1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 REPORTER'S TRANSCRIPT 7 SEPTEMBER 25, 2018 8 9 10 11 12 13 ITEM K1.1 14 BOE CONSOLIDATION UPDATE 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 For the Board Equalization: 3 Honorable George Runner Chair 4 Honorable Fiona Ma 5 CPA, Vice Chair 6 Honorable Jerome Horton Third District 7 Honorable Diane L. Harkey 8 Fourth District 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: Henry Nanjo 15 Chief Counsel 16 Dean Kinnee Executive Director 17 18 Also Present: Jeff McGuire Chief Deputy Director 19 Department of General Services 20 Patrick Foster Assistant Chief 21 Department of General Services 22 ---oOo--- 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 SEPTEMBER 25, 2018 4 ---oOo--- 5 MS. RICHMOND: Our next item is Item K1, the 6 Executive Director's Report; and Item K1.1, BOE 7 Consolidation Update. 8 MR. KINNEE: Good afternoon, Chair Runner 9 and Honorable Members. I'm Dean Kinnee, Executive 10 Director for Board of Equalization. 11 Staff from the Department of General 12 Services are with us today to provide an overview and 13 update of the efforts to consolidate the Board into 14 one Sacramento location. 15 Presenting on behalf of the General Services 16 are Mr. Jeff McGuire, Chief Deputy Director, and 17 Mr. Patrick Foster, Section Chief of the Real Estate 18 Leasing and Planning Section. 19 MR. RUNNER: Thank you. 20 One quick thing before -- 21 Welcome, Jeff. 22 MR. McGUIRE: Thank you. 23 MR. RUNNER: One quick thing is, I think 24 there has been -- and I don't know if you're going to 25 lead with this anyhow. But in regards to -- a lot of 26 this developed around the fact that there was a 27 potential BCP that we were going to be dealing with, 28 dealing with these costs. And that got a concern. 3 1 It was probably the primary motivator for bringing 2 DGS over. 3 Because it looked like we were gonna have to 4 approve the bill, or be taking responsibility for the 5 bill. But I think maybe some of that has changed. 6 And maybe that's where we might want to make sure 7 that -- begin with that and may shorten our exposure 8 here. 9 MR. McGUIRE: Okay. Well -- yeah. I can 10 almost guarantee I'll be quicker than the previous 11 agenda item depending on the number of questions, of 12 course. 13 Good afternoon. I'm Jeff McGuire. I'm with 14 the Department of General Services. 15 With me today is Patrick Foster. He's our 16 Assistant Chief of our Asset Management Branch. 17 And as Dean mentioned, we're here to give 18 you an update on the consolidation of BOE, and the 19 move of Board Member offices. 20 And as you know, we were directed to do that 21 as leases expire on the current Member offices. 22 So we have looked at a number of options. 23 And so I will just kind of cut to the chase if you 24 want to on your first question, which was really 25 about the cost to do tenant improvements on the new 26 space. 27 And so we have worked with the Department of 28 Finance. And there's an architectural revolving fund 4 1 that was BOE's and CDTFA's, related to their 2 headquarter's facility. And that those funds can be 3 used now to do the tenant improvements at 4 160 Promenade, which is going to be the location of 5 the new Board Member offices. 6 And so for BOE itself, you will have no 7 budget impact to pay for the tenant improvements, or 8 the only cost that you would have -- and we have 9 worked with Dean and his staff -- is you would still 10 pay the actual physical moving cost which are 11 estimated to be about $30,000 to move into the new 12 facility. 13 So I can give some other just kind of 14 general -- 15 MR. RUNNER: Give us highlights. 16 MR. McGUIRE: Okay. So we did evaluate a 17 number of options of kind of what was maybe 18 available. And we considered, as doing that, the 19 state's ten-year sequencing plan. We have a 20 sequencing plan for all the facilities in Sacramento. 21 We looked at issues -- operational issues 22 related to BOE, like minimizing travel between 23 headquarters and the BOE Member offices; ease of 24 constituent access to Member offices; and also 25 minimizing the cost and reducing the cost for both 26 BOE and the state. 