Committee Hearing, June 16, 1998

COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE THE COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, June 16, 1998 10:45 a.m. - - - RES. 970684 - Authorizing the Committee on Commerce and Economic Development to hold public hearings on proposals and strategies for a community revitalization and infrastructure renewal program for Philadelphia's neighborhoods. - - - PRESENT: COUNCILMAN MICHAEL A. NUTTER, Chair COUNCILWOMAN MARIAN B. TASCO COUNCILMAN FRANK DiCICCO COUNCILWOMAN HAPPY FERNANDEZ COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN ANGEL L. ORTIZ - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center Plaza, Suite 600 Philadelphia, PA 19103 (215) 561-2220 I N D E X RESOLUTION 970684 PAGE Manuel Ochoa, Rep., National Main Street Center--------------------------------------- Stephanie Redman, Program Manager, Technical Services, National Main Street Center-------- Jeremy Nowak, Rep., Delaware Valley Community Reinvestment Fund---------------------------- Lamar Wilson, Rep., Wilson & Associates-------- Steve Culbertson, Rep., Philadelphia Association of CDCs-------------------------- 29 Ralph Saggiamo, Rep., Paine Webber, Inc.------- 45 Malcolmn Pryor, Rep., Pryor, McClendon, Counts & Co., Inc.---------------------------------- 49 Joan Stern, Esq., Blank, Rome, Comisky & McCauley------------------------------------- 53 Farah Jiminez, Rep., Mt. Airy USA-------------- 61 Allison Kelsey, Rep., Preservation Alliance for Greater Philadelphia------------------------- 71 Bernard Hawkins, Rep., Neighborhood Housing Services------------------------------------- 79 Derrise Stovall, Rep., Philadelphia Neighborhood Housing------------------------- 94 Tom Forkin, Vice-President, PIDC--------------- 101 Robert Fina, Senior Vice-President, PIDC------- 105 - - - 3 RESOLUTION 970684

Good morning, ladies and gentlemen. This is a Committee on Commerce and Economic Development. I am Councilman Nutter, Chair of the committee. To my right is Councilman DiCicco. To my left is Councilman Ortiz. And Councilwoman Blackwell is in the chamber, as well. A quorum being established, the committee is now in session. And Councilwoman Fernandez. A quorum being present, the committee is now in session. This is a hearing on Resolution 13 No. 970684, authorizing the Committee on Commerce and Economic Development to hold public hearings on proposals and strategies for community revitalization and infrastructure renewal program for Philadelphia's neighborhoods, including but not limited to infrastructure repair, replacement and reconstruction, street tree maintenance, removal and planting, streetlighting repairs and enhancements, housing preservation, commercial corridor improvements and curb and sidewalk repair and replacement, and to discuss and analyze funding options, implementation methods, and performance measurements for such a community revitalization and 4 RESOLUTION 970684 infrastructure renewal program. Good morning, ladies and gentlemen. I am sure that you realize that prior to this, subsequent to this hearing being scheduled, there was a Special Meeting of the Council called to deal with another pressing matter, which has pushed our schedule back. And we apologize to everyone. We will do our best to accommodate everyone's schedules. Having said that, why don't we move right into the agenda, unless any of my colleagues have statements that they wish to make.

The time has come.

The time has come. First let's have Manuel Ochoa, National Main Street Center. Good morning, please identify yourselves for the record.

My name is Manuel Ochoa. I am with the National Trust and National Main Street Center. I am a program associate that 5 RESOLUTION 970684 works here in Philadelphia.

I am going to need to ask you to pull that microphone much closer.

I am Manuel Ochoa with the National Trust and National Main Street Center. And I am a program associate here in Philadelphia. I work with three neighborhoods. And also with me here is Stephanie Redman, who is the program manager for technical services at National Main Street Center.

Good morning. We obviously are not from the City of Philadelphia, but were very pleased to be here and joining the committee this morning. We know time is limited, so we will try to keep our remarks brief. C. We work nationwide with cities and towns to revitalize their traditional commercial districts. And I have been involved with commercial district revitalization for about nine years personally. 6 RESOLUTION 970684 It is an integral and important part of any community's or city's economic and community development strategy. Communities that address commercial district revitalization, and I think the types of activities and actions that you are considering, whether in towns and villages, across the country, to urban neighborhoods and cities the size of Boston, Rosendale, Chinatown, et cetera, all experience job growth, net gain to new businesses, increased social activity, overall reinvestment in the neighborhoods in the commercial districts where these activities take place. And I think here in Philadelphia, you have seen the results of some of that revitalization in your neighborhoods, and also in city centers, and as well as some of the work that we have been doing, which Manuel with speak to later. The National Main Street Center, again, is a national organization that helps cities and towns revitalize their traditional commercial districts. We work with a variety of local nonprofit organizations and municipal governments to 7 RESOLUTION 970684 make that happen through public/private partnerships. In the or so years that the Main 5 Street Center has been around, we have worked with 6 approximately 1400 communities, and in those 7 communities have documented a reinvestment ratio of 8 $35 to every one dollar, single dollar, that local 9 communities invest in their commercial district 10 revitalization programs. 11 We have seen more than 43,000 net new 12 businesses in commercial districts that choose to 13 undertake revitalization efforts, and more than 14 161,000 net new jobs in those communities. 6 billion reinvested into physical 18 improvements alone, a combination of public and private dollars. So there is a really large wave of commercial district revitalization activities going on in the country. And it is wonderful to see Philadelphia considering additional activity. Briefly, what we do is work with communities, again, local nonprofit organizations 8 RESOLUTION 970684 for the most part, public/private partnerships, to revitalize commercial district areas. And responding to economic and physical decline that a number of cities across the country saw several years ago, the National Main Street Center developed a methodology, the Main Street Approach to Commercial District Revitalization. Very briefly, it is a four-point approach. We work to help organize a community, to help identify financial and human resources to revitalize the districts. We work in the area of design improvements, which is physical improvements, streets, sidewalks, building facades, interiors, public amenities, street furniture, those kinds of issues. Working in the areas of promotion marketing, improving the commercial district's image, and creating a more positive image of the district and creating additional social activities. Economic restructuring, which is essentially the economic development arm of commercial district revitalization, addressing 9 RESOLUTION 970684 business retention, business recruitment, market analysis, and finding new commercial uses for historic structures. Within that context, communities implement a variety of commercial district revitalization projects. We have found in the hopefully or 9 so years that we have been in this business, that 10 support to create a comprehensive approach, not just 11 to address the physical environment or the economic 12 environment, but to look at it holisticly and 13 address a variety of factors that affect the value 14 and activity level in commercial districts.

15 Main Street is grass roots and 16 community driven. It is a public 17 private/partnership, and utilizes a variety of 18 players and individuals coming to the table, both in terms of project support, as well as funding resources. Most of our communities have a balance of public and private funding, with investment in the commercial districts coming from not only city government, municipalities, but also from business owners, property owners, residents, 10 RESOLUTION 970684 and the like.

Can I ask you just one quick question? I hate to cut across your testimony. It is my understanding that you also have projects going on right here in Philadelphia.

Yes.

Could you tell us a little bit about your activities right here?

Absolutely. Give a little context. We have been working with Local Initiative Support Corporation, in partnership with them, in three neighborhoods in Philadelphia. Mr. Ochoa will speak to those.

Yes. Basically, about two years ago, we started this initiative with LISC being, and it is called Neighborhood Main Street Initiative. And it is a partnership between LISC being and the National Trust to find out how Main Street can work within CDCs. And so this project has been ongoing now for two years. And the whole idea, as Stephanie mentioned, is our four-point approach, which is 11 RESOLUTION 970684 incremental and comprehensive, and fosters public and private partnerships working through the CDC and organizing the community around that to redevelop the commercial district, in this case Frankford Avenue. So we have been working with them for about two years. And it has been -- our latest projects that we have been working with, we have been working with Hispanic neighborhood around 5th Street, with the CDC Hispanic Association of Contractors and Engineers, and they are also attempting the same thing. And they are also trying to look at how some of the cultural activities that they have going on in their neighborhood, Tiet, Puerto Ricano, and the Association of Latin American Musicians, how that can sort of fit in with commercial revitalization. Frankford is particularly looking at how they can take advantage of all the commuters that come into their neighborhood every day, and aren't really using the commercial district. So that's one of the ways they are looking at revitalizing their neighborhood. 12 RESOLUTION 970684 And Germantown, which we have also been working with in the past year, is looking at how they can use all of the historic resources and take advantage of that, and bring also tourism from Center City, and also getting plugged in in terms of neighborhood commercial districts and taking advantage of the tourists that may be coming and helping to create a better commercial district for their neighborhood. So we have been working with Greater Germantown Housing Development Corporation with that. And part of it is also, as we mentioned, partnerships. So we have been trying to work with Preservation Alliance, Preservation Pennsylvania, which has just awarded a loan from their stabilization grant fund to a building in Germantown to help this really key block in their commercial district to get revitalized. So it is things like that that we try to foster, and that type of cooperation.

I have also brought along some materials, which I can pass on to you.

That would be great. I will get them out to all the committee 13 RESOLUTION 970684 members, as well as the rest of the members of City Council. I appreciate that.

Any questions?

I would just briefly mention if there are cities that are similarly interested in looking at a traditional model, we would recommend the City of Boston, which has an active commercial district, neighborhood commercial district, revitalization district, Boston Main Streets, run through their Public Facilities Department. The Mayor of Boston has essentially reorganized the department and reallocated existing resources into neighborhood commercial district revitalization. And they have been doing that for about three or four years, and very, very successful examples there. We are working in the City of Chicago, three neighborhoods, just getting up and running within the city of Chicago. And also in San Diego, with an ongoing number of neighborhoods being added to their Neighborhood District Revitalization Program. 14 RESOLUTION 970684 We are also affiliated with the Cities of Tocoma and Portland, who utilize the Main Street approach, the four points, and deliver technical assistance and financial assistance to participating neighborhoods in their cities. So a combination of -- I know funding is an issue. A combination of Community Block Grant Dollars and also General Fund administrative dollars.

And what's interesting about San Diego, is that they are doing this program mainly through their business improvement districts. So Boston's program is more diverse, in that it is CDCs, could be chambers of commerce, neighborhood associations, and it is about in 14 neighborhoods in Boston. And also one city program that's nearby that you may want to visit is Pittsburgh, over on the south side. And we just had our conference, our annual conference, our national town meeting, in Pittsburgh a month ago. And they were part of our Urban Demonstration Project back in 1985. 15 RESOLUTION 970684 And they actually helped to start a CDC. And it is a very successful neighborhood, Carson Street. So it is worth a look. They have really turned it around. It is a great place to visit.

Thank you very, very much for coming in. We apologize for holding you up. Are there any questions? And you will leave the materials for us?

Yes. Thank you.

Thank you. We appreciate it. Let me call up our next panel, which is Jeremy Nowak, Steve Culbertson, and Lamar Wilson. And while they are coming up, add some information to the record. Part of the impetus behind this particular resolution was, at times we find it difficult to have as much funding as possible for not only our commercial corridors and programs run through OHCD and RDA for housing revitalization, but we never have enough money for neighborhood 16 RESOLUTION 970684 revitalization activities, especially in non-CDBG-eligible areas. And part of the focus here, at least on my part, was to put together a small work team of different individuals, various backgrounds, to talk about how we might find a new source of funding, not impact the city's General Fund, and possibly seek access to financial markets. This particular panel of individuals are part of that work team. And if they would identify themselves for the record. And I'm sure you figured out who you would like to speak first among you. Please proceed. Pull the microphone as close to you as possible.

I am Jeremy Nowak from the Delaware Valley Reinvestment Fund.

I am Lamar Wilson, Wilson & Associates.

