1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JANUARY 26, 2016 10 11 ITEM P 12 OTHER ADMINISTRATIVE MATTERS 13 ITEM P5 14 ADMINISTRATIVE DEPUTY DIRECTOR'S REPORT 15 1. FACILITIES UPDATE 16 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Carole W. Browne 28 CSR NO. 7351 1 1 P R E S E N T 2 3 For the Board of Jerome E. Horton Equalization: Chairman 4 Sen. George Runner (Ret.) 5 Vice Chair 6 Fiona Ma, CPA Member 7 Diane L. Harkey 8 Member 9 Yvette Stowers Appearing for Betty T. 10 Yee, State Controller (per Government Code 11 Section 7.9) 12 Joann Richmond Chief 13 Board Proceedings Division 14 For Board of Equalization Staff: Edna Murphy 15 Deputy Director Administration 16 ---o0o--- 17 18 19 20 21 22 23 24 25 26 27 28 2 1 INDEX OF SPEAKERS 2 SPEAKER PAGE 3 David Paeper 4 4 Senior Planner Hamel, Green & Abrahamson 5 Sean Bergstedt 5 6 Industrial Engineer Hamel, Green & Abrahamson 7 8 ---o0o--- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JANUARY 26, 2016 4 ---o0o--- 5 MS. RICHMOND: Our next matter is Item P5, 6 Administration Deputy Director's Report. P5-1, Facility 7 Update. 8 MR. HORTON: Whenever you're ready, please 9 introduce yourself for the record. 10 MS. MURPHY: Good afternoon, Chairman Horton 11 and Members. I'm Edna Murphy, Deputy Director of 12 Administration. Here with me today is Dave Paeper, 13 Senior Planner, and Sean Bergstedt, Industrial Engineer, 14 for Hammel, Green & Abrahamson, to present the Progress 15 Improvement Study. 16 MR. PAEPER: Good evening, Members, 17 Mr. Chairman. 18 MR. HORTON: Good evening. 19 MR. PAEPER: I'm David Paeper. 20 MR. HORTON: Welcome to the Board, sir. 21 MR. PAEPER: We're here -- thank you. We're 22 here to provide you with a brief overview of a Process 23 Improvement Study that we've been working on for the 24 last -- in the last half of last year. 25 So this Process Improvement Study is for the 26 BOE's headquarters operations, and it is in direct 27 response to the State Auditor's Report 2014-108 asking 28 for some additional support and backup on certain 4 1 points. 2 Our general findings are that the BOE continues 3 to grow -- we'll have a little more detail on that -- 4 that your operations are constrained by the 450 N Street 5 facility, that your fragmentation -- your current 6 fragmentation between 450 N Street and the four annex 7 facilities will continue to increase as you continue to 8 grow. 9 A process of improvements, especially in the 10 return processing operations, are possible. 11 Employee-related issues will be reduced with the new 12 facility, and you could operate more efficiently if your 13 entire headquarters operations were consolidated on a 14 single campus. 15 So as a benchmark today you're operating -- 16 you're occupying about 800,000 gross square feet in five 17 locations in Sacramento and West Sacramento. Your 18 growth is projected at approximately 3 percent per year, 19 per our calculations, for the next ten years. And that 20 will result in a gross square footage need of about 21 995,000 gross square feet for a new campus in 2025. 22 So on page 4 of our presentation, we took a 23 look at the square footage that you've occupied in the 24 past and projecting ahead, and the gross square feet 25 needed, which is the blue line, and you can see that 26 those lines intersect at about 2019, so we're projecting 27 that our projected growth for you, that you'll be out of 28 facility space around 2019 unless other space is 5 1 provided. 2 MR. BERGSTEDT: Good evening, Members of the 3 Board. I'm Sean Bergstedt. 4 Two primary opportunities exist for the 5 Headquarter Operations Process Improvement, and these ar 6 effectively -- most -- most effectively realized on a 7 consolidated campus, as Dave said. 8 These opportunities are: A significant 9 reduction of travel-related waste due to transportation 10 of materials and a reduction in workload imbalance 11 between departments through time of year. 12 With respect to travel-related waste, it is 13 expected that a consolidated campus would reduce 14 6500 annual staff miles today to around 2700 miles in 15 the future. 