27 We have collaborated closely with Mr. Kinnee 28 and his staff, as well as the BOE facility's staff 5 1 that supports you, and then Department of Finance as 2 I mentioned related to the ARF. 3 Based on those factors, we did make the 4 decision to actually do a build out at 160 Promenade 5 Circle in Natomas, which is where most of the BOE 6 staff currently resides. 7 And so we will build out four suites there 8 for the Board Members. They'll be private suites, so 9 they'll all have privacy and all the things they need 10 for that. 11 We will also be moving over the Executive 12 staff Board Proceedings and Legal staff to the same 13 facility. They'll be kind of a phase to -- the 14 Member's spaces will be Phase 1. 15 Just kind of some of the things we looked at 16 like cost benefit, the cost for the lease, or the 17 lease payments in Natomas is about one-third the cost 18 currently that we're paying in downtown Sacramento 19 for Member space. 20 And, again, the tenant improvements, which 21 is the big part, it's about $100 a square foot to 22 build out the space from the empty space that's there 23 into suites and offices. So that will all be covered 24 by existing funds that already are there, so BOE 25 won't have to pay anything upfront. And you won't 26 have to repay anything after the fact for doing those 27 tenant build outs. 28 And so really that's kind of the key 6 1 highlights. We can answer specific questions if you 2 want and, you know, try to keep it concise and short 3 for you guys. 4 MR. RUNNER: Okay. 5 Member Ma. 6 MR. McGUIRE: I think I would ask one other 7 thing. I need to mention this. This is important. 8 I apologize. 9 The build out at 160 Promenade won't be 10 completed until June of 2019. So there is this 11 interim phase -- period between January 7th, when new 12 Members are sworn in, and June of 2019, when the 13 space will be available. 14 And so right now we're working on looking, 15 like, what are the options for the new Members that 16 will come in in January? What temporary space will 17 they occupy before they actually move to the new 18 space that's being built out for them in Natomas? 19 And so we'll work with Dean and his staff. 20 But we're looking at kind of -- we're evaluating 21 several different options. And we should have that 22 completed by the end of October. 23 MR. RUNNER: Okay. 24 Member Ma. 25 MS. MA: No, that's it. 26 MS. STOWERS: I have one question. 27 MR. RUNNER: Member Harkey. 28 MS. HARKEY: Go ahead. 7 1 MR. RUNNER: Oh, Member Stowers. 2 MS. STOWERS: You talked about Member 3 suites, and then moving over the rest of the staff in 4 phase two. I didn't hear you comment about a hearing 5 room. 6 MR. McGUIRE: Oh, I apologize. Sorry, I was 7 starting to be -- yes. So as part of the build out 8 over there, there will be a multipurpose room. 9 They'll be several different rooms, like, 10 for training and some other things to accommodate 11 BOE. But there will also be a multipurpose room that 12 can accommodate Board meetings in the future. 13 But in between then and now, or in 14 perpetuity, CDTFA is fine with the Board still 15 meeting here at 450 N Street, you know, as long as 16 they need to. But there will be a facility there at 17 Natomas that will be built out that can accommodate 18 Board Meetings. 19 MR. RUNNER: Okay. 20 Member Harkey. 21 MS. HARKEY: I guess, you know, I'm trying 22 to figure out why we had to go do this. Because 23 there's not that many people up here left. So I'm 24 trying to figure out -- I know it's not coming out of 25 our budget. But it's still $2.6 million and 26 continuing. And then we have a Board hearing meeting 27 here we're gonna build that out. What's going to 28 happen with this Board hearing room? 8 1 MR. McGUIRE: Well, we know CDTFA uses this 2 room regularly for staff meetings and other things. 3 So that will continue to be used for them when you 4 guys aren't meeting, you know, at your monthly 5 meetings. 6 As far as this as a Board room, the Board 7 still can use this -- this room as long as they need 8 to. Ultimately, this building, CDTFA is planning to 9 move out of this building to a new building that will 10 be built where the current location of the state 11 printer up on 7th and Richard's Boulevard. It's part 12 of the sequencing plan. They will move to a new 13 space. This building, then, will be completely 14 renovated. 