1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 REPORTER'S TRANSCRIPT 7 FEBRUARY 26, 2019 8 9 10 11 ITEM K1.2 12 BOE OFFICES RELOCATION 13 AND CONSOLIDATION UPDATE 14 15 16 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 Henry Nanjo 13 Equalization Staff: Chief Counsel Board Proceedings 14 Brenda Fleming 15 Executive Director 16 Also Present: Jeff McGuire 17 Chief Deputy Director Department of General Services 18 Patrick Foster 19 Assistant Chief Department of General Services 20 21 ---oOo--- 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 FEBRUARY 26, 2019 4 ---oOo--- 5 MS. FLEMING: So, Members, if I may -- thank 6 you again for that support. 7 Members, if I may move to my third item, 8 which is the office relocation project update. 9 And we're -- we're grateful today to have a 10 guest speaker and a friend, former BOE employee 11 Jeff McGuire. Jeff McGuire is the Chief Deputy 12 Director of the Department of General Services. 13 Thank you, sir. 14 And joining Jeff -- I'm going to let Jeff do 15 the introduction. Patrick will take it from there. 16 So they're here to give us an update on our office 17 relocation project. 18 Patrick. 19 MS. COHEN: Good morning. 20 MR. McGUIRE: Am I on? 21 MS. COHEN: You're on. 22 MR. McGUIRE: Okay. Good morning, Members, 23 Chair Cohen and other Members. 24 I'm Jeff McGuire. I'm the Chief Deputy 25 Director at the Department of General Services. 26 With me today is Patrick Foster. He's the 27 Assistant Chief of our Asset Management Branch. 28 We were asked to appear today to provide an 3 1 update on the Sacramento-area facility consolidation 2 to 160 Promenade Circle. 3 So as you guys have already been discussing, 4 but as you know, DGS was directed to relocate Members 5 to new office spaces as existing leases expired in 6 accordance with legislation that was in the Budget 7 Act as well as AB 102. 8 And that AB 102, as you know, split up the 9 BOE into three departments, leaving the original 10 BOE -- which is you guys -- still consolidated, you 11 know, on the property tax functions. 12 Some of the changes directed by the 13 legislature were in response to audits that were 14 conducted of the prior BOE Members' activities, 15 including expenditures on lease spaces, furnishing, 16 staffing, other issues. 17 So the key directions that we were following 18 was to consolidate the BOE Members as -- again, as 19 existing leases expired, into a consolidated 20 facility. 21 The original plan before AB 102 was to 22 consolidate the Members back into 450 N Street. This 23 building. Which was where all of their primary 24 business functions were headquartered. 25 However, as a result of AB 102, now BOE's 26 remaining function, property tax, is actually 27 headquartered out in Natomas at 160 Promenade. And 28 so that's kind of the direction that things went. 4 1 But consistent with the legislature, we did 2 evaluate state space, as well as private lease space, 3 taking into consideration the operational needs 4 identified by BOE with a goal to create a long-term 5 location for the new BOE. 6 During the valuation and decision-making 7 process last year, we collaborated closely with 8 Mr. Kinnee, who was the BOE Director at the time, and 9 his team. And we also worked with the Department of 10 Finance related to cost and budget impacts. 11 BOE Members were updated and informed of the 12 analysis and plans throughout the process, and 13 provided input related to their operational needs. 14 From a financial perspective, the lease at 15 160 Promenade is currently $2.41 a square foot. 16 Compared to the average cost of the current lease 17 space for Members' spaces is 364 (phonetic) a square 18 foot. So Promenade provides a 34 percent reduction 19 in the cost per square foot for lease space. 20 The funding for tenant improvements as well, 21 which is the build-up cost to the new space, was 22 actually redirected from funds that BOE had 23 previously put aside in prior years to address tenant 24 improvements here at 450 N Street. 25 As a result, BOE did not have to acquire any 26 additional funding or budget augmentation to 27 accommodate the build-out cost at 160 Promenade. 28 It was at the request of BOE's Director we 5 1 did evaluate options of new lease space downtown 2 here. And as already noted, the rent costs are 3 significantly higher in downtown than they are at 4 160 Promenade. 