1 BEFORE THE CALIFORNIA STATE BOARD OF 2 EQUALIZATION 3 450 N STREET 4 SACRAMENTO, CALIFORNIA 5 6 7 REPORTER'S TRANSCRIPT 8 JANUARY 29, 2019 9 10 11 12 13 ITEM K, 14 EXECUTIVE DIRECTOR'S REPORT; 15 ITEM K1, 16 ORGANIZATIONAL UPDATE 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Jillian M. Sumner 28 CSR NO. 13619 1 1 P R E S E N T 2 3 For the Board of Honorable Malia S. Cohen Equalization: Chair 4 Honorable Antonio Vazquez 5 Vice Chair 6 Honorable Ted Gaines First District 7 Honorable Mike Schaefer 8 Fourth District 9 Yvette Stowers Appearing for Betty T. 10 Yee, State Controller (per Government Code 11 Section 7.9) 12 For the Board of Equalization Staff: Brenda Fleming 13 Executive Director 14 Toya Davis Board Proceedings Division 15 16 ---oOo--- 17 18 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JANUARY 29, 2019 4 ---oOo--- 5 MS. DAVIS: Our next item in the 6 administrative session is Item K1, Executive 7 Director's Report. The first K Item is the 8 Organizational Update. 9 Ms. Fleming. 10 MS. FLEMING: Thank you. 11 Good morning, Honorable Members. 12 Madam Chair, Vice Chair, and other Honorable 13 Members, my name is Brenda Fleming. And I'm the 14 acting Executive Director for the Board of 15 Equalization. 16 On behalf of the agency's employees, 17 welcome. We're glad to have you. We look forward to 18 working with you. 19 If I may pause for a second just to 20 acknowledge and say thank you for those of you had 21 kind expressions for my birthday yesterday. Just a 22 mile-high decade birthday yesterday. So for all that 23 extended some cheers and gifts, etc., I thank you 24 with heartfelt. I really appreciate it. 25 With that said, Members, I will begin. 26 Members, this Board is significant. Not 27 only because you're the only elected Board in the 28 nation, but the last time all four equalization 3 1 districts had new Members was in 1882. 2 Congratulations. 3 Beginning a new year with a new team of 4 elected officers is exciting because it brings great 5 opportunities to go forward with fresh perspectives, 6 renew commitments to public service, renew 7 commitments to our taxpayers, to pardon with our 8 fellow tax professionals, and to support the 9 extraordinary employees of the BOE. And supporting 10 our mission, which is to serve the public with fair, 11 effective, and efficient tax administration. 12 Members, most of what we'll present today 13 are overviews of the agenda topics. More 14 comprehensive information and material will be 15 provided throughout the next several weeks and 16 months. 17 Allow me to pause to acknowledge a special 18 guest presenter today, Ms. Leslie Davis. Ms. Davis 19 is the president of the California Assessors' 20 Association. And later on the agenda, Leslie will 21 present an overview of CAA. 22 This month's Executive Report will focus on 23 four items; AB 102, the challenges and the 24 opportunities; ACA 2, BOE's role and value at a high 25 level, and the administration of tax programs; 26 delegated authority, explanation and impact; and then 27 office spaces and relocation, a status update. 28 As it relates to AB 102, Members, the 4 1 taxpayer -- AB 102 and Fairness Act of 2017, it 2 established two new tax administrative departments, 3 which is the California Department of Tax and Fee 4 Administration and the Office of Tax Appeals. 5 It transferred various duties, 6 responsibilities, and powers from the former BOE to 7 the two new departments. 8 And, thirdly, it changed the scope of the 9 BOE's tax administration to its core constitutional 10 duties, powers and responsibilities. Which primarily 11 is the administration of taxes on property, alcoholic 12 beverages and insurers. 13 In talking with my colleagues at CDTFA and 14 OTA, I note that all three of us as organizations 15 have been working through the normal range of issues 16 that come with organizational change and 17 restructuring. Normal or change, you manage your way 18 through those. They're definitely manageable and 19 we're make progress. Doesn't mean our days don't 20 have day-to-day hick-ups. But we work through them. 21 I would, however, like to take a moment to 22 note some areas of challenge. 23 AB 102 directs that the CDTFA shall provide 24 the Board with administrative and personnel services. 25 These services have been formalized via interagency 26 agreement. CDTFA's management and employees have 27 been supportive, they've been cooperative, and in 28 compliance with the law. We appreciate the 5 1 responsiveness and the customer-service approach 2 provided by CDTFA's executive office. 3 That said, receiving these services from an 4 external service provider versus performing the 5 services internal to the organization directly 6 impacts our operational efficiencies and timeliness. 7 The legislation further directs that all 8 employees serving in state civil service, including 9 temporary employees, who are engaged in the 10 performance of functions, transfer to the Department, 11 are, therefore, transferred to the Department. 12 The former BOE's Legal Department included a 13 staff -- a section of staff that handled the Board's 14 administrative functions, Board Proceedings, support 15 disclosure activities, and just general legal 16 support. These staff included the subject matter 17 experts on BOE functions. 18 But rather than remaining with the BOE, 19 these staff are transferred to the CDTFA as a part of 20 the AB 102 transition. 21 Thereby, the result; it diminished BOE's 22 ability to perform many of its legal functions. And 23 many of you are impacted by that today, again. We'll 24 be working with you to determine how to resolve 25 those. 26 We're, again, managing the issues, the 27 day-to-day operational issues. But the actions that 28 are needed to put in place and to develop the 6 1 knowledge needed to rebuild these functions and the 2 service levels and the knowledge levels, it just 3 takes time. 4 In the interim, we are addressing the gaps 5 by performing detail, quality reviews of all of our 6 work products and processes; adjusting teams, 7 rotating people to accommodate the work; distributing 8 work, longer days, etc. 9 So that's our short-term means of getting 10 through it. On a longer term, we've got to address 11 the issues. 