1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 AUGUST 22, 2012 9 P OTHER ADMINISTRATIVE MATTERS 10 P5.1 HEADQUARTERS FACILITY UPDATE 11 12 13 14 15 16 17 18 19 20 Reported by: Juli Price Jackson 21 No. CSR 5214 22 23 24 25 26 27 28 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 Joann Richmond Chief, Board 16 Proceedings Division 17 18 For the Staff: Liz Houser Director 19 Administration 20 ---oOo--- 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 AUGUST 22, 2012 4 ---oOo--- 5 MR. HORTON: Ms. Richmond. 6 MS. RICHMOND: Our next item is P5, 7 Administration Deputy Director's Report. 8 MR. HORTON: Welcome. 9 MS. HOUSER: Thank you. Good afternoon, 10 Chairman Horton and Members. I'm Liz Houser, Deputy 11 Director Administration. 12 My first item is an update on the headquarters 13 building, here at 450 N Street. On Thursday, 14 August 16th, a town hall meeting was held for BOE 15 employees to discuss the planned repair to the spandrel 16 glass. 17 DGS is recommending that we replace the 18 spandrel glass with a more durable product, such as 19 aluminum or laminated glass. And BOE concurs with this 20 recommendation, as it will present a permanent repair. 21 The replacement cost will be approximately 3 to 22 $4 million and we have set aside funding to pay for this 23 repair. And the Department of Finance has approved this 24 expenditure. We will provide updates to you once we 25 receive a schedule. 26 We also provided an overview of the wastewater 27 drainage pipe corrosion. We continue to work with DGS 28 to develop a solution and costing for the drainage pipes 3 1 and will provide updates to you once we have that 2 information. 3 On a lighter note, we are happy to announce 4 that a cafeteria vendor has been selected for the 5 headquarters facility. Renovations are under -- 6 currently underway to update and remodel the space and 7 we hope to have the cafeteria open for full operation in 8 September. 9 Are there any questions on the facilities? 10 MR. RUNNER: Just a quick follow-up question in 11 regards to the cost. 12 MR. HORTON: Mr. Runner. 13 MR. RUNNER: The 4 to $5 million -- 3 to 4 -- 14 MS. HOUSER: 3 to 4. 15 MR. RUNNER: -- 3 to $4 million. Then just to 16 clarify, DGS owns this building. 17 MS. HOUSER: The State of California owns -- 18 MR. RUNNER: The State of California -- 19 MS. HOUSER: -- the building and DGS -- 20 MR. RUNNER: -- operates -- the State of 21 California -- 22 MS. HOUSER: -- DGS manages. 23 MR. RUNNER: -- and operated by DGS. 24 MS. HOUSER: Uh-huh and we're the tenant. 25 MR. RUNNER: And we are the tenant. When -- 26 when we say that 3 or $4 million, is that the money -- 27 and it's available from the BOE? 28 How do have -- how do we have an account to pay 4 1 for those kinds of things? And why isn't it a new 2 expense then that DGS takes on? 3 MS. HOUSER: The way the leases -- and I can 4 have DGS come back and explain this -- but the -- 5 basically the way the leases are set up for State-owned 6 buildings -- 7 MR. RUNNER: Right. 8 MS. HOUSER: -- is that tenant has to pay the 9 repair costs for any -- especially major repairs such as 10 this. I mean, any remodeling costs that you have. 11 MR. RUNNER: Right. 12 MS. HOUSER: The -- 13 MR. RUNNER: Remodeling is a little different 14 issue than -- 15 MS. HOUSER: Right, but the -- 16 MR. RUNNER: -- ongoing repairs, all right. 17 MS. HOUSER: -- the rent that we pay kind of 18 covers some basic maintenance but when it becomes a 19 larger item, then we're, as the -- as the only tenant in 20 this building, we're responsible. 21 MR. RUNNER: So, how does that show up in 22 our -- in our -- in our BCPs then to Finance then? Do 23 they just reflect -- are they reflected in our BCPs 24 to -- 25 MS. HOUSER: They -- 26 MR. RUNNER: -- Finance saying, you know, we're 27 going to have to have an additional 3 to $4 million 28 for -- because of the building? 5 1 MS. HOUSER: For this -- later on in my 2 presentation we'll be talking about a placeholder BCP 3 just for that sort of thing. 4 But what we've been doing is we've been very 5 careful the last few years. And any savings that we 6 have at year end from our, basically, $500 million 7 budget, if we have any year-end savings we work with the 8 Department of Finance and request that those savings be 9 placed in an architectural revolving fund, which are 10 kept at the Department of General Services. 11 MR. RUNNER: Uh-huh. 12 MS. HOUSER: So, given the history on this 13 building, we've placed some money in a fund for the last 14 couple of years to have this 3 to 4 -- 15 MR. RUNNER: Okay. 16 MS. HOUSER: -- million available. 17 MR. RUNNER: And the reason I want to have this 18 little discussion is simply because when people then 19 talk about the cost of operation of the -- of the BOE, 20 in terms of efficiencies, how do our work and whatnot -- 21 the fact is that a big -- not a big portion, but there's 22 a portion, a significant portion of dollars that we end 23 up having to put into that we recover in the cost of 24 operation that goes into a building and repair of the 25 building, not remodeling because we want new offices 26 somewhere, but the ongoing repair, which, I believe, is 27 now tens of millions of dollars. 28 MS. HOUSER: It's the 64 million. 6 1 MR. RUNNER: Okay, 64 million. We end up 2 having to kind of eat, as a part of our efficiencies, 3 not as a cost for us to operate our core 4 responsibilities and duties. 5 Is that fair? 6 MS. HOUSER: I think that's a fair assessment, 7 yes. 8 MR. RUNNER: Thank you. 9 MS. HOUSER: And we do make sure that people 10 are aware how much we're spending out of our operating 11 budget for this. 12 MR. RUNNER: Thanks. 13 MR. HORTON: Further discussion, Members? 14 Hearing none, thank you very much for your 15 presentation. 16 MS. HOUSER: Thank you. 17 MR. HORTON: We will receive and file. 18 ---o0o--- 19 20 21 22 23 24 25 26 27 28 7 1 . 2 REPORTER'S CERTIFICATE 3 4 State of California ) 5 ) ss 6 County of Sacramento ) 7 8 I, JULI PRICE JACKSON, Hearing Reporter for the 9 California State Board of Equalization certify that on 10 AUGUST 22, 2012 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 pages 1 14 through 7 constitute a complete and accurate 15 transcription of the shorthand writing. 16 17 Dated: SEPTEMBER 24, 2012 18 19 20 ____________________________ 21 JULI PRICE JACKSON 22 Hearing Reporter 23 24 25 26 27 28 8