Has there been a request for a hearing on this? I'm actually somewhat surprised about that, given the nature of all of the discussions for both these chunks of 58 2/5/01 FISCAL STABILITY - RES. 010024 dollars, which have now been put together. At the time, it appeared that it was an emergency, and one of these is almost a year old, and the other one is, I don't know, six months? Is there a request for a hearing on this yet?
No. I don't believe we had a request for a hearing. We were anxious to have the legislation introduced. If you recall, it was introduced, I think, in the middle of stadium discussions. You know, it was introduced with the understanding that we wouldn't try to move it immediately. We will be needing a -- we'll be requesting that hearings be scheduled some time before the early spring. I think some of it turns on when the District will need the cash, and Janice can answer.
I'm sorry, Madam Chief of Staff, some of it turns on weather?
On when they actually need the cash. It was essential that they get a commitment from us of the availability of the funding. However, the actual cash needs are for 59 2/5/01 FISCAL STABILITY - RES. 010024 later in the fiscal year.
Not a commitment. What we wanted was to have an indication that the Administration intended to seek Council approval of. We understand that, you know, the Mayor on his own can't commit, you know, that it was going -- it was thought important that we initiate the process, so that the Mayor was, in fact, pursuing a course that he had committed to with the State.
Okay. Mr. Dubow, back to you. I had interrupted you a long time ago.
Actually, I didn't. Is the $45 million for PGW built into this assumption as well?
It's built into the estimate for '01, and then it's also built in as a repayment in '03. 60 2/5/01 FISCAL STABILITY - RES. 010024
Okay. Now, I seem to recall a number of five-year plans ago that -- and I don't think the number was 295; it may have been 250 back in those days. There was a spending schedule that had the surplus at that time, I think, going down to $4.9 million in FY '04. Do you have any recollection of that? Is that --
I know last year's took us down to about 6 million at the end of '05.
It may be that two years ago, it took us down to 5 at the end of '04. I don't remember.
Okay. The current plan has the 295, and it looks like almost half is being used this year, the balance being used in the FY '02 budget and it's gone? Is that correct?
Well, we have a line -- I guess we've talked about this -- I think we talked about this a little last year too. That Line 26, Funding for Future Obligations, it shows $127.5 million. And then that gets eaten into 61 2/5/01 FISCAL STABILITY - RES. 010024 over the next several years.
It's essentially a funding- for-contingency line. It gives us room in case things come up, and then we show it going away over time.
Well, I guess that wasn't necessarily my question. Where does it come from?
I said you're being pretty cagey today. Why don't you give us a more expounded explanation of the 127, where does it come from, what is it for, how are you able to generate it? Just share with us today. 62 2/5/01 FISCAL STABILITY - RES. 010024
The 127 -- well, we present our budget with a zero every year because the Charter says you need to have a balance; we interpret that to mean a zero. So if there's revenue in excess of expenditures and we know that over the course of the plan, we need that extra revenue for obligations in future years, we put in a line that takes some of those revenues and distributes it over several years.
Okay. Let's go back to -- what was that, Line 22. So in ''02, '03 and on out, all of those years, we are showing deficits between estimated revenues and expected expenses.
Is that correct? Okay. And then you're covering them with various components of the 127?
Partially that's right. It's partially that and partially you wind up with surpluses at the end of '03 and '04, and they get eaten into too.
Okay, all right. 63 2/5/01 FISCAL STABILITY - RES. 010024 Madam President, I have more questions, but I'll be glad to come back for them.
Thank you. The Chair recognizes Councilman Rizzo. I'm sorry. Before I do that, are there any other Councilmembers on the committee? I'll have to recognize the Councilmembers from the committee first. Councilman Cohen?
Mr. Dubow, with respect to your assumption that the stadium is going to produce, did you say, 10 to $15 million in plus revenue?
Does that -- when does that revenue begin to flow to the City?
The first -- portions of it begin when construction begins, which we assume will be in -- well, actually later -- towards the end of '01.
I think that's also towards the end of '01. 64 2/5/01 FISCAL STABILITY - RES. 010024
When do the payments begin to be made on the bonds? When do the interest and repayment portion of the bond kick in?
Is your estimate of a positive flow of revenue, does that mean after the expense of the bonds? Aren't the payments on the bonds out of the General Fund?
Well, does your estimate of plus-revenue take into account the expenditures for interest and payment of principal on the bonds?
The plan assumes both the principal and interest payments on the bonds and the increased tax revenues. So, yes, they're both in there.
Well, since, as far 65 2/5/01 FISCAL STABILITY - RES. 010024 as I've been able to discover, no city has shown any economic increases as a result of stadiums, isn't that a kind of brave and dangerous approach to estimate that Philadelphia will have a plus where other cities have not had them? No other city has yet made a claim in exact dollars. You get the puff pieces, like in yesterday's Inquirer, that says Pittsburgh is already benefitting, and when you read the whole article, you don't find a single reference to anything that is currently producing income.