12 Thirdly, the organizational change has 13 provided many opportunities for us to modernize many 14 of our operational practices and processes. It gives 15 us an opportunity to improve publications, our 16 communication material, many of our systems, etc. 17 For example, our Web site really needed to 18 be updated. Property tax is an extraordinary 19 industry, amazing tax professionals, lots of 20 knowledge. And as in any industry, you tend to speak 21 your own language. 22 One of the things that we're looking at is 23 to make sure that our Web site offers information so 24 that Joe, citizen in the public, can read it, easier 25 to understand, easier to navigate. So those are the 26 types of things that we're talking about. And 27 there's a broad range of opportunities. 28 Allow me to move on to Assembly 7 1 Constitutional Amendment, ACA 2. Later on the 2 agenda, Members, Mr. Mark Durham, who is the Chief of 3 our Legislative, Research & Statistics Division. 4 He'll present an overview of ACA 2. 5 Allow me to offer the following: Property 6 tax is an essential part of the state's budget and 7 its economic stability. The duties and the 8 responsibilities performed by the agency are 9 important elements of the county assessors' success 10 and their ability to support public services, school, 11 police, etc., etc. 12 You're all very aware. 13 Here are a few revenue of matrix from our 14 2016/2017 annual report: 15 California property tax levees for fiscal 16 year '16/'17 totaled over 62 billion. 17 County-assessed property values reached 5.7 18 trillion for the 2017/'18 roll year. Trillion with a 19 "T." 20 In 2017 the BOE set their values of state- 21 assessed properties at 105.5 billion, with a "B," for 22 the 2017 roll. 23 State-assessed properties produced an 24 estimated 1.48 billion, with a "B," in local property 25 tax revenues for the state's 58 counties in '16/'17. 26 Just to note, we do add value to the state. 27 I understand, you know, the dynamics of ACA 2. At 28 this point as staff, we're not here to make 8 1 recommendations to support one way or the other, but 2 just to recognize the value of this agency and the 3 pride that exists in the staff that are extraordinary 4 property tax professionals. 5 Let me move further to the delegated 6 authority. In April of 2017, then Governor Brown, 7 issued a letter to the Board of Equalization and its 8 Members at the time a letter suspending the Board's 9 authority for personnel, contracting and technology. 10 The Governor's letter required that the 11 decisions in these areas required review by the 12 appropriate departments; i.e., the organizations over 13 procurement, contracting and technology. 14 There were subsequent meetings when that 15 memo was issued. It took effect immediately. So 16 literally the next day we began meetings with those 17 organizations to drill down on the detail of 18 operationally how to move forward to provide a 19 background on delegated authority. 20 The Department of General Services and the 21 Department of Human Resources have statutory 22 authority over the state's contracts and procurements 23 and personnel activities, respectively. Commonly 24 referred to as control agencies, both entities have 25 the authority to delegate aspects of their authority 26 down to the state departments. 27 The suspended delegated status, issued in 28 April of 2017, required BOE then to submit all 9 1 contracts and procurement requests to DGS for 2 approval, with the exception of IT contracts, which 3 went to their Department of Technology. 4 Similarly, all HR and personnel-action 5 requests were required to be submitted to CalHR for 6 approval. So contracting and procurements to DGS and 7 IT shop, and then personnel to CalHR for approval. 8 BOE's delegation was, over a bit of time, 9 restored by DGS for the contracts and procurement end 10 of it. That allowed us to process contracts and 11 procurement for the agency. 12 However, and I know this has been a point of 13 question, AB 102 -- now through statute, separate 14 from the Governor's suspension letter -- AB 102 in 15 the subsequent budget bills restrict acquisitions or 16 procurements for Board Members or Board Members' 17 staff, including the renting or leasing of office 18 space. 19 All of these items are to be processed 20 through the -- and this is per the statute -- through 21 the Executive Director through the Department of 22 General Services. 23 The bills further state that the Department 24 of General Services has final decision-making 25 authority for all acquisitions or procurement for 26 Board Members and the Board Member staff. 27 Regarding HR delegation, in November of 28 2017, the State Personnel Board -- so you'll hear us 10 1 refer to it to as SPB -- completed an investigation 2 of BOE's personnel practices. 3 SPB issued an order that revoked delegated 4 authority over the processing and approval of all 5 civil service appointments for both BOE and CDTFA. 6 BOE was required to submit all civil service 7 appointments to CalHR for approval. 8 In November of 2018, one year later, the SPB 9 lifted the restriction for CDTFA; however, BOE 10 remains under permanent restriction for a range of 11 personnel-related activities. All of which still 12 require CalHR approval before BOE is allowed to take 13 any actions. And we are required to use all of their 14 specific processes. 15 Members, the loss of the delegation coupled 16 with the arrangement to receive our services through 17 our service provider CDTFA -- even though, you know, 18 this is not an issue about CDTFA. It's the process. 19 Having those two items coupled definitely has a 20 direct and significant impact on BOE's ability to 21 manage its HR and personnel matters. 22 The opportunity to have all or some of our 23 delegation restored would make us more efficient and 24 improve our recruitment efforts significantly. 25 Next, Members, if I may: office relocation 26 and space. I'll provide an update. And we'll try to 27 provide these to you on a monthly basis, unless the 28 Board has a different pleasure. 11 1 AB 102 and 2017 Budget Act included specific 2 language about office spaces and locations for Board 3 Members. 4 In January of 2018, in anticipation of the 5 expiration dates for the existing leases that we 6 currently have, and the length of time it typically 7 takes for site selection -- so you pick a site, 8 negotiate the leases, etc. -- then, Executive 9 Director Dean Kinnee, sent a letter to the Department 10 of General Services that proposed that our four Board 11 Members, as they came out of their existing leases, 12 would move back to 450 N Street. On the 23rd floor 13 offices are arranged there for -- historically, is 14 where we had Board Members staffed. 