1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 REPORTER'S TRANSCRIPT 7 JUNE 26, 2018 8 9 10 11 12 13 ITEM K1 14 EXECUTIVE DIRECTOR'S REPORT; 15 ITEM K1.1 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 Equalization: 4 Honorable George Runner Chair 5 Honorable Fiona Ma 6 CPA, Vice Chair 7 Honorable Jerome Horton Third District 8 Yvette Stowers 9 Appearing for Betty T. Yee, State Controller 10 (per Government Code Section 7.9) 11 Joann Richmond 12 Chief Board Proceedings 13 Division 14 For Board of Equalization Staff: Dean Kinnee 15 Executive Director 16 Brenda Fleming Chief Deputy Director 17 Henry Nanjo 18 Chief Counsel 19 ---oOo--- 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JUNE 26, 2018 4 ---oOo--- 5 MR. KINNEE: Good morning, Chairman Runner, 6 Board Member Horton, Deputy Controller Stowers. I'm 7 Dean Kinnee, Executive Director with the Board of 8 Equalization. 9 This month's report provides updates on the 10 following topics; one, outcome of the legislative 11 budget hearings for fiscal year 2018/19; office 12 relocation discussion with DGS; and strategic plan, 13 goals and priorities. 14 As you know, SB 18 -- 840, the Budget Act of 15 2018, passed and was enrolled on June 14th. It's 16 currently with the governor. 17 The BOE budget for fiscal year 2018/19 is 18 $28,766,000. The 2018/19 budget includes four 19 provisions. Provision One states that state funds 20 appropriated to BOE for revenue-generating activities 21 shall be used in a manner consistent with Board's 22 authorized budget. 23 This provision includes additional 24 instructions for reporting to the Department of 25 Finance any direct -- redirection of funds or 26 personnel resources and instructions on expeditiously 27 filling budgeted positions. 28 Provision Two states that the funds 3 1 appropriated for the State Board of Equalization are 2 for the support and operation of the State Board of 3 Equalization. 4 Provision Three provides that all 5 acquisitions or procurements made by or on behalf of 6 Board Members or Board Member staff, including the 7 renting or leasing of office space, shall be 8 processed by the Executive Director through the 9 Department of General Services. 10 The Department of General Services shall 11 have the final decision-making authority for all 12 these acquisitions and procurements. 13 And Provision Four provides each Board 14 Member shall retain their existing personnel staff 15 until December 31st, 2018. 16 On January 1st, 2019, each Board Member 17 shall be limited to two exempt and four civil service 18 staff. Any civil service above the four shall be 19 redirected from each Board Member to support the 20 activities of the Board of Equalization. 21 Office relocation discussions with DGS. 22 Members, in a series of discussions with DGS 23 regarding the BOE office space and headquarters 24 consolidation, we propose that the Sacramento office 25 where Board Members were to be located per AB 102 be 26 the 23rd and 24th floors of 450 N Street. 27 As you know, the 23rd floor was designed to 28 accommodate Board Members to provide convenient 4 1 access to the first floor Board room, convenience for 2 meeting with tax professionals and the Legislature. 3 Additionally, this proposal included moving 4 Board Proceedings staff from 621 Capitol Mall to 5 vacant space on the 23rd floor. 6 It further included moving our Legal 7 Department to the office on the 24th floor that was 8 originally designed to accommodate the Chief Counsel 9 and the attorneys, including adequate space for 10 storage of confidential files and material. 11 DGS declined a proposal, and instead stated 12 the BOE headquarters would be located at 13 160 Promenade and are preparing their plans to show 14 how the facility could be reconfigured. 15 MS. MA: Where's that? 16 MR. RUNNER: Where's that? 17 MR. KINNEE: The Natomas. 18 MR. RUNNER: Oh, Natomas. 19 MR. KINNEE: It's where the Property Tax 20 Department is right now. 21 MR. RUNNER: Okay. 22 MR. KINNEE: And the call center. 23 MR. RUNNER: Okay. 24 MS. MA: What's going to be there? 25 MR. KINNEE: Pardon? 26 MS. MA: What's going to be there? 27 MR. KINNEE: That's what DGS has proposed 28 that the Board Members be relocated in 2019. 5 1 And they're preparing plans to show how the 2 facilities could be reconfigured. 3 We have, on more than one occasion, 4 expressed our concerns with certain aspects of this 5 plan. We are continuing our discussion with DGS. We 6 will keep you apprised. 7 Strategic management plan, goals and 8 priorities. 9 As we approach the one-year anniversary of 10 AB 102, we spent this past year assessing the 11 challenges and issues facing the agency. As we look 12 forward to the second year of BOE 2.0, we're in the 13 process of developing our strategic management plan. 14 Some of the goals and priorities include, 15 but are not limited to, addressing the salary and 16 classification adjustments needed to make BOE staff 17 recruitment more competitive with local government 18 and other state agencies; focusing our workforce 19 development succession planning efforts to ensure the 20 continuity of our staffing levels and property tax 21 expertise; beginning revisions to the assessors' 22 handbook to ensure up-to-date and complete guidance 23 for assessor's offices, including working with 24 assessors in the industry to determine what 25 additional guidance may be necessary to supplement 26 the assessors handbook, and reviewing our property 27 tax systems for modernization opportunities. 