And Steve Culbertson from the Philadelphia Association of Community Development Corporations.

Councilman, I will start the testimony. 17 RESOLUTION 970684 Could I first distribute some maps to you.

That's fine.

Thank you for the opportunity to testify. I will lead off, and then my colleagues will follow, and just try to give an overview of why we are here, and refer a little bit to the map that we produced recently as part of this planning analysis. The three of us that are here today are community development professionals who have worked in the City of Philadelphia in a variety of neighborhoods over the last or years. 15 In fact, longer than we want to think 16 about; right? We are getting old. 17 We are here today to testify on 18 behalf of the neighborhood investment initiative 19 that targets resources to median income, to moderate 20 income neighborhoods. Our interest in this program derives from our direct experience working throughout the city, in the lowest income neighborhoods and in moderate income neighborhoods. We think that there is a real crisis 18 RESOLUTION 970684 in the city. And it is a crisis that has not until recently received too much attention. It has begun to receive some attention around the issue of population loss, and it has begun to receive some attention around the schools issue, why people take a variety of positions on charter schools and vouchers. And it has begun to receive some attention around the issue of land, and the problem of coming up with a rational land policy in the city. It is not the crisis of the homeless, which is a real crisis and a real problem, and we all agree has got to receive attention. It is not the crisis of public housing, which is certainly a crisis, given the fact that we are in a city where we have got a significant Welfare population, given the changes in public housing laws and Welfare laws, a terrible strain has been placed on the poorest among us. But, rather, we would refer to a crisis that we see and that we hear about anecdotally. It is a crisis of sort of the moderate income center. 19 RESOLUTION 970684 It is a crisis of the neighborhoods, of those people that make roughly to 50 thousand 4 dollars a year, and they live in neighborhoods that 5 surround the innercity ring. And here I would refer 6 to the map in front of you. 7 And I realize this is 1990 data. We 8 would like to have later data. And there is some 9 '95 and '98 projections that we could have used. 10 But we tried to use the more accurate '90 data. 11 And if you look at those 12 neighborhoods that are 80 to 100 percent of median 13 income, understanding that most of CDBG allocation 14 goes to neighborhoods, and understandably, goes to 15 neighborhoods that are 80 percent of median and 16 below. 17 If you look at those neighborhoods 18 that are in the Frankford and the Lower Northeast, 19 large parts of West and Southwest Philadelphia, Oak 20 Lane, the upper part of North Philadelphia, and 21 parts of South Philadelphia, it is our sense that it 22 is those neighborhoods -- and we would imagine that 23 the census, the next census will bear this out, and 24 they will spread and be in larger parts of the -- 25 particularly of the Lower Northeast and taking 20 RESOLUTION 970684 larger parts of West Philadelphia. It is our sense that it is in those neighborhoods right now that there is a real crisis. And it is in those neighborhoods where there is a significant number of people that are leaving or trying to figure out how to get out of the city, and are going, be attracted to the innerring suburbs of Darby, Yeadon, Bristol, Pennsauken, those places where housing values are now competitive for people of that income.

Mr. Nowak, Councilwoman Fernandez has a question.

Just one question for clarification. Looking up in the Northwest, with the semi dark, that looks to me more like the park, so I am confused. Should that have been white?

Yes. The park is over way to the left.

That's Wissahickon?

That's Wissahickon, yes. That should be white.

Okay. 21 RESOLUTION 970684

Just that one strip there that goes up through there. Yes, you are right. But the rest is Oak Lane, is West Oak Lane, is Ogontz, is Lower Germantown.

Right. I got that.

That's right. We think that in those neighborhoods, that they are the neighborhoods that are experiencing right now rapid housing abandonment, neighborhoods that had not had housing abandonment up until the last decade. They are neighborhoods that -- where it is not clear who the next generation of homeowners will be and where they will come from. I would refer, for example, to a neighborhood within Councilwoman Blackwell's district, a neighborhood that we did some planning work around the Church, Councilwoman, around 52nd, 53rd and Chestnut. And when we analyzed that area around there, we found that there was an extraordinarily high number of homeowners who were 55 and older. And the real question became 22 RESOLUTION 970684 increasingly who was going to move into those neighborhoods as people moved out or as they died, what was the succession pattern going to look like, particularly given the population loss. They're neighborhoods re where there are real problems of retail strip obsolescence. You know, new retail, the new franchises, despite the good work -- and I applaud the good work of Main Street program -- but the new retail doesn't look for -- the footprint of their stores is not the small, little, you know, retail establishments on old strips, where buildings and lands, where the building and the land are relatively obsolescent for their uses. And these are neighborhoods where increasingly the part of that population that can get out is starting to get out. So we would see the importance of identifying those neighborhoods that are not the usual neighborhoods, that are not the neighborhoods of the greatest need, but they are the neighborhoods where there is a quiet crisis in the city going on. There are also neighborhoods -- and here we would say that it is important to understand 23 RESOLUTION 970684 that investing in one neighborhood reflects something of what happens in another neighborhood. We tend to think of these things in relatively isolated terms. But real estate markets work as interrelated submarkets. And so investing in these neighborhoods has positive effect for the inner neighborhoods that we provide investments to now. These are also neighborhoods where, if we lose that population, it seems to us, we lose the vital center that, quite frankly, pays the taxes that create, you know, the rateables, that create the public wealth, that pay for schools, police, fire, and the rest. And so we would see some strategic attention to those neighborhoods as an extraordinarily important thing for Council and the Mayor and others to take up. And right now we don't see any kind of plan. It is sort of a transaction. You know, somebody does a good project here, a good project there. But there is no real strategic attention to those neighborhoods that, for the most part, were not classified as the neediest neighborhoods, but 24 RESOLUTION 970684 represent the absolute center of Philadelphia's working-class life.

Thank you.

I would turn to Lamar Wilson and to Steve Culbertson to talk a little bit about the potential program design elements that might be in an initiative like this.

Thanks, Jeremy. One of the key elements of the community revitalization and infrastructure renewal program, as the name implies, is improvement of the public infrastructure serving Philadelphia neighborhoods, and particularly middle-income neighborhoods and areas where the median family incomes are in the 80, 90, 100 percent of citywide median range, as Jeremy so capably highlighted. I want to take a few minutes to summarize and provide an overview of what we believe are the strategic importance and the key goals and principal objectives which should underscore any efforts to invest in the public infrastructure. First of all, in terms of the strategy, we think it is really basic. And it ought to be to target brick-and-mortar type investments in 25 RESOLUTION 970684 public infrastructure across middle-income neighborhoods, which represent a major asset of Philadelphia's residential market and which contribute to and help sustain the local economy. We think there are two goals which support this particular strategy. One is, this certainly will make significant public investments which, number one, rebuild, enhance, and protect the aging infrastructure that support neighborhoods, housing stock, the open space, transportation systems, commercial districts, and institutional land uses. The second key goal, sort of in our view, is to protect and reinforce the personal and community investments that have been made by individual homeowners, merchants, and institutions of that particular neighborhood. Likewise, there are three principal objectives which we believe should be used to track and measure progress towards achieving these goals and carrying out the strategy against it. It is about accountability. We are making sure what we do, we can measure it. And it goes back to determining whether the goal was RESOLUTION 970684 established and whether the strategy was in fact met. Again, the three objectives, one is to commit and direct new capital that is generated from this new source to make the following types of investments in the neighborhoods' public infrastructure and streetscape. And I might add that I think we all from time to time take these kinds of physical structures for granted. They become obsolete, they become in disrepair, and a lot of times they are missing. And until those happen, we usually don't pay much attention to them. First of all, basic street reconstruction and resurfacing, curb and sidewalk reconstruction, street and alleyway lighting, which certainly enhances public safety and security, something that in some of my work in other parts of the country, and certainly here in Philadelphia,, neighborhoods are continually interested in what they kind of refer to as traffic-calming measures and signage improvements. So various engineering and physical interventions which encourage slower traffic, slower 27 RESOLUTION 970684 speeds, reduced noise pollution, protect children at play, and enhance sort of the user-friendliness and the accessibility of interior streets. Public open space and landscaping improvements, which shall beautify, soften, and green the streetscapes, and certainly facade improvements which help dress up and promote neighborhood commercial areas that service those particular resident needs. The second objective is to, in our view, again, to target public infrastructure improvements in the ways which, first of all, result in measurable and visible change on contiguous blocks. In our business of neighborhood revitalization, we think it is really important that psychologically, particularly for residents, changes that are made, you can see them, you can touch them, you can feel them. It helps to build confidence, it helps to promote a sense that progress is being made and that accomplishments are also being made.

Secondly, to encourage and reward greater resident participation and involvement in 28 RESOLUTION 970684 promoting quality-of-life issues; such as, community safety and security, public education, for example, which contribute to a sense of community so important in sustaining stable, healthy neighborhoods. And lastly, in terms of targeting public infrastructure, in our experience, looking around Philadelphia in particular, we think there is something that can be said for contributing to the development of what we call model blocks, which have a generally successful history here in Philadelphia of demonstrating the impact of concentrating housing improvements, along with public infrastructure, so you really get sort of a multiple effect of doing block-by-block development. The last objective is to attract new investments from public, quasi-public, and private sector interests, which have an institutional and financial stake in the stability and growth of such neighborhoods. These interests might include, for example, existing homeowners, prospective home buyers, merchants, places of worship, as well as other entities which provide capital, services, 29 RESOLUTION 970684 products, and philanthropic support, such as banks, utility companies, hospitals, health care providers, educational institutions, foundations, et cetera.

Thank you very much. Before you start, Steve, let me also mention that Councilwoman Tasco has joined us, because of her interests in the topic. Thank you.

I would just note from what Lamar just said of the model blocks program, you have, as I testified today, Bernard Hawkins, from Philadelphia Neighborhood Housing Services. The organization is one of the major proponents of model blocks and has done an amazing job of doing model blocks around the city for a long, long time. I want to talk a little bit about two other items that could be funded by a new funding stream. One is an idea that my organization has been promoting of doing mortgages over and above the current mortgage amount. The value of most mortgages is about 30 RESOLUTION 970684 90, 80 or 90 percent of the actual value of the house. What we have been promoting, and actually been successful in getting from First Union National Bank as part of the agreement we worked on, is 125 percent mortgage. It is 125 percent of the post-rehabilitation value of the house. The reason for is this is that, as you all know, the housing values in the City of Philadelphia, even in middle-income neighborhoods, are depressed. And in order for us to turn around the real estate market, for a period of time we need to be putting more into the houses, rehabilitating them over and above what we could possibly get from bank financing currently. So that's the reason for the First Union mortgages. It's also the reason for the current Home Ownership Rehabilitation Program at the Redevelopment Authority. But that program is restricted by the current guidelines to neighborhoods in 80 percent and below median. So what we are proposing is that that gets expanded to other neighborhoods within the 31 RESOLUTION 970684 city. We are going to need to figure out a different funding stream for that. The other piece that is very important is neighborhood commercial districts. And this type of funding, separate form of funding from bonds or what-have-you, could be used to augment the Special Services Districts that we have already gotten in several of our neighborhoods. We could do Special Services Districts in other neighborhoods, where we are not generating enough revenue from the special taxes that are levied as part of the Special Services District. We could augment that and put into place patrols and facade improvements and all the infrastructure improvements that would normally go into special improvement districts, and have definitely happened in Center City. And we all benefited from it. Basically, we are saying, expand what has gone on in Center City to the rest of the community.

Great. Thank you very much for your testimony. 32 RESOLUTION 970684 Any questions?