15 We noted there that that would be a 16 cost-effective approach, and it would also be in 17 compliance with the law. Because, at the time, the 18 law said that you needed to be in one state-owned 19 building, co-located in one state-owned building. 20 The proposed plan for the office space in 21 Sacramento was not approved. DGS proposed that all 22 BOE employees, rather than be be at 450 N Street on 23 23rd, for all BOE employees in Sacramento -- which is 24 the Board Members, the Board Member staff, and then 25 all of the other BOE employees -- be co-located in 26 the Natomas location. 27 DGS indicated that the square-footage cost 28 for the Natomas location was less costly than the 12 1 office spaces in the downtown Capitol Corridor. We 2 have recently received information. We absolutely 3 will be providing that information and making it 4 available to you. 5 The DGS construction and relocation plan is 6 comprised of two phases. Phase one is the 7 construction for the Members' offices at the Natomas 8 location. 9 Phase two is for the construction of the 10 Executive Office, Legal Office, and that would be on 11 the first floor. 12 So two phases. The phase one schedule 13 indicated construction completing by May of 2019, and 14 the move-in originally anticipated as June of 2019. 15 We're hearing recently that there may be some delays 16 in that schedule, anywhere from two to three months 17 up to five to six months. 18 The leases, Members, for the Board Member 19 offices in this area, we've got District One, whose 20 lease is going to be expiring in April. It does have 21 a month-to-month option. And so we can talk to you 22 more about that in detail. 23 District Two, Chair Cohen, the lease expires 24 March of 2019. We were in negotiations to try to 25 determine if there's a month-to-month extension. 26 For Mr. Vazquez -- Board Member Vazquez and 27 Board Member Schaefer, your leases are already in 28 what we refer to as a soft term. So we're allowed to 13 1 do a month-by-month basis. 2 As of this reporting date, Members, the 3 phase one construction costs are estimated -- just 4 the phase one construction costs are estimated to be 5 $850,000 range, construction only. 6 Phase two costs are not yet known. The move 7 or relocation cost are estimated to be $125,000 per 8 fiscal year; 125 for '18/'19, and then 125 for 9 2019/'20. 10 The Department of Finance has approved and 11 authorized that $3 million be allocated for 12 construction cost. The move and relocation cost are 13 to be funded from BOE. 14 So money is there and been allocated. The 15 discussion will be, as we move forward, the cost 16 effectiveness. 17 Members, some of you have expressed a 18 concern about the cost effect of this. And we've 19 asked DGS to join us at our February Board Meeting so 20 that they can provide more detail for you. 21 With that, Members, that concludes this 22 month's report. I'm available for questions should 23 there be any. 24 MS. COHEN: Thank you very much. 25 We'll start here on my left. 26 Senator Gaines. 27 MR. GAINES: Thank you. Wonderful. 28 Yes, I want to thank you for your report, 14 1 Ms. Fleming. And I am very concerned on the 2 budgetary cost of the office moves. And I just -- I 3 hope that you can work with us. And certainly we can 4 work with DGS. But I do have my lease coming up. 5 MS. FLEMING: Right. 6 MR. GAINES: I'd like to find another 7 location as soon as -- 8 MS. FLEMING: As soon as possible. 9 MR. GAINES: -- possible. And reduce our 10 footprint and reduce our cost. 11 And I'm speaking for myself and my office 12 situation. But we think there are alternatives 13 available that are proximate to the state capitol. 14 My belief as constitutional officers is that 15 we ought to be close by, just like all the other 16 constitutional officers in the state of California 17 are located fairly close to the state capitol. 18 And I think it's important, especially in 19 this stage of the BOE, that we stay in communication. 20 And that we develop trust with the Legislature in 21 terms of what we are doing here; that we're 22 transparent; that we're in communication. And that 23 we are being very careful of our budgets. And so I 24 have made a call to see if we can delay this so that 25 we can make the right decision. 26 I'm concerned about this $3 million budget. 27 I don't know if you could break that down or not. 28 But it would be nice to know what that number is for 15 1 the Board Members to make that move for the tenant 2 improvements that are being made. And of course an 3 opportunity to see, you know, kind of what their 4 allocations are, and see what sort of alternatives 5 are available. 6 And to do so on a quick basis. That -- I'm 7 expecting a call from DGS hoping that, you know, I 8 can have this conversation, and that we can get 9 clarity that action needs to take place very quickly. 10 And we want to make sure that we're keeping an eye on 11 the bottom line; saving the taxpayer money. 12 MS. FLEMING: Thank you for that. 13 MR. GAINES: Some of the other areas here 14 that I would agree with are issues relating to 15 administration, HR responsibility, contracting and 16 technology, as you've mentioned, that we can 17 hopefully work with the administration on a 18 cooperative basis getting those duties back that 19 really ought to fall within the jurisdiction of 20 constitutional officers. 21 And in terms of options, I think we can 22 also -- I'm going back to the office now. But if 23 you're talking about these TIs being maybe delayed 24 until December potentially, and we have leases coming 25 up for renewal -- 26 MS. FLEMING: Exactly. 27 MR. GAINES: -- it would sure be nice for us 28 to at least -- you know, maybe there's an option, 16 1 too, that's temporary, but also makes more sense from 2 the Member's perspective. 3 MS. FLEMING: Right. Understood. 4 MR. GAINES: Great. Wonderful. Thank 5 you. 6 MS. COHEN: Thank you. 7 Member Schaefer, did you have a question or 8 a statement? 9 MR. SCHAEFER: Well, I have a couple 10 comments. 11 First of all, that Jerry Brown bombshell 12 letter that you mentioned, I want to see a copy of 13 it. My staff is going to get me a copy of it. But I 14 think it'd be a good reading for all of us since we 15 all are students at this point, you know. 16 Second of all, I don't think there's any 17 conflicts if the two of us have offices in the same 18 floor in the same building. I mean, if all four of 19 us are together, then you get worried more than if 20 there's two of us. 21 I'm concerned that I have three-times as 22 much office space as I'm using here. And I have an 23 office that's 90 miles from my home in my district. 