28 Of course there are a number of interim 6 1 projects and activities in place that address our 2 operational needs. For example, completing our new 3 Board Members' binder to welcome the new Members to 4 the BOE and pride them with an operational manual 5 that gives useful guidance during their time with the 6 BOE; updating the Board of Equalization 7 Administrative Manual, BEAM; and revising our 8 Internet and Intranet web sites, provide a new look 9 and feel, and also provide useful and easy access to 10 BOE program information. 11 That concludes my report. 12 MS. STOWERS: Mr. Chair. 13 MR. RUNNER: Yes. Ms. Stowers. 14 MS. STOWERS: Mr. Kinnee, can you go back to 15 the office relocation AB 102? 16 MR. KINNEE: Yes, ma'am. 17 MS. STOWERS: Can you give me additional 18 clarification? Did AB 102 require the Board Members 19 to vacate their office space and private buildings? 20 And did it require for them, as their leases expire 21 in the private buildings, to move into a state-owned 22 facility? 23 And if it -- and also, what's the cost 24 estimate to move the Board Members over to this 25 Natomas location? 26 MR. KINNEE: I think AB 102 provides the 27 Board Members shall have one district office and one 28 Sacramento location. 7 1 And AB 97, the Budget Bill last year, had 2 more specific language, and talked about the 3 Executive Director shall terminate leases as 4 expeditiously as possible to co -- consolidate the 5 Board Members to one location. 6 So AB 102 just kind of -- it just says the 7 Board Members shall -- one Sacramento office. 8 MS. STOWERS: Okay. 9 MR. RUNNER: Is it state-owned -- is it 10 specific state-owned building? 11 MR. KINNEE: I thought it had said that; 12 when I looked, it didn't say that. 13 MR. RUNNER: Is that right? Okay. 14 MR. KINNEE: Yeah. 15 So -- and I might have -- I thought I read 16 it somewhere. But when I reviewed it this morning, 17 it doesn't say that. 18 MR. RUNNER: Okay. 19 MR. KINNEE: And this Budget Bill doesn't 20 have the -- the information about the Executive 21 Director canceling leases. And I think that's to 22 acknowledge the challenges of finding the location, 23 building it at Natomas. 24 As far as cost, that has -- was an issue we 25 raised. We said it will be costly based on our 26 experience of having some space built out there. And 27 it's not in our budget. But it's -- DGS is in charge 28 with -- 8 1 MS. STOWERS: I've never been to the Natomas 2 location. 3 MR. KINNEE: Pardon? 4 MS. STOWERS: I've never been to the Natomas 5 location, so I'm not visualizing how it looks. But 6 does it currently have space where they can have 7 separate offices? 8 I mean, kind of when you look at the 23rd 9 floor, each Board Member's office was, you know, 10 separated so that you wouldn't commingle and possible 11 violations of Bagley-Keene. 12 MR. KINNEE: That is an issue that -- 13 MS. STOWERS: So is the plan to separate -- 14 MR. KINNEE: -- we brought -- we brought to 15 their attention. The challenge of, you know, 16 commingling the Board Members, Bagley-Keene issues. 17 Having Board Members, you know -- without putting a 18 separation wall, you'd have Board Members sitting in 19 with staff. 20 So those are some of the challenges we 21 pointed out that we're working through with DGS. 22 MR. RUNNER: Just to -- in terms of the 23 current locations and current leases, then, for Board 24 Members' offices that are here in Sacramento that are 25 not in their district. Ours is a little unique, in 26 that we're -- this is the district office location 27 for the First District. But are those all set to 28 expire then? 9 1 For instance, when a new Board Member comes 2 in in January, let's say from the Second District, if 3 this is unresolved, where will they go -- 4 MR. KINNEE: If I could ask -- 5 MR. RUNNER: -- for a Sacramento office? 6 MR. KINNEE: -- Chief Deputy Fleming to 7 address that point. 8 MS. FLEMING: Good morning, Chairman Runner, 9 Honorable Members. 10 So for the Sacramento and district office 11 locations, there's a combination of statuses for the 12 leases. A number of them are in soft term -- and 13 we're more than happy to share this information with 14 you. A number of them are in soft term. Soft term 15 does give us the opportunity to extend the leases on 16 a 30/60/90 day basis. 17 MR. RUNNER: So if it's unresolved -- if 18 it's unresolved, for instance, going -- whether it's 19 in Natomas or whether it's over here, those leases 20 can be extended -- 21 MS. FLEMING: Yes, sir. 22 MR. RUNNER: -- on a -- on a -- whatever -- 23 MS. FLEMING: Month-to-month basis, 24 whatever -- 25 MR. RUNNER: -- 90 day, month to month, in 26 order to have an option -- 27 MS. FLEMING: Correct. 28 MR. RUNNER: -- for new Members coming in to 10 1 have a -- 2 MS. FLEMING: Correct. 3 MR. RUNNER: -- place in Sacramento. 4 MS. FLEMING: Correct. Correct. 5 Both in the Sacramento and the District 6 offices. So you do have the flexibility. And that 7 was one of the key points we asked about, just to 8 confirm going forward what are our options. 9 Because originally, the legislation was 10 interpreted as, as Mr. Kinnee spoke to, we were 11 supposed to start to cancel the leases as 12 expeditiously as possible. We were contacted and 13 asked to kind of pause on that to give us an 14 opportunity to look at what's the consolidation. 15 MR. RUNNER: Right. It doesn't make any 16 sense to cancel leases unless you have somewhere for 17 them to go. 18 MS. FLEMING: Exactly. Exactly. 19 MR. RUNNER: Right. Okay. 20 I have a -- actually a question, too, that 21 one of the comments that were made. 22 In regards to the Board Member staffing and 23 the civil service positions. 24 MS. FLEMING: Mm-hm. 25 MR. RUNNER: Going from the six to the four, 26 obviously, right now we have people in positions. 27 MS. FLEMING: Correct. 