I just wanted to go back to what Jeremy was talking about, in terms of the issue of people in some neighborhoods, aging homeowners who, as you know, some of the studies have predicted, there is, what, four to five thousand people a year will be turning over their homes due to death, and how to keep up with that. And as you know, I am looking at the map. A lot of those homes are in sort of these potentially at-risk neighborhoods. You are probably aware that a group of people are working on that, including Dennis Culhane is doing some work, I think, for PCA. We have had several meetings. But there is a group of people looking at what could be done to provide for a more orderly transition for many of the elderly homeowners who will need to either give up their home or, because of death, their home will need to be transferred, and how to have wills, and make title changes quicker, and also how to get young families to move back into those neighborhoods. 33 RESOLUTION 970684

I am aware of that. And I think it is a really important initiative, Councilwoman. I do think the overriding issue, though, is will these neighborhoods be places where people with choice will want to live. And the overriding issue is that Philadelphia is in the top two or three cities right now in the country in terms of population loss over the past seven years. And that if the data projections can be believed, and we don't know, sometime between 1991 and 1996, we lost 7 percent of our population. Now, St. Louis and Baltimore may have us beat by a few percentage points, depending on whose date you agree with, but that is a significant problem. And there is no short list of cities losing population at that level that are going to do well, I mean, in the future. You don't lose population like that and have a prosperous city. And so the broader problem is -- and I don't think any of us -- you know, I would love to see the day when someone would stand up and say, I'd 34 RESOLUTION 970684 like Philadelphia to gain another 300,000 people in population. I don't think we even have the imagination to say that at this point because we have come to accept this pattern of loss that has been so significant. And I think the broader problem is, if the city is only a place where the wealthy and the poor can live, right -- the wealthy can sort of privatize certain kinds of functions for themselves; the poor have no choice because we are not building low-income housing in Gladwynne. So if it only becomes that, what's the city's capacity, what's the city's capacity to survive? And I think that is a really, really poignant question that we have got to come to grips with as part of the strategy for both housing and economic growth in the city. It is just central to the city's survival. So I applaud what you are doing with that and with the land use issues. But I think it is within the context of this broader problem of how you attract and retain working populations. 35 RESOLUTION 970684

Councilwoman Tasco.

Thank you. Good morning. I often think about this in terms of the population loss. And I wonder what happens to the houses that they leave. Does someone move in? I guess my question is, does the 7 percent also reflect in the number of abandoned properties we have, or included in that 7 percent would be the number of elderly people who die and leave a home that the heirs don't want, and it becomes abandoned? Does that include the 7 percent? You say 7 percent of the people left. Maybe certain part of the 7 percent, maybe they died.

That's a great question. And I don't think we have a handle on the data. I think there is what Councilwoman Fernandez and others understand -- and I know Councilwoman Blackwell and Councilman Nutter and I have talked about this in different contexts -- we have a data problem here. We are not sure how to 36 RESOLUTION 970684 answer that question. Now, what we do know is that unlike, say, New York City, that over the last decade lost a million people, we do know there, a million new people came in. So it is sort sort of a wash, a new set of inmigrants came in. What we know is that that isn't happening here. And that in the broad sense, we have got a real problem of what to do about that, particularly because it happens in such a way that it makes service delivery inefficient. If you have got a city that you built for 2.1 or 2.5 million that now will maybe close out the century close to 1.4 to 1.3, depending on whose projections you believe, then you now have a city that just in terms of basic service delivery, the efficiency of that service delivery becomes a problem, let alone a problem with rates. It is also clear -- and I have spent my life trying to work on behalf of poor people and finance projects to help poor people, so I don't want to say that in this context. It is also clear, however, that people that are staying are people who are poor, and 37 RESOLUTION 970684 that the people that are leaving are middle-income people. And increasingly, middle-income people -- what used to be middle-income white, increasingly becoming middle-income African-American, increasingly. My sense is that the Year 2000 data will show that. I mean, anecdotally you can see it. You can see it if you just look in Montgomery County, what's happening. You can see it in the transformation of places like Yeadon. You can see what's happened over the last ten years. So I think the question is, how do you make those neighborhoods, how do you make those markets that people with choice want to stay in. And a piece of that around physical infrastructure is important. Because people buy a house because of the amenity structure, the schools and the like, but they also need to have some future expectation that the investment is not going to collapse. And if they can't have that future expectation, then they will make the rational decision to not invest. 38 RESOLUTION 970684 And what you have got right now in Philadelphia are a lot of people making rational -- at the household levels, rational decisions to not invest because they don't think they can get the value back out of their neighborhoods.

Councilwoman Fernandez has a question, and then I will come back. I just want to quickly ask the finance team to kind of start moving up. One of the members has to catch a plane. So I want them to be in place when ever we are ready. Councilwoman Fernandez and then Councilwoman Blackwell.

Jeremy, you mentioned the data problem. Again, it is my understanding that there is some very comprehensive work, Dennis Culhane doing it, that deals both that, coupled with the Philadelphia Snapshot Project that John Kromer has initiated, where perhaps by the end of the year we will for the first time have a citywide comprehensive picture, actually, and some solid numbers on how many homes are vacant and abandoned, how many residential, how many commercial 39 RESOLUTION 970684 structures, how many vacant lots there are. We have been going on figures based on, I think, '87 extrapolated data. So I think the data issue is being addressed, and perhaps in a very, very creative way. But I think to reinforce what you are saying, my sense is, we have had no policy, perhaps because data was missing, perhaps because data was missing, perhaps because our attention has been elsewhere, we have really had no clear policy on what do we do to preserve, retrain, retain, and attract people in middle-income neighborhoods in the city. Again, because I think we have had a lot of other problems that people have been looking at.

I agree. I think we have what seems to be a coherent Center City policy, and I think an important hospitality sector policy, which I think is important, I would support as a citizen. But I do not think we have a policy around those issues that you just talked about.

And we have 40 RESOLUTION 970684 had a policy driven by CDBG dollars of a policy for reinvestment in low-income neighborhoods.

But also our interpretation of it, I mean, there are other cities, for example, that use CDBG dollars differently, and do not just use CDBG dollars in the way, the categorical way, that we use them. So I would say yes, some of it is regulatory, some of it is not regulatory. We have made choices within the context of even the CDBG regulations.

But if you had specific recommendations about changes in CDBG dollar allocation, I would be interested in seeing them.

Yes. Yes. Councilwoman, let me give you an example of something that I think is really important that Councilwoman Blackwell is getting ready to do in her district, which is to create, is to use stimulus money -- is that what it is? -- stimulus money, and not CDBG money, because of the problems, because of the way we use CDBG money, to be able to rebuild some of the real estate markets 41 RESOLUTION 970684 there, and to not have to worry about whether the person's salary that they got is, you know, 80 percent or below. I can remember when we financed the 46th and Market project out in West Philadelphia, I can remember having people who had worked overtime that year be told -- we got an exemption, because it was stimulus money -- but before we got the exemption people being told you don't qualify because your income was up $1,000 over that. I mean, for God sake, this is who you want to keep in the city, right, a hard-working person who was working overtime to support their family. Because it now creeped up to 82 percent of median, or something. So it is the stimulus money that allows you to get, in this case, that would allow to get around some of those regulatory issues and think about rebuilding those markets, and not just think about the categorical allegation of money based on income.

Councilwoman Blackwell.

Thank you 42 RESOLUTION 970684 very much. Certainly I agree with the majority of what was said today. We did in the neighborhoods, as I am sure you know, in previous Housing administrations, have a policy that the CDBG dollars would go to preserve neighborhoods that were worth saving. We had that strategy. We have never had a strategy, an overall strategy -- and, in fact, I don't think we have it fully developed in Center City -- that would -- here in Center City, we have a focus on business districts, but we still don't have a handle on entertainment and on family affairs that could happen, or family entertainment that could happen in the evening, which we have to have in order to keep the city open to draw the people we need to even preserve Center City. So you know we haven't had it in our business strips and in our neighborhoods. Although there was a policy in previous Housing administrations to give money to those areas that were worth saving. And then the lower end would be knocked out. Albeit I think all of us agree that 43 RESOLUTION 970684 you can't pick and choose, you have got to try to help everybody, or your city still falls. Certainly, I hear what you say, and know all of those blocks in my district around that area and beyond, up to and including Southwest, where you have that aging population and where you have people who have a difficult time sustaining themselves due to the increase in real estate taxes, which we keep saying we're not doing, and we are equalizing, the increase in real estate taxes, increase -- there was a time you got a water bill 13 once or twice a year. Due to the increase in all your utilities, due to all the increases and a rising economy, where income doesn't go up -- everything else goes up, costs go up, but income and what folks get on their little Medicare and Medicaid, their income is stable, but everything else goes up. So it makes a real, real big difference when it comes to trying to sustain life in the neighborhoods and not enough, which is what concerns me about housing. Some of our quality of life bill, for example, that certainly puts the gun more on, as we 44 RESOLUTION 970684 are doing, I believe that the bill puts more regulations on people, but it doesn't put the -- it doesn't allow for the infrastructure to change, as with the School District. We all know that until we improve the schools, we are going to have a problem in the first place. But as long as we just institute more tests at the top, it is not going to change. A test doesn't educate anyone. A test is a measure of what you know. But we focus on testing at the top, on making laws at the top, but not improving the housing base, the economic base, the real base of where people are in our schools or in our neighborhoods. So certainly I applaud your interests in this issue and your life-long commitment to trying to do something to preserve and to improve life in the neighborhoods. Because there are so many people who want to stay, and want to survive, and don't know a way out. So certainly those of us who are in leadership positions need to do something. And I commend the Chair for this hearing. And also I see our friends from 45 RESOLUTION 970684 Philadelphia Neighborhood Housing Services, and they certainly do do a great job. We thank you for what you have been doing out West.

They will be up shortly. Gentlemen, thank you very much. We appreciate it. Along with any of these kinds of ideas, there is still always the question of, how do you pay for it and how do you do it. The next panel coming up will talk about alternative financing methods, as well as the legal issues that go along with that. Please identify yourselves for the record and proceed.

I am Malcolmn Pryor, Pryor, McClendon, Counts & Company.

My name is Ralph Saggiamo. I am with Paine Webber here in Philadelphia.

Joan Stern; Blank, Rome, Comisky & McCauley, Philadelphia.

Please proceed.

I guess I will 46 RESOLUTION 970684 start off. We were presented with the interesting question from Councilman Nutter a while ago about sources of funding this particular program, and we were given particular guidelines. You can argue that they were almost impossible guidelines, in that the sources of funding had to be stable, had to be predictable, and had to attempt to have no adverse affect upon the city's current General Fund financings. So I likened it to kind of spinning gold out of straw.

The impossibility of the request was commensurate with the team that was put together. We expect great things from you.

Well, we greatly appreciate that faith in us. One of the things that hit the table first, for a number of reasons, that the Council member approached us on, is the concept of securitization. We had recently been through a situation with the city and the School District for the tax lien securitization. And it is almost kind 47 RESOLUTION 970684 of like a buzz phrase now going thoughout political subdivisions of New York City and other cities looking at taking, segregating out from their general revenue base particular sources of revenues, insulating those sources of revenues, and using just those sources of revenues in order to finance long-term capital improvements through the issuance of bonds. In essence, the way that it would work is that there would be an identified, historically predictable, historically provable source of revenues, which would be completely taken out of the General Fund, or wherever else it would go into the city's annual budget, and used specifically to secure a dead issuance, the proceeds of which would then be used for this particular project. In theory, that's the way a securitization works. Now, the potential benefits -- and again I have to underline the word "potential" here -- the potential benefits of that securitization is that, if done properly, with the right source of security, with the right amount of time and explanation to the rating the agency, the 48 RESOLUTION 970684 sum of the parts can equal more than the whole. Meaning that the benefits of segregation and insulation could generate greater revenues than the potential adverse effect of dropping it out of the General Fund. Now, I issued a lot of if's there. And clearly there are a number of issues that have to be addressed, evaluated, looked at from a number of points of view, discussed with the rating agencies. But one of the things we did was to break out certain sources of revenues based upon the city's fiscal '97 audits. And just to use some round numbers, the Amusement Tax, for example, generates $9.2 million a year in revenues to the General Fund. It doesn't seem like that's a large number relative to the size of the overall city budget. If you could show -- and again, all the capital I if's -- if you could show that that is a historic number, that is it is verifiable, that you could prove to the rating agencies that you have great expectation that it will always be approximately at that level, you would be able to 49 RESOLUTION 970684 issue up to $90 million worth of bonds, ratable bonds, off of that number. In essence, that's an example of an asset securitization. Clearly there needs to be, as Councilman Nutter knows, we have discussed extensively, a lot of further research and analysis as it relates to those revenue sources and also communication negotiation with rating agencies. And there are also a number of legal issues. In order to do that insulation, in order to do that securitization, as I believe Ms. Stern will talk about, there have to be legislation adopted both at this local level and, depending on the revenue source, probably at the level of Commonwealth, also.