24 And I would think we'd have enough muscle to get out 25 of those leases, especially since you say the one 26 here is soft. 27 I would think the CDTFA offices, which are 28 adjacent to ours in Irvine, could be encouraged to 17 1 expand by 5 or 10 percent and take over my space, so 2 I can escape from it and go into the state building 3 in San Diego. Which is just across the bridge from 4 Coronado where I live. I can go there without having 5 to rent a motel. 6 And so those are two things I'd like to see 7 us look at as a matter of housekeeping. And I think 8 we'd look progressive, and not just to the taxpayers, 9 if we can cut some of our personal bills. Like mine 10 down in Southern California would be cut to the bone, 11 because I understand the space in the state building 12 is almost free. And the space in this very fancy 13 building, which is also a university building, is 14 very expensive. 15 And every time we can save $100,000 for the 16 taxpayers, you know, we're going to get some kind of 17 trophy. And that's good. 18 MS. COHEN: Thank you. 19 Member Vazquez. 20 MR. VAZQUEZ: Yeah. I would also like to 21 echo the thoughts of my colleagues here. And I 22 shared this with you in previous meetings. And I'm 23 just going to dwell on the move. Because some of the 24 other items you mentioned are also agendized. So 25 I'll save those comments until we get to those items. 26 But on the move, to me, it just doesn't make 27 any sense. Why would we spend $3 million? And then 28 these are estimates. And having done some 18 1 construction back home, three million can turn into 2 five million at the end of the day when you're all 3 said and done. Especially with cost overrides and 4 change orders, and everything else that's going to 5 come in when you're doing construction. 6 So -- but I understand you're working under 7 orders that were voted on or directed by the 8 Governor, or DGS, or somebody a year ago. So I would 9 like to -- if there's a consensus here on the Board, 10 I would like to move -- at least we go on record as a 11 Board objecting to it, and try to put a halt an any 12 move until we get -- I think you mentioned February, 13 we're going to have a report coming to us. 14 MS. FLEMING: We requested. 15 MR. VAZQUEZ: Oh, requested. Which I think 16 will be helpful, so we can actually get into the 17 nitty-gritty of it. And have them explain to us in a 18 public meeting the justification for this type of 19 money to be spent on something that makes no sense. 20 Because at the end of the day, I think, for 21 us, as we're working with the business community, I 22 think it's more advantageous for us to be closer to 23 the capitol than further away. 24 MS. FLEMING: Understood. 25 And just a footnote; DGS, we've invited them 26 to come to the February meeting. And at this point, 27 it seems like they're in agreement. 28 For the record, DGS actually presented to 19 1 this Board in September, I think, of 2018. So it 2 won't be the first time. 3 So some of that is on record in terms of, 4 you know, what the scope of the project, when it was, 5 and scheduling, etc. 6 But certainly, for this Board, we can invite 7 them back again. And February is the tentative date 8 at this point. So I concur. 9 MR. VAZQUEZ: I would appreciate it. 10 So if there's a second, I would like to move 11 that we -- this Board at least goes on record saying 12 that we should try to put a stop on any moves. 13 Because I know you're spending time and 14 energy on this now. And I think it's a waste of time 15 and energy on your part, given everything else you 16 have to do. For us to kind of put the brakes on this 17 until we have that report. And that we all, at least 18 this Board, agrees on where we're going to move and 19 at what cost. 20 MR. GAINES: I'll second that. 21 MS. STOWERS: Point of clarification. 22 MS. COHEN: Just -- just hold on a second. 23 Ms. Stowers. 24 MS. STOWERS: Yes. 25 Point of clarification. This is to Chief 26 Counsel. 27 Can we take a motion on this item? It was 28 not identified as an action item on my agenda at 20 1 least. I mean, I think -- I don't think -- if we 2 can't take an action item, I think it would be more 3 appropriate for the four district Members to make 4 comments on the record, but not vote at this time. 5 MS. FLEMING: So if I may, just to 6 answer -- just as a point of clarification. 7 So to the extent that we -- and I 8 acknowledge what you're saying in terms of the 9 Board's -- the current Board's right to have all of 10 the information and the data to make informed 11 decisions. 12 But I would want to note that we would 13 really look -- and I think to the point that 14 Mr. Gaines made -- to look at some temporary space 15 until the -- until some final -- more final decision 16 is made, just to be clear. 17 Because we've got leases that are expiring. 18 So as we're moving forward, this is a hold. Just for 19 the record, let's be clear that we still have to look 20 at some interim space. And then we would have to 21 revisit the cost associated with that. So just a 22 point of clarification. 23 MR. NANJO: And Deputy Controller Stowers, 24 you are correct. This is not agendized for an action 25 item, so unfortunately a motion wouldn't be 26 appropriate. But I think there's been an expression 27 of consensus on the Board Members' part. And your 28 Executive Director can take that along to the people 21 1 she's meeting with. So -- 2 MS. COHEN: So just so I'm clear, I want to 3 make sure, we're not able to take an action, but we 4 can provide you direction -- 5 MR. NANJO: Yes. 6 MS. COHEN: -- as the Board giving direction 7 to the Executive Director, and the direction that we 8 would like you to move in on our behalf? 9 MR. NANJO: Yes, that is correct. 10 MS. COHEN: Okay. 11 So first I just want to say -- I just want 12 to emphasize how grateful I am and admire the work 13 that you have done. 14 MS. FLEMING: Thank you. And the team. 15 MS. COHEN: Give me a second. I haven't 16 gotten to the team yet. 17 I just want to acknowledge your leadership 18 as a head of a team, a transitioning team. A team 19 that has come with team members that have started and 20 have not finished, or have not brought us where we 21 are today. But those that are still with us, thank 22 you. 23 I know that it's been a very difficult and 24 challenging climate that, of which, you have come 25 through, and you brought us where we are today. 