28 MR. RUNNER: Those are a variety of 11 1 positions, everywhere from a, you know -- from an 2 intake type of -- a secretary role to attorneys. 3 MS. FLEMING: Correct. 4 MR. RUNNER: I was unclear in regards to how 5 that process is going to take place, and which 6 positions we're dealing with, and how that actually, 7 then, happens, Member to Members' offices, since all 8 Members have kind of unique roles in their offices. 9 MS. FLEMING: Correct. 10 MR. RUNNER: So how -- where -- have those 11 discussions taken place, and what is the process that 12 we anticipate? 13 MS. FLEMING: Yes. 14 So we've had a number of conversations 15 with -- with the control agencies, including CalHR, 16 SPB and Finance. It's early enough in the process 17 where they still don't have that specific detail. 18 And we've asked that specifically. It's like, Well, 19 okay. What's the game plan? 20 The general thinking at this point is that 21 when you're looking at the six civil service 22 classifications, the -- to your point, they're all 23 configured differently. 24 MR. RUNNER: Right. 25 MS. FLEMING: To the extent that there are 26 individuals in those positions, those positions -- 27 the intent is those people would stay with the Board 28 Member offices. They have their positions; they stay 12 1 with the Board Members. 2 The language suggests -- 3 MR. RUNNER: Even if it's -- even if it's 4 more than four? 5 MS. FLEMING: So those that are above the 6 four, whatever positions above the four -- 7 MR. RUNNER: Right. 8 MS. FLEMING: -- are redirected. 9 MR. RUNNER: Those are the ones that I have 10 a question about. 11 MS. FLEMING: So for those, what we're 12 looking for is to look at the detail -- and I hate to 13 say this, but unfortunately each office is going to 14 be different. 15 MR. RUNNER: Right. 16 MS. FLEMING: So we'll need to take it 17 off-line and have that conversation with you on an 18 individual basis. But the intent is to work with HR 19 and with CalHR to try to come up with that -- exactly 20 what that work plan is. 21 MR. RUNNER: So the -- so -- at least what I 22 think I hear you saying is, so the intent is then to 23 have -- because each office is configured 24 differently -- 25 MS. FLEMING: Correct. 26 MR. RUNNER: -- the intent will be to have 27 conversations with each Member's office -- 28 MS. FLEMING: Correct. 13 1 MR. RUNNER: -- in regards to which position 2 could be the kinds -- 3 MS. FLEMING: Correct. 4 MR. RUNNER: -- that would be easily 5 moved -- 6 MS. FLEMING: Correct. 7 MR. RUNNER: -- to the -- to the BOE. 8 MS. FLEMING: Correct. 9 The general information that we're getting 10 at this point is it appears that the Members would 11 have the voice in saying which of those positions 12 and/or individuals you'd keep. 13 My comment on that, because there are a 14 number of a configuration of the six positions that 15 are of people in it and they're also vacancies. 16 MR. RUNNER: Right. 17 MS. FLEMING: So -- and, again, it really is 18 going to determine, going forward, what is the need 19 of the Board Members going forward, those positions, 20 and then really just how are we going to address -- 21 MR. RUNNER: And that will be done prior to 22 new Board Members coming in. So it's going to be 23 outgoing Board Members who will be determining -- 24 MS. FLEMING: Now that, I can't comment at 25 this point. Because we don't have that level of 26 specificity. 27 MR. RUNNER: Well, just the calendar. I'm 28 just looking at the calendar. 14 1 MS. FLEMING: From the calendar perspective, 2 what we know is that those civil service positions 3 maintain their positions. 4 So it's just a question of: do they stay 5 with the Board Member based upon our discussions with 6 you? And then which would then redirect it to the 7 BOE or whatever that option is for that specific 8 employee and individual. 9 Again, each employee has really their own -- 10 their own profile of what's -- of what could happen 11 to them. 12 So that's the level of specificity that we'd 13 have to work with CalHR. And -- and candidly, we 14 have a meeting with CalHR. And they are still early 15 enough in the process where they didn't quite have 16 all those answers either. 17 MR. RUNNER: Okay. 18 MS. FLEMING: So we apologize that we can't 19 give you more specific detail. 20 But the thing that was helpful to us is that 21 the Board Members would have an opportunity to have a 22 voice in -- 23 MR. RUNNER: Okay. 24 MS. FLEMING: -- staffing. 25 MR. RUNNER: Okay. 26 MS. FLEMING: We just don't have the 27 timing. 28 MR. RUNNER: Okay. 15 1 Member Horton. 2 MR. HORTON: Thank you, Mr. Chair. 3 Is it possible at some point in this process 4 that we can actually meet with the employees and kind 5 of give them some understanding as to what their 6 options are? 7 MS. FLEMING: Yes. 8 And the general plan from an HR 9 perspective -- CalHR's perspective is that you would 10 have those conversations clearly with the managers, 11 supervisors of those employees, but then it does 12 become a case-by-case basis for each employee. 13 Because each employee has a different 14 configuration of their work history, of their status, 15 of their classifications. And the more we work with 16 CalHR and HR down in the details, it really is very 17 important that you have those individual 18 conversations. 19 But there will be a personnel action plan 20 that allows us to map out that level of specific 21 detail. Since we haven't confirmed, we'll bring it 22 back to you as managers and supervisors of those 23 employees, so that you're fully informed about what 24 the approach is. 25 MR. RUNNER: Yeah, it's clear it needs to 26 have -- their discussions are needing to take place. 