Mr. Pryor.

Yes. The approach that was our assignment with this task was to take a look at those inflows coming into the city that aren't necessarily General Fund kind of flows, that are already in the budget in terms of cash flows, and how do you take advantage of them. What I handed out, basically, was 50 RESOLUTION 970684 looking at the budget outlays of HUD for the period of '97 through '99 in terms of what the actuals are and what they seem to be, the estimates for Fiscal '98 and Fiscal '99. And it is significant to note those areas that are increasing with these HUD budget outlays, and to take a look at how you have to qualify, I think, with future planning, to be consistent with the philosophical bend of HUD these days. The significance of that really gets, again, to what Ralph started to talk about, being able to securitize those revenue streams. The city currently uses revenue streams, say, from Section 108, to do financings, and then it gets to the issue of what prior groups have said and what we recognize is really allocation of those revenue streams for projects within the city, and start to emphasize those that benefit neighborhoods. It is all related together to develop jobs. But we do need to take a look at how to get money to the infrastructure of those neighborhoods that need them. 51 RESOLUTION 970684 The next basic approach is really looking at some of the specifics, the kind of projects that are there, and some of the line items with the HUD allocations. If we take a look, for example, at the Home fund lines, we have had the experience of working in Chicago, for example, to use those home funds to provide some of the basically deep-discounted securitization of working on developing assisted-living alternatives. It is a housing answer to the problem of how you provide for the elderly. It is happening on its own in the private sector and suburban neighborhoods. But when you get into urban areas, where income levels are much less, the private model just doesn't work. So there needs to be some recognition that housing is a way to solve one of those problems of people, after they're elderly, beginning to need different kind of housing. So how do you really not take them out of the neighborhoods where they want to be? So that's a reallocation, perhaps, of 52 RESOLUTION 970684 one of the line items that the city already gets, that can really be a tremendous benefit to the city. When we take a look specifically at the Section 108 loans and, really, what they can do, it is considered new, and it is newly authorized by HUD, to allow these funds to be securitized into a bond issue. The significance then of a bond issue is that you really have the discipline of a bond financing to achieve those things that are usually done on a direct management alternative to city agencies. Now, that imposes another level of effort and work and focus on these agencies to comply with some of the federal programs. But it really has the benefit of saying that people really have to comply with what the bond documents say, and that it is a long-term solution for the problem. That once that priority is made and those commitments are made, the constituency that benefits really has the security of knowing that that fund will be in place over a long period of 53 RESOLUTION 970684 time. Thank you.

Ms. Stern, you are hitting cleanup, to figure it all out and to tell us what we can do and what key can't do.

Well, now that Ralph and Malcolmn have told you how we can finance the program, it is my job to tell you what legally we have to do to get the tools in order to pay the bonds back. As you know, because of the way the First-class City Home Rule Act is written, the powers with respect to indebtedness and taxation are reserved to the legislature, the General Assembly of the Commonwealth. And Council can only legislate on the subjects of taxation and debt within the limits of authorization granted by the state legislature. Now, there is ample precedent in Pennsylvania for doing special taxes that are dedicated to special purposes and for authorizing debt to be paid back by special taxes that are dedicated and pledged to those bonds. And in my testimony, which I have 54 RESOLUTION 970684 handed up for the record, I have given examples that I think are most familiar to our region, which are the PICA tax and the PICA bonds, and SEPTA, which receives, through the dedicated taxes to the Public Transportation Assistance Fund, a stream of revenue it can use to pay its bonds back that it issues for the SEPTA Capital Program. After I completed the testimony, I realized that the most common dedicated tax in the Commonwealth is Gasoline Tax, Liquid Fuels Taxes, which, in the Constitution, are dedicated to highway construction and maintenance. And the Commonwealth is authorized to issue bonds paid for from the Motor License Fund, which is where those taxes go, except for those that are distributed to the counties, precisely for the highway program. The Public Transportation Assistance Fund, which we created in the Act for SEPTA, is 21 modeled on that. And we dedicate certain state 22 taxes, percentage of sales tax, to that fund to 23 create a capital stream that can be leveraged by 24 mass transit entities around the state to fund their 25 capital programs. 55 RESOLUTION 970684 By the same token, PICA was created and given a dedicated tax. And Council chose from a menu of taxes that it could have dedicated for PICA, chose a tax with a very good history of collectability and natural growth in order to make the PICA bonds very marketable. And in that bill we were able to get some replacement revenue for that because that bill 10 also provided the sales tax for the city. So there are examples, there are legislative models. But it will require, in order to get the ability to dedicate the stream in a way that makes it legally secured for bondholders and able to get an investment grade rating or better, you must be able to create and insulate the collection of the revenue stream that you are dedicating. You must be authorized to pledge it and grant a security interest for the benefit of the bondholders. You must be able to promise not to repeal it while the bonds are outstanding. And all of those elements must be contained in legislation passed by the General 56 RESOLUTION 970684 Assembly that gives the Council the authority to then choose the tools from the legislation and to create an ordinance that will finance the program. Thank you.

Thank you very much, Ms. Stern. Let me just ask you a couple of quick questions, just on those points, to make sure that our record is as clear as possible. When you talk about taxes being dedicated, one, we are only talking about taxes that already exist; we are not talking about imposing any new taxes or creating any new taxes. Is that correct?

I think in this model, we are simply talking about a tax which we are already authorized to levy. And what we want to be able to do is to be allowed to pledge it and dedicate it for a particular purpose.

And in that context, to follow up on a point made by Mr. Saggiamo, if you were to do that, whether it is the Amusement Tax, or we have also had discussions 57 RESOLUTION 970684 about the Real Estate Transfer Tax, or any other tax, the tax already exists, it generates whatever it generates -- I think in the current Fiscal Year, for instance, the Real Estate Transfer Tax is estimated at, I believe, a little over $60 million, but historically it has been somewhere more in the mid 40's to about '50s. In this scenario, you could look at that tax and say, over the last ten years, it has been no lower than this, it has been as high as that, but it gets to your test of it is stable, it is reliable, it is fairly consistent. And if you were to take away 10 to 15 million dollars and segregate it, the first danger is that you just created a 10 to 15 million dollars hole in your budget. But Mr. Saggiamo's point is that you could take that money away. It would then allow you to float bonds at a level of possibly a couple hundred million dollars. The use of those bonds and the proceeds and the work at the end of that process could, in fact, generate more to the city's General Fund than the 10 or 15 million dollars that you 58 RESOLUTION 970684 segregated out in the first place. I mean, is that the essence of the model?

In essence, that's exactly the argument. You need to set up, prove, and develop for the rating agencies. And, unfortunately, they are the final arbiter here as to the effect it is going to have on your General Fund.

And lastly, I guess, for my question for this panel, and just to ask Mr. Pryor, you could proceed with this model, and also utilize securitization of, in your testimony, the HUD 108 loans, which would generate additional dollars?

Yes. That would give you a budget to start with a lump sum, to go ahead and finance the construction of a project of your definition. But it is a better program to set up from the start if all the construction fund is funded, and then you can let the contracts systematically, and just ensure that the project will be completed, as opposed to the vagary of 59 RESOLUTION 970684 annual appropriation.

One last question for Ms. Stern. Again, in this kind of model -- and we most recently, I guess, saw some even more creative variation on the theme with the airport terminal financing, in order to speed up production and construction and remove as many restraints as possible -- could this program be structured in such a way, with either an existing agency or a created agency for these purposes, that would relieve us of many of the burdens and constraints that we currently face either with the use of city capital dollars or even CDBG dollars? Do we create for ourselves some additional flexibility in types of projects and programs, as well as speed of use of those dollars?

I think it depends on the components of the projects that are being financed. When we are talking about infrastructure elements that are pure public property improvements, it would be extremely difficult, again without legislation, to fast track construction of pure public infrastructure. 60 RESOLUTION 970684 Other kinds of projects that are part of some development initiative are projects that entities like the Philadelphia Authority for Industrial Development were designed to finance and to streamline. So I think you have to go project by project through the purpose, the ownership, and the control to determine what legal structure it is going to govern and whether or not -- if we are looking for legislation, any way we wanted to look for legislation that gives us some more flexibility. When we were doing the whole package of legislation for public transportation, we did a new governance structure statute for SEPTA, and we built into that legislation, because of the immense amounts of property they own that's capable of commercial development around the stations, the ability for SEPTA to do something called the finding of special opportunity, which would allow them to enter into a competitive process to select a developer to partner with to do commercial and retail and economic development with real estate that they owned by virtue of having a station. 61 RESOLUTION 970684 So, again, there is a legislative model for that sort of thing, too.

Okay. Any other questions? Thank you very much. I appreciate it. Our next panel is Farah Jiminez, Allison Kelsey, and Bernard Hawkins. Please identify yourselves for the record and proceed.

Farah Jiminez, Executive Director of Mt. Airy USA.

I am Allison Kelsey, with the Preservation Alliance.

Bernard Hawkins, Philadelphia Neighborhood Housing Services.

Please proceed.

I want to thank you for this opportunity to come and talk about the needs of one of Philadelphia's gateway communities. And identified as a gateway community because it sits only about to miles away from the county border. And we neighbor communities like 62 RESOLUTION 970684 Cheltenham, Jenkintown Elkins Park, Plymouth Meeting. And I cite those communities because, in essence, what happens in places like Mt. Airy, where you have got the demographics of a presumably wealthy community, where the average, the median household income in Mt. Airy is about $57,000, you have got people who leave our commercial district to go shop elsewhere. And they go to Plymouth Meeting, and they go to Jenkintown to do not only their clothing shopping, but also their grocery shopping. One of the reasons I wanted to come and testify is that my organization was founded about years ago with the intent of developing the 16 commercial district, which is Germantown Avenue. 17 It is about two-and-a-half miles 18 long. And Germantown Avenue at that time was quite 19 blighted and full of vacant commercial properties. 20 My organization was founded, we rehabbed several properties, in 1997 hired its first executive director. I am here to talk about the fact that there is a great deal of potential in our commercial corridor, even though right now it serves primarily 63 RESOLUTION 970684 as a services location. We have got a lot of historic churches, dare care centers, hair and nail salons, real estate offices, and funeral homes. What we don't have are the types of stores where we can capture the dollars of our community. Instead, in our community, we all seem to leave and shop elsewhere. And it is important, I think, as we talk about the revitalization, the strengthening of Philadelphia, that we begin to address needs of commercial districts and communities that traditionally are not eligible for CDBG or income-restricted types of funding and financing. I just want to talk to you a little bit about some of the current strategies in place in Mt. Airy in terms of addressing that need. My organization is a community-based development corporation. And what it does is, it acquires and rehabs commercial buildings, and then we hold them open and lease them out ultimately and/or sell them to established businesses. As you all know, that doesn't happen with great frequency for many reasons. 64 RESOLUTION 970684 One is that to do development work, you need, in a struggling commercial district, you ultimately need subsidy. Because what happened was that people left the buildings in debilitated states. And so the market doesn't quite work when you try and invest dollars and rent out the spaces at the market level. But also because it is Mt. Airy and the demographics are such, we are placed out often of traditional funding sources and other types of financing. So often we have to dig deep into either our own pockets or we have to find an institution that is willing to finance our deals. And we have been able to do that sometimes with some of our large institutions, like the Lutheran Theological Seminary. Similarly, when it comes to business development work, we also have to reach out to foundations and other entities who will allow us to stretch the numbers a bit, and will see need based on a smaller area than is traditionally accepted. In other words, if you take Mt. Airy 65 RESOLUTION 970684 as a whole and you take the skip code, you have got the third wealthiest zip code in the City of Philadelphia. However, if you take sections of census track blocks within Mt. Airy, and you look at the demographics there, then you have got places where people are living at 80 percent of median within the City of Philadelphia, and some places where people are living below 50 percent of median. Which suggests that even though, when you take the whole area together, it might be wealthy, when you take it within sections, there is great, great need.