5 To consolidate Members and staff downtown 6 would add significantly to the space need that we 7 would have to find downtown. And also the one-time 8 build-out cost would be significantly higher downtown 9 to add for everybody to consolidate. 10 Also 160 Promenade is already space that is 11 available under an existing lease. And so that it 12 can -- currently that space is available to 13 accommodate not only the Members, but also the 14 Executive staff who is currently downtown. 15 Leasing additional space downtown would 16 result in BOE paying for some unused space that 17 currently exists at 160 Promenade that's not being 18 used and is planned for the consolidation. 19 With respect to state space, there is 20 currently no state space downtown that would 21 accommodate a consolidation of the BOE Members, let 22 alone the entire BOE agency. 23 With the split of BOE as a result of AB 102, 24 moving the Members back to 450 N Street is really not 25 a viable option anymore for a number of reasons. 26 Based on all these factors, the decision was 27 made last year to consolidate BOE, including the 28 Members at 160 Promenade Circle, which is the current 6 1 location, as I mentioned, of the BOE program staff. 2 Final design plans for 160 Promenade were 3 approved and signed off by BOE last September. 4 160 Promenade does have free parking. It 5 has ease of access for Member constituents. It's 6 convenient airport access for Members who do travel 7 by air to get to Sacramento, and will be built out 8 with a multipurpose room that can accommodate BOE 9 public hearings in the future. 10 Transition to 160 Promenade for Members is 11 expected to take place in August of this year. BOE's 12 Executive Board Proceedings and Legal staff would 13 move later in 2019, at which time it would provide a 14 new consolidated headquarters for BOE. 15 Construction documents for 160 Promenade 16 have already been developed, and the contractors on 17 board for the phase one Member suite's build out. 18 Building permits are being obtained, and the 19 construction should begin in 60 to 90 days. That 20 could fluctuate a little bit depending on timing. 21 With all of this background, though, we have 22 received requests over the past several weeks, 23 knowing there is a new Board, from -- we've had 24 inquiries from Ms. Fleming, as well as a couple of 25 Member's offices to consider a change in the current 26 plan that would allow the Members to relocate to new 27 space in downtown while continuing with the 28 consolidation of BOE agency staff to 160 Promenade. 7 1 We've been asked that the process -- we've 2 been asked, really, what is the process for Members 3 to have the current plan modified based on the fact 4 that we have legislation and Budget Act language. 5 So just to kind of provide that path, while 6 the typical path is pretty straightforward for a 7 department who is looking for lease space and trying 8 to acquire that, the process for BOE is unique now 9 because of the -- again, the changes that were made 10 by the legislature. So for any new leases -- 11 (Whereupon Mr. Vazquez was present.) 12 MR. McGUIRE: -- the approval 13 responsibility -- leases for BOE approval 14 responsibility was assigned under legislation to the 15 Director of Finance. 16 The Director of Finance is also required to 17 send a 30-day notice to the JLBC, which is the Joint 18 Legislative Budget Committee, before formally moving 19 forward with any approval for new leases for BOE. 20 Therefore, if BOE does desire to pursue new 21 lease space or renewal of existing lease space 22 downtown, that would require the approval of the 23 Director of Finance, and then a 30-day notice to the 24 JLBC. 25 DGS stands ready to assist with whatever 26 decision is made. We are really just the real estate 27 agents for the state of California. And so whatever 28 decision is made by those other entities, we would 8 1 assist BOE in whatever decisions are made to move 2 forward with that. 3 So at this time we are available if you want 4 us to answer any questions specifically related to 5 the current plans, or what's going on with the timing 6 or anything like that. 7 MS. COHEN: Thank you very much for your 8 presentation. 9 I just want the record to reflect that 10 Member Vazquez has joined us. 11 And, colleagues, let's see -- I'll start on 12 my left to see if there's any questions on the 13 presentation by DGS. 14 Mr. Schaefer, do you have any -- any remarks 15 that you'd like to make? 16 MR. SCHAEFER: Well, I'm interested in how 17 quickly we can take my Irvine office and turn it over 18 to CT -- to the taxing agency, which is adjacent to 19 us, and could possibly use a little additional space. 