27 Because, clearly, we have -- people -- staff who are 28 sitting in our offices realizing that we're going 16 1 from six to four. 2 MR. HORTON: Right. But the -- for me, it's 3 just a matter -- I'm more concerned about the welfare 4 of the employees. 5 MS. FLEMING: Mm-hm. 6 MR. HORTON: And that part of that is that 7 they have a conscious understanding -- 8 MS. FLEMING: Right. 9 MR. HORTON: -- of what their future looks 10 like. 11 MS. FLEMING: Correct. 12 MR. HORTON: You know. I mean, I can 13 reassure them based on my knowledge and so forth. 14 MS. FLEMING: Right. 15 MR. HORTON: They're either going to SROA 16 list, or they go here, and they have a level of 17 priority. But in this confused time, I don't know 18 that anyone is relying on -- I mean, the staff is 19 confident in historical practices or what the law 20 says. 21 MS. FLEMING: Correct. 22 MR. HORTON: Because, you know, we may not 23 necessarily -- there's no indication to date that we 24 are following personnel policy, and the law as it 25 relates to these employees. And I'm not saying we're 26 not. I'm just saying it hasn't been communicated, at 27 least to the employees in my office, as to what -- 28 what their options are. 17 1 MR. RUNNER: But just to clarify, I mean, 2 the -- the -- the number -- there's not a question, 3 at least as far as I know from the Legislature and 4 the legislation, in regards to a loss of a role. 5 It's just where their cheese is going to be moved. 6 MS. FLEMING: Correct. So your -- 7 MR. RUNNER: Right. I mean, it's 8 whether -- who they're going to, you know -- 9 MR. HORTON: Well, the challenge is -- 10 again, you know, there's a void of information here. 11 So the challenge is, is that if it's a timing more 12 than anything else -- let's say, in fact, it is the 13 agency's and everyone's intent to protect these 14 employees. But let's say that you haven't been 15 allocated the position. 16 And so you're shifting positions that may 17 not have been allocated. And now you have to go 18 through a process in order to assure that those 19 positions are part of your budget. 20 And -- and if that's already addressed, and 21 someone has already sort of anticipated that this 22 position that's currently in the Board Member's 23 office will more likely -- because of the limit and 24 the numbers, may more likely be matriculated to the 25 Board of Equalization or into another agency. 26 If they have those return rights to CDTFA, I 27 don't think -- I haven't heard the answer to that. 28 Or return rights to OTA, or return rights to the BOE. 18 1 Or do they get on a priority list so they 2 can move back into the BOE agency as a result of 3 their position now becoming a surplus position? 4 All of those are budget-related questions, 5 and was the reason that we requested a copy of the 6 budget proposal. Which we have yet to receive, by 7 the way. 8 MS. FLEMING: Duly noted. 9 MR. HORTON: So that we could at least make 10 the timing decisions, or at least assure the staff 11 that, from a timing perspective, January 1st, the 12 position will be in place, here's what happens. 13 MS. FLEMING: Correct. So thank you for 14 those comments. 15 Duly noted on the BCP again. And we'll make 16 sure you get copies of that. We'll get that out to 17 you this week to all of the Members. 18 But as it relates to the employees that are 19 going to be shifting from Board Member offices to the 20 other office, there is a standard, and the state has 21 been following a standard practice, HR practice in 22 terms of that. 23 So the employees -- civil service employees 24 are entitled to be noticed. So it's a multiple -- a 25 multiple-throng project. And that, one, the employee 26 is going to be notified, again, and evaluated based 27 upon what their specific configurations are. They're 28 definitely CalHR rules. So that's the other aspect 19 1 of it. 2 MR. HORTON: Apologies for interrupting, but 3 I don't want to lose the thought. 4 They will be notified when? 5 MS. FLEMING: So our intent at this point -- 6 again, the budget just passed on -- just on the 14th. 7 So this week and next week we will be working with 8 CalHR and with SPB to try to get down to that level 9 of specifics. 10 The intent is -- and I'm speaking from a 11 general practice at this point -- the employees need 12 to be noticed, specifically including labor 13 relations. 14 So there is a process that CalHR hasn't -- 15 so this is really -- I know it's terribly impactful 16 to us. But from a state of California perspective, 17 it's not the first time that employees have been 18 moved around. So they do have a practice. We don't 19 always necessarily, you know, agree with the 20 approach. But it is -- there are some standard 21 practices. 22 We did it with OTA also when we were doing 23 the transitions. So a number of the processes we 24 used there will be similarly followed. We will be 25 working over the next couple of weeks with HR, with 26 CalHR to go through the process of noticing those 27 employees, coming up with their specific 28 identification of what is the specific work plan for 20 1 those employees, and then giving them and the unions 2 ample notice. Because the unions also have to be 3 noticed in this process and do have a voice in it. 4 So we'll go through the process. 5 The intent is -- 6 MR. RUNNER: Are we still talking about 7 the -- the -- the four -- or the six to four? 8 MS. FLEMING: So the issue with going from 9 six to four is in the budget. 10 MR. RUNNER: Right. 11 MS. FLEMING: So what we need to do is 12 identify very specifically for those six, you get the 13 four, we'll work with you. So that's step one. 14 MR. RUNNER: Right. 