Similarly with our housing development work, how that ends up dictating how we do housing development is that we can only focus in areas that would qualify for those traditional sources of funding, unless we go to outside sources or subsidize it, which we have as an agency, ourselves, expecting no return, but really a loss of our investment in the rehab of a building. Where we would like to see the city, in terms of helping us out in addressing some of these challenges that we have -- because one of the 66 RESOLUTION 970684 realities, too, is that Mt. Airy is a beautiful place. I am sure all of you have been there. With rolling hills and lots of land. It is a great place to raise your kid. We have got great public schools. And people live there for two reasons. One, some people are committed to the ideology of the area, where people are committed to diversity and integration. The other reason people live there, and I hear this a lot, is because they have to. In other words, they work for the City of Philadelphia, and there is a residency requirement, so that's why they live there. So we end up losing people if they are not committed to living here for those reasons. So how do we keep them from moving out? And one of the things I would like to see the city help us do is help fund some streetscape improvements, which will help create the sense among our current businesses, as well as outside businesses, that we are doing direct mailing campaigns to, in trying to attract them to Germantown Avenue, by giving the sense that the city is committed to this area, that it is willing to put 67 RESOLUTION 970684 in millions of dollars that are necessary to improve our sidewalks which are torn up, to plug up the potholes, to add pedestrian lighting, which adds some character, and to help us with some facade improvement monies so that the current business owners who are struggling can improve their facades and create a sense of safety and a pleasant walking environment. The other is to make available loan monies at a lower level so that we can also assist our small businesses and also create another form of incentive to people who might be interested in siting their business in Mt. Airy by giving them lower interest rates on loans for their businesses. Similarly, there has been some talk, there was an article in the Philadelphia Business Journal, about tax increment financing and how that can be used as a tool to help subsidize development. And that would be an excellent vehicle, I would think, in a community like Mt. Airy, where we are taking properties that aren't at moment generating any tax revenue, and you have an opportunity to develop something that can be filled 68 RESOLUTION 970684 with the business that will not only generate real estate tax, but now we are also talking about gross receipts. And with the tax increment financing, we would be able to subsidize those developments and also be able to address more vacant properties at a time than we are able to do now, given the limited funding available within the city and otherwise. And, furthermore, in the area of housing development, in Mt. Airy we have these wonderful institutions, great grand homes. And a lot of people would love to move into them, but we can't afford to rehab them because the amount of subsidy currently available within the city under programs like the housing rehabilitation program, that the Redevelopment Authority administers, limits the amount of subsidy to $25,000. Well, when you have a home that needs about $100,000 rehab because there is 4,000 square feet, it is impossible to do any kind of redevelopment, and so those homes, unfortunately, sit vacant.

Okay. Thank you. You have to give us some sign. 69 RESOLUTION 970684 Councilwoman Fernandez.

As you were talking, I was listening and also reviewing your materials here. Yours is a very attractive brochure, I think, that really sells some of the assets of Mt. Airy, and then some of your background materials. Certainly Mt. Airy would be one of the neighborhoods that really -- and you have broadly defined Mt. Airy -- to really a very strong middle-income neighborhood in the city that does need to be supported. In addition to some of the stuff you are doing, I would also add some of the things that are happening in the cities around the country regarding traffic calming, to make neighborhoods much more citizen, resident, child friendly, may be of interest for some of the neighborhoods in Mt. Airy. In fact, New York, the Mayor of New York, has committed $50 million over several years to help neighborhoods put in speed humps and do other kinds of things that naturally has traffic slow down in neighborhoods, particularly around 70 RESOLUTION 970684 schools and rec centers and libraries, or areas where there might be a lot of elderly people crossing the street. I think in England, speed humps, not bumps, but humps are referred to as sleeping policemen, because they are there hours a day, 8 and people must slow down. And they get this 9 physical signal to slow down around schools and 10 libraries and rec centers and crossing. 11 So I would think that's a fairly 12 cost-effective way for a neighborhood like Mt. Airy 13 to look at how to enhance its friendliness as a 14 place where people want to move and raise their 15 families. 16

Well, I always like to 17 liken the effects of streetscape improvements to 18 what happened with Old City. 19 I used for live in Old City, on Bank 20 Street. And I remember sufferings through all the 21 redevelopment work, which I think took about five 22 years. 23 But as that was going on, I saw 24 people move in and businesses starts to open because there was a sense that the city was committed to 71 RESOLUTION 970684 this area and that their investment dollars, monies being invested there. And they also did something similar in terms of addressing that kind of calming effect and making people slowing down by creating those brick crosswalks, and also adding trees and adding areas where people can park. And all that has a wonderful effect in terms of tying a neighborhood together, showing that there is investment, and also making it appealing and safe.

And also in an area like Mt. Airy, with so many trees, their having lighting that's designed for pedestrians, rather than motor vehicles, so that the sidewalk and area is lit, makes a dig difference, too.

Absolutely.

Okay. You are next.

I would like to thank you also for the opportunity to talk a little bit. I am from the Preservation Alliance for Greater Philadelphia. I am the Special Projects 72 RESOLUTION 970684 Administrator. And I have a couple of special projects going on, one of which I have been working with Farah and with Bernard about in Germantown. But this morning I guess I am here to share with you a little bit about a kind of micro-level public/private cooperation in the city neighborhood that the Alliance is involved with, the 1500 block of South Street, which is the Royal Theater, historic theater. In March of year, the Preservation Alliance purchased the theater at 16th and South, is where it is. In fact, we bought all the property belonging to the property owner on that block. And the total price was about $370,000. The Royal is truly the Alliance's first acquisition of historic property. And what we found is that although this theater is located just two blocks west of the Avenue of the Arts and a couple of blocks south of the sort of southern boundary of the Center City District, it really hasn't benefited from the gains that Center City has made. There are scattered small shops and offices, but they are not thriving due to a certain 73 RESOLUTION 970684 amount of disinvestment. The theater itself attracted us. It opened in 1920 as a moving picture house, as a movie theater. Its architect was a Philadelphia architect, Frank Hahn, who has also done buildings you have seen, the Gershman Y and the Warwick Hotel. What was unusual for the time about this theater was that it was marketed specifically for an African-American audience. And, in fact, in this theater African-Americans could sit wherever they wished. And also the staff of the theater was an all-African-American staff, including projectionists. And they started the Colored Motion Picture Operator's Union, which is pretty interesting. Soon after it opened, the Royal became really the city's foremost African-American venue for both films and live performances, with real headline acts like Fats Waller and Pearl Bailey, and Bessie Smith. So it has a very rich history. But despite its early popularity, it 74 RESOLUTION 970684 closed in 1970 and has remained vacant since. And it was placed on the National Register of Historic Places and on the Philadelphia Register in around 1978. So believing that the theater's reuse was really key to neighborhood revitalization, the South of South Neighborhood Association, SOSNA, attempted for several years to find a sympathetic purchaser for the building. They got a predevelopment grant from the Commerce Department in 1977 to try to identify potential users and occupants. But without site control, they really weren't able to attract a developer. So SOSNA asked the Preservation Alliance to try to step in and work with our foundation and political contacts in order to acquire the property and act as a steward for it. And what we believed then and now is that the transformation of the Sterilick Building and the buildings surrounding it that we also purchased, into a functioning facility would really have a very positive impact on what is a very multi-racial, very mixed-income neighborhood. 75 RESOLUTION 970684 And not just in real terms, in improving the property, but also symbolically. But being nonprofit, the Alliance really wasn't in the business, and we didn't have stores of catch around to finance something like this. We were fortunate to receive assistance from the city, many city agencies, including Councilwoman Verna, the Historical Commission, and the Redevelopment Authority, and L & I. And in the end we got a $160,000 grant from the Commerce Department's Economic Stimulus Program to buy the theater itself. But to acquire the remaining buildings, we were fortunate to be loaned from an anonymous foundation a significant sum of money at no interest rate.

I'm sorry; what was their name, again?

I am sworn to secrecy. Otherwise, everyone will be calling them up, I think, is probably the rationale.

You are right.

At any rate, the 76 RESOLUTION 970684 Alliance, we don't intend to be the developer of the property, but we are holding it, we are stabilizing it, we are maintaining the buildings while we work with SOSNA and their Royal Theater Committee to identify a new use agreeable to the neighborhood, as well as appropriate to the building. Our idea generally is to have an arts-and-culture-related use. But in the interim, our caring costs are about $3500 a month, which is not insignificant for a nonprofit. But the good news is that over the past few months, that we have been involved with the neighborhood, and it has really created a certain amount of positive activity on the street. Several property owners have done exterior renovations, a couple of new businesses have moved in, one other has decided to expand. I mean, clearly, some of these things may have been in the pipeline. But we have heard from SOSNA and from real estate agents in the neighborhood that are choosing to come in has really influenced some property owners in a positive way to see, to kind of wait and see, rather than abandon 77 RESOLUTION 970684 the area. And in fact, Tara Realty, and I included this in the handout, have began including in their ads, their print ads, "Across the street from the Royal Theater," which was not a draw, I think, prior to our acquiring the building. But our feeling is that we really, clearly, we can't act alone. And in case we didn't act alone, we did receive some city funds. But what we need is assistance with the types of problems that are beyond our expertise and beyond our funding capacity. For example, we did have a prospect for the Royal who decided against moving to the site to a large part due to the state of the street. The organization felt that the sot of lumpy sidewalks, the scraggly trees, the abandoned lots, the busted curbs would not be attractive to their patrons. And you can't really argue with that. To be sure, not every organization can be an urban pioneer. But what this resolution 24 describes is just the sort of thing that would demonstrate the city's concern for the residents, 78 RESOLUTION 970684 for the neighborhood in a real tangible and very immediate way, and would be complementary to the other things that are going on that are much greater investments in the city, like the Avenue of the Arts. So, in fact, you know, our involvement goes beyond buying the property. We are feeling that historic preservation really is neighborhood preservation. We are working with SOSNA on a couple of other things, including codifying their vision of the neighborhood through designing streetscape guidelines and building guidelines to help development for Broad through the Royal area. We are also helping them with creating a how-to manual for facade improvements, for financing, for obtaining insurance. And to accomplish these goals, we would be looking to the city also for -- in cooperation with a number of city agencies and other nonprofits. So in closing, the Preservation Alliance very much supports this resolution because we have learned through the experiences with the 79 RESOLUTION 970684 Royal thus far that modest sums of money can really leverage significant private investment in the city neighborhoods. We accepted SOSNA's invitation to get involved not only because of the importance of the theater, but also because we believe that historic buildings provide communities with a great sense of place. And we also know that preserving a building alone, while the surrounding neighborhood is going to pieces, is really not a productive use of everyone's funds or time. There are a lot of people in the neighborhood who have very fond memories of attending theater, of working there. You know, we really don't perceive the job to be complete with the building acquisition.