Well, what we looked at was the amount of construction activity that the stadium would generate and what kind of wage taxes would flow from that. So that's one way that we have tax revenues in there. We looked at projected salaries for the teams, and that was also a revenue generator. We looked at concession estimates from the teams as to what they were going to charge and what that would mean in terms of tax revenues. So we really just looked at projections for activity at the stadiums and what kind of revenues those would generate, so -- 66 2/5/01 FISCAL STABILITY - RES. 010024
Did you consider the testimony of economists, that whatever increases come from deductions and other expenditures, that if the money were not spent for the stadiums, they would probably be spent in other parts of the tourist or hotel industry? Do you consider that? I'm only asking; I'm not wanting to argue the point at this stage.
One of the things that we did -- and we did this when we came to Council and looked at what the numbers meant for the plan -- was that we discounted the projections that were included in the runs that PIDC did. So for -- and I might get these wrong because it's been a while. For the Phillies, we took 80 percent of what the team had projected, what the team and PIDC had worked on. For the Eagles, we took 90 percent. And for the other events at the stadiums, we took 50 percent. And that's what we built into our projections.
Well, I hope your assumptions prove valid, but I think they're dangerous assumptions for budgetary purposes. One other just general comment I wanted 67 2/5/01 FISCAL STABILITY - RES. 010024 to make to the Chief of Staff particularly. Sometimes later in the year, after Council acts on this voluminous Five-Year Plan, we're later told in other things that Council has already made a decision on something because somewhere in this Five-Year Plan, there was a reference to something, and Council did not amend it out of the plan. And now, as far as I understand it, my understanding is that this is a general plan presented to PICA, in accordance with requirements of law that were followed in order to make it possible for the City to issue bonds about a decade ago, and that this presents a plan into the future, subject to amendment as conditions occur, and subject to whatever budgetary action this Council takes each year when it considers the budget. Am I right on that?
Or should we consider that this replaces our regular budgetary processes, and in one fell swoop, we try to bind the City Council for the next five years? 68 2/5/01 FISCAL STABILITY - RES. 010024
No. I think that the document before you does a number of things. Some are required by PICA, but a lot of what is before you is not required by PICA. A lot of the discussion that you have in your Five-Year Plan, I believe, is not mandated by PICA or even desired by PICA, Rob tells me. It's simply, you know, the number part. We have a budgeting process that the City adheres to. That is what guides the expenditures, you know, and guides the City --
Yeah. For the most part, what's required by PICA is the appendices in the back. Most of the text up front is done at the Administration's discretion because it's a vehicle for communicating what it is the Administration wants to do and what the Administration has done.
I -- I'm sorry. I don't understand that at all. When did these five-year plans get born? 69 2/5/01 FISCAL STABILITY - RES. 010024
The five-year plans got born, I guess the first one covered the period Fiscal '92 to Fiscal '96. What's required in the plan is, there are a bunch of appendices in the back that lay out the numbers underlying the plan and the assumptions underlying the plan. That's what PICA requires. The front part, which is the text that talks what our plans are for the next five years and talks about what we've done for the last year, that's not required.
When did the City begin issuing a Five-Year Plan that had nothing whatever to do with PICA?
No, it has a lot to do with PICA, 'cause all the numerical projections are required by PICA. But the City, with the first plan, took the opportunity to go beyond what PICA required to include more information and to include specific --
The level of detail that we 70 2/5/01 FISCAL STABILITY - RES. 010024 have in here? No, there's no ordinance that requires that.
I mean, that that administration ten years ago decided that it was going to have a Five-Year Plan, even though nothing required it?
Yes. And what the statute requires is that the City showed that it's going to retain a balanced budget for five years. It also requires that the City demonstrate that by showing a set of tables, including revenue projections, obligation projections, a description of our methodology. But what it doesn't require is descriptions of what every department's going to 71 2/5/01 FISCAL STABILITY - RES. 010024 do. It doesn't require that we have an introduction and a chapter on each department.
Well, would it be possible, say, to take this Five-Year book and separate it into a portion that PICA requires and a portion that is just projections by the Administration? I'm just very concerned that the Five-Year Plan seems to have been used a number of times by the previous, and perhaps the present, administration to commit the Council in advance, prior to extended hearings on specific subjects. And we always felt we had to approve this document for submission to PICA. Now I'm told that it's more than a PICA document, and I think what we ought to be having before us is the document that must be submitted to PICA, and then there can be an addendum saying, in addition, we think Council ought to know what our general plans are for the next five years, or for whatever time you might want to do, for 20 years, what we see well into the future. We ought to know that what we're doing is approving or considering a document required by 72 2/5/01 FISCAL STABILITY - RES. 010024 law. And from what I see, the whole of this document is not required by law.