15 MS. FLEMING: We'll work with you to 16 identify which of the four are the employees that 17 should stay with their office. 18 MR. RUNNER: Mm-hm. 19 MS. FLEMING: As it relates to the 20 additional two civil service positions, those are the 21 ones, once we identify exactly who they are, to the 22 extent there are actually people in those 23 positions -- 24 MR. RUNNER: Right. Because they could be 25 vacant. 26 MS. FLEMING: -- and not the positions. 27 Because there are a number of them that are actually 28 vacant. 21 1 MR. RUNNER: Right. 2 MS. FLEMING: So we can get a specific sense 3 of how many people are we talking about. 4 For those individuals, we will have a 5 specific conversation with them including noticing 6 going through the normal channels and processes from 7 a CalHR perspective. 8 MR. RUNNER: But the legislation was clear 9 in regards to they -- it wasn't whether -- which -- 10 where they would go, they were going to the BOE. 11 MS. FLEMING: That level of specificity, we 12 don't have. We're making that assumption. But I'm 13 cautious there, because I don't -- 14 MR. RUNNER: I thought that -- well, was it 15 not specific in the bill? 16 MS. FLEMING: Well, it said -- correct. It 17 says anything above the four -- 18 MR. RUNNER: Right. 19 MS. FLEMING: -- would be redirected to the 20 BOE. 21 MR. RUNNER: Right. 22 MS. FLEMING: There is a question that we 23 have. And I'm being careful here. There's a 24 question. Because we've got to make some 25 determinations about those offices where we don't 26 physically have offices. 27 So in Southern California, we don't have -- 28 so we've got to make that determination. So I'm 22 1 being very cautious, because I don't want anyone to 2 be alarmed or to provide any misinformation. But we 3 do have some questions about, "Okay. So what happens 4 for those employees that are civil service that are 5 in the Southern California office?" And we don't 6 have a presence there. 7 MR. HORTON: And the other concern is some 8 of the civil service employees, their capacity or 9 their position is not compatible to positions within 10 the BOE. And so at some point someone needs to 11 respond to their inquiry about their return rights to 12 CDTFA or to OTA. 13 MR. RUNNER: They may choose to go to some 14 other place. I see. 15 MR. HORTON: Well, they -- they can't. 16 MR. RUNNER: Right. 17 MR. HORTON: I mean, let's say -- let's say 18 you have a tax auditor position. That position is -- 19 comes from -- came from, theoretically, CDTFA. There 20 is no position within BOE for that particular 21 individual. 22 And so do they become surplus? Which means 23 that gives them a certain level of priority. The 24 next available position, they get priority for that 25 position. 26 But the challenge is, is that you've got 27 these timing issues. If we do it now, we've got a 28 couple of months to try to solve these problems for 23 1 our employees. 2 If we do it January 1st, then you've got 3 this position sort of hanging out here. And where 4 does it go? Legislatively, it's gone. So -- and it 5 can't go back to the agency, theoretically, because 6 there is no budgeted position for that -- for that 7 category of a position. And so those become a 8 challenge. 9 And even though they've -- they've went from 10 six to four, the employees still should just have 11 some general knowledge. I'm not necessarily 12 questioning the process. And I can't, because I 13 don't know what it is. I mean, I do know, 14 historically, what the process is. 15 MS. FLEMING: Right. 16 MR. HORTON: And for me, it's just a matter 17 of providing a level of security -- 18 MS. FLEMING: Correct. 19 MR. HORTON: -- to these employees as far as 20 knowing at the end of the day. 21 Now, of course, you know, we all know when 22 the shoe drops, the employees are going to be fully 23 protected -- 24 MS. FLEMING: Correct. 25 MR. HORTON: -- or we run into a potential 26 lawsuit or challenge from those employees for a 27 number of different reasons. Which I won't 28 necessarily go into. 24 1 So not only is the matter protecting the 2 employees, it's also a precautionary matter of making 3 sure that we don't have an eruption -- unnecessary 4 eruption that causes public concern, or -- 5 MS. FLEMING: Absolutely. 6 MR. HORTON: -- or we end up with some 7 filings of complaints for all kinds of different 8 reasons. 9 MS. FLEMING: Yeah. 10 And just to restate, again, regardless of 11 the configuration of the four or the two, if you're a 12 civil service employee, and you're having sort of an 13 organizational shift, those employees are protected. 14 You've got permanent civil service status, and all of 15 the rights that come with that. 16 Is there a process? Absolutely. 17 Do we have a level of specific details at 18 this moment? That's the -- that's the level of 19 specific detail that we'll be working with CalHR for 20 the next few weeks. 21 But those employees will be protected. And 22 it's in the best interest of the state of California 23 of our agency, and all that are represented, to make 24 sure those employees are well cared for through this 25 process. 26 MR. HORTON: The two additional positions 27 that left the Board Members' offices and is going 28 back to the BOE, did the budget provide any language 25 1 as to how those positions would be used? 2 MS. FLEMING: No, not at this point. 3 MR. HORTON: Is there any intent to support 4 the Members -- the new Members on the various tasks 5 that there is some commonality between the agency and 6 the Member, such that currently their -- the support 7 is limited to the Members because of capacity, not 8 desire. 