1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 NOVEMBER 15, 2011 10 11 12 13 ITEM P 14 OTHER ADMINISTRATIVE MATTERS 15 ITEM P1 16 EXECUTIVE DIRECTOR'S REPORT 17 2. CROS PROJECT UPDATE AND ACTIONS 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 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 Government Code 13 Section 7.9) 14 Diane G. Olson 15 Chief Board Proceedings Division 16 17 Eric Steen Project Director 18 19 David Gau Deputy Director 20 Property and Special Taxes 21 Randy Ferris 22 Acting Chief Counsel 23 24 ---oOo--- 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 NOVEMBER 15, 2011 4 ---oOo--- 5 MS. OLSON: We need to go back to P1.2. 6 MR. HORTON: As you wish. 7 MS. OLSON: Okay. I skipped over the CROS 8 Project Update and Actions. 9 MR. HORTON: P1.2. 10 Okay, Ms. Olson. You want to -- 11 MS. OLSON: Yes. Mr. Eric Stein -- Steen. 12 MR. STEEN: Steen, yes. 13 MS. OLSON: Steen. 14 MR. HORTON: Okay. The floor is yours, Mr. 15 Steen. 16 MR. STEEN: Mr. Chairman. 17 MR. HORTON: Welcome, by the way. 18 MR. STEEN: Thank you very much. 19 MR. HORTON: This is your first hearing? You 20 came before. 21 MR. STEEN: I came before, that's true. 22 MR. HORTON: Second. 23 MR. RUNNER: But he's on his own today. 24 MR. HORTON: But you didn't speak. 25 MR. STEEN: I don't have -- yeah, I have nobody 26 to fall back on. 27 MR. HORTON: Well, I still have that list of 28 questions here. 3 1 MR. STEEN: Okay. All right. 2 MR. HORTON: Just kidding. 3 MR. STEEN: Okay. 4 MR. HORTON: All right. Welcome. 5 MR. STEEN: Thank you. 6 MR. HORTON: Glad to have you. 7 MR. STEEN: Thank you very much. Pleasure to 8 be here. 9 Um, I'd like to walk you through a brief status 10 of the CROS Project. I'm going to address a few items. 11 I believe you have, uh, my talking points in front of 12 you. I'll talk a little bit about the procurement 13 activities, our communication with the control agencies, 14 our partnering with the revenue agencies, uh, project 15 communication, briefly address our schedule, and then 16 something I refer to as the parallel initiatives. 17 Um, so with that, I'll go ahead and launch into 18 our procurement activities. 19 Um, we've crafted -- the first thing we did is 20 sit down and craft a resource plan. And I've worked 21 closely with our CIO and CTO to understand what the 22 implications are to those organizations, so that we 23 bring the best talent to bear to the -- to the 24 procurement. Um, and it's gone very well. I feel like 25 we have a very strong team. 26 Um, we have finalized the information 27 technology procurement plan which outlines our approach, 28 and we will submit that to General Services shortly. 4 1 That essentially kicks off, in a more formal way, with 2 General Services, the effort. 3 We've completed roughly 40 percent of the 4 requirements that go into the Request for Proposal, the 5 RFP, which, of course, is used by the vendors to come up 6 with their solution. Um, we've also documented the 7 as-is processes that outline the activities currently 8 that are in play to support the -- the BOE's business. 9 And those, of course, are inputs into the revised 10 processes that will support, uh, the organization once 11 the new system is in place. 12 Um, we've also modified our approach, the 13 procurement, slightly. We are going to be submitting a 14 draft of the RFP roughly three months prior to the 15 final. And the rationale for that is that it gives the 16 vendor community an opportunity to review, uh, our RFP 17 and to give us feedback. And then we have the choice 18 then to incorporate that feedback into the final RFP or 19 to ignore it, either way. But it really helps us 20 understand the gaps that may exist in the -- in the RFP 21 at that point. Then three months after that, of course, 22 we'll submit the final. 23 Um, we've also given our team some counsel, 24 some direction, regarding what communication looks like 25 to those who are not part of the CROS Project effort; 26 and in particular, what does it mean to talk to, you 27 know, the vendor community whose obviously very 28 interested in this -- in this endeavor. 5 1 Um, that's it for the procurement activities. 2 Unless you have questions, I'll move on to the next, uh, 3 talking point. 4 MR. HORTON: Members? 5 Continue please. 6 MR. STEEN: Okay. 7 MS. YEE: One question. 8 MR. HORTON: One second. 