That's correct. Although one of the rationales for having this whole document is that the text up front puts the numbers in the back in context. So if we just gave the numbers, I don't know how much meaning that would have to you.
If we just gave you the numbers at the back, I don't think you'd have the proper context for them.
Well, could you designate which pages have to go to PICA and which are just for the general information of City Council?
Yeah, we can do that. I think it's really Appendix 2 on the back, but I will get back to you with a more specific answer to make sure not I'm not leaving anything out.
We'll have a letter written that defines specifically what it is in this submission that is intended to comply with 73 2/5/01 FISCAL STABILITY - RES. 010024 the PICA requirements so that you'll know specifically what it is that's being acted on.
Well, we understood that the reason we were put under this time pressure to consider in effect five years of budgets in great detail, without having the time to really cover each item in full, we were told that there was a PICA requirement, that a document had to be furnished.
It's certainly always been my believe that what we were dealing with was with the furnishing of an item, and that's why I was so concerned about everybody knowing that that Five-Year Plan with PICA could also be amended. It was not something engraved in stone that acted as a straightjacket for the next something years.
But now you're telling me that in addition to that, it serves some sore purposes unrequired by statute or by City ordinance. And I think it ought to be very clear, 'cause I'm personally very strongly opposed 74 2/5/01 FISCAL STABILITY - RES. 010024 to our consideration of a document like this containing the whole budgets for the next five years as presently conceived of and have us pass it in one or two hearings. It makes no sense whatever. And we thought we were doing it because it was required by PICA in order to maintain the stability of the bonds that PICA authorized us to issue some ten years ago.
I'm sorry. I guess I'm not being clear enough. The budgets for each year are required. So all the numbers that show our projection for each year and show that we'll be balanced at the point of Fiscal Year '06, that's required, we have to give that to PICA. It's the written description of that material up front that we don't have to give them, but we have to show that that we're balanced for each year.
Madam President, I'm going to be asking and probably introducing an ordinance to require that there be submitted to City Council a separate document that is required by PICA, and that that be the only document that 75 2/5/01 FISCAL STABILITY - RES. 010024 we consider under the time pressures we're placed under in considering a Five-Year Plan.
Councilman, if you would yield, I believe Councilman Nutter would like to follow through on your line of questioning.
Thank you, Councilman. Mr. Dubow, Councilman Cohen's been asking questions about this Five-Year Plan concept. One, would you tell us directly, as you best understand it, what the PICA statute requires from either the Administration and/or the Council in terms of a plan?
The PICA statute requires that we produce a plan that shows that we will have balanced budgets for the following five-year period. It also requires that that be based on reasonable projections of revenues and expenditures, that we provide the underlying assumptions that generate those numbers.
The budgets that 76 2/5/01 FISCAL STABILITY - RES. 010024 you're showing and that have been approved in the past and the four additional years' worth of budgeting that even this particular plan is showing, are any of those out-year budgets binding on the City of Philadelphia in terms of next year's actual budget that may be submitted by the Mayor and may possibly be approved by this Council?
No. In fact, each year, when the plan's amended, that front year, this year's Fiscal '02 budget will look much different from what FY '02 looked like in last year's plan.
And has there ever been an occasion where a PICA Five-Year Plan in an out-year budget that had been approved as a part of that plan was substantially or materially different in that subsequent out-year when the Mayor actually introduced the City's budget?
Then my question is: What is the amount of, quote/unquote, binding that is imposed upon either the City in general or 77 2/5/01 FISCAL STABILITY - RES. 010024 the Council in particular with regard to any Five-Year Plan or any year of any Five-Year Plan?
I don't think there's any binding in approving the plan beyond the binding of approving the FY '02 budget.
The purpose is to demonstrate to PICA that we're not -- we're not undertaking any commitments that will, over the course of the following five years, put us into the red. It's to show that we can maintain a balance through the Five-Year Plan period.
But if the City decides, or the Council decides, to make a change in a subsequent-year budget, are we prevented from doing that because of the previously-approved Five-Year Plan?
If we made a change that was of -- for example, just to give a really bad -- well, if we undertook a commitment this year that committed us to giving someone $200 million in FY '05, we would have to show PICA how we could maintain balance through '06. 78 2/5/01 FISCAL STABILITY - RES. 010024
But you will be able to respond to the Councilman's question with regard to -- you could take the Five-Year Plan that's in front of us today and either by marking or by some letter of explanation show us the actual components that are required by PICA statute and the components that you just put in, because you thought you'd like to have a nice story to tell.
The answer to your question is, yes, we can do that. And we will.
I will be waiting for the production of the revised version.
