COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, November 29, 2000 2:35 p.m. - - - BILL NO. 000705 and 000706 - Related to Stadiums. (Full text of both bills attached hereto.) PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILWOMAN JANNIE BLACKWELL, Vice Chair COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN W. THACHER LONGSTRETH COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 11/29/2000 WHOLE - STADIUM BILLS I N D E X William Hankowsky, PIDC. . . . . . . . . . . . F. Pekune, City Treasurer. . . . . . . . . . . 6 R. Tustin, Acting Dir. of Capital Program Off. 20 7 Joyce Wilkerson, Mayor's Chief of Staff. . . . 25 8 Rob Dubow, Budget Director . . . . . . . . . . 32 9 P. McCarthy, Divisional Deputy City Solicitor 69 10 3 11/29/2000 WHOLE - STADIUM BILLS P R O C E E D I N G S
Good afternoon, everyone. The public meeting of the Committee of the Whole regarding Bill No. 705 and 706, and I would ask Mr. McPherson to please read the title of the bills.
Bill No. 000705, an ordinance authorizing the Commissioner of Public Property, on behalf of the City, to enter into a lease agreement with the Philadelphia Authority for Industrial Development providing for the leasing by the City to the Philadelphia for Industrial Development of Veterans Memorial Stadium, including the ground lease of land underneath Veterans Memorial Stadium and obligating the Philadelphia Authority for Industrial Development to finance certain repairs to Veterans Memorial Stadium. Bill No. 000706, an ordinance amending Bill No. 000003, adopting a Capital Program for the six fiscal years 2001 to 2006, inclusive, and amending Bill No. 000004, adopting a Fiscal 2001 Capital Budget, each to provide authorization of certain capital repairs, renovations, and 4 11/29/2000 WHOLE - STADIUM BILLS replacements to Veterans Stadium, as part of said Capital Program and fiscal 2001 Capital Budget. (Witnesses come forward.)
Good afternoon, Mr. Hankowsky. Are you testifying first?
Council President, if I could take just a second of indulgence of the chamber.
I think it would be better if I do this today than tomorrow -- since I think tomorrow might be a little more emotional situation. Tomorrow will be my last day that I will be testifying in front of City Council -- not my last day but my last set of hearing over the last 15 years, and I would like to take an opportunity to publicly thank all the members of Council -- yourself as president, the technical staff, and everyone else for treating me personally in a courteous and professional way in 5 11/29/2000 WHOLE - STADIUM BILLS the cooperation on a variety of projects. And most of the time, we agreed; occasionally we didn't. But it's been a terrific experience, and I would be remiss if didn't take an opportunity to thank Council once before I leave. It's not that I do it today versus tomorrow. So thank you.
Thank you for all that you have done. You have certainly been an asset to the City. And I will tell you, I think we're all going to miss you, and I know that Councilman Goode is smiling and I know he agrees with me, that you -- that we're all going to miss you. And we want to thank you for all that you have done, and I'm sure we're going to see you before you actually --
You will, you will, but thank you very much for those kind words. So let me talk about the matter at hand.
Yes. As perhaps one of the Councilmembers -- maybe the Councilmember 6 11/29/2000 WHOLE - STADIUM BILLS most critical of the testimony that Mr. Hankowsky has presented over the years in support of various projects, I wanted to add my note of thanks. He's always conducted himself in a very professional manner, and despite some of the barbs in my questions -- I didn't think they were barbs, but other people tell me that they might have been, I think he handled himself very, very well. And I just wanted to make sure that everybody understands that the differences we express in City Council have nothing to do with personalities. And I think he really did, on behalf of the City, even though I still disagree with him -- (Laughter.)
But that in matters that he presented to City Council, I think he did act in what he considered to be in the best interests of the City. And I want to thank him for his entire professional, fine, personal manner he's always exhibited.
Thank you very much, Councilman. I look forward to coming back 15 7 11/29/2000 WHOLE - STADIUM BILLS years from now and seeing you here. (Laughter.)
Because you clearly are the institution, an institutional memory.
Excuse me, sir. Councilman Nutter, did you want to be recognized? Your light is on.
I did, Madam President, but I was just kissing a young lady on the cheek here, so I --
There's no 19 one else to be recognized, so we'll proceed. Thank you.