20 It hurts me to see a $4,000 a month lease 21 when there's really no physical need for it at this 22 time since I'm 90 miles away and can't commute to the 23 office that easily. 24 We're in the process of opening my office in 25 the state building in San Diego, which I understand 26 won't cost us anything. Which is good. 27 On the -- on the larger view, I'd like to 28 know that we Members have easy access of other 9 1 members of the Assembly, other members of the State 2 Senate, the Governor's Office, the receptions, and 3 all the activity that goes on at the Capitol. 4 Because it's part of our input that we 5 maintain good, strong relationships with the other 6 elected officials of California, since we are in the 7 dozen top executives of the state. And if we, 8 personally, are required to be 10 to 15 miles out, 9 that would inhibit our hitting happy hour at the 10 Capitol, (inaudible) at the Capitol, all the 11 different things. 12 I'm always taking anybody that comes to town 13 on a tour of the Capitol, because that is sort of the 14 basis of our government. And it's a great 15 attraction. And we want to make government as 16 attractive as possible. 17 So these are things that I -- I have in 18 mind. But I'm all for efficiency. And I do hope 19 that the beautiful office that I have in the Wells 20 Fargo Center here is put to good use. And it's 21 costing us $14,000 a month now. And there's only two 22 or three of us that are using an office that could 23 take a dozen. 24 And I'm a businessman more than anything 25 else, and I want to see us operated with common sense 26 as -- as a good business. And I think the taxpayers 27 expect that out of us. 28 MS. COHEN: Thank you. 10 1 Did you all hear that? 2 Mr. Schaefer, you've got to speak into the 3 mic, sir. 4 MR. SCHAEFER: I should have moved -- 5 MS. COHEN: There it is. 6 MR. SCHAEFER: -- this over here. 7 MS. COHEN: There you go. 8 MR. SCHAEFER: I've never been soft 9 spoken. 10 MS. COHEN: All right. 11 I think we've got that, right? 12 MR. McGUIRE: Absolutely. 13 MS. COHEN: Do you have a response for 14 Mr. Schaefer? 15 MR. McGUIRE: I guess I could address a 16 couple of things. As far as the Irvine space that's 17 currently -- was used by your predecessor, that is 18 adjacent to the CDTFA field office in Irvine. 19 I can't speak specifically to whether CDTFA 20 needs any additional space or would be interested in 21 utilizing that space. That was something that I 22 think BOE would need to talk to CDTFA about. And 23 then whatever the process is, know we can move 24 forward with transferring that lease if that's the 25 case. 26 You did mention that -- and we have been 27 working with you to provide some space for you in the 28 downtown San Diego building. I did just want to 11 1 create some clarification is that state's building 2 space is not free. It does have a rent cost as well. 3 The rent here in the 450 N Street building 4 has a lease cost. The downtown San Diego building, I 5 believe is 222 -- it's our base rental rate. 6 Two-twenty-two? 7 Two-twenty-two a square foot. So there is 8 still a cost on state space. It's -- it's a 9 reimbursement for the state for anyone that's a 10 tenant in the building. 11 MR. SCHAEFER: I don't mind paying for it. 12 It's just -- 13 MR. McGUIRE: Okay. 14 MR. SCHAEFER: -- I don't want to pay for 15 more than I need. 16 MR. McGUIRE: Right. I just wanted to 17 clarify if there was just a misunderstanding that 18 state space was free and that only lease space costs 19 money. 20 MR. SCHAEFER: Nothing is free. 21 MS. COHEN: Yeah. I don't think anyone -- 22 MR. McGUIRE: Thank you. Yes. 23 MS. COHEN: I don't think anyone doubted 24 that. 25 MR. McGUIRE: Okay. 26 MS. COHEN: We know nothing is free. 27 Senator Gaines, I see you taking copious 28 notes over there. 12 1 MR. GAINES: Yeah. I've got some questions 2 if you could help me. 3 MS. COHEN: All right. 4 MR. GAINES: Thank you for coming forward 5 and making your presentation. I was just wondering, 6 could you clarify what that aside cost for square 7 foot is for 450 N Street? 8 MR. McGUIRE: Current lease cost of 9 450 N Street -- 10 MR. GAINES: Yeah. 11 MR. McGUIRE: -- is 376 (phonetic) a square 12 foot. Yeah. 13 MR. GAINES: Okay. 14 MR. McGUIRE: So if you just wanted 15 clarification, there's a base rental rate for state 16 buildings. But then some buildings still have a bond 17 cost on them. So that's the reason that 450 N Street 18 is higher than the base rate of 222, is it's still 19 paying off bonds on this building. 