9 And as a result of that lack of capacity, 10 I'm just curious, what is the intent to address that 11 going forward to the new Members? 12 MS. FLEMING: Yeah. 13 At this point, the budget doesn't have that 14 level of specificity. This week I've been in contact 15 with Mr. Kinnee. And Mr. Kinnee and I have been in 16 contact with both the budget shop and with DGS, and 17 the level of specifics are not there yet. 18 MR. HORTON: Does the proposal have that 19 level of specificity? 20 MS. FLEMING: Not at this point. 21 MR. HORTON: So we're not even proposing 22 what we're going to do to support the Members? 23 MS. FLEMING: No, that's a different issue. 24 As my understanding, the question was, does the -- 25 does the budget have that level of specific detail. 26 MR. HORTON: There were two questions. That 27 was the first. 28 The second was, does the BOE's budget 26 1 proposal specify support for the new Members going 2 forward, and the intent to use those positions or 3 some positions to provide that level of support in 4 Legal and some of the other areas that we don't have 5 the capacity currently to do so? 6 MS. FLEMING: Yeah. 7 The BCP that was submitted was, again, 8 denied from Department of Finance's perspective. 9 They continue to work with us through the post BCP 10 process. And it was just a timing issue for them. 11 Specifically, in the BCP, the positions that 12 we were asking for were seven PYs over the next 13 number of fiscal years to begin to address some of 14 the gaps in the organization. 15 There were some positions in Legal, that 16 gave us some legal from a disclosure -- for example, 17 for disclosure purposes, there's some litigations 18 roles, for some legislative roles in our leg. and 19 research. So it really was to -- what we call -- it 20 was kind of a greatest areas of gaps. 21 Were there any positions specifically to 22 address direct support to the Board Members? Not in 23 that specific seven positions that we were asking 24 for. 25 So our intent at this point is to now look 26 at if we're getting those eight positions redirected, 27 depending on who -- if it's people or positions, to 28 make a determination of how do we address, not just 27 1 what the Board Members need, but -- 2 MR. HORTON: So did the agency get a total 3 of 15 positions? 4 MS. FLEMING: No. 5 MR. HORTON: Or you didn't get the seven, 6 you got eight? 7 MS. FLEMING: Correct. 8 MR. HORTON: So you've got seven to address 9 the agency's needs, and maybe, possibly, 10 theoretically, in adding a couple lawyers to the 11 Legal staff, that intent is, to some degree, that 12 those additional lawyers could, in turn, support the 13 office of the Board Members to some degree. 14 MS. FLEMING: So I'll be -- 15 MR. HORTON: But there still may be a need 16 for additional positions. Which, at that point, you 17 would have to submit an additional BCP in order to 18 accomplish that objective. 19 MS. FLEMING: Correct. 20 MR. HORTON: Okay. 21 MS. FLEMING: So there are significant gaps. 22 The BCP that we submitted for the '18/'19 fiscal year 23 was for seven positions, that was denied. 24 So we're redirecting -- working with 25 Department of Finance, redirecting to leverage the 26 eight positions that would become available to -- 27 from each of the Member offices. 28 Going forward, for the next fiscal year at 28 1 this point, which would be '19/'20, fiscal year 2 '19/'20. Because on July 1, we'd be starting 3 '18/'19. We'll revisit what the BCP needs to 4 address. 5 MR. HORTON: Okay. 6 Salary parody with the BOE employees. 7 Thank you, Mr. Kinnee. You indicated that 8 that's progressing well. Is -- was that your view? 9 MR. KINNEE: I don't know if I'd say well. 10 We did bring it up when we met with CalHR. They 11 understood it, and they agreed to work with us. So 12 we're having conversations with them, and we'll see 13 where we can go from there. 14 There's a process for dealing with it. I 15 think you probably have to show vacancies and a lot 16 of data. Which we have been -- for Property Tax 17 Department, we've been collecting it for years. As 18 you're well aware, we've had challenges. 19 MR. HORTON: I think -- I thought some time 20 ago we actually gathered all the data to support that 21 parity for the appraisers and other employees that we 22 now represent, and we submitted that data. And that 23 we were in the process of determining whether or not 24 we need legislation, or how to proceed. 25 So we're gathering the data again; is that 26 what I'm hearing? 27 MR. KINNEE: We've continuously gathered it. 28 I don't think -- to my knowledge, we did not submit 29 1 it to CalHR. We worked on some other issues to 2 address salary and stuff, and we're working on it. 3 But those stalled out, you know -- 4 MR. HORTON: Okay. 5 MR. KINNEE: -- outside our control. So now 6 we're working with CalHR. 7 MR. HORTON: I've got a memo from five years 8 ago. 9 MR. KINNEE: Okay. 10 MR. HORTON: I'm going to provide you with a 11 copy of it, and the response to that memo. It 12 appeared five years ago that we were progressing 13 well. And, in fact, we were in the process of 14 accumulating data for the auditors, as well as the 15 compliance staff, so that they, too, could have a 16 level of parity. And that it was going to be 17 incorporated in the overall -- what do you call that 18 plan? The plan where you have a number of employees 19 that are retiring. 20 MR. KINNEE: Succession plan. 21 MR. HORTON: Succession plan. That it was 22 going to be incorporated in that. Because part of 23 the reason that we're going to have the agency, the 24 state of California, in fact, will have just an 25 inherent challenge in this area of being able to 26 function, is that a number of our employees -- I 27 forget the number. But a huge number of our 28 employees are going to retire, leaving a vacancy. 