Good afternoon. I'm William Hankowsky, President of the Philadelphia Industrial Development Corporation. I'm here 8 11/29/2000 WHOLE - STADIUM BILLS today to testify in support of Bills No. 705 and 706. These bills complete a process that was begun this past spring to allow for certain repairs to be made to Veterans Memorial Stadium ("The Vet") to extend its useful life. These bills amplify the process set forth in Bill No. 9 82, enacted by City Council March 23rd of this calendar year. Let me briefly describe the content of Bill No. 705. This bill sets up a financing structure for Vet repairs. It does so by the following actions: The City will lease the ground and improvements of the Vet to the Philadelphia Authority for Industrial Development ("PAID"); PAID will issue bonds to finance the Vet repairs; PAID will lease back the Vet to the City and provide the proceeds of the PAID bond issue to the City for the City to execute the Vet repairs; The City will pay PAID a rent equal to the cost of PAID's debt service on the PAID bond 9 11/29/2000 WHOLE - STADIUM BILLS issue; The City will continue to operate the Vet, remain the landlord to the Philadelphia Phillies and the Philadelphia Eagles, consistent with their current leases, which remain unaffected. The proposed structure is consistent with suggestions actually made by City Council in the spring to explore the use of PAID in this transaction. The successful passage of this legislation will eliminate the need of the City to use valuable and scarce City Capital Budget authorization to repair the Vet. We thank City Council for this suggestion, and we are pleased to be here today to say that the use of PAID can work and will be used. This legislation authorizes up to $80 million in repairs to the Vet. This amount would be necessary at a minimum to extend the Vet's useful life to 2010, should we decide not to proceed with the construction of new stadiums. Should we decide to proceed with new stadiums, we only need to extend the useful life through 2003, which is estimated to cost $19.7 million. A copy 10 11/29/2000 WHOLE - STADIUM BILLS of the list of repairs for that amount has been provided to Council, I believe, yesterday, and delineates the 19.7 million of repairs. I would recommend Council's favorable consideration of these bills and am available to answer any questions that Council may have. I believe we have one amendment -- we have two, which I will ask the City Treasurer to let out, which I believe are technical in nature, being provided to us by (unintelligible) counsel.
Good afternoon. My name is Falasha De Olane Pekune (ph.), and I'm the Treasurer for the City of Philadelphia. I wish to offer to Council an amendment to Bill No.'s 705 and 706. The proposed changes on , Section 18 3 of this Bill 705 and of the Veterans Stadium sublease between PAID and the City. Section 3 of Bill No. 705 provides the authorization language that will permit PAID to issue bonds from time to time in an aggregate principal amount not to succeed $80 million. of the said lease provides for the definition of "bonds." The clause being 11 11/29/2000 WHOLE - STADIUM BILLS inserted is: "and amounts necessary to effect any more funding." The reason for this change is to permit the flexibility of effecting of refinancing should economic conditions or structural issues warrant such. Because interest rates are constantly, it was changing virtually impossible to determine what our cost exposure would be in the event there is a need to refinance the debt. As a result, it would be imprudent to subject the issuer, PAID, to what might be, depending on prevailing interest rate environments, unnecessary restrictive financing language. Please note that the proposed ordinance 15 amendment does not change the maximum aggregate dollar amount of $80 million authorized to be spent on Veterans Stadium repairs and improvements. It simply provides the flexibility of executing an economic or structural refinancing on the debt that prospectively may be beneficial to PAID and the City. In Bill No. 706, it's also another technical amendment, and all it is doing is inserting the Bill number, Bill No. 706, that is authorizing the amendment to the Six Year Capital 12 11/29/2000 WHOLE - STADIUM BILLS Program. We have provided copies of both amendments on disk and in hard copy and in black-line form and in clean form for Council this afternoon.
Do Councilmembers have copies of the amendments?
All right, Mr. McPherson, members of Council do not have copies of the amendments.
I was instructed to bring them this afternoon. They're in this box.
And a disk containing the documents. (Copy of amendments distributed.)
Okay. Are you finished? 13 11/29/2000 WHOLE - STADIUM BILLS
No? Mr. Hankowsky, you stated in your testimony, you stated that these bills complete a process that was begun this past spring to allow for certain repairs to be made at the Vets Stadium and to amplify the process set forth in Bill No. 13 82, enacted by City Council on March 23, 2000. Would you please explain how these bills amplify the process provided in Bill No. 82 in light of the fact that the process envisioned in Bill No. 82, in summary, provides the City and the two teams with mutually agreed upon the list of capital improvements, which would be attached as an exhibit to agreements amending the leases in each team. Also, the agreements, including the exhibits, would list the capital improvements, would be subjected to Council for its approval by resolution prior to the execution and delivery of 14 11/29/2000 WHOLE - STADIUM BILLS each agreement. Three, Council would then adopt resolutions approving the agreements. Can you tell me how this amplifies or what I have just read to you as to what Council approved in spring?