Because I think that's all -- from my understanding over the last ten years, it's been my understanding that we were 79 2/5/01 FISCAL STABILITY - RES. 010024 being subjected to the pressure of covering this huge volume of material very quickly because of the necessary filing with PICA, and I think it's wrong to include other items which can later be cited Council that considered has them and approved them in the Five-Year Plan. And I just think that's a bad legislative practice and something I was not aware of at all. So I will await the results of your production of the new document. Thank you.
You're welcome. Councilwoman Blackwell, is your question in the line of what has been discussed?
Sure, yes. For example, on Appendix -- on of Appendix 3, you list future target reductions on Line 20, and it's listed in Fiscal Year '03 and '04 stayed the same at 12 million, but 18 million is listed in Fiscal Year 2005 and 2006. Is the detail of that increase in future target reductions somewhere in this plan?
No. They're actually -- 80 2/5/01 FISCAL STABILITY - RES. 010024 this is consistent with what we have done over the last probably five or six plans. It's our way of saying that we have to find ways to reduce our costs out in those future years.
I'm sorry, I didn't hear you. Would you repeat that?
Yeah. It's something that we've done over, I don't know, maybe the last five or six years. Those are unspecified cuts, and it's our way of saying we have to figure out ways of making the cost of doing business lower in the out-years of the plan.
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. I know the airport financial situation and the way that the monies are handled at the airport are very complicated, but I have a question of the Administration. I understand that the leases, contracts with the various airlines are about to end. And they will soon need to 81 2/5/01 FISCAL STABILITY - RES. 010024 renegotiate all of those contracts. And I don't see anywhere in the Five-Year Plan anything about the contracts with the airlines and the way we plan, and I've heard that there are some airports throughout the country that have lotteries with the airlines for the gates, they have in fact physically been on them. And I'd like to know what the Administration's doing to prepare for the fact that these leases have been for 28, I believe, 29 years, and they are about in a year or just a little more than a year about to need to be renegotiated. And I'd like to know a little bit about the plan for the renegotiation of these leases at Philadelphia International Airport and what are our strategy is to prepare for those negotiations.
We will have to get back to you on that question. There's no one here from the airport. From prior experience, I can tell you, I did work for an airport for quite some time. Those negotiations are usually begun very early, much before the actual expiration of the leases. 82 2/5/01 FISCAL STABILITY - RES. 010024 But at this point, the fiscal impact of those would be almost impossible to predict.
There's no one here, the Chief of Staff, there's no one here representing the Administration that can discuss this?
I think the Chief of Staff will be back momentarily.
Then I'll go to my next question and will follow up on that later. I was surprised and disappointed to hear that we might be facing an increase in our water bills. And based on some of the horror stories that we've read and have personally experienced at PGW, I'm wondering if someone representing Water Revenue, the Water Department can give us a feel for where we are with the outstanding debt that's not collected in the Water Department. I'd like to get a feel for exactly where we are with our collection process at Water Revenue. Because I have personally seen some water bills of businesses and customers that have water service when they owe 6, 7, 8, 9, $10,000 to 83 2/5/01 FISCAL STABILITY - RES. 010024 the Water Revenue Department. So I would like to make sure that every dime is collected before we consider a rate increase. (Witness comes forward.)
Good morning. Identify yourself for the record, please.
Good morning. My name is Denise Garrett, and I'm the Bureau Chief of Water Revenue. Good morning, Councilman. I did hear earlier that Commissioner Roy announced that there would be a rate increase for Water Revenue, and I would like to say that in spite of some of those large bills that you have seen, we've made tremendous progress in collecting revenue. In fact, since 1997, the receivables have been going down. In our commercial base, we introduced a program called USTRA -- Utility Service Tenants Rights Act, and that program is specifically geared toward large apartment buildings, and these were the most delinquent group within our receivable base. At this time, we've reduced that group significantly. And obviously, we haven been 84 2/5/01 FISCAL STABILITY - RES. 010024 able to reduce every account, but we are working with the Law Department, and they are assisting us in try to resolve the outstanding delinquencies that we're presently at.
Do you have a ballpark figure of how much -- could you break it out how much money is owed to the Water Department, business/commercial accounts versus residential? Could you provide the Chair with that information if you're not prepared to identify that, how much money we actually have out on the street?
Yes, we can provide the Chair with that information. We're not prepared to answer that at this point.
But would you -- could you estimate anticipate that possibly if we could do more in collecting revenue, that we could avoid a rate increase?