15 So, again, I don't know exactly what would 16 happen with this Board room and that renovation. But 17 eventually this room might be converted to some other 18 use at that time. 19 MS. HARKEY: Okay. And this question is for 20 Mr. Kinnee. 21 Since we're kind of completing the divorce 22 here for the new Members, are they going to be 23 contracting for their other services outside of 24 CDTFA? Why would we still contract with CDTFA under 25 MOUs? Why wouldn't we go to somebody that's going to 26 serve our Board, rather than some of the hassle we've 27 had getting things done through CDTFA? 28 MR. KINNEE: That would require a statutory 9 1 change. Right now, by statute, CDTFA -- 2 MS. HARKEY: Well, why don't we put forth a 3 bill, and figure out how that might work best. Maybe 4 DGS should contact for us or somebody else. 5 I mean, I'm just saying, CDTFA has their own 6 world. They're going to have their own world, and 7 they do act like they have their own world. So it's 8 been -- you know, it's not been the easiest 9 transition. 10 And so I would like to just -- if we're 11 going to do this, just get it done so that the new 12 Members coming in have a -- have a clean slate and a 13 clean way to do it. 14 I still do object to doing this. I think we 15 can find a couple little locations, and we'd be fine. 16 But I understand it is not the Board's decision. So 17 we have no authority, whatsoever, as to where we 18 locate or to how much is spent. And I do want that 19 to be on record. 20 MR. RUNNER: Good. 21 Member Horton. 22 MR. McGUIRE: Thank you. 23 MR. HORTON: And these are more just 24 inquiries, sort of questions at the end of the day. 25 It's for the new Members, for the most part, to 26 contend with. 27 How much will all of this cost? I mean, 28 we've heard different figures. What will be the cost 10 1 of the build out of the new conference room or 2 multipurpose room, as you referred to it as? 3 MR. McGUIRE: So -- so -- go ahead, Patrick. 4 MR. FOSTER: No, that's all right. 5 MR. McGUIRE: So the build-up's about $100 a 6 square foot. And so it would be about -- for the 7 whole build out for all the rooms and everything is 8 just about $2 million. 9 MR. HORTON: Okay. And the renovation of 10 this building, what is the time line for that? 11 MR. McGUIRE: So the current time line in 12 the sequencing plan is that CDTFA would move out of 13 this building to a newly built building that, again, 14 will be where the state printer currently is in 2024. 15 So that's about five years out. 16 MR. HORTON: So five years. So over the 17 next five years, this room will be used as a 18 conference room? Or -- 19 MR. McGUIRE: No. I'm sorry, no. This room 20 will still stay the way it is currently. And so, I 21 know -- 22 MR. HORTON: What's its anticipated 23 utilization? 24 MR. McGUIRE: So CDTFA says they regularly 25 use this room for different staff meetings and other 26 events. 27 But, again, right now CDTFA has agreed that 28 as long as the BOE still wants to meet here and have 11 1 their public meetings, they could do that. But we 2 are making sure that there is a room at Natomas where 3 you could also do that at 160 Promenade. 4 MR. HORTON: Okay. So for the next five 5 years after the Board leaves, this room will be used 6 as a conference room. I don't want to 7 mischaracterize this, but it seems like for five 8 years. 9 And then when CDTFA moves out of this 10 building -- this is a state building -- who continues 11 to pay the lease for this building? 12 MR. McGUIRE: So at that time, the plan is 13 that this building, kind of like some of the other 14 offices buildings in downtown Sacramento, would be 15 kind of renovated because of the different issues 16 this building has had historically. So it would be 17 unoccupied for some period of time while those 18 renovations are made. 19 And then the plan is -- right now is that, 20 actually, the Government Operations Agency, which 21 would include General Services, Department of 22 Technology, CalHR would eventually be the new tenants 23 in this building. 