I think I can, in part. What was envisioned in the spring, as you recall, was the subject of much discussion, was the use of City Capital Budget authorization, and we actually included $40 million in the approved City Capital Budget. And then we also had a dialogue about this early this fall, when we did the authorization for the voter referendum on the Capital Budget. And what we're doing today is bringing a new vehicle -- I mean, a technique as to how those repairs can get done, so that instead of using the Capital Budget, we can use the technique of having PAID-issued debt, and thereby eliminate the need to put any strain on the City Capital Budget for these repairs. That' is what I meant by "it amplifies and further carries out the process." 15 11/29/2000 WHOLE - STADIUM BILLS As we all are well aware, we also have before us not today but tomorrow the question of whether we would be proceeding with new stadiums or not proceeding with new stadiums. We provided to Council, I believe, yesterday, the list of the $19.7 million in repairs, which would be the list that the teams have mutually agreed to, which would provide for extending the use of the life through 2003, and that obviously makes the assumption that Council would consider in the affirmative the development of new stadiums. If you don't do that, then 19.3 is not the relevant list. So we should have one list if we're proceeding with stadiums. The relevant list, if we're not proceeding with new stadiums, is the report that -- I think the final report that you recall produced, which laid out the approximately $80 million in repairs, which was looking at a useful life extension to the Vet through 2010. And which of those two lists to be consistent with the provisions you read is the appropriate list, in effect, that gets triggered by which of the two scenarios we decide to pursue collectively over the next several weeks. 16 11/29/2000 WHOLE - STADIUM BILLS
Do we have any assurances that agreeing to make the repairs does not obligate the City to make additional repairs?
I think I can speak in one scenario to that question, but not in both. In the scenario where we would develop new stadiums and extend it for three years, the teams have verbally said to me that they are prepared to say that this 19.7 is the cap -- I'll use that term -- of the exposure the City has on Vet repairs, with one caveat, which would be some kind of an emergency safety problem, you know, if something broke that was dangerous and it would have to get fixed that's not on the list. We do not have a similar agreement with the teams under the scenario where it would not develop stadiums. They have withheld agreeing that A is the correct list. I think that's -- I'm only going to reference -- I believe that's, in fact, consistent with the correspondence the Law Department's received. And I'm getting a head nod that that's accurate. So we've accurately portrayed that. 17 11/29/2000 WHOLE - STADIUM BILLS
So, Mr. Hankowsky, can we be led to believe that in your opinion the expenditures of the $20 million will maintain the Vet in a fit-for-habitation state of repair for the next three years?
I'm going to answer in the affirmative, but the phraseology sounds like someone quoted the lease. I'm not a lawyer, so I don't want to interpret the lease, but from a business perspective, that's what the teams are saying. They're saying, do that 19.7, that place will sustain itself through 2003, that's fine. And as I said, I just want to be clear, with the one caveat: unless there's some safety emergency, you know, something just falls and it has to get fixed that would come up that's unanticipated.
Thank you. The Chair recognizes Councilman DiCicco.
Thank you, Madam Chair. Good afternoon, Mr. Hankowsky. The capital improvement summary that we were supplied with that identifies approximately 18 11/29/2000 WHOLE - STADIUM BILLS $19.7 million in repairs, my question is, there are a lot of different items, with a certain amount of costs involved for each item. Are these costs that we are asked to incur as absolutely necessary, are they absolutely necessary for at least the three-year life expectancy of the stadium? I guess my question is -- it's a small item, but by way of example, interior wall resurfacing, painting of the concourse walls in 2, 3, 5, and 700 levels. Is it an esthetic thing that we're doing and we're spending $400,000 just to paint over what may be flaking paint? Does that really make that much of a difference if we didn't paint it? What I'm looking to do is, obviously, see about shaving this million down even 18 further. 19
If it's something that is of public-safety nature, the heating system is definitely broken, you know, we have to do something? Are we putting in a Cadillac state-of-the-art heating system, or will we be putting something in that will at least get it 19 11/29/2000 WHOLE - STADIUM BILLS past the three years and maybe another year as a cushion?
Because you can't determine how long these things would last.
I see some of these things, and I'm wondering, do we really have to paint the locker room?