We are looking for the city to provide leadership and an ongoing commitment, not just fixing something and leaving, and creating problem-solving to help this neighborhood and others.

Mr. Hawkins, I know you here with Ms. Stovall. And she may have 80 RESOLUTION 970684 some things as well. So Ms. Stovall would you come up, also.

Bernard Hawkins, Neighborhood Housing Services. And thank you for having us here today. And thanks for your complementary remarks about the organization. I will endeavor not to repeat other things that have been said by the previous testimony. Philadelphia Neighborhood Housing Services has a mission of revitalizing targeted neighborhoods. And in doing so, we provide resources to those communities that ordinarily might not be available. They include city subsidy, but they also involve private reinvestment, and we also attempt to stimulate homeowner reinvestment through our programming. Our programs are focused towards services to existing homeowners. And I think that makes us fairly unique within the city structure. And also we attempt to do the kinds of repairs that are being talked about by this resolution, basically infrastructure repairs, 81 RESOLUTION 970684 repairs to the exterior fronts of the properties, repairs that will in some way enhance the beauty and attractiveness of the neighborhoods to restore confidence of the people who live there and to in some way enhance the attractiveness of the community to people who might consider residing in those communities. With the Community improvements Program that we administer through the CDBG program, we leverage homeowner funds back into those projects. Those projects are targeted to people at or below 80 percent of the median. But those individuals who are homeowners, have some capacity to contribute to the projects that we provide -- and they do contribute at 20, 30, 50 percent level to the projects that we provide them. We also administer the Model Blocks program that was talked about earlier, working with Greater Germantown Housing Development Corporation, APM, and also with -- what's the third group? Germantown APM. And I will get to it later. But we work with those groups as an intermediary. We have an expertise in providing 82 RESOLUTION 970684 these comprehensive community improvement, model block services. And consequently they have expertise in other areas of development. We come in as a consultant in many ways, provide our services on targeted blocks and communities served by other CDCs. We also have available to us a revolving loan fund. This is a privately funded loan fund that makes available funds to unbankable and low-income homeowners for home repair. And we also do a limited number of first mortgages with that program. We involve ourselves in strategic vacant property rehabilitation as part of our comprehensive programming to preserve neighborhoods. If there is a block that has one or two vacants, we will attempt to acquire and rehabilitate that vacant property as a way of preserving the block and stabilizing the block on the whole. So with these homeowner services and with some of the other programs that we can provide, Philadelphia Neighborhood Housing Services, I think, 83 RESOLUTION 970684 is at the core of many of the kinds of improvements that are being talked about in this resolution, and also some of the improvements that are needed to preserve neighborhoods. We try to leverage private reinvestment into all our activities. We are presently involved with the Nationwide Insurance Company. And with subsidy provided by Nationwide Insurance Company, we are providing a major system repair subsidy to existing eligible homeowners, up to 50 percent of the cost of the project for electrical and plumbing repair systems. This encourages homeowners to reinvest in their properties, and also provides a means for doing the kinds of repairs that would ordinarily be ignored. We think these programs are valuable, in that they rebuild the structure of the properties, the major systems of the properties, and make them viable on the market once the existing homeowners either move on or want to sell their properties. So we think that's a very valuable program.

And we are looking to leverage more 84 RESOLUTION 970684 property reinvestment, possibly from the utility companies in the City of Philadelphia. Because these programs also advance the systems that homeowners use for their utility. We are also working with First Union Bank in new loan product that will be purchased from the bank on the secondary market. Again, it is a low-interest loan program, has flexible rates in terms of existing low-income homeowners in targeted neighborhoods. I am going to pretty much stop there, but just to address a couple of issues as it relates to the resolution. Philadelphia Neighborhood Housing Services does sidewalk and curb repairs. We do porch repairs, steps, handrails, and facade treatments. But we always leverage homeowner reinvestment back into those programs. And I will say to you that that's a way of stretching the available dollars, and consider doing that in some of these programs. I will also indicate that we need to do more to help families between 80 and 120 percent of median. 85 RESOLUTION 970684 A young college family, college graduates, making $20,000 a year, with one child with, would not qualify for a subsidy. And yet they are struggling to make it. And if we don't do things to encourage them to buy properties and remain in the City of Philadelphia, we will be dismissing, basically, those people who will preserve the city and grow the city. So I think we really need to do more with people above 80 percent of the median. Sensitive code enforcement is a key issue. I think another key issue is rezoning. There is a lot of archaic zoning issues in the City of Philadelphia and the key issue for us in preserving our neighborhoods also is property conversions, conversions of single-family properties to multi-family units, which tends to destroy the fabric of the community. And something needs to be done to stop that from going on. Thank you.

Thank you very much. Let me start the way this has finished. I want to thank all the panelists for their testimony. 86 RESOLUTION 970684 Mr. Hawkins, can you tell us a little bit more about the scope of service that you are able to provide, the level of funding that you get? And aren't you restricted by way of the program in terms of what areas you can cover? First, you don't have enough money to take care of the whole city. But there are also other restraints, and I think you have recently expanded.

We provide services for facade treatments which are funded by Community Development Block Grants. Through that program, we can provide, subsidize step and sidewalk replacement, handrails, porch repairs, wall repairs, main roof. We also do a limited amount of weatherization, which would include new furnaces, main roof under our Community Improvements Program and also under the Model Block Program. These are CDBG funded, so we are restricted to 80 percent of median income for eligible homeowners, and consequently restricted by neighborhood.

And you are 87 RESOLUTION 970684 presently primarily working with the Model Block Program in what areas?

We are working in Carol Park, West Philadelphia. We also work in Cobbs Creek in West Philadelphia, both for the historic programs that we serve by Philadelphia Neighborhood Housing Services in Fernrock, Ogontz, Belfield, and Overbrook. We are continuing to provide our lending programs there because we are investing in those communities long-term. With the Model Block Program, where we work with existing community groups, we are working with the Frankford Group Ministries, the group I forgot about earlier, Greater Germantown Housing Development Corporation, and also APM, which is to service targeted blocks in their communities.

And, lastly, you have mentioned on a couple of occasions the private reinvestment or the homeowner covers some of the costs. I am primarily familiar with, pretty much, the 70/30 model. You pay 70 percent, the homeowner pays 30 percent. Can you share with us what some of 88 RESOLUTION 970684 the reaction is to that in some neighborhoods? Are people resistant to deal with the 30 percent, or do they look at it as 30 percent beats 100 percent every day, or...

I think generally speaking those who have the capacity respond very, very well. Those who don't have the capacity to come up with their share of the costs, have an adverse reaction to that. But I think, generally speaking, people take ownership of a project when they are putting their own money out. When someone is doing something for them, they may not value it as much as they will when their money is being put in. When they put their 20, 30, 50 percent into the project, that's their project, they take ownership of it, and they want a quality service.

Okay. And for Ms. Kelsey, you made the point that with the Royal project, it sounded like almost the mere fact that the Preservation Alliance bought the building, in conjunction or utilizing your own funds and other people's funds, and the anonymous donor funds, when 89 RESOLUTION 970684 you are able to capture the block and get it away from the previous owner, and could demonstrate some capacity to do something with it, nothing physical about the property may have changed in a relatively short period of time, but the market and the private sector anticipating or perceiving change coming, the ads from the realtor, that, you know, now you are across the street from the Royal, even though if you went down to the Royal today, you might say, "Do I want to be across the street from that," but it seems to me that what happens in the private market, the moment they see that there is any activity, or any prospect of something going on, people are always trying to anticipate the wave and want to get in early on. And we have seen that happen in a couple of different places. But that it's not enough to just fix that building. Because whether it is the curb and sidewalk on that property or across the street or other vacants in and around that area, if you don't do it in a comprehensive fashion, you may have fixed up a very nice building, but you haven't made the area more inviting. I mean, is that your experience? 90 RESOLUTION 970684

Exactly. You summarized it exactly. I mean, we found that, yes, the building looks exactly as it did when we acquired it. We have some plans, depending on how long it takes to turn it over to a developer, to do some improvements with the outside. But it is such a large part of the block, that it really makes a difference. Had we only been involved with one single rowhouse, I'm not really sure that -- I am certainly actually quite sure that it wouldn't really have had the same sort of impact. But given that there was such an affinity for this building, and people had been very disgusted that it was literally, you know, sort of falling down, that, you know, there was a great deal of hope generated by the fact that we were able to come in and do something about it. And, you know, I think if a year goes by and nothing has happened, and we haven't been able to make a sale or make serious changes or deliver on any of the things that we are trying to accomplish, which address the blocks that surround 91 RESOLUTION 970684 the area, not just the building itself, then, you know, it would be legitimate for people to not to continue trying to make investment. But it is a very spotty area. There are people that have long before this made serious improvements to the property, and then there are abandoned lots. And it is quite a mix.

Ms. Jiminez, the one thing I took, there were a lot of things in your testimony that were certainly important, but when you have a place like Mt. Airy being discussed in, I guess, the two or three faces of a place like Mt. Airy, what people believe it may be and then what is the reality of some parts of it, are the same kinds of things that happen when someone might mention Wynnefield or Overbrook or West Oak Lane. I mean, there is a general perception that those neighborhoods, while they are in very very good shape, and they don't really need anything, because we really have to focus our resources on the places that are visibly physically literally falling apart. And if anything ever happens in some of those neighborhoods, we will go and deal with it at that point. Many of us don't 92 RESOLUTION 970684 want to wait that long. And there are parts of Mt. Airy, Wynnefield, Germantown, Overbrook, and a number of other neighborhoods, that I might not have that much experience with, that have their pockets, and that kind of deterioration and decay can move out. Is that what you are trying to address through Mt. Airy USA?

Our thought is that, if we were to address the commercial district and bring people back to the Avenue to do their shopping there, and return to a sense of safety by having some activities on the Avenue, that you will be able to start suring up some of our surrounding housing. We have got a market that's deep enough right now with our housing that sometimes private developers find it worthwhile to come in and rehab the properties themselves, and then turn around and sell them. We are also trying to avoid the scenario where these houses are so large and the subsidies so small that we end up with duplexes, as opposed to single-family homes. But that is one of the biggest problems that we have. 93 RESOLUTION 970684 And if you ask people walking down the street in Mt. Airy, where do you do your food shopping, they will tell you Flourtown. Or if they ask you, where do you rent your video, often they will tell you Jenkintown. Or where do they have brunch, they will go to Elkins Park. They just aren't shopping anymore within Mt. Airy. And they don't view it as their community because the commercial district is not a vital part of it anymore. And one of the scariest things for us is just that a lot of our community now, since over the last seven years, we have lost 10 percent of the population, and we are continuing to lose people. And part of the fear is that we are only going to end up with people who have to live there, whether it be because they are stuck with their real estate or because they work for the city and have to choose a community in which to live. So we are hoping with the commercial district revitalization, that we are going to create a thriving community, people will choose to live there and return from the suburbs. And anecdotally, I did have one call 94 RESOLUTION 970684 once where someone was asking me to put her in contact with a realtor, because her church community in Mt. Airy was so great, she decided she wanted to move back to the city. So there is potential, particularly if one is a suburbanite, there still is that feel within Mt. Airy, as well.

Miss Stovall, can you share some of your experience. I know you work right at the front lines and the ground level with much of what we are talking about here today. Please identify yourself for the record.