9 Member Yee. 10 MS. YEE: I wanted to just go back, uh, maybe 11 even preceding, um, some of these activities. And that 12 is, um, I wasn't clear what communication may have 13 occurred, um -- and maybe it's not appropriate and this, 14 um, draft RFP might be the way to do it. But, um, when 15 the, uh, FSR was conditionally approved, was there 16 communication back to the vendor community in terms of 17 what those conditions meant? Or do you know? 18 MR. STEEN: I'm unsure if that communication, 19 the -- the approval letter was, uh, made public or not. 20 I'm not -- off the top of my head, I don't know that. 21 MS. YEE: Okay. I just -- I didn't know 22 whether -- 23 MR. STEEN: Can certainly find that out. 24 MS. YEE: -- we took any, um -- and maybe 25 Mr. Gau knows. 26 MR. GAU: Mr. Steen's correct in that it just 27 was made public, uh -- the letter back to us was on the 28 technology agency's website. 6 1 So a couple contacts that I had, I had made 2 that known to any vendor, that that's where it was. 3 MS. YEE: Okay. But you -- you didn't feel any 4 need, given what was sent back to us by, um, the, uh -- 5 the, uh, approving authority, that we needed to go back 6 out to the vendor community to talk about the conditions 7 that had been placed on the project? 8 MR. GAU: No, not at that time. 9 MS. YEE: Okay. Okay. 10 MR. HORTON: Okay. Further discussion, 11 Members? 12 Please continue. 13 MR. STEEN: Okay. So, regarding our 14 interactions with the control agencies, um, we have met 15 with the California Technology Agency. They are, of 16 course -- their involvement, um, in this effort, they're 17 bringing to bear independent project oversight. So 18 there will be a consultant actually on-site here, you 19 know, attending meetings, reviewing our work, writing 20 reports, and really providing some -- some measure of 21 oversight in terms of the effort. And this starts in a 22 formal way in January. 23 Um, we have a meeting scheduled with General 24 Services. That's happening, I believe, next week. And 25 we are also, um, refining, working on our compensation 26 model in anticipation of meetings with the Department of 27 Finance. 28 Um, any questions about the -- the control -- 7 1 that talking point? Any comments? 2 MR. HORTON: Please continue. 3 MR. STEEN: Okay. Thank you. 4 Um, one of the stipulations of the approved FSR 5 was, of course, that we interact with the other revenue 6 agencies and look for opportunities to collaborate, to 7 partner. Um, and -- and so we've already commenced with 8 that. 9 We met with EDD, and they were incredibly 10 receptive. Myself and the CIO and CTO went to meet with 11 EDD, and we learned, um, a number of things about their 12 efforts, their previous efforts, and they've been very, 13 very helpful. 14 We have a meeting scheduled with Franchise Tax 15 Board. And I'm hopeful that the same level of 16 cooperation will exist there. I see no reason why it 17 would not. 18 Um -- uh, so we've made some headway there, 19 some progress there as well. And we're going to be 20 bringing on a specialist that, uh -- sort of an 21 architect that will help assess the business processes 22 in our organization and these respective organizations. 23 And that individual will help makes recommendations. 24 EDD is eager to have this person come on board and, uh, 25 work in that capacity. 26 As far as, um -- just moving on to the next 27 point here regarding project communication -- 28 MR. HORTON: One quick minute, please. 8 1 MR. STEEN: Sorry. 2 MR. HORTON: Um, on the collaboration, do 3 you -- it sounded as if, though, you may be viewing that 4 as collaborating on best practices as opposed to a 5 functional collaboration potential? 6 MR. STEEN: There is a lot -- there are a 7 number of ways which we could collaborate. There are -- 8 there are many different options. Uh, there are 9 possibly tools that we could share. I mean, there's -- 10 uh, there are processes that we could share. There, 11 um -- possibly we could host at one of the -- the 12 revenue agency's, uh, hosting sites. 13 So, we have some ideas around what those 14 opportunities may look like, um, but we have yet to 15 refine, you know, concrete, um -- concrete ways in which 16 we will collaborate. And that's part of what this 17 specialist will help us with. 18 MR. HORTON: Okay. My -- my read on the 19 legislature was, is that they were looking to see -- in 20 addition to best practices and learning from the 21 activity that has gone on before us, uh, to see if there 22 was any functional collaboration that could exist as 23 well. Um, and so I would encourage that we take a look 24 at that. 25 Mr. Runner. 