24 MR. HORTON: And how long would it take for 25 the renovation? 26 MR. McGUIRE: I'm not sure at this point, 27 but it'd probably take a year or two. 28 MR. FOSTER: Roughly 18 to 24 months. 12 1 MS. HARKEY: You know, I just have always 2 had this question. I know that there were -- I'm 3 sorry. Are you still -- 4 MR. HORTON: Legislation was passed that 5 indicated that the Board of Equalization was on a 6 waiting list. Did we -- you know, we went through 7 this legislative process in determining which 8 office -- which state offices would be renovated, 9 changed, and so forth. And there was a priority 10 established by a statute as to what that process 11 would be. And I don't remember the BOE being at the 12 top of that list. 13 MR. McGUIRE: You're correct. There was a 14 facility's assessment study done of all the buildings 15 in downtown Sacramento, and BOE, I think, was No. 16 16 on that list. 17 The resources building was No. 1. The 18 resources building is what is happening right now. 19 The rebuild on -- I can't remember if that parking 20 lot is right near them over on R Street -- or P 21 Street. P Street. Sorry. So that's where their new 22 facility is being built. 23 They're also building another facility on 24 O Street right now. There's also the undergoing plan 25 related to the annex of the Capitol, which needs to 26 be done. 27 But the ten-year sequencing plan addresses 28 all these issues with those other facilities that are 13 1 higher up, or that were worse than, I guess, this 2 facility was, and moving those buildings around and 3 renovating as we go. 4 So the idea is you would either have a new 5 building or renovate a building, and then move 6 tenants into it. And then renovate the other 7 building behind it that needs updating. 8 Our ten-year sequencing plan is on the Web 9 site. 10 MR. HORTON: So it's anticipated by DGS that 11 they will get through 15 different renovations, 12 relocations in five years; but, yet -- yet, it will 13 take one year for this one? 14 MR. McGUIRE: So -- no. We wouldn't be 15 doing all 15 in 5 years. That's a great question. 16 It's not exactly sequenced perfectly based 17 on top to bottom. Some of it's based upon the size 18 of the departments, where they're going. 19 Right now -- again, we have 17 acres out 20 where the state printing plant is. They are moving 21 to West Sac. We will be demolishing that old 22 facility there, and then putting up about a million 23 square feet, or a million-and-a-half square feet of 24 facility there, and moving several different 25 departments out there. CDTFA being one of them. 26 MR. HORTON: So is -- is that being 27 accelerated by any -- the other 15 will get done 28 before CDTFA -- 14 1 MR. McGUIRE: No, not all 15. 2 MR. HORTON: -- in this building? 3 MR. McGUIRE: No, not all 15. Some of them 4 will move out there also to the printing plant, or 5 where that printing plant used to be, or where it is 6 today, and occupy space there as well. So a number 7 of them will be taken care of by relocating them. 8 So -- but it does not -- I don't want to 9 mislead you that, like, we're going exactly in order 10 of, like, all 15. Some of it has to do with size and 11 where they fit. It's almost like a puzzle. 12 MR. HORTON: Oh, okay. 13 And what's the cost of all this? 14 MR. McGUIRE: I don't have a price tag for 15 the full sequencing plan. It's a ten-year sequencing 16 plan, and it's updated every year. So the overall 17 cost, I don't know. 18 MR. HORTON: Interesting. 19 MR. McGUIRE: It's expensive. 20 MR. HORTON: And just a follow-up question. 21 I just want to make sure I heard you correctly. How 22 would this conference room be used for during our 23 absence? 24 I mean, there are quite a few other training 25 rooms. There are conference rooms. There's a huge 26 conference room over in the building that we're 27 currently in. 28 MR. McGUIRE: So I just know in our 15 1 conversations with CDTFA, and I can say from 2 experience when I worked at the Board of Equalization 3 previously when I was Tax Policy Chief, I had a staff 4 of about 100. And so if we had a large staff 5 meeting, this was really the only room in this 6 building where you could actually put 100 people and 7 actually have a meeting with all of them at once. 8 So CDTFA says they continue to use this for 9 a number of meetings with their staff, you know, that 10 require this many people. I think it seats 100 in 11 this room without counting. 