20 MR. GAINES: Oh, I see. Okay. And that's 21 being used currently by the CDTFA? 22 MR. McGUIRE: That is correct. 23 MR. GAINES: Okay. All right. 24 So I've just got some concerns about the 25 move to south Natomas. I'm wondering on your cost 26 per square foot analysis if it's including the 27 security cost. Because we were looking at security 28 costs in south Natomas at $260,000. 13 1 And I know that many of the buildings that 2 are located more proximate to the State Capitol 3 include different levels of security depending on 4 which building that you're in. 5 But I just want to make sure that that 6 260,000 is included in the cost per square foot so 7 that we have a fair comparison. 8 MR. FOSTER: Traditionally that cost is bore 9 by the department or agency, so it wasn't factored 10 in. We thought that the security for that space in 11 particular would be the same for others downtown. 12 Just an assumption we made. 13 MR. McGUIRE: There -- there were security 14 features built in for the requirements for the 15 suites, such as panic buttons. There's security 16 access. No one can come into the common space or 17 into the Members' suites without, you know, badge 18 access. 19 So there's restrictions to actually get into 20 the space. But there isn't any additional, like, 21 security guard features there. There is some 22 security guard for that facility that comes by 23 certain times during the day. But there's not, like, 24 someone sitting downstairs all the time in that 25 building, if that's your question. 26 MR. GAINES: Well, I want to be sensitive to 27 the needs of my colleague, Ms. Cohen, in terms of 28 security, and for all Board Members. 14 1 But I would sure like to see direction by 2 the Board Members in terms of trying to locate space 3 near many other constitutional officers in the state 4 of California. And that's along the Capitol Mall 5 corridor. Or at least within walking distance. 6 And I think we're walking about half a mile 7 to get there now. I don't have any problem with 8 that. It's a good exercise. But -- and I'd walk a 9 little farther if I had to. But I do want proximity 10 to the Capitol. I think Board Members have expressed 11 similar comments. 12 I'm also concerned about AB 102 and its 13 direction that Board Members cannot communicate with 14 employees of the BOE. And yet we're being collocated 15 in the same spot. 16 So it says to me that it makes more sense, 17 again, to have us located in proximity of the State 18 Capitol. 19 I think the south Natomas location would 20 work fine for the function of the BOE and their 21 day-to-day activities of staff. 22 And then, of course, I also am concerned 23 about TIs and the factor that you're using for TIs. 24 So what is the number that you're using in the event 25 that we found space along the Capitol corridor for 26 TIs, and then what is the number that you're using in 27 south Natomas? 28 MR. FOSTER: So I think currently the cost 15 1 for the construction of the new facility at 2 160 Promenade would roughly be just over $700,000. 3 It would depend greatly -- 4 MR. GAINES: So how does that -- can you 5 help me in terms of how that breaks down per square 6 foot for Member offices? 7 MR. FOSTER: So it's taking into account the 8 5,600 square feet that the four-Member Board would 9 occupy. It's roughly about $127 a foot per square 10 foot for the Board Member space. 11 MR. GAINES: That's for the TIs? 12 MR. FOSTER: For the tenant-improvement 13 cost. 14 MR. GAINES: Okay. All right. 15 MR. FOSTER: One-time cost. 16 MR. GAINES: Tenant improvements. Right. 17 So if we were able to find space that would 18 require a less intensive TI -- because there's a lot 19 of offices that we've looked at personally. We found 20 space that is available that does have security. The 21 security -- the security level differs from building 22 to building, which actually I think could address the 23 issue of proper levels of security for certain 24 Members of the Board. 25 And so my thinking is that there's available 26 space with minimal TIs. I think we can find 27 competitive space. The footprint is going to be much 28 smaller than it has been historically. And so we can 16 1 make sure that we're looking out for the taxpayer. 2 But at the same time, make sure that we're 3 being treated as other constitutional officers are in 4 terms of access and proximity to the State Capitol. 