26 Thank you, Mr. Nanjo. You've also stepped 27 up in a similar way. 28 And so for all the folks that I don't know, 22 1 I just want to say thank you. I think it's important 2 to be very grateful. I think it's the -- 3 MS. FLEMING: Heartfelt thank you. 4 MS. COHEN: -- cornerstone of just 5 leadership, right, is gratefulness. 6 And I also want to make sure that we 7 acknowledge CDTFA and thank them and GovOps for their 8 partnership in this critical time in this agency, and 9 this agency's history. We need to acknowledge that 10 we are going to be having to work together and move 11 forward collectively. 12 And I understand that there have been many 13 decisions that have been made over the past two 14 years; however, I want to also state unequivocally 15 that this Board of Equalization establish its path -- 16 its path forward. 17 MS. FLEMING: Correct. 18 MS. COHEN: And that this agency, we need to 19 be able to be empowered to carry out the statutory 20 authority that is given to us. And the most 21 cost-effective and the most customer-centric matter. 22 And I think that's the point that Senator Gaines was 23 making. 24 Now, we're not looking to blow a whole bunch 25 of money. But we are just asking something very 26 simply to be able to do our jobs collectively, that 27 includes the Board. So it's my hope that we'll be 28 able to partner together and begin to address some of 23 1 these issues. 2 Now, what I have heard and what I'm 3 listening is issues of office space is probably the 4 most immediate needs. But second to that really has 5 to do with the authority for procurement and human 6 resources as we continue to move forward. And then I 7 think on a secondary level, also has to do with the 8 budget. We don't really know exactly what we are -- 9 what we have available to us. 10 I'm going to ask you, Ms. Fleming, if you 11 could come back to the Board with some clear steps 12 that could -- that we could begin to engage with to 13 help you address the following facilities, restoring 14 delegation. I think that's one of the paramount 15 issues. Restoring delegation, ultimately getting 16 focused on the real business of the Board of 17 Equalization. 18 Because they kind of have us dancing in 19 dealing with these superfluous issues that are in the 20 environment that other constitutional officers don't 21 have to deal with. 22 So as we continue to tighten up and clean up 23 our own house -- 24 MS. FLEMING: Correct. 25 MS. COHEN: -- I just need you to tell us 26 what we need. So then that we, as a body, can direct 27 you and give you that authority to move forward with 28 urgency to what I consider to be able to restore that 24 1 delegation power. 2 Real quick, in terms of office space, AB 102 3 states that all Board Members -- all Board Member 4 procurement shall be processed through the Department 5 of General Services. And certainly one can clearly 6 conclude that the Legislature was attempting to 7 ensure that Board Member procurement were reviewed 8 and ultimately improved by DGS. 9 If a lease or facility-need of the Board 10 Member's considered a procurement, arguably DGS must 11 process such a procurement. 12 But, question, AB 102 doesn't appear to 13 prohibit Board Members, and certainly not the agency, 14 from exploring facility needs consistent with budget 15 availability. Exploring the agency needs when it 16 comes to -- that it's consistent with our -- with our 17 budget. 18 I also want to acknowledge that I'm 19 attempting to wrap my arms around the process that 20 the agency has embarked upon deciding relocating the 21 entire -- understanding the decision that the 22 Department -- the agency made on moving this body to 23 Natomas. 24 You heard this Member, Member Vazquez. 25 You've heard it echoed in Member Gaines. And you 26 heard it coming in a nuance way with Member Schaefer, 27 particularly -- specifically to his district office. 28 So there needs to be some -- some level of 25 1 flexibility on where our -- our needs are. 2 For me, including safety. Safety is a No. 1 3 issue. I want to make sure that we're able to get to 4 and from our cars, to and from our offices. 5 I would imagine in the first couple months 6 as we establish ourselves that we are going to need 7 to have some late hours, quite frankly. So my 8 question to you is did the agency explore any other 9 options within the downtown area? 10 MS. FLEMING: Yes. 11 MS. COHEN: The answer is yes. 12 If so, are you able to share with us what 13 those options were? 14 MS. FLEMING: So a number of the options -- 15 and I don't know that I have the specific list in 16 front of me. So if I may, and I would like to give 17 you a thoughtful and complete answer on that. 18 MS. COHEN: Okay. 19 MS. FLEMING: So if I could ask for the 20 Board's permission to come back to you with that 21 information. I can certainly provide it timely in 22 writing. And then perhaps we can revisit more 23 lengthy discussion in February. 24 But there were a number of downtown 25 locations. The downtown area is sort of organized 26 into what they call corridors. So the Corridor A is 27 going to be like a capitol mall lane, main lane. You 28 can have visibility into the capitol. 26 1 And then there's a Corridor B that's a 2 little further out from some of the peripheral areas. 3 Still noted as downtown R Street, S Street and those 4 locations. 5 And so there were designated -- there's not 6 a whole lot of state space available. So there has 7 been some review of both state buildings and private 8 buildings, and some of those designated areas. 9 So I'll come back with that so we can get a 10 sense of what -- you know, address, locations, so 11 you'll know specifically where those locations were. 12 As recent as yesterday, we had an 13 opportunity to do a tour of 721 Capitol Mall, which 14 is a state building, Department of Rehabilitation. 15 It had some space available perhaps as a swing space, 16 etc. 17 And, again, just for the record, there's 18 also a 621 location where BOE and CDTFA have existing 19 space and leases. Board Member Schaefer is there. 20 So there are other locations. But I don't 21 have the specific lists, Madam Chair, that gives the 22 specific addresses of all of them that DGS 23 considered. 