I work with Philadelphia Neighborhood Housing Services. One of the things that I really wanted to make clear is that all of our neighborhoods in Philadelphia are under some type of transition or another. It is clear that we do need to revitalize our communities. One of the resources that Philadelphia Neighborhood Housing Services has is model blocks and community improvements. I speak with 50 to 75 residents per week. And it is clear that people in our 95 RESOLUTION 970684 communities recognize that the day of free opportunities is not here anymore. So what we need to make residents understand, through organizing them, is to understand that they need to take their responsibility to do their part in revitalizing the community. We can do that through our community improvement program, through our copay projects. And this is something that we really need. And if we slowly extend this to residents who meet within our economic needs, and also those who don't. Because one of the things that I find, that we find a lot of young couples, who are attempting to move into the communities, they have problems because there are -- let's say we have a block that has three vacant houses. The house has been vacant and the for 15 or years. You can't get acquisition to the 20 house. They would clearly like to purchase the house, but they can't. So what we need to do is simply to make a means to see if they could acquisition the property. That's another thing that is tearing 96 RESOLUTION 970684 our neighborhoods down, acquisition of properties on our blocks.

Because it takes --

It takes too long. It takes too long. You have a couple who each couple may make $30,000. So that puts them out of the median income to really qualify for our projects, but they still need assistance. They are still living from paycheck to paycheck, just as everyone else. So we need the resources to do that. But through what we are speaking about here, the projects will be made available, the communities and the blocks could be made whole, and this is really important in order for us to revitalize the City of Philadelphia. And I thank you, Councilwoman Blackwell and Councilman Nutter. We have successfully worked in your communities, and the residents are just great.

Unfortunately, often our disposition process with houses is driven 97 RESOLUTION 970684 more by demolition than acquisition. I mean, it just takes so long that the place can't stand any longer. And the only way we end up disposing of it is by knocking it down.

That's very true. But one of the things we have done, and we are working in right now, the area called Hestonville. We have a block where we have had a lot of headaches with residents, I will be very honest with you, but these houses were vacant for at least years. 13 Now what we have done is, there was 14 one property that just had a front wall. We have 15 built actually an entirely house and put the infrastructure, everything in on it. But the block is whole now. The residents are happy. And we see that children are moving back to be with their parents, whether they are educated or whatever. They are starting to move back into the neighborhoods because where they have chosen to move, they are not happy. So we have to make the resources available to bring our residents back to our community. People who leave, bring them back. They 98 RESOLUTION 970684 want to come back. We just have to give them something there to make them feel empowered and want to stay and help rebuild.

We may want to check with the parents on that, and see how they feel about it. They may not want to encourage those kinds of activities. I am only playing. Yes.

I would like to add a comment. I was recently at a conference where a woman spoke about some of the redevelopment work that they had done in Providence, Rhode Island. And one of the initiatives that she spoke of was that they had passed a resolution. I think they had to do this in conjunction with the state. Where if a property owner was letting a property sit vacant and did not affirmatively market that property, that they would be levied fines and, therefore, be pushed into affirmatively making a decision as to how they are going to address that blighted property. And I think it would be a useful tool not only on the housing side, but also on the 99 RESOLUTION 970684 commercial side, which is one of the problems that you see sometimes in even a commercial district like Germantown Avenue, where you have got people who are sitting because they figure someone is going to revitalize, and all the sudden their property will be worth millions, and they don't care to do anything until they see some action. But if we push everyone to start thinking about putting people in there, maybe we can make a difference.

Could you get us a copy of that?

Yes absolutely.

And, Ms. Stovall, you know that I was only joking about the parents and their kids. We need as many people to come back. We don't care what their relationship is. We need them to live here.

Never an issue, Councilman.

Anything else? Thank you all very much. I greatly appreciate this panel's testimony. Mr. Tom Forkin and Bob Fina from 100 RESOLUTION 970684 PIDC. Let me also mention at this moment that I know that our Commerce Director, Steve Mullin, is here, and various other individuals from our economic development agencies. I am not aware of whether or not you plan to testify or not, or are whether you are just observing. But I did want to recognize your presence. And also individuals from our city Planning Commission are here in attendance, as well. Please identify yourselves for the record, and you may proceed.

Good afternoon, Mr. Chairman. I am Tom Forkin, Vice-President of PIDC.

Good afternoon, Mr. Chairman and other members of the committee, if they are still present. My name is Robert Fina. I am a Senior Vice-President with PIDC, and I am appearing today to provide testimony on Bill No. 23 970684. And me esteemed colleague will proceed first. 101 RESOLUTION 970684

Thanks, Bob. Mr. Chairman, we are here to discuss the Urban Industry Initiative pilot program, which focuses on connecting more than 300 manufacturers in Lower Northeast Philadelphia, specifically sections of Frankford, Bridesburg, Juniata, and Port Richmond, connecting these businesses with each other and with resources that are available through the city, the state, and federal governments, and resources that are available within their communities. As background for you, the UII Strategic Project was founded in 1997 by the Philadelphia Industrial Development Corporation's new Regional Development Corporation, or RDC, with support from the Pew Charitable Trusts. Board members include an earlier testifier, Steve Culbertson, as well as Steve Mullin, the city's Commerce Director. And the intent of the program is to strengthen existing manufacturers so that they will grow and strengthen their ties with the community so that they will remain where they are. As you know, Mr. Chairman, a century 102 RESOLUTION 970684 ago manufacturing dominated the landscape of the City of Philadelphia and other great American cities. Manufacturing firms were key to providing jobs, community stability, and social and economic advancement. Today manufacturing has become a distant and unfamiliar thing for many Philadelphians, yet manufacturing remains essential to the live of the city. Over 1,000 companies, making everything from Easter suits and soft drinks, to highly resilient coatings and electromechanical grinding equipment, still employ over 60,000 men and women and provide crucial stability in the city's neighborhoods. The problem is that too many of these firms are like islands, they are isolated from each other, from the communities where they are located, and from resources which are available to assist them. The UII has been designed to break down this isolation and take advantage of the constructive activities which communication among 103 RESOLUTION 970684 companies generates. Some of the connections made by the UII are simple ones, like bringing companies together to buy and sell, arranging for companies to see each other's facility, share ideas, connecting businesses to local job banks and technical assistance providers, including the Delaware Valley Industrial Resource Center, the Ben Franklin Technologies Center, and the Private Industry Council. Other connections which the UII is developing are more complex; coordinating businesses to pursue contracts together, helping businesses to pursue capital projects, and pooling collective needs for better prices on supplies. One of the more complex connections is the formation of supplier alliances. A supplier alliance, for example, can bring together manufacturers of injection-molded electronic components and fabricated metal to form subassemblies needed by automakers and shipbuilders. I would refer you to the handout which you were given for specific examples of UII 104 RESOLUTION 970684 projects and programs. The attainability of these connections is that for all of them, simple and complex, to add up to a vital, expanding manufacturing community again in Philadelphia, where ideas and operations are up-to-the-minute and where businesses feel like they are part of something that's alive. The UII's anchor investor, the Pew Charitable Trusts and PIDC have broken new ground through this venture. So far two important lessons are evident. First, community revitalization is linked to developing a core of local industries which are connected to each other and to their community. Second, urban manufacturing industries still maintain great potential for their surrounding community, despite physical and financial obstacles. However it is essential to provide these businesses with technical assistance that they need to participate in a quickly changing economy. The UII looks forward to exploring 105 RESOLUTION 970684 new working relationships with others as it progresses as a working model.

Thank you very much, Mr. Chairman.

Thank you. Mr. Fina.

Thank you, Mr. Chairman. Again, I am Robert Fina with PIDC. My testimony will focus on PIDC's Neighborhood Development Fund, commonly referred to as the NDF program. NDF is a financing program designed to respond to the need for a public capital investment in neighborhood economic development projects, with an objective of stabilizing and fostering economic growth in distressed areas of Philadelphia. The NDF program is usually funded with federal Community Development Block Grant dollars, in cooperation with the city Commerce Department. The NDF programs provides gap financing for projects which do not have access to sufficient financing to ensure their ultimate and sustained success in typically high-risk areas of 106 RESOLUTION 970684 the city. The NDF program's goals are to provide economic anchors in distressed neighborhoods, stimulate additional private reinvestment in those neighborhoods, provide quality goods and services in underserved areas of the city, provide employment opportunities for neighborhood residents, and build upon prior and planned public and private investment opportunities. Eligible applicants for the NDF are for-profit and nonprofit private real estate developers, for-profit and nonprofit community development corporations, institutions, corporations, or joint ventures among all these groups. Eligible projects are neighborhood commercial, retail, service, office, industrial, and mixed-use projects. Eligible uses are land and property acquisition, site improvements, new construction, building rehabilitation, and limited professional and settlement fees. It should be noted that the NDF will not finance costs associated with the project prior 107 RESOLUTION 970684 to the approval of PIDC of that project, or will it participate in refinancing completed projects. Typical NDF project financing will be structured as a secured subordinated debt on terms and rates that accomplish the twin goals of promoting community economic development on providing a rate of return to the program that is commensurate with the risks taken for the levels of public benefit generated for that project. In other words, the NDF program is a creditworthy loan program, and not an equity investment program, nor a grant program. The loan is underwritten with the goal of repayment. The maximum amount of the loan is limited to $750,000, or percent of the total 17 eligible cost, whichever is less. 18 It should be noted that the NDF 19 program is a shallow subsidy program, one that 20 encourages private investment in distressed areas of 21 Philadelphia, and not intended to replace that 22 investment. 23 Therefore, we look for a minimum 24 ratio of at least two private dollars for every 25 public dollar in the project. And, again, no more 108 RESOLUTION 970684 than 25 percent of a project will be funded with NDF funds. The specific amount rate term of an NDF financing will be determined on a case-by-case basis based upon a review of the project's ability to repay the loan, the life of the assets financed, the collateral provided, the level of public benefit generated, the project's demonstrated need for public investment. The entirety of the project is analyzed prior to making a commitment for NDF dollars. Additionally, NDF dollars are not funded except on a pro rata basis with all other dollars in the project, private and public. I will provide a few statistics at this point. To date, PIDC has designated 33 projects for funding. 9 of those projects have multiple components of NDF funding or other public dollars, meaning more than one loan in that particular project. Therefore, the 33 projects have or will result in 52 loans. I won't name all 33 projects, but I will give you a flavor of the 33. I will identify a 109 RESOLUTION 970684 few. , at 100 West Lehigh, Christ Church Hospital Nursing Home in the 2100 Block of North 49th Street, Brandywine Workshop on the 700 block of South Broad Street, Beach Interplex on the 1500 block of Cecil B.

Moore, Baltimore Avenue Revitalization Corporation on the 5000 block of Baltimore Avenue, and the American Music Festival on the 1400 block of Chestnut Street. 110 RESOLUTION 970684 of the 33 projects have been completed. Two others are anticipated to close on financing within the next two days. Three projects are currently under construction. million. million, slightly less than percent of the total project 10 cost. 11 Projects under consideration 12 presently for NDF assistance include, but are not 13 limited to, a family entertainment facility on North 14 Broad Street, the Blue Horizon, also on North Broad 15 Street, Girard Avenue Shopping Center, a West 16 Philadelphia shopping center, Mt. Sinai renovations, 17 Brewerytown shopping Center, Beach Day Care Center, 18 GGHDC Service and Retail Center, and Mt. Airy USA. 19 At this point I will conclude my formal testimony, and I would be happy to answer any questions the Chair or the committee members have.