12 MR. HORTON: I believe you. 13 MS. HARKEY: We don't approve this, but I 14 will tell you I think it's a huge expense that we 15 really don't need to be having. And even if it 16 doesn't come out of our budget, it's still paid for 17 with tax dollars. And the state is constantly 18 claiming there's not enough revenue to do something, 19 and then we're doing this. 20 So I don't approve of it. I think it's 21 outrageous. I think we can have Board Members just 22 fit in in different locations. All that we need is a 23 couple offices, you know, a Member office and an 24 outside office. I don't think we need a big 25 facility. We also have spaces in our district, which 26 will remain. 27 So I don't see what the need is to build a 28 big facility up here, or to relocate a hearing room. 16 1 And I object to it, quite honestly. 2 MR. HORTON: Mr. Chair, just a question of 3 Mr. Kinnee. 4 MR. RUNNER: Mm-hm. 5 MR. HORTON: Thank you as well. I 6 appreciate you coming before us. 7 But the Board of Equalization did an 8 analysis as well to assure that we could be in 9 compliance with the statute of relocating the Board 10 Members all into one physical location. 11 What is being proposed by DGS is, I guess 12 they said, two-point-some million dollars or 13 something. Correct me if I'm wrong. 14 What did the Board of Equalization determine 15 the cost would be on their analysis? 16 MR. KINNEE: I believe ours were very close 17 to theirs. I think a little over two million. 18 MR. HORTON: Again, there was an alternative 19 analysis done, an alternative plan. I'm not asking 20 what their assessment of what they plan to do, but 21 the alternative analysis that the Board of 22 Equalization -- 23 MR. KINNEE: Yes. Yes. 24 MR. HORTON: -- to meet the -- okay. You're 25 with me. 26 MR. KINNEE: Yes, sir. 27 Initially, when the 2017 budget language had 28 a provision, it provided the Board Members would be 17 1 in a state-owned building. Our proposal was the 23rd 2 and 24th floor in this building. 3 I think if we were to go, then we projected 4 maybe a quarter of a million dollars. 5 MR. HORTON: A quarter of a million dollars. 6 Out of the 365 days in the year, the Board 7 would have hearings here maybe 24 or maybe 12. 8 MR. KINNEE: Perhaps the Board did ask us to 9 do a proposal to cut back on -- give the future Board 10 an option to not meet monthly. 11 MR. HORTON: Well, let's presume that -- 12 MR. KINNEE: Correct. Yes. Probably no 13 more than 24. 14 MR. HORTON: -- meet monthly. 15 MR. KINNEE: Yes. 16 MR. HORTON: Okay. So is it your 17 professional judgment -- which -- which -- that we 18 can -- never mind. Let me not put you on the spot. 19 MR. KINNEE: Thank you, sir. 20 MR. HORTON: Okay. This is pretty costly, 21 you know. And I certainly appreciate the work of 22 the, you know, professionals, and complying with the 23 direction that you're given. I appreciate that. And 24 I think you guys have done an exceptional job. And I 25 think your facility is a nice facility. And I think 26 you are in compliance with the law. 27 I think that there is somewhat of a waste 28 factor that we should take under consideration. I'd 18 1 like to know what that is, what that cost of delay 2 would be. But it's optional. I -- I mean, I defer 3 to your judgment, Mr. -- 4 MR. McGUIRE: Was that a question that you 5 wanted me to try to answer? 6 MR. HORTON: No. I think I know the answer 7 to it. We're being relatively polite here. But 8 thank you for coming before us. 9 MR. RUNNER: Okay. 10 Any other questions? 11 Okay. Thank you very much. 12 MR. McGUIRE: Thank you very much. 13 ---o0o--- 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 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 September 25, 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 19 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: April 2, 2019 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 20