24 But they did look at it. They looked at, 25 you know, comparison of comparables, cost, square 26 footage to square footage. 27 Clearly, the cost is going to go down 28 because the footprint of our need has gone down 27 1 50 percent. The prior Board had 12 staff; we 2 currently have 6 per Member. So we know that there's 3 going to be some savings there. 4 I think the real topic is to look at the 5 comparison and the cost, the total cost of the move 6 to the Natomas area and the downtown area. 7 And if I can bookmark what you've said, 8 we've got cost on construction and moves, etc. But 9 what we don't have is if we are moving out of the 10 downtown corridor and moving to that location, it 11 changes our business model. 12 And so there's a lot of other costs, 13 security being one of them. And so there are a 14 number of other services, especially if we had 15 electeds on site at that location. Most of the 16 buildings that you come into here are going to have 17 security, you know, man security out in front of the 18 building. 19 We noted yesterday when we toured some of 20 the other locations, we don't have that at the 160 21 Promenade Natomas location. 22 So there would be additional costs that we'd 23 have to revisit the entire cost of shifting a 24 government agency to a different location. 25 I will note, though, in fairness, that we do 26 have a good government organization. FTB is not in 27 downtown corridor. It doesn't have elected 28 officials, etc. But there are other state agencies. 28 1 There's, you know, a number of them. Department of 2 Consumer Affairs, etc. 3 So there is a model for the staff to be 4 relocated in the Natomas area. But I just want to 5 qualify for the record that we're making the 6 distinction that we're having our elected 7 constitutional officers have the same respect that is 8 granted to the other elected officials. 9 MS. COHEN: In your report you touched on 10 procurement authority. And it is my understanding 11 that the BOE no longer has procurement authority. 12 Could you describe -- 13 MS. FLEMING: BOE is the agency. Excuse me, 14 ma'am. 15 MS. COHEN: That's what I'm -- thank you. 16 The agency doesn't have that authority. Can 17 you walk us through the process of how we can go 18 about and acquire that earning back that -- that 19 authority? 20 MS. FLEMING: That authority? 21 MS. COHEN: Mm-hm. 22 MS. FLEMING: So there's two parts, if I can 23 clarify. 24 So the authority at this point is, one is 25 authority that is delegated to us from the -- the 26 actual authority for procurement is DGS. So they 27 would have to grant that authority. 28 MS. COHEN: So when you say "grant that 29 1 authority," that simply means that we draft a letter 2 and we petition them for reconsideration? 3 MS FLEMING: I'd have to come back and give 4 you the specific, you know, step-by-step actions. 5 But, typically, what happens -- and, again, this is 6 something we can have DGS help to clarify their 7 expertise. 8 There's actually a process where you go 9 through training, and you get certifications. And 10 then they -- they delegate the authority to you. 11 They are the owners of the authority, and they 12 delegate that authority to you. 13 So there's actually a state process that you 14 go through to get credentials, if you will, that 15 allows you to say, I'm an official -- a procurement 16 officer, if you will, and status. We'd have to do 17 that. 18 Secondly, you'd need resources to make that 19 happen. Which, of course, is also a budget issue. 20 And so currently, if I can go back to that 21 April 2017 letter, the letter suspended the 22 authority. BOE, as an agency, actually got the 23 authority back, right, prior to the July 2017 AB 102 24 operative date. 25 MS. COHEN: Okay. 26 MS. FLEMING: When we shifted, then BOE -- 27 those resources that were the credentialed, if you 28 will -- credentialed procurement officers moved -- 30 1 went to CDTFA. So BOE didn't have those resources. 2 Because the statute says that BOE gets its 3 administrative services from CDTFA, who are actually 4 leveraging the CDTFA's authority. So for us to get 5 it back as an agency, as BOE proper for the agency, 6 we would have to go through that process that other 7 state agencies go through to get that procurement 8 status -- 9 MS. COHEN: So that's my question. 10 MS. FLEMING: -- and delegation. 11 MS. COHEN: You are aware of that process? 12 MS. FLEMING: I'm aware of that process. 13 I'm not prepared today to give you that specific 14 detail. But, yes, ma'am, we can provide that for 15 you. 16 MS. COHEN: Okay. So I'm just going to -- I 17 don't want to hog the mic. But I do have a couple 18 more follow-up questions based on what you were 19 saying. 20 So maybe you could come back to the Board 21 with clear steps on how we can gauge, and how we can 22 address the following: the facilities, the 23 restoration of delegation, ultimately getting focused 24 on, again, our business at the State Board of 25 Equalization, human resources. 26 I think it's easy to make some assumptions. 27 Perhaps you can ground us in fact. But what 28 impacts -- what are the impacts -- or what have they 31 1 been with the lack of delegation having them on your 2 organization, on the agency? 3 I know what it's been on me. But from your 4 perspective. And I'm thinking long term. How do we 5 make a persuasive argument to the Legislature that 6 we're here, we're ready to serve, when I know my 7 agency has a few vacancies or some challenges that we 8 need to get addressed before we can start to be 9 persuasive in our arguments? 10 MS. FLEMING: And thank you for that. 11 First of all, let me start by saying we 12 appreciate the support to try to get the delegation 13 restored. And we definitely are going to have to 14 work collaboratively within our agency, and really 15 working with CalHR and working with CDTFA also. 16 So we would definitely like to get the 17 delegation back. And, you know, maybe an incremental 18 process where maybe we start with -- for lack of a 19 better way of saying it -- proof that, you know, that 20 we are -- careful to say worthy -- but proof that 21 we're worthy to get it back. 22 So perhaps the first step is, as we sit down 23 with CDTFA's leadership, would include State 24 Personnel Board's leadership also, to really talk 25 about the transgressions that occurred, and how some 26 of those have been remedied in some cases with the 27 legislation. 