16 In addition, due to the decentralization of 17 resources among the many floors at 450 North Street -- 18 450 N Street, there's a potential to better flex staff 19 based on seasonal variation and workload need. 20 A consolidated campus would allow for a 21 cross-trained staff to share work throughout the year 22 more easily, reducing workload imbalance and a potential 23 for improved document-processing time. 24 It is anticipated that an opportunity for 25 flexing of staff could yield up to 45 -- 45 personnel 26 years of savings, which would free resources to be 27 reallocated towards other efforts of the BOE. 28 As the BOE looks towards the future, it was 6 1 determined that predicting grown on head count will be 2 approximately 3 percent per year. This is based on an 3 analysis of budget change proposals over the last 4 20 years. The last ten years were taken as most 5 representative of the next ten to come. And this is 6 mostly primarily the -- the reasoning behind that is 7 because of the e-filing that started during that same 8 time frame. 9 With that in mind, it is expected that the head 10 count would increase from 2852 today to roughly 3800 by 11 2026. So there's significant growth expected. 12 MR. PAEPER: So, in summary, the recommendation 13 from our study is that you relocate to a new campus, 14 consolidate all of your headquarters operations there, 15 load a mid-rise campus. This is consistent with the 16 findings from previous studies and recommendations that 17 have been out there. 18 A new campus could be either a single-phased 19 project or a multi-phased project. And if it were 20 multi-phased, creating a return processing center for 21 those operation would make sense for a first phase of 22 the campus. 23 So the benefits of taking this path is that it 24 would accommodate your growth, you'd be able to 25 consolidate your headquarters operations on one campus, 26 multiple buildings, in all likelihood, but one campus, 27 you could implement some of the process improvements 28 identified in this study, you'd remove some of the 7 1 facility deficiencies you're currently experiencing in 2 return processing with technology and with disruptions 3 that will happen with facilities repairs year over time, 4 and you'll see some improvement in employee-related 5 issues, should see improved recruiting and retention and 6 employee satisfaction. 7 That concludes our report. 8 MR. HORTON: Thank you very much. 9 I would encourage that we extrapolate those 10 num -- those projections of savings and personnel and so 11 forth to -- to estimate what the dollar revenue savings 12 might be to the State of California. The same thing 13 with the mileage. I would transfer that into an 14 analysis of the benefit to the environment and so forth, 15 that type of extrapolation and analysis. 16 The unfortunate thing is, is that the 17 legislature may very well look at these things from a 18 waste analysis, which one wastes the most, you know, and 19 so -- as opposed to a revenue analysis, which is very 20 unfortunate, but means that the allocation of revenue is 21 based on, you know, the waste, a certain level of waste 22 is acceptable to government, which I don't necessarily 23 agree with, but it is what it is. It's been our 24 experience dealing with this building. See? I've got 25 environmental issues now. So let's see if we can 26 convert that into a language that the legislature 27 understands. 28 Member Ma. 8 1 MS. MA: Yes. Thank you. 2 So I had an opportunity to meet with Daniel 3 Kim, the new head of the Department of General Services, 4 and I don't know if you've shared this with him, but he 5 was asking us for data, not only space requirements and 6 preferable needs, but also where our employees live, for 7 example, just to have them start. There could be a 8 path, you know, should there be a will and a way, and, 9 you know, appropriate location and, you know, everybody 10 pushing the right way. 11 So if you wouldn't mind getting together with 12 Daniel and just giving him this data, if -- if it's 13 available. 14 MS. MURPHY: Yes. And actually, the executives 15 from DGS contacted me today and they said that they were 16 very interested in meeting with BOE and start talking 17 about next steps, so we'll be scheduling that real soon. 18 MR. HORTON: Excellent. Thanks. 19 Further discussion? 20 MS. HARKEY: Good deal. 21 MR. HORTON: Hearing none, the Board will 22 receive and file. Thank you for your presentation 23 today. 24 ---o0o--- 25 26 27 28 9 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, CAROLE W. BROWNE, Hearing Reporter for the 8 California State Board of Equalization, certify that on 9 January 26, 2016, I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 9 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: February 3, 2016 17 18 19 _________________________________ 20 CAROLE W. BROWNE, CSR #7351 21 Hearing Reporter 22 23 24 25 26 27 28 10