I don't believe that's possible at this time. I think that since 1995, when we began an aggressive collection program, we've reduced the fund by more than $50 million. We've also instituted many programs that would 85 2/5/01 FISCAL STABILITY - RES. 010024 allow us to reduce the delinquent base, we've instituted many programs to support customers who are not able to pay us. And I think that at this point, we have achieved a tremendous amount of success in that area. We obviously have not been able to liquidate every dollar of our fund, and I don't think we'll be able to do that to avoid a rate increase by 2002. As Commissioner Roy stated, the receivables have been going down; our collection rate has been going up. What we are experiencing at this time is that the consumption is going down; that means that the amount of water used for household or per service is actually declining, and the number of accounts are declining. And that's directly related to the economic condition of Philadelphia. And you notice that there has been a decline in the number of active residents in the City, and that directly relates to the number of active services.
Do you want 86 2/5/01 FISCAL STABILITY - RES. 010024 to question the Chief of Staff, now that's she's back, on your question regarding the airport?
Thank you. I understand we're getting to the point where the leases at Philadelphia International Airport are about to expire, and I understand throughout the country that there have been some very creative ways to negotiate airport leases, there's been lotteries, they've actually had to bid on some gate space at various airports. And I understand these leases, based on the information that I just received, that it's something that's normally done a year or more out, and I understand these leases are about to expire next year, if not the year after.
No, I don't think they're that far out. That doesn't -- that's not consistent with the information that I have.
I have asked for somebody from the airport to come out in order to provide you with specific information. I'm sure you're understand, though, that it does take a 87 2/5/01 FISCAL STABILITY - RES. 010024 long lead-in in order to do the kind of lease arrangements that will best serve the interests of the, you know, the City and the residents flying in and out of Philadelphia.
I understand that the leases -- and I'd be surprised if that's accurate the information that you have, that it's 2006. But if that, in fact's, the case, the leases have been in place now for close to 30 years, and I'm hoping that we're looking at the way the airline leases have been handled in other places, since it's good that we do that, and that we're planning -- I'd be pleased, I would guess, if it is 2006, because that then gives us a little bit of breathing room, but from what I understand, we might not have that luxury of 2006; I understand it's in the next couple of years -- 2003, maybe 2004 at the latest -- that those leases will expire. So I'll wait until you have some definite information and would appreciate knowing how we plan to deal with that issue.
Councilman Clarke? Councilman Rizzo, do you mind yielding? 88 2/5/01 FISCAL STABILITY - RES. 010024
Yes, not at all, Madam Chair. You need to turn on his microphone.
Thank you Councilman. Madam Chair, I just wanted to add to that, at the time that the information is provided by the representative of the airport, could they also talk about the potential, or actually I guess it's the impending, acquisition by American Airlines of US Air and how that will potentially affect our ability to enter into lease negotiations with what is currently US Air.
Yeah, I'll -- I'm trying to get him down here now. He's in a position to talk about that, both the, you know, the American and the United acquisitions, you know, will potentially impact Philadelphia. And so the airport people have been very vigilant about that and in order to protect the City's position.
The reason that this issue concerns me, on many occasions, when I talk to a resident of Philadelphia or from the suburbs, 89 2/5/01 FISCAL STABILITY - RES. 010024 they tell me they're about to take a business trip or they're going on vacation. And I said your visit to the Philadelphia Airport will be a pleasing visit; you'll find that there's been lots of improvements there. And I find out that they're flying from Baltimore, they're flying from Atlantic City, they're flying from airports that surround Philadelphia for reasons being that the lack of competition at Philadelphia International Airport has driven the price of a ticket up incredibly high, where people will be willing to drive to Newark to get a flight, people will drive to Atlantic City to get a flight, people will go to Baltimore to get a flight. And something has to be done about that because we are just losing so many people traveling through Philadelphia because there's very little opportunity for them to buy a fare that is competitive with these other airports. So I'd appreciate -- are we going to hear about that today?
I'm trying to track down airport representative to get him here today.
Okay, thank you. 90 2/5/01 FISCAL STABILITY - RES. 010024 Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Kenney.
Thank you, Madam Chair. Good morning. I think the biggest problem facing the City of Philadelphia relates to every other problem that we deal with in this budget process is that over the last eight years, the City has lost virtually 200,000 people. At the same time, New York City gained approximately a million people. Boston broke even. And Chicago increased its population by about 3 percent. When it comes to blight initiatives, when it comes to the tax base, the revenues that we project or can't project, the condition of our schools, it all relates, in my opinion, to this continued loss of middle-class, working-class taxpayers in the City. I don't see anywhere in this Five-Year Plan any specific strategies to retain that middle-class workforce; and more importantly, to replace that leaving population, which is 91 2/5/01 FISCAL STABILITY - RES. 010024 out-migrating from every city in the country. Even the cities that I mentioned that have gained population in the last nine years have had a tremendous amount of out-migration and replaced those out-migrating residents with people from around the world who have come to this country legally. And I see nothing in any of these documents as to what we're going to do about that problem. And the reason I raise that is because recently in the Inquirer, our Planning Commission Chairperson was quoted, again, yesterday in the Washington Post that they view -- or she views the Planning Commission's responsibility as trying to find a way for the City to shrink gracefully. And a slogan, for example, the Philadelphia, more room 18 for those who stayed. What has me concerned about that particular position, coupled with our loss of population and coupled with our lack of a cohesive plan to attract new residents, is that somehow maybe we've thrown in the towel, that we can't increase the number of people that are living in this city. 92 2/5/01 FISCAL STABILITY - RES. 010024 And I'd like anyone at the table to comment on what exactly it we're doing to not only stop the flow but to increase the number of people. Because within that opportunity, as we've seen in the Brooklyn, in the Bronx, as we've seen in other cities in the country -- I guess I've read that the Boston biotech and e-commerce expansion in that particular area could have never happened without new immigrants, new people coming to this country to live and locating in cities like Boston, Chicago, New York, Houston, Los Angeles, Miami, but certainly not Philadelphia. And I just need some comment on that.