28 And, at that point, maybe we proceed with 32 1 the process that suggests that we get restoration of 2 the delegation and certain aspects of it. 3 So, for example, when we're processing -- 4 you know, we've got a vacancy, and you're going to go 5 for recruitment. You're trying to hire just a civil 6 service position. If it's what we call just a clean 7 straight refill, then give us the delegations to do 8 the straight refill. 9 We're not amending, you know, any part of 10 the duty statements or reporting structures. Just a 11 simple one, two, three process. If we can have some 12 of those kinds. Because those are the ones the staff 13 are turning over. 14 Especially for retirement, for example. We 15 have significant retirements that have occurred. If 16 we're just doing a straight refill, give us the 17 authority to say, "This person retired. Here's the 18 new one." Let's make the process, appoint the 19 person, move the work on. 20 Because, again, as a footnote, the impact is 21 you are -- these are people that are overseeing 22 processes and activities for our revenue activities. 23 So to the extent that you've got a vacancy, and not 24 only are you burning the vacancy and burning the 25 money with that, but you're just -- you're not -- you 26 don't have the resources that's producing that work 27 product. 28 So I would suggest that we first start -- 33 1 and we can come back with a more specific, go-forward 2 plan. But I would say first, we've got to start 3 those conversations about, you know, where are the 4 things that are -- are -- are at least safer -- for a 5 lack of a better word -- and seem to get us started. 6 Especially when and if the legislation that 7 currently stands says that we still process it 8 through CDTFA, and they have the official 9 procurement; they have the official qualified HR 10 personnel. Then if we're still working through those 11 agencies, we have a partner there to do the checks 12 and balances. 13 And I will go on record of saying CDTFA has 14 done, you know, a great job of saying, "Hey, Bren. 15 This one doesn't look good," or, "There's a problem 16 here. Go back and revisit it." 17 So, you know, you do have those HR 18 professionals that are, you know, helping to check 19 the work. They're not acting as a control agency. 20 They're actually saying, "Okay. You might want to 21 revisit that," or, "Let me give me some tips here." 22 So I would say that we start with some of 23 that, and then just look at some incremental 24 opportunities to, you know, progressively, you know, 25 get that restored. 26 MS. COHEN: Member Gaines. 27 MR. GAINES: If I could, just a follow up. 28 I really appreciate what you're saying. And 34 1 I'm trying to figure out what the time-saving would 2 be. We've got Members that are in the hiring 3 process. 4 MS. FLEMING: Exactly. 5 MR. GAINES: And just as you've described, 6 they're defined positions that they're trying to fill 7 quickly. 8 If we can get what you're proposing, do you 9 know how -- how much that can shorten the time line 10 for approval-positions for Members? 11 MS. FLEMING: Yeah, I wish I could tell you 12 like an exact number. Because right now what we have 13 is -- the recent history is we have a loss of 14 delegation in the April time frame. 15 Prior to that, you could -- you could 16 generally process --and I'm saying prior to the 17 April, you know, 2017 memo -- we were able to process 18 recruitments in a matter of weeks, you know, working 19 two to four weeks, six weeks -- 20 MR. GAINES: Yes. 21 MS. FLEMING: -- was like, "Oh, that's a 22 long one, six weeks." 23 We've got -- and Mr. Durham -- I'm looking 24 in the back. Mr. Durham had given us some numbers. 25 I think we had some of them that were approaching 200 26 days. So you're talking -- some of them we have had, 27 the process has taken so long that the actual 28 candidates are no longer available to us. 35 1 MR. GAINES: Right. 2 MS. FLEMING: So to the extent we can get it 3 back to some reasonable time. So if a candidate 4 comes in for an interview, there's just a natural 5 sort of organic expectation that if I've interviewed, 6 that within a couple of weeks they should be getting 7 some communication back. 8 We literally, you know, have -- well, by the 9 time we are able to be opened up to contact the 10 candidate again, the candidate has accepted another 11 position. 12 The next note I'd like -- and these are just 13 side-bar notes, you know. And we'll approve this if 14 you guys capture this as we move forward with a 15 go-forward plan. 16 We are a very deadline-driven organization. 17 Every two weeks we've got a PAN, and then a Board 18 Meeting; PAN, and then a Board Meeting. 19 We're deadline-driven in terms of, you 20 know -- 21 MS. COHEN: I'm sorry -- PAN? 22 MS. FLEMING: Public Agenda Notice for our 23 Board Meetings. 24 Inside the Property Tax Organization, we're 25 very deadline driven. So to the extent that we have 26 vacancies that are vacant for too long, is really 27 changing our work flow. It changes the dynamics of, 28 you know, how -- who, what, when, where, and how you 36 1 achieve those objectives. 2 So I would, you know, just make a note of 3 that so we're capturing all that as a part of the 4 go-forward plan. And then we can come back with the 5 specifics of, you know, how do we remedy, you know, 6 how long it takes, etc. And then use some of that as 7 the justification that says, you know, "Here's the 8 impact." 9 So to directly answer your question, it's 10 not so much of like how it will go forward, but 11 here's the impact to help to understand that, and 12 then what the cost of that is. 13 MR. GAINES: Yes. Yes. 14 So I just encourage whatever you can do and 15 what we can do as a Board. I think we're in 16 agreement in terms of speeding that hiring process 17 up. And, I mean, we want to be successful. 18 MS. FLEMING: We do. 19 MR. GAINES: Right? We're the new BOE, and 20 we have to be properly staffed. 21 And it goes beyond that. We have to make 22 sure the vacant positions in the BOE are getting 23 filled. And the number I heard was 30 or around 30 24 positions. Correct me if I'm wrong. 25 MS. FLEMING: I would suggest it might be a 26 little higher than that. 27 MR. GAINES: Higher than that. Okay. 28 So anything we can do to help -- 37 1 MS. FLEMING: Absolutely. 2 MR. GAINES: -- streamline that process, I 3 would appreciate that. 4 MS. FLEMING: And, again, I'll go on the 5 record and say we appreciate the support. 