5 And -- so that's -- that's the direction I'd like to 6 see us go in. 7 And I do have another concern. I want to 8 congratulate you on your retirement. But it begs the 9 question as to who takes over at the helm upon your 10 retirement on Thursday? 11 MR. McGUIRE: Well, the Department of 12 General Services has about 3,600 employees. And 13 so -- 14 MR. GAINES: Okay. But do we -- 15 MR. McGUIRE: -- I personally believe I have 16 value they are -- Mr. Foster and his whole team deals 17 with all the real estate aspects. Our director 18 Daniel Kim is continuing on. So I'm sure they won't 19 really miss me much. 20 MR. GAINES: So will it be Mr. Foster that 21 we speak to next week? 22 MR. FOSTER: Absolutely. 23 MR. GAINES: Okay. 24 MR. FOSTER: Here to help. 25 MS. COHEN: Mr. Vazquez. 26 MR. VAZQUEZ: Good morning. 27 Sorry I'm a little late here. But of course 28 good old Delta is always on time, right? 17 1 And you may have said this in your opening 2 remarks, so please excuse me if I'm repeating 3 something. But on the -- as we're moving forward, it 4 sounds like the move is to split. To have staff in 5 this new facility and the Members here locally, or 6 close by the Capitol; is that correct? 7 MR. McGUIRE: That's what the request is. 8 The current plan is actually to collocate the Members 9 and the staff all at 160 Promenade. 10 MR. VAZQUEZ: And the cost -- I guess you 11 touched on it already. I guess the biggest cost 12 obviously, it seems to me setting up a room like 13 this -- you know, a Board room like this in a 14 facility is probably one of the major cost factors as 15 we relocate; is that true? 16 MR. McGUIRE: I don't know the exact cost of 17 the multipurpose room that could accommodate Board 18 Meetings compared to the other tenant improvement 19 costs. I don't -- I don't actually have that 20 breakdown in front of me. But we can get back to 21 Ms. Fleming with that. 22 MR. VAZQUEZ: Okay. 23 And like you mentioned just a few minutes 24 ago that obviously whether it's a state building or 25 it's a private facility, there is a cost. 26 But I'm assuming if we invest -- if we don't 27 already have a state building, let's say, but if we 28 have a facility here that possibly could be owned by 18 1 the state -- obviously in the long run it's better 2 than to lease for umpteen years, I'm assuming, right? 3 MR. McGUIRE: Yeah. Any decisions for the 4 state to buy property would go through a whole 5 different process and through the Public Works Board 6 and stuff. So we wouldn't enter into a lease to buy, 7 typically we would just do a lease or we would be in 8 state buildings. Sorry if I misunderstood the 9 questions. 10 MR. VAZQUEZ: No, no. 11 Now, of the state buildings, now I 12 understand there is some state buildings within the 13 proximity of the Capitol that are available; is that 14 correct? 15 MR. McGUIRE: There's really not -- 16 MR. VAZQUEZ: Or facility. I guess I should 17 say space, because it's probably not the whole 18 building. 19 MR. McGUIRE: So there's -- like we had a 20 space -- the one at -- 21 MR. FOSTER: The Department of 22 Rehabilitation had a suite available. But I don't 23 know that it would accommodate everyone's needs. 24 But other than that, there isn't any 25 state-owned spaced in or around the Capitol or the 26 city of Sacramento. 27 MR. VAZQUEZ: You said it wouldn't 28 accommodate all our needs, but would it accommodate 19 1 staff and a Board room? 2 MR. FOSTER: No. Absolutely no. 3 MR. McGUIRE: It would accommodate maybe one 4 Member. 5 MR. FOSTER: Maybe two possibly. 6 MR. VAZQUEZ: But no staff? 7 MR. McGUIRE: Oh, the Member and their 8 staff. I'm sorry. When I say Member, I mean a 9 Member's office. 10 MR. VAZQUEZ: When I say staff, I'm 11 referring to the BOE staff. 12 MR. McGUIRE: I apologize. No, it would 13 definitely not accommodate the BOE staff. 14 MR. VAZQUEZ: All right. So I guess my 15 issue is, one -- my first choice would obviously be 16 to keep everyone in tact as close as possible to the 17 Capitol. And I think for me, it's all about just 18 having public access. 19 And I think, like a couple of my colleagues 20 have already mentioned, I think whatever we can do to 21 at least try to zero in on that, I think the better 22 it's going to be. Not only for us as Members, but I 23 think for the public. Those that want access to us. 24 So I guess that's where I'm heading with 25 this. And at the end of the day, I'm just -- have 26 you already explored all of the possibilities here 27 within close proximity, or are you still doing some 28 of that research? 