimately will be the outcome. 20 MR. HORTON: All right. 21 MS. CAZADD: All right. 22 MR. HORTON: Thank you, Ms. Cazadd. 23 MS. HOUSER: Thank you. 24 I do have one more concept. There's no 25 additional comments on the building concept? 26 I will move to the last concept, which is the 27 permanent establishment of the Natural Gas Public 28 Purpose Program Surcharge staff. 10 1 We enforce statutory requirements and the 2 legislative mandates of AB 1002 through administration, 3 collection and audit activities. 4 They request $203,000 and the conversion of the 5 two limited term positions to permanent. BOE estimates 6 revenue of $14.7 million, for a 69 to 1 return on this 7 proposal. 8 MR. HORTON: Okay, thank you. 9 Discussion, Members? 10 Hearing none, thank you very much for your 11 presentations today. 12 Ms. Olson, the Board is going to work through 13 lunch, and, so, we just thought we'd put that on public 14 record. 15 ---o0o--- 16 17 18 19 20 21 22 23 24 25 26 27 28 11 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 MAY 25, 2011 I recorded verbatim, in shorthand, to the 10 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 11 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: June 1, 2011 17 18 19 ____________________________ 20 JULI PRICE JACKSON 21 Hearing Reporter 22 23 24 25 26 27 28 12