I think there are a couple of things, and you've indicated too that if we don't improve the quality of life in our neighborhoods, people will leave; if we don't provide a quality school system, people will leave. You know, and so we do have to address both of those things. There are things going on to increase the potential attractiveness of Philadelphia for other people. For example, there's the study of the North Delaware River, and it's anticipated 93 2/5/01 FISCAL STABILITY - RES. 010024 that that study will potentially open up new areas of residential, commercial, and other kinds of development. There are -- you know, part of what's going on in neighborhood transformation is not just to focus not just on neighborhoods that have experienced blight, but also trying to develop strategies that will bolster the housing market in areas like Chestnut Hill, Mt. Airy, and throughout certain parts of the Northeast and South Philadelphia. We've been working with GMAC and Fannie Mae to create mortgage subsidy programs that will assist those kinds of communities, understanding that we cannot allow those neighborhoods to decline in the way that the City permitted in parts of North Philadelphia and West Philadelphia to decline. I think some of Maxine Griffith's comments were targeted, though, at acknowledging the fact that the City has shrunken and that you have neighborhoods where 40, 50, 60 percent of the population has lost, and we have to figure out how to make those communities liveable communities for 94 2/5/01 FISCAL STABILITY - RES. 010024 the people who remain in them. It's not enough to have, you know, abandoned buildings standing up, it's not enough to continue to support an infrastructure that was developed at a time when the City's population was thought to be going up to 2.5 million. And so I think, you know, things have to go on on both -- well, I guess, on three fronts: we have to stabilize, we have to grow, but we also have to acknowledge the fact that in some areas of the City, we are in fact shrinking.
Well, I can't think of a more devastated area in the country -- maybe in the world -- at the time of 1977, '78, '79, '80 than Brooklyn, New York. It experienced, I think, after that major and famous blackout, the night the lights went out in New York City, total devastation and abandonment and destruction. That neighborhood was never stabilized until people from West Africa and West Indies and Central America and other places and Mexico started coming to buy up those homes, those abandoned shells, and create a vibrance and a sweat equity and a tax base that is rivaling 95 2/5/01 FISCAL STABILITY - RES. 010024 perhaps any city in the world. And I guess part of my concern is that we believe that in some way, spending City taxpayers' resources to do this kind of stabilization should be, maybe some of it, invested in trying to get people to come here to build it. I mean, Commissioner Timoney's sitting here, I remember his comment at the hearing we had on immigration, where Councilperson Tasco, I think, basically said the same thing, was that we should improve it, we should build it, and then they will come. And he corrected her politely and said, "No, if they come, they will build it." And I think in some ways, we have not concentrated -- in many ways, we have not concentrated considering the numbers of immigrants flowing to Philadelphia compared to other cities in this country, we have not made an effort to replace people. And the reason I raise this is because a lot of people who I know have left the City don't hate the City. They left because of the schools, and they left because their wife or this husband wanted a larger home, with a family room, 96 2/5/01 FISCAL STABILITY - RES. 010024 a garage, a lawn, a deck, things that we probably couldn't provide in a city environment no matter how hard we tried. But, again, those neighborhoods are depleted and degraded because no one came to replace those people, and we've made no 8 significant effort to have that happen.
I think you're right. We have to do a better job marketing, I think, you know, in commerce and also marketing some of our neighborhoods. And you're right, a lot of cities have grown because they have increased their immigrant population, and we need to develop strategies for that, and haven't done that thus far.
Let me ask you about the City workforce, about the size, and maybe, I think, Mr. Dubow and Miss Wilkerson have some institutional knowledge of these questions. In 1992, what was the size of the City workforce, in general terms? I know it varies comparing different agencies and --
I don't know; I'd have to look that up. I don't know off the top of my 97 2/5/01 FISCAL STABILITY - RES. 010024 head.