20 1 MR. McGUIRE: So based -- and I apologize, 2 maybe it was at the begging, that last fall the Board 3 did sign off on the plan to relocate everyone to 4 Natomas. So we haven't done really any other 5 exploring or looking at lease space. 6 There's a lot of small suites and lease 7 space around downtown and private buildings, 8 absolutely. 9 There's no -- that we're aware of, there's 10 no really, like, large space to take, like, all of 11 BOE and find a space for them in a commercial 12 building here downtown right now. 13 But I'm finding smaller spaces for Board 14 Members. There's absolutely space that could be 15 found in commercial buildings downtown. But we 16 haven't done an extensive search. But, again, if 17 directed to do that, we would actually go out and 18 find the options and the space again. 19 I know there's a question of trying to find 20 something that maybe requires less tenant 21 improvements I've heard. You know, but some space 22 would require more tenant improvements. They would 23 just vary based upon what the space currently has and 24 what the needs of the Members' offices are. 25 MR. VAZQUEZ: Because I have no problem with 26 if we have to separate, you know, the staff from the 27 actual Members. 28 And, for example, like in the space I have 21 1 here on Capitol Mall now, there's room for another 2 Member. And I know there's other spaces available in 3 the building on different floors. 4 So for me, as one of the Members, if my 5 colleagues are on Board, I have no problem with 6 giving direction that maybe we should look at those 7 private facilities that we would lease at least for 8 the Members. 9 And then in terms of the staff, which I'm 10 assuming requires a lot more space, especially to do 11 a built-out like this, that may or may not be 12 available on the Mall. But if it is, I think that 13 would be my preference. 14 But in listening to staff, and specifically 15 the Executive Director, I know the staff seems to be 16 amenable to the move. 17 But for me, just in terms of access and 18 proximity, I think I would like to see us a little 19 bit closer if at all possible. 20 MS. COHEN: I just want to thank you for 21 your presentation and your thoughtfulness. We 22 appreciate you giving us kind of a historical 23 overview and bringing us to where we are today to 24 this point. 25 I want to direct my comments to Ms. Fleming, 26 just to be very clear that I trust that you will 27 follow up with Mr. Kim over at DGS. 28 MS. FLEMING: Mm-hm. 22 1 MS. COHEN: And provide the Board an update 2 about options as soon as possible. 3 I think you've heard here very clearly that 4 these four Board Members, including myself, are 5 interested in other options. 6 MS. FLEMING: Mm-hm. 7 MS. COHEN: And would like to slow down the 8 process to moving into Natomas. We want to carefully 9 evaluate the resources that -- that are before us. 10 And also I wanted to also just say that we 11 remain mindful of the various expenditures that are 12 accruing. And quickly, we'd like to ascertain our 13 decisions -- ascertain our options so we can make an 14 informed decision. We're not looking to be lavish 15 and wasteful in money. I understand that some money 16 has already been spent. 17 And I'm respectful of the desire to 18 collocate the property division with Board Members, 19 and I understand that. I also think it's important 20 to remain, at most, accessible to taxpayers. 21 MS. FLEMING: Mm-hm. 22 MS. COHEN: Those that have elected us. 23 I also want to just take a moment to provide 24 a little direction to Mr. Nanjo. 25 If he can begin to start to look at the 26 Legislation AB 102, and then also the trailer bill to 27 see if there's anything in that legislation that 28 requires us to be nestled with the property division. 23 1 If there's -- I just want to make sure that 2 we have -- we are in good standing to insure that we 3 are not in violation of the statutes that -- that 4 provide kind of some oversight structure and 5 governance. 6 Mr. Nanjo, so I'd like you to begin to 7 complete your assessment. 8 MR. NANJO: Chair Cohen, Members of the 9 Board, I can address a little part of that. 10 MS. COHEN: Oh, great. 