30 1 And I haven't seen that succession plan. 2 And part of the -- and the other employees 3 are going to be leaving and moving into private 4 industry, because the salaries just aren't there. 5 And the gap between our employee salaries and that of 6 private and other government is just getting wider 7 and wider and wider. And the cost of living is 8 getting wider. A number of our employees are having 9 to leave the state just to be able to take care of 10 their kids. 11 And so at some point, I think, you know, 12 maybe we should come up with legislation. We drafted 13 it before. Michele Pielsticker and her team drafted 14 it before, and kind of expedite this process. And 15 maybe meet with labor and so forth on the union side 16 and the office configuration. 17 The staff that are attorneys, it's my 18 understanding that their MOU actually requires 19 certain office configuration. And so just want to 20 encourage that we take a look at that in designing 21 the Members' offices. 22 MS. FLEMING: Yeah. We did include that 23 also in our continuing conversations with DGS. 24 Including even, you know, as been noted -- but the 25 significant issue as it relates to office relocation 26 is that -- the other issue is that it's relocating 27 our headquarters from 450 N Street to 160 Promenade, 28 which is the Natomas location. 31 1 So the question on the table is even the 2 Board room and Board facilities. Because shifting -- 3 just moving people around is one thing. We've had 4 that happen before. But to shift our headquarters 5 has some other implications. As Executive Director 6 Kinnee commented on, you know, we have some 7 challenges with a number of aspects of that 8 proposal. 9 MR. HORTON: On the office configuration, as 10 a result of the transitioning, Members terming out 11 and so forth, a number of our staff has relocated. 12 Several of mine have gone to OTA, and several have 13 gone to CDTFA, and several have gone to represent 14 other state taxing agencies. 15 But that has left vacancies in the office 16 that we could actually consolidate our current 17 Sacramento facility. And so it's being underutilized 18 for a period of time. 19 And you might want to put that in your -- 20 consider putting that in your cost benefit analysis. 21 And any further delay is actually costing the state 22 additional cost of unutilized space. 23 MS. FLEMING: Yeah. And that's one of 24 the -- when one examines the pros and cons of the 25 existing leases, even though we extended it, is the 26 existing lease. 27 And so to the extent that the size of the 28 Member's office organizations are smaller than the 32 1 footprint for that office is greater, ultimately 2 going to be greater than the need. So that's a part 3 of the conversation in the cost estimates to 4 determine that. 5 And then, as it relates to office 6 relocations, we're looking at, you know, building out 7 the locations for that. 8 So there's -- what they are weighing in our 9 conversations is the cost of ongoing leases per 10 Sacramento office for the Members, per our other 11 leases for the operational side. The cost of those 12 ongoing leases versus the cost of building out the 13 facility in Natomas. 14 And Deputy Controller Stowers mentioned that 15 you haven't seen that facility, and so I'd be more 16 than happy to extend some tours of those facilities 17 so you can see it. 18 MR. HORTON: And the proposed site is a 19 non-state building? 20 MS. FLEMING: It currently is a private, 21 non-state. 22 And there are two floors currently. So 23 there's a first floor configuration where the CDTFA 24 call center is located. The training rooms are 25 there. The second floor is really where property -- 26 a combination of the Property Tax staff and then some 27 CDTFA staff. 28 So there's an issue of not just the ongoing 33 1 leases, there's a cost of -- and you guys -- some of 2 you have been through this before when we do the 3 musical chair of offices. 4 So -- because to do the construction, 5 there's a cost attached to moving some of the staff 6 out of the Promenade location, relocating them 7 temporarily so that you can do the musical chairs. 8 All those are cost-related activities. So 9 we're having conversations about the cost of that 10 kind of an activity versus the location at 11 450 N Street. 12 MR. HORTON: And what about the discussion 13 about -- from a wholistic perspective, I'm just 14 trying to sort of make sure that all of these 15 variables are considered in this debate. Because at 16 the end of the day, fingers get pointed, and, you 17 know, generally our way unnecessarily. 18 But the -- when -- when a state agency -- 19 when there's a state agency that has a vacancy, and 20 that vacancy is not filled by another state agency, 21 the state agency is required to continue to make the 22 lease payments for that, even though it's vacant. 23 And throughout the state, we have a number 24 of vacant facilities that the state of California is 25 paying lease for. And it's not even being occupied. 26 It's just vacant. We could create a similar 27 situation in this transition. 28 So the question is, has the benefit of 34 1 relocating the new Members into a state building that 2 is unoccupied -- I understand the 23rd floor is 3 unoccupied -- and there's a cost associated with it 4 not being occupied versus relocating them to this new 5 site. Is that also being considered? 6 MS. FLEMING: All those factors are being 7 considered, yes. 8 MR. HORTON: Okay. 9 MR. RUNNER: All right. 