26 MR. RUNNER: Yeah. I was going to say the 27 other issue I think we -- that I would -- I know we've 28 had some conversations about, in general here, and 9 1 specifically in regards to CROS; and that is the -- the 2 collaboration that takes place I think not only needs to 3 be, I think, functional in terms of that and the 4 resources that are available. But, also, I think as the 5 taxpayer looks up at the tax agencies, um, you know, we 6 understand and see that there's -- you know, we're 7 dealing with two different other agencies here. 8 But I think the taxpayer often times just looks 9 at all this as one big state of California and, you 10 know, I'm just trying to do business here. And how do I 11 work it? And how do I -- 12 MR. STEEN: Right. 13 MR. RUNNER: What's my website? How do I find 14 my stuff on a website? 15 So I'm -- I'm hoping that we not only look at 16 it in regards to those aspects in terms of our 17 efficiencies and effectiveness, but also then, how it is 18 that we can bring together for the taxpayer, uh, you 19 know, a single taxpayer folder that might give all kinds 20 of options -- 21 MR. STEEN: Right. 22 MR. RUNNER: -- to the taxpayer, uh, in regards 23 to how they deal with their issues before the state. 24 MR. STEEN: Right. Absolutely. And that's 25 something that we're taking a serious look into. We 26 very much want to ensure that the taxpayer gets the most 27 bang for his buck, as it were, um -- and so we're 28 looking at opportunities to possibly share, you know, 10 1 collections activities to share, you know, help desk 2 activities or customer service, uh, related activities. 3 Are there data that we can share? Uh, what 4 sort of -- uh, how is data being -- how are we dealing 5 with data going back and forth among these various 6 organizations? Um, all of those. User -- user 7 experience, um, would be another area we'd be looking 8 at. 9 So there are a whole host of people, process, 10 technology categories that we're looking at in terms of 11 hopefully finding -- identifying ways that we can not 12 duplicate our efforts and our activities. So -- 13 MR. HORTON: Thank you. 14 MR. STEEN: Sure. 15 MR. HORTON: Please continue. 16 MR. STEEN: Sure. Project communication, I 17 bring this up because I -- I believe that's one of the 18 things that I was chartered with. I'm responsible for 19 being the face of the project, as it were. And so I 20 bring this up because I want to be clear that -- that -- 21 that this is something I'm taking very seriously. I'm 22 responsible for this. 23 So one of the things that we've done, or one of 24 the things that I have done is met with the executive 25 team. I've met with the managers in the organization. 26 Uh, met with the program areas, uh, various Board 27 Members. And this will continue to occur. 28 Um, I've also -- uh, we've also started, uh, 11 1 revamping our communication plan, in which we 2 communicate as well to the taxpayer. So this is 3 something that we are taking very seriously as a project 4 and we're committed to a consistent message. So we're 5 committed to a consistent message in terms of the 6 objectives of CROS, impact to stakeholders and, um, all 7 of those things. 8 The objectives being, of course, improving the 9 taxpayer experience, improving internal operations, 10 achieving some revenue lift and, as was already 11 mentioned, collaborating with the other revenue 12 agencies. 13 And, of course, the system that we implement is 14 simply a means to those ends. And that's a message that 15 we've been faithful in the short time that I've been 16 here to communicate. And we, of course, will continue 17 to communicate faithfully. 18 MR. HORTON: Thank you. 19 MR. STEEN: Sure. 20 And as far as the schedule goes -- the 21 schedule's, uh, also before you -- we've made some 22 modification to the interim dates in the schedule, but 23 there's no impact to the final date. So, in other 24 words, we still -- our plan is to still have a vendor on 25 the ground February 25th, 2014. 26 Some of the interim dates have changed. The 27 ITPP, instead of being submitted in June of 2011 will 28 submit in November, this month, of 2011. 