11 MR. NANJO: As far as I'm aware, the portion 12 of the legislation, if you will, that will cause some 13 conflict is AB 97. And that's the budget act in 14 2017, the budget bill. 15 In that, it said that the funds -- it's 16 provision one -- the funds appropriated in this item 17 are for the payment of sub-item five, the cost to 18 provide each Board Member with one district office 19 facility and with adequate office space as determined 20 by the Executive Director of the BOE in the BOE's 21 Sacramento headquarter building. The Executive 22 Director shall terminate as expeditiously as possible 23 the leases for the Board Member office facilities 24 that exceed the number of offices -- office 25 facilities authorized herein. 26 So that was -- that's the consolidation 27 language that has been referred to. 28 And Mr. McGuire has correctly stated some of 24 1 the other provisions. There was also a provision 2 three in the -- I believe it was the 2018 Budget Act 3 that stated all acquisitions or procurements made by 4 or on behalf of the Board Members or Board Member 5 staff, including the renting or leasing of office 6 space, shall be processed by the Executive Director 7 through DGS. DGS shall have the final 8 decision-making authority. And then it goes on. 9 So as far as I'm concerned -- and I will 10 take your direction and look further. But those are 11 the only ones that I'm aware of that would cause 12 issues with the Board, potentially -- Board Members, 13 I should say, or their offices -- potentially trying 14 to stay in the Capitol corridor, if the rest of BOE 15 property tax is not consolidated with them. 16 MS. COHEN: Thank you. 17 All right. This is just an -- oh, of 18 course. 19 MS. STOWERS: Thank you, Madam Chair. 20 Two points or questions. The first one to 21 Mr. McGuire. 22 Did you say that Department of Finance would 23 have to give direction to slow down the move? 24 MR. McGUIRE: Yeah. So in the budget 25 language, too, it indicated that BOE shall not 26 construct lease acquire, otherwise office space, 27 without the approval in advance of the Director of 28 Finance. 25 1 And the Director of Finance shall not 2 approve such action until they've taken -- sent the 3 30-day notice to the JLBC. 4 MS. STOWERS: Okay. 5 MR. McGUIRE: So that's our understanding of 6 really the approval wall. I know that Mr. Nanjo 7 referred to, like, we have the final decision-making 8 authority. We would follow the direction that 9 Finance and the JLBC give us related to any facility 10 issues, and then execute those. 11 Again, we're really just the real estate 12 middlemen kind of in this. 13 MS. STOWERS: So should Members be having 14 this conversation with the Director of Finance? 15 MR. McGUIRE: That appears to be what the 16 indication is in the budget. 17 Again, I don't want to act like I'm an 18 attorney and tell Mr. Nanjo what the direction is. 19 But that appears to be what the plain language 20 implies, is that you would start with the Director of 21 Finance. 22 MS. STOWERS: Thank you. 23 MR. NANJO: That is consistent with my 24 understanding as well. 25 MS. STOWERS: Okay. 26 My other point to Mr. McGuire, I understand, 27 like Senator Gaines said, that you're getting ready 28 to start a new chapter in your life? 26 1 MR. McGUIRE: I am. 2 MS. STOWERS: Congratulations. I believe 3 it's like 30-plus years of services. 4 MR. McGUIRE: Thiry-five-and-a-half. 5 MS. STOWERS: Thiry-five-and-a-half. So 6 thank you very much. 7 MR. McGUIRE: I know I look young still. 8 MS. STOWERS: Yeah. But as a former Deputy 9 for the prior BOE, you did a great job then. You're 10 doing a great job with DGS. So Controller Yee says 11 thank you very much. 12 MR. McGUIRE: I appreciate that. Very 13 honoring. Thank you. 14 MR. SCHAEFER: Chair Cohen, before they get 15 away, I had a comment. 16 MS. COHEN: Yes, please. Mr. Schaefer. 17 MR. SCHAEFER: I just want to let you know 18 that I have no big visions of grandeur in my office 19 here. I have a very elaborate conference room that 20 could have a dozen people for a meeting. But we 21 haven't used it. 22 If people want to come see me, my office has 23 a little table that seats four or five people. I sit 24 at my desk and talk to people. I think we should 25 look at downsizing some of these facilities. 26 And down in San Diego, former speaker Perez' 27 office is just two offices. One is a library and one 28 is an office that could be a reception. I would be 27 1 quite happy to have my office in the library. I'm a 2 bookie guy. And you have the library and the Mike 3 Schaefer office would be the same room. And having a 4 place for one reception is all I'm looking at that 5 would be doing all my scheduling. 