Thank you very much, Mr. Fina. I will start with you and then come back to Mr. Forkin. A number of issue that you raise kind 111 RESOLUTION 970684 of remind me of conversations that I have had with either yourself or, at times, our Commerce Director or other people in Administration. Which is, when we do these -- and I understand that for the most part PIDC does projects, transactions, deals. What I'm constantly trying to, I guess, move toward and push all of ourselves toward is that transaction-to-transaction or deal-to-deal activities may do a great amount for the recipient of the loan, and it may do great things for the business. But I think similar to the Royal Theater example, I am left to still ask the question, what's going on around the place. And I think that whether it is our commercial corridor programs, or if we give someone a grant or a loan because we think it will help stabilize their business or expand their business -- and we want people to do that -- I have to constantly ask our economic development agencies -- and I mean now, for the most part, this is kind of a discussion between and amongst government people -- can we build in a component that talks about 112 RESOLUTION 970684 exterior improvements and what else is going on around the particular facility, and figure out as creatively as possible not only the solving of the business problem, but the surrounding neighborhood problem? Because I philosophically believe that it is certainly a good thing to help the business. I don't believe that it is enough to just help the business, if you have infrastructure problems. If the place looks the same as you try to get there, from wherever it is that you are coming from, and the only physical improvement is within the walls for the people who work there, and they are the only ones that are ultimately going to see it or benefit from it, then we haven't really helped that community. Now, on the other hand, if the place shuts down, we have caused further deterioration, and it is going to rapidly fall apart. So I am certainly not here to criticize about how we currently do things. I am just trying to build on it and expand on it. Do you have any reaction to that? 113 RESOLUTION 970684

I think we both have reaction.

Can I say something, Mr. Chairman? One of the reasons we wanted to talk about the UII program was for that very reason. One of the core elements that PIDC and Pew wanted to foster with that program was what you just spoke of, the idea that these companies cannot be in isolation, cannot be in islands. And one of the things, for example, I give you a concrete example. If you saw yesterday's Inquirer, in the Business section, Martin McNamara, who is the manager of the UII, program worked closely with the Port Richmond Industrial Development Enterprise in getting that effort underway. As a direct outgrowth of one of our manufacturers meetings, one of the component parts of the UII produced the impetus to create the Port Richmond effort that was written about yesterday. This is the sort of thing we are trying to foster. There are approximately 30 companies in that zone, and they want to do all sorts of 114 RESOLUTION 970684 infrastructure improvements, street improvements, and other things that will make that a viable industrial area.

All right. Good.

Mr. Chairman, you ask a very complex and difficult question to respond simply to. There is strategic planning in our efforts. It is not always as apparent as probably we would like. And it isn't as comprehensive because of the limited resources that we have. But earlier, today's newspaper in the Daily News, Terry Gillan, who was here earlier for this meeting, was written about, and was discussed how she was in the planning for the conversion of the Navy Base, not only for Kvaerner and industrial uses, but also for housing. So there is that kind of linkage. We are doing a number of projects, as you heard from my testimony and other reports that I will provide you on a number of projects, on North Broad and Cecil B Moore Avenue, where there is quite a bit of new housing also being developed. So there 115 RESOLUTION 970684 is that connection of commercial retail with residential. Part of the NDF program does exclude certain areas of the city from its use, so that we strategically think about that. But you are right, we are an agency that acts, reacts to transactions, to deals, to projects. Just the NDF program alone has created, or will create, 1,066 jobs by our statistics. Without those jobs, people all over the city will not be able to maintain their housing. And there is no doubt that we have to look comprehensively and strategically, and there are discussions with the Commerce Department and the city Planning Commission, to do more of that in the future.

Quick comment, and then Councilwoman Blackwell has a question. I appreciate the financial restraints under which you operate. I think you have been here for most of the testimony today. Would you agree that if there were alternative funding sources to do the kind of 116 RESOLUTION 970684 infrastructure and community revitalization activities that we're talking about, we would then be able to combine what you are doing on a transactional or deal-to-deal basis, reach to another location, or tie into activities that are already planned in that community, and then roll in with not only your loan or the transaction that you are working on, but we would, in fact, be able to say, well, the business is located here, but we are going to go two or three blocks in each direction and create an area with all the other activity going on, tied into the loan or the grant or the combination that's helping this particular business? I mean, would that be of benefit to you? Is that something even the business owners who are coming in looking for help and assistance, is that something they would be interested in?

Absolutely. I mean, that comprehensive approach would be very helpful economically. It would stimulate more business, it would stimulate nearby home ownership and stabilize in areas. It is a matter of resources, sir. 117 RESOLUTION 970684 And what was spoke about earlier, we have created a HUD 108 loan pool. A gentleman earlier talked about that. That financing does exist at PIDC. We have dedicated some of that just for the empowerment zones. Again, it is limited resources we don't have the abundance of resources that we would like. We are also trying to create a HUD 108 loan pool for the Navy Yard, so we would have a comprehensive approach to doing a multiple number of activities. Not only financing businesses like Kvaerner, but improving the infrastructure to encourage other businesses to go there, to have housing built and maintained around the Navy Yard, not start to be abandoned and people leaving the city. So you are absolutely correct, sir. That would be helpful.

Thank you. Councilwoman Blackwell.

Thank you. I want more information with regard to the status of 118 RESOLUTION 970684 the projects that you mentioned in West Philadelphia. West Philadelphia Economic Development Corporation at 52nd Street. We are pretty much aware of the activities of BARC. And West Philadelphia Shopping Center is pretty broad. If you don't have that information today, you can certainly get it to me. Or if you are prepared to give me a little detail today, it is fine, whichever way is easiest for you.

I would be happy to respond quickly now, and also provide the Chairman with numerous copies of NDF update as of May of 1998, providing a description, brief description, of each project, the current status, the amount of NDF funds, the location, the number of jobs created, the total budget, et cetera. With the West Philadelphia projects, you are aware of, BARC, PIDC has been very much involved in that project, providing the construction loan, providing an NDF permanent loan of -- exceeding our guideline, I believe, on that project. We are over the $750,000 mark at the point. 119 RESOLUTION 970684 In fact, we have made numerous loans to BARC. That's run of the recipients of a number of loans that have settled, and that project is proceeding. The West Philadelphia Economic Development Corporation was one of our first NDF loans at South 52nd Street. We provided $125,000 9 for the first portion of a project of about 10 $440,000. 11 I believe that project still has an 12 opportunity to come back to PIDC for its next phase 13 of development. I am not sure what the status of 14 that phase is. But we are open to do that. 15 As far as the West Philadelphia 16 Shopping Center, that is in the very preliminary 17 stage. And PIDC's policy is not to discuss details 18 publicly of a project until we are sure it will be 19 funded and we close the loans, keep maintaining the 20 integrity of the people involved in that project to 21 make certain that it can proceed on a reliable and 22 credible way, without being discussed in the press 23 and in the public.

Where on 52nd Street are you talking about? 120 RESOLUTION 970684

I am not discussing that project on 52nd Street. That's closer to PIDC's Industrial Park in West Parkside and West Philadelphia.

West Parkside?

Well, many times when I refer to it as West Parkside, residents who live nearby say they are West Philadelphia. So I just generally say it is West Philadelphia Shopping Center.

All right. With regard to the West Philadelphia Economic Development Corporation, we would like to be involved in that. I mean, as we know, that building has been there for many, many years. It is not being used for any public use. It sits there. Other than some bullhorns every now and then and demonstrations out of a window, and maybe a Moslem mosque sign in the window. But there is nothing go going on there. We would certainly like to be involved in this. It is big structure, has been 121 RESOLUTION 970684 there a long time, and it just hangs there. We would certainly like to be involved with PIDC with regard to, and consulted, at least, with regard to any investments, so that we make the maximum use, certainly, of these dollars on 52nd Street.

Again, we would be more than happy to entertain additional financing requests for that project under a viable business plan that ensures that the project can proceed with its next phase of development.

Will you contact us before anything happens --

Certainly.

-- with regard to that? Thank you very much. Thank you, Mr. Chairman.

Let me mention at this time -- and I do appreciate the testimony of both gentlemen from PIDC -- earlier today the Mayor's Chief of Staff, Greg Rost, mentioned to me that the Mayor has expressed great interest, if not support, for the general components of the 122 RESOLUTION 970684 resolution about which we are hearing testimony today, and has asked for an opportunity to have a meeting between myself and I am sure any interested Councilmembers and various individuals within the government. I do want to say for the record that I appreciate that, and look forward to convening that meeting. The Mayor, by way of, I guess, sheer coincidence just in the past year became the Chairman of the Rebuild America Coalition, which is a national organization that deals with infrastructure issues. S. " My brief conversation with the Chief of Staff, and an earlier one with the Mayor, would indicate that Philadelphia needs its own infrastructure renewal and community revitalization program. 123 RESOLUTION 970684 And I am hopeful that out of this Public Hearing and private conversations and other meetings, we would be able to return in the fall with a more detailed proposal, the ideas that we heard earlier about the potential need for local and state legislation, and the opportunity to creatively access the financial markets for a separate source of funding that would not have the kind of restrictions that we talked about, that could be used also by our various agencies as a package of dollars to go in not only for loan purposes, expansion, retention, attraction, but also in many places outside of industrial parks, people also live around these locales. And they need assistance in preserving and maintaining their homes. And when we invest in our businesses, at the same time we should also demonstrate the commitment to investing in our neighborhoods. Both parties, I believe, benefit as a result and can play off of each other's success. So I look forward to those discussions. And Mr. Forkin, I did want to ask one question on the UII program. I notice on the map, 124 RESOLUTION 970684 the boundaries of the program, one of the boundary lines is Allegheny Avenue east of Broad Street, and I guess it terminates at 5th. I would only ask -- and I am sure I have been in this area, but I don't know how large it is -- and I am sure there are a number of businesses there. I would only mention to you to the west, all the way out Allegheny Avenue, there are other manufacturing-type businesses. And at some point in time, even if it was a more narrow stretch, I ask for your consideration in possibly expanding the UII service area. One last thing I do want to put on the record. One of your colleagues, Duane Bumb, is here. And, again, the reason why infrastructure renewal and community revitalization is at times in some neighborhoods a blessing and a curse, we get the benefit because people are happy in the areas where work is going on, but then we are potentially subject to criticism where it is not. We currently have a community 125 RESOLUTION 970684 revitalization project going on in a long commercial corridor on Allegheny Avenue, from 24th to Ridge Avenue. It happens to be within the district that I represent. The people on Allegheny Avenue -- and it was tough getting this project done because it is not only commercial, there is some residential. But eventually the Controller agreed that there was enough commercial and would sign off on the project. The people on Allegheny Avenue are thrilled. The problem is that there are numerous cross streets that are all residential; they are not eligible. And so we have created a circumstance and a situation where the promise of Allegheny Avenue is wonderful. New curb, sidewalks, street trees, lights, and signage. But if you happen to live on Spangler Street, you get nothing. And so you go out of your house, drive out to Allegheny Avenue, see all of this activity, and then you are left to wonder, are you chopped liver.

So, again, for this kind of program, 126 RESOLUTION 970684 about those constraints, we could do Allegheny Avenue and the side streets, and get the whole benefit.

We would be happy to take that suggestion under consideration.

Mr. Chairman, let me say that over the summer, PIDC and I'm sure, the Commerce Department would be more than willing to participate in any discussions you have about infrastructure improvement of the City of Philadelphia.

Great. Thank you very much. Councilwoman Blackwell.

Let me note also that we are really interested in PIDC's roles in neighborhoods and in our neighborhood corridors. All of us who have neighborhood corridors are intricately involved. And so we would like to maintain a relationship where we are not the last to know what is involved and who is involved in our districts with regard to development. Thank you.

Thank a fine comment. We 127 RESOLUTION 970684 will keep you informed, Councilwoman.

Thank you very much. Is there anyone else here who wishes to testify on this particular resolution? Seeing none, this committee will stand in recess to the call of the Chair. Thank you very much. (Public Hearing adjourned at 1:00 p.m.) - - - 128 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Tuesday, June 16, 1998, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COMMITTEE ON COMMERCE & ECONOMIC DEVELOPMENT _____________________________________ DEBRA A. WHITEHEAD, RPR