12 1 We're going to release a draft -- that's 2 something we hadn't planned for previously -- in July of 3 2012. And then we'll release the final RFP of October 4 of 2012 versus February of 2012. 5 So, again, some interim dates have changed, but 6 the final dates have not. The overall timeline has not 7 changed. 8 Um, any questions about that, or comments? 9 MR. HORTON: Discussion, Members? 10 Member Yee? 11 MS. YEE: No. 12 MR. HORTON: Okay. 13 MR. STEEN: Okay. Thank you. 14 As far as the -- the parallel initiatives go, 15 what this really describes are efforts that we can 16 conduct in addition to, or in parallel with, the 17 procurement activities. And these are really designed 18 to do a couple of things. One is set up, secure the 19 success of or make more likely the success of the 20 subsequent implementation, and also, hopefully achieve 21 some sort of immediate gains. 22 And -- and so the two areas that I've 23 identified here for you are what we call data readiness 24 and then data integration. 25 So, um, one of the challenges for most IT 26 projects is, um, data readiness. We are not building a 27 brand new system with no data. What we have is a 28 system -- what we have is a handful of systems where 13 1 there are large amounts of data, data going back to 2 1879, I think. 3 So what do you do with all of those data? You 4 just -- you can't just hope to put in a new system and 5 then those -- those data just magically appear. Many 6 projects run into trouble there. 7 So what we're doing is laying special emphasis, 8 special focus and attention on cleansing, synthesizing 9 and -- and, uh, refining our data for the target system. 10 And we'll spend the next couple of years working on 11 that, and that will do a couple of things. One, it will 12 ensure the success of the project. And, two, it will 13 also give us some opportunities, potentially, for some 14 revenue lift early on. 15 Um, data integration is another area related to 16 that. We have a lot of interfaces with various 17 organizations, the FAA, DMV, EDD, IRS. We need to make 18 sure that we are dealing with those, uh, in a unified 19 way, in a standard way, and those data are being -- can 20 be brought in and then assimilated into our data stores 21 and hopefully enable us to ask questions sooner rather 22 than later that's tied to some sort of a revenue -- 23 revenue lift. 24 MR. HORTON: Okay. Thank you very much. 25 Discussion, Members? 26 Let me just reiterate a concern that all of the 27 Board Members have echoed before. And that is assuring 28 that we integrate our existing team members into this 14 1 process; that there is a plan that enables individuals 2 who are interested in learning and transitioning into 3 potential new positions that may be created as a result 4 of this activity; that there is a process and a plan in 5 which we go about training them. 6 And -- as Member Yee, who was the sort of the 7 genesis of this program and the catalyst of it, bringing 8 the efficiency to -- to government is just a large part 9 of what we're seeking to do. And I want to commend you 10 guys for working on that. 11 And there's just one piece that I'd kind of 12 like to have a report back on; that is online 13 registration. As the taxpayers begin to look at 14 registering, one of the concerns is, is that -- and I 15 believe Member Yee had actually brought this up 16 before -- is that as a taxpayer you have to go to five 17 different places, with five different permits, and 18 possibly other permits and so forth. So if, through our 19 system, we can make life easier in the registration or 20 cancellation of a permit, that would be helpful. It's 21 just an aside. 22 MR. STEEN: Okay. 23 MR. HORTON: Okay. 24 Thank you very much for your presentation 25 today. 26 MR. STEEN: Thank you very much. 27 MR. HORTON: Mr. Ferris, did you want to say 28 anything? 15 1 MR. FERRIS: No. I was just here on -- Kris 2 Cazadd asked me to sit in her place during the 3 presentation. 4 MR. HORTON: That's exactly what I do. 5 ---oOo--- 6 7 8 9 10 11 12 13 14 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, KATHLEEN SKIDGEL, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 November 15, 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 pages 1 13 through 16 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: December 9, 2011 17 18 19 ____________________________ 20 KATHLEEN SKIDGEL, CSR #9039 21 Hearing Reporter 22 23 24 25 26 27 28 17