10 Member Ma. 11 MR. HORTON: Thank you, Mr. Chair. 12 MS. MA: Yeah. Since you did bring up our 13 employees and trying to figure out this transitional 14 plan, I'm very disappointed that when we went to the 15 Senate Committee to testify, one of my staff members 16 did ask the HR personnel, whoever the woman was, 17 saying, "Well, what happens if there's no spot for 18 me, or, you know, the level is not the same?" And 19 she basically told her, Well, it's too bad. Then 20 maybe you need to take a demotion. 21 And she said this to her, which was very, 22 very upsetting to me. And I was going to write a 23 letter to her. But since we're bringing this up, I 24 mean, it's not that easy. And I don't believe that 25 CalHR is accommodating or being even compassionate or 26 friendly about this. 27 And so I'm going to put it on the record 28 right now that I was not happy about that. Now that 35 1 you brought it up that CalHR is supposed to be 2 working with our staff members. I want to let you 3 know that this was the answer that she gave my staff 4 member when she asked. If you don't like it, you can 5 take a demotion. 6 MS. FLEMING: Okay. Thank you for those 7 comments. Duly noted. 8 MR. RUNNER: Member Horton. 9 MR. HORTON: Thank you, Mr. Chair. 10 Outreach and education: of course we're 11 getting tons of concerns about the decrease in direct 12 education across the Board. And at least from our 13 agency's perspective, are there any plans on the 14 table to do more than provide the information for the 15 taxpayer for them to review, or any outreach efforts 16 that we're going to -- any whatsoever? I mean, I'm 17 not -- 18 MR. KINNEE: The Taxpayer Rights Advocate 19 attended the assessors' conference in April and 20 talked to them. And, you know, pointed out that they 21 can reach out to the TRA. 22 MR. HORTON: Now, was that a legal 23 determination that our constituents are only the 24 assessors and not the property taxpayers who pay the 25 property tax? 26 I mean, there are a number of provisions in 27 the law that contradict that, that I'd be more than 28 happy to share with you. 36 1 Or was that a budget decision that, because 2 we don't have the budget, we had to narrow that 3 somewhere? 4 Or was that part of AB 102? 5 I mean, I don't understand what's changed. 6 Help me. 7 MR. KINNEE: I would say it's budget, first 8 of all. I mean, I'll discuss with the Chief Counsel 9 whether it's legal. But I think if you read the 10 Board's duty and responsibilities that pertains to 11 property tax now, it's laid out in Government Code 12 15606, and it's channeled towards the assessor. 13 The assessors have -- I've recognized the 14 Board Members. And we've had this discussion at a 15 prior Board Meeting that I believe, you know, the 16 Chairman said that perhaps we have different 17 constituents. The program versus the Board Members. 18 We've never been budgeted for outreach for taxpayers. 19 MR. HORTON: We should probably seek a legal 20 argument -- I mean, a legal position on that. 21 If a group of taxpayers happened to get 22 together and believe that the agency has some 23 obligation to educate them, then that creates a 24 potential legal liability to the state for our 25 failure to educate them, and to consciously fail to 26 educate them. 27 Which is what we kind of ran into with the 28 cannabis issue where the Board of Equalization took a 37 1 position that, Well, we don't have to educate you. 2 We don't have to necessarily issue permits to you. 3 You're protected under the First Amendment. And we 4 don't -- you don't have to disclose that you're a 5 cannabis operator. Anyway -- 6 MR. KINNEE: If I may. I think we have -- 7 MR. HORTON: Just a recommendation. 8 MR. KINNEE: Okay. 9 I think we have, in the past, where, like, 10 the legal entity ownership program where they're 11 filing with us, so there's a benefit to us. They're 12 educated, cleaner filings and stuff. 13 We do -- Ms. Thompson, when she's over in 14 that program, has gone and spoke at events. So we do 15 in that area. 16 But then as it would pertain to their 17 interaction with the assessor's office, we don't -- 18 you know, we answer calls, we answer letters. But we 19 don't go out and put on a seminar on parents/child. 20 Although we have spoken at some Realtor events as 21 budget allows. 22 MR. HORTON: Well, I -- at some point I just 23 think there's wisdom in making a legal determination. 24 It would be helpful to me to be able to tell these 25 constituents the Board of Equalization has taken a 26 position that is not our responsibility to assure 27 that you are paying your property taxes, and you are 28 in compliance with the property tax laws. And that 38 1 there's uniform, that you're being treated uniformly 2 by all property tax assessors throughout the state of 3 California. 4 That's not our role according to our Chief 5 Counsel. And so -- 6 MR. KINNEE: Okay. Understood. 7 MR. RUNNER: Member Ma. 8 MS. MA: Yeah. Ms. Brenda, I do have her 9 name. Her name was Katie Hagen, Chief Deputy 10 Director of CDTFA who came from CalHR. 11 MS. FLEMING: She's -- actually, ma'am, the 12 Chief Deputy for CDTFA. 13 MS. MA: Right. But that's the woman that 14 said to my staff that if she doesn't like it, she can 15 take a demotion. 16 MS. FLEMING: Okay. Duly noted. Thank 17 you. 18 MR. RUNNER: Okay. Any questions to the 19 Executive Director? 20 Okay. 21 ---o0o--- 22 23 24 25 26 27 28 39 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 June 26, 2018 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 39 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: April 23, 2019 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 40