Would it be a safe assumption to assert that -- or a safe assertion to say that it is approximately what it was in 1992?
Can you explain to me the rationale and the potential for failure in any company or business or endeavor that has the name number of employees eight years later than it had eight years ago, with approximately 200,000 less customers/residents with which to serve? Is that not a formula for defeat?
Well, I guess there are two ways to look at that. One is looking at our population and clearly looking at just population and saying population has gone down in relation to the size of our workforce, yeah, that clearly gives us an exposure. At the same time, our revenues have gone up, and, I mean, that's the 98 2/5/01 FISCAL STABILITY - RES. 010024 reason that we've been able to fund those positions. But I think that really doesn't get to your real question, which is, what's happened and why has the workforce increased? And I think we've talked about this in general terms before, that the areas where our budget has really been expanding is in the area of social services and in criminal justice. And part of what's happening is -- and I guess it was the guy from one of the rating agencies said that the people left behind are residents with greater need. And so there's a greater cost per resident than there would have been ten years ago.
Is that not something both in the short term and long term we should be addressing in five-year budget planning? I mean, for example, what is the percentage of the budget increase annually over the past eight to nine years? Has there been an average increase that you could identify as to how this budget has grown?
Over the last ten 99 2/5/01 FISCAL STABILITY - RES. 010024 years?
Has it grown percent in the last 10 years on average? Has it grown 3 percent in the last years on average? 10
I mean, that generally sounds right to me, but I don't know and I don't want to give you a number and then --
How has it grown between last year and this year percentage-wise?
Between '00 and '01? The expenditures actually -- in some ways, '01's a bad year to look at because we have all of the bonuses. So the growth this year looks like almost 10 percent. Now, if you look at next year, it's actually going down a little 'cause the bonuses come out. What you'd really have to do is -- (Unintelligible, parties talking over each other.)
What's the percentage (indiscernible). I'm not looking for --
Almost zero. I mean, it's million out of 3 billion, so it's going down 11 marginally. 12
So would I be off-base by asserting that on an average, percent a year, percent a year, 3 to 5 percent a year?
The end question here is that at some point in time, don't we have to say that this budget is going to be the same as last year in the raw number, and then we try to figure out a way to live within that budget? As opposed to assuming that there's going to be an ongoing increase every year of 3 percent? For argument's sake. 101 2/5/01 FISCAL STABILITY - RES. 010024 I mean, at some point in time, don't we have to figure out a way to deal with the dollars that we have now as opposed to continuing to expand those expenditures in the face of a decreasing tax base? We lost 20,000 people just last year.
But we build our budget based on our revenue projections, so we do live within our means. And that's why -- you know, that's how the surplus has built up over time.
But does not that fiscal discipline imposed upon ourselves, either through a mechanism like a rainy day fund or a zero growth fund budget approach, require us to view and look at the services we provide in a different way? I mean, at some point in time -- I mean, you know -- and I think you'll agree that over the last eight years of unprecedented national economic growth, the City has barely benefitted in comparison to other areas of the economy, that we should be and, again, have been preparing for what might be coming over the horizon that you've alluded to in your 102 2/5/01 FISCAL STABILITY - RES. 010024 presentation. Rather than spending the to percent on increasing size of the budget in the last few years, should we not have been putting that away and also trying to figure out a way to spend within a zero-growth budget?
There are a couple of things. In essence, we have been putting away, and that's why we have the $295 million fund balance.
Yes, we should always be looking at the way we provide services and which services we provide and to ensure doing that we're doing that in the best way and the most cost- effective way possibly. And our goals should always be to do more with less.
Well, I would argue that if the budget's getting bigger and the workforce is staying the same size and your 103 2/5/01 FISCAL STABILITY - RES. 010024 customer base or service -- the people that you serve is getting lower, at some point in time, that's going to be a formula for disaster. And I don't know whether or not it's -- hopefully, it's, you know, not next year or the year after, but at some point in time, unless something gets reined in in some way, there's no business or government that can exist in the current way it's going.
I -- I agree with you. The only thing I would say is that we just have to differentiate between the number of people here and our tax base, 'cause our tax base has actually been growing. But I mean, I --
I guess it's that jobs have started to grow over the last several years, and the wages for those jobs have grown faster than costs. But that's still -- I mean, that doesn't contradict your underlying point, which is, we really consistently have to look at the way we do business to make sure we're doing it the best way possible. 104 2/5/01 FISCAL STABILITY - RES. 010024
Our fund balances -- we had this question the other day but no one -- I don't think anybody in the media covered it, our rainy day fund here, which was, I thought, very interesting and very enlightening, but it wasn't, I guess, as sexy as District Attorney Abraham's announcement. What is our fund balance now?