6 MS. COHEN: Thank you. 7 Member Schaefer, do you have anything you 8 wanted to add? 9 MR. SCHAEFER: Well, I was looking over the 10 cost of this whole relocation and whatnot, and I was 11 astounded at the amount of money that's allocated for 12 security. I think we're the least sexy of all the 13 agencies of government. I haven't seen any riots or 14 protests going on. 15 If we're spending a couple hundred thousand 16 a year projected on security because we're having a 17 few hundred thousand dollars for the cannabis money 18 to protect, either in our agency or nextdoor to our 19 agency, there's got to be better ways to deal with 20 that. 21 I just don't want to see the taxpayers 22 spending 10, $20,000 a month on security. I see that 23 the security needs to check our office at 10:00 at 24 night and 4:00 in the morning. You know, there's 25 ways you can do that with electronic devices and 26 whatnot. We -- I just want us to not be -- have 27 somebody think we need that much security. 28 Yesterday I wanted to go from one side of 38 1 the capitol to the other, and the staff member was 2 explaining to me, because I'm a constitutional 3 officer, I should call the CHP. And they will drive 4 me from one side to the other. And I thought that 5 was absurd. And I just hope that doesn't get 6 repeated. 7 MS. FLEMING: Okay. Yes, sir. Duly noted. 8 Thank you. 9 MS. COHEN: Comments on this end? 10 Ms. Stowers. 11 MS. STOWERS: I was going to comment on 12 CalHR issues, but I think you guys covered it as far 13 as looking to get the delegation back. 14 And I just wanted to acknowledge CDTFA -- 15 Ms. Hagen's in the audience -- as providing a service 16 to the Board of Equalization. 17 I think you guys have done a fabulous job 18 considering that you have your own -- your own work 19 to deal with as well, and adding on BOE. So thank 20 you for your service. And hopefully we can work 21 together in partnership and obtain some of this 22 authority back to BOE. 23 MS. COHEN: All right. 24 MR. GAINES: Could I follow up one more -- 25 MS. COHEN: Absolutely. 26 MR. GAINES: -- if I could. 27 Thank you. 28 You know, this other, perhaps, temporary 39 1 option would be here at 450 N Street. And, you know, 2 we'd have to, I think, work with the Department to 3 get approval. And I know that's not the pathway they 4 want to go down. But I think it's -- it's at the 5 right location. You currently have security here. 6 MS. FLEMING: Yes. 7 MR. GAINES: I don't know if that'd be the 8 24th floor. 9 MS. FLEMING: Twenty-third floor. 10 MR. GAINES: Twenty-third floor. So there 11 was a layout I think originally -- 12 MS. FLEMING: Correct. 13 MR. GAINES: -- for Board Members to be in 14 this building. 15 MS. FLEMING: Correct. Correct. 16 MR. GAINES: So if, you know -- it's a state 17 building, right? 18 MS. FLEMING: Correct. 19 MR. GAINES: So, you know, we might be able 20 to save a lot of money by looking at that option. I 21 just think we ought to be exploring that and making 22 sure we're checking every possible option. And we 23 have a timeline that is short. 24 MS. FLEMING: Yes. 25 MR. GAINES: Yeah. So, thank you. 26 MS. FLEMING: Duly noted. Thank you. 27 MS. COHEN: So I just want to say thank you. 28 I want to summarize; some of the key issues 40 1 that I heard were office space procurement, human 2 resources, and, again, budget, figuring out what 3 exactly our budget -- and when I say "our," I mean 4 kind of the Board Members. It's still not clear to 5 me -- 6 MS. FLEMING: Right. 7 MS. COHEN: -- what -- what exactly that is. 8 And as we continue to move forward and 9 continue this discussion, being very prudent and very 10 mindful of the realities that we are existing. 11 So thank you for your presentation. 12 Is there anything else for you? 13 MS. FLEMING: No. Just my final comments, 14 again, is, you know -- it's a pleasure to get the 15 opportunity to serve you. Again, we welcome you. 16 The -- the interesting thing about the 17 AB 102 that sort of restructured us and gave us kind 18 of a new identity, is that, again, it's the Taxpayer 19 Transparency and Fairness Act. And so transparency 20 is who we are. We're probably one of the more 21 transparent agencies in the State of California. 22 Short of knowing our social security numbers, etc., 23 we expose a lot. 24 Is there room for improvement for our 25 agency? Absolutely. Do we have work ahead of us? 26 Absolutely. Are we going to make tons of mistakes? 27 Absolutely. We're human. 28 But I would suggest that the transgressions 41 1 and some of the issues that were addressed are not 2 unique to the BOE. Not all of the issues, but, you 3 know, a number of the issues, you know, have occurred 4 with other agencies. 5 So I think, you know, my -- my commitment 6 and my perspective on it is we're still a government 7 agency. And we may be significantly smaller in size. 8 Prior to this we were approximately just under 5,000 9 employees, and now we're about 200. So even though 10 we're small, we still have a governmental 11 responsibility. 12 We're still public administrators. We've 13 got people who are elected by almost 10 million 14 constituents. So I think we still have a 15 responsibility to the state of California. 16 I don't know about you all, but I was raised 17 by parents who said, "Show up and do a good job. 18 Give your best every day. And if you're managing 19 something for someone else, you take better care of 20 it." 21 So I think we just have to demonstrate to 22 those who maybe have a different perspective of our 23 prior Board's history, we may have to just do what we 24 can as a collective Board, and us as, you know, 25 supporting the Board to show them we're capable of 26 doing that. We're a professional organization, and 27 we're able to move forward. 28 I look forward to working with you and 42 1 trying to achieve those objectives. 2 MS. COHEN: Thank you very much. 3 MS. FLEMING: Thank you. 4 MS. COHEN: I appreciate your presentation. 5 Ms. Davis, is there any -- or could you call 6 the next item? 7 ---o0o--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 43 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, Jillian Sumner, Hearing Reporter for 8 the California State Board of Equalization, certify 9 that on January 29, 2019 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 43 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: February 22, 2019 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 44