6 I'm not looking for a Vice President Chief 7 of Staff, or any of that type of person. Those are 8 all people up here in -- like Ms. Blake and my Chief 9 Deputy here working out of Sacramento. 10 So just because some of the people have 11 bigger egos that were in office before me, doesn't 12 mean that we're trying to duplicate that in San 13 Diego. 14 And if you think Speaker Perez' little 15 office down in San Diego is too small for me, it 16 isn't. Smaller is better. We all learned that from 17 former Governor Brown. 18 Thank you. 19 MS. COHEN: Thank you, Member Schaefer. 20 So I just want to wrap up this part of the 21 conversation, and just reiterate that we will defer 22 to Ms. Fleming to obtain all the approvals. 23 Thank you very much. 24 MS. FLEMING: I appreciate the direction and 25 the support. 26 MS. COHEN: Senator Gaines has one last 27 remark, and then we'll continue. 28 MR. GAINES: Yes. 28 1 I would just like to clarify on the issue of 2 collocation. If Mr. Nanjo could take a another look 3 at that in the, you know -- in the coming days or 4 weeks just for clarification. 5 MS. COHEN: Okay. 6 MS. FLEMING: So if I may, Members, just to 7 offer a point of clarification. And Chief Counsel 8 will memorialize this for us. 9 Just be cautious with the budget bills. 10 Because if you have a budget bill for the Budget Act 11 2017, what we've experienced since the AB 102 12 implementation, and it's consistent across the Board, 13 AB 102 -- I'm sorry -- the Budget Bill of 2017, which 14 is Assembly Bill 97, took -- that's the budget bill 15 at that point. That's not declared as statute. 16 And so then we have the subsequent fiscal 17 year, and you have the next budget bill, Senate Bill 18 840, which is the Budget Act of 2018. We are -- 19 also, one of the early things we do is compare the -- 20 the differences between those two bills. And so the 21 language shifted from AB 97 to Senate Bill 840. 22 And the second, the latter bill, Senate Bill 23 of 2018, eliminated the language that specifically 24 said collocated in one state-owned facility. And so 25 we've had subsequent -- subsequent to the budget 26 bill, had clarifying conversations with Department of 27 Finance. 28 So we just want to be careful that you do 29 1 look at the budget bill annually as compared to 2 looking at the statute Assembly Bill 102. There are 3 some differences there. So I'll have Chief Counsel 4 go back and just make sure that we're memorializing 5 that correctly. 6 MR. GAINES: Thank you, Ms. Fleming. 7 Just want to make sure we have clarity, 8 because maybe -- maybe -- I think there's a pathway. 9 And I'm just -- would like to -- 10 MS. FLEMING: And in my conversation -- I'm 11 sorry. 12 MR. GAINES: -- look into that in a more 13 judicious matter in the course of the next few days. 14 We don't have to declare anything right now. 15 MS. FLEMING: Yeah. We still have a 16 requirement to work with Department of Finance. And 17 Department of Finance has the responsibility to go to 18 Joint Legislative Budget Committee for that process. 19 And we've had that conversation with Finance. 20 Again, but it does specifically say 21 collocated in one state-owned building downtown, 22 etc., etc. So there's some latitude there. We'll 23 have Chief Counsel clarify -- 24 MR. NANJO: And that's consistent. 25 And just to make sure we're all on the same 26 page, the direction from the Board to have me look 27 into that will be directed to the Executive Director 28 for the Executive Director to me. 30 1 So thank you very much, Members. I think I 2 understand the Board's direction and Executive 3 Director's direction. And I'll look into that. 4 Thank you. 5 With that being said, Mr. McGuire's comments 6 are accurate as far as I'm concerned, and so are 7 Ms. Fleming's. I only bring up the Budget Act of 8 2017 just as kind of a historic reference that that's 9 where a lot of the understanding came from. 10 And Ms. Fleming is correct that that doesn't 11 exactly hold true, because the same language was not 12 carried forward into the 2018 Budget Act. 13 MS. COHEN: All right. Thank you very much. 14 MR. NANJO: Sure. 15 MS. COHEN: Ms. Davis, could you please call 16 the next item. 17 --o0o--- 18 19 20 21 22 23 24 25 26 27 28 31 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 February 26, 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 31 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: April 4, 2019 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 32