The way we do our fund balance is, since we accrue revenues and accrue expenditures, we don't have, a you know, a December 31st fund balance or a February 5th fund balance. We look at it at year-end. At the end of '00, it was 295 million, and we're projecting that in this plan that at the end of '01, it will be 151 million.
Wouldn't there be some benefit to a required percentage of that fund balance in any given year or a required percentage of the actual budget that's being proposed be set aside in a fund that would be virtually impossible to touch by any of us in government, with the 105 2/5/01 FISCAL STABILITY - RES. 010024 exception of extremely dire economic situations that would trigger the ability to go into that fund for withdrawals?
There are a few benefits. One obviously imposes an additional fiscal discipline on us. It gives us an additional cushion in bad times. And third, as we heard last week, it helps in the eyes of the rating agencies and our financial overseers.
Okay. Just one more comment, and this will be the end of my questioning in this particular period. And I know that Councilmember Blackwell and Councilmember Cohen made comments in reference to the Gas Works, and I certainly respect their opinion. This individual Councilperson's opinion is that unless we are earnestly trying to sell this utility today, we are wasting time, because the length of time that we're going to try to anticipate using to stabilize, quote/unquote, stabilize this company, and the money that we're going to be required to spend out of our General Fund revenues -- 'cause I think the $45 million is lost. It's my opinion, I may be shown to be 106 2/5/01 FISCAL STABILITY - RES. 010024 wrong, but I do believe at some point in time in the spring, the Administration will be back again asking us for more money. This utility is not -- because of its abuse, not by this administration, but by governments over the past 30 years, is not retrievable. It is bankrupt. And unless we stop wasting time in dealing with its sale, not only will it cost the taxpayers more money in the near future, but we're going to have less of a value of an asset to sell when we finally come to the realization that no matter what we do, this governance scheme, the layers of government that gone on top of this utility for years have kept it from being able to respond in any way in an industry standard compared to any other energy utility throughout the country. Now, people say, you know, we run the Water Department pretty well, and we do. I mean, Commissioner Kischinchand and Acting Commissioner Roy and the people at Water Revenue, I think, have done a very good job. The difference between a water utility and a gas utility is that in the northeast part of this country, water is not 107 2/5/01 FISCAL STABILITY - RES. 010024 necessarily a problem commodity. Gas, however, in responding to the gas needs and the changes in the gas industry, this utility, under current control of the City government, has not ability to respond, virtually no ability to collect its bills, and virtually no 8 ability to serve its companies the way it should. And my only advice at this point in time is, we should be sitting with someone, whether it's a proposal, whether it's a negotiated sale, whether it's a bid, whatever it is, there is value left to this company, and the biggest part of its value is its half a million customers. It's about -- that and the (indiscernible) planner are probably the only two things that this company has left that's worth anything. And I think the longer we delay, the more expensive it's going to be and the less we're going to get for it in the end, and the less the taxpayer and ratepayer are going to benefit from any potential sale. That's just an editorial comment, and I'd just like to have it on the record. Thank you. 108 2/5/01 FISCAL STABILITY - RES. 010024
Thank you. The Chair recognizes Councilman Clarke.
Thank you, Madam Chair. I -- I have a couple questions, but before I do, I just wanted to add to Councilman Kenney's reference to our loss of population. I represent a district that is -- has the extreme, so to speak. In the Center City portion of the district, it is the only place in the City of Philadelphia where we have increased population. I represent parts of North Philadelphia where there has been a massive exodus over the last 10 to 20 years. And I think when we do an analysis of that, there is no rocket science associated with the reason why that has happened. In Center City, the quality of life has been enhanced considerably. We have a special services district now here, we have a job growth, we have probably one of the best elementary schools in Greenfield in the City of Philadelphia. So when you look at those things, you can get a sense of why we have 109 2/5/01 FISCAL STABILITY - RES. 010024 this great population increase in Center City. So I guess as we move ahead, I just want to say to the Administration and to Councilmembers, 'cause there is a partnership as it relates to this neighborhood transformation program, that we look at Center City in some degree and use that as model for transforming parts of North Philadelphia so we increase the educational opportunities and increase the quality of life up in those communities, and the job creation aspect of it is very important to us as we move ahead. But getting to my questions, I guess, Miss Wilkerson, if you recall, last year, when this whole issue with respects to PGW came to bear, there was a request for a rate increase and a loan. And at that time, I had talked to the Administration about a transfer ordinance that I was interested in introducing that would transfer approximately a million dollars to OHCD so they could contract with UESF to allow some resources to go to those individuals that make 150 percent of median income, which is the highest rung in terms of eligibility. 110 2/5/01 FISCAL STABILITY - RES. 010024 And I was kind of talked out of that, and I forwarded a letter and asked that that be acted upon, and I was given the impression that there was going to be something done administratively as it relates to that additional revenue in terms of support services.