Right. Let me give a partial answer to that, then I will ask Mr. Tustin to further amplify it since he's actually worked in detail with the design firm and, I think, understands these projects much better than I do. But just so you understand, you might even recall that initially, we had Ewing Cole do it, a three-year number, a five-year number, and a ten-year number. I think the original three-year number was like million. 22
And we have sat down 25 with the teams, in fact, to review that, in fact, 20 11/29/2000 WHOLE - STADIUM BILLS exactly in the spirit of your question, which is, what do we really have to do here to be reasonable but not extravagant? And that led in part to what is now the 19.7 number versus the number. 6 There was also, I think, an 7 understanding in some of these categories where 8 the consultant just said, Okay, here's our 9 estimate of what it is. When you really get into 10 it, you should really kind of go around, and you 11 might actually find out that we don't need to fix 12 every inch of the wiring, there's three places 13 where it's a problem, let's just fix the three 14 places, and that these numbers, in fact, could go 15 down. 16 So I think what's built in here -- 17 contingency's one way to look at it or, you know, 18 worst -- this is kind of the worst case if you had 19 to fix it all, but there's a theory that, in fact, 20 you may well be able to save money on this list. 21 And I'll ask Mr. Tustin to further 22 amplify that and make sure I'm correct when I say 23 that. 24
Good afternoon. My name 21 11/29/2000 WHOLE - STADIUM BILLS is Richard Tustin. I'm the Acting Director of the Capital Program Office. I think Mr. Hankowsky answered the question probably as good as I could at this point. He's absolutely right. Some of the issues, as you've just rose, concerning the resurfacing of the walls, we will look at them in depth as we get to each project. And anything that doesn't have to be done will not be done. But I need to remind everyone that the Vets Stadium is an open structure; there is no 13 inside and outside. Essentially, it's all open. So an interior wall is still exposed to the weather in many, many cases. So it may not just be a situation where there's some flaking paint and it usually doesn't look good; there could be other issues as well, with it constantly being wet through driving rain or whatever. That moisture would seep into concrete structure of the block. So those areas would have to be sealed just to protect the structure. But, again, we intend, as we get into each and every project, to look at it in detail and determine what the minimal amount of work we 22 11/29/2000 WHOLE - STADIUM BILLS would have to do in order to get us through the next three years, and restrict ourselves just to that work. The numbers you see here are, as Mr. Hankowsky said, a worst-case scenario, and they do include a contingency of approximately percent to each number. So, therefore, things 9 that you will uncover as you get into construction 10 that you didn't anticipate, and because the 11 building is as open as it is, we really don't 12 think we'll need that full 20 percent either. 13 So I can only see these numbers going 14 down. 15
Okay. And how 16 would we know that? I mean, is that something 17 that would be reported back to Council? I mean -- 18
Whatever protocol or 19 procedure that we want to develop, you know, we 20 would be happy to follow in that. Some things happen during the actual construction that you -- you take down a part of a ceiling or a pipe or whatever and you find --
And you find something else. 23 11/29/2000 WHOLE - STADIUM BILLS
-- something that you have to do right away, yeah. But we can develop some sort of a periodic reporting process or paper that we could forward to Council on a regular basis, with updates, periodic updates, monthly updates, bimonthly updates, however you would like to see them, on what's happening, what decisions have been made, and what things we may have uncovered.
I don't know if I necessarily would need to see a punch list.
But I just was curious that we're not at least making repairs or resurfacing things that we really don't need to do, just for the aesthetic value, because in three years, we're going to tear it down.
Right, right. If I can also add to that answer, going with the new stadiums, the Eagles, now that their new practice field is complete, will be moving out of their offices shortly into that new space. Some of the items we have in here included their office space. 24 11/29/2000 WHOLE - STADIUM BILLS
Okay, that was my next question. Thank you. Thank you, Madam Chair.
When is it anticipated that they will be moving into the new facility for their office? The Eagles, that is.
We have talked to the Eagles organization and they believe that they will start moving in early February, after the season. They will not be moving in all at once, lock, stock and barrel; they'll be moving over a long period of time. They have not yet identified for us what that time will be. That's very important for us as we put together construction schedules, knowing when they're going to be out of certain spaces, so we're anxious to get that information as well. 25 11/29/2000 WHOLE - STADIUM BILLS
Thank you. Councilman, are you finished with your questioning?
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. I'd like to follow in the same line with a major item. About a week, ten days ago, the Finance Director indicated at a briefing that a letter of intent, a commitment letter, was sent to a sole-source vendor to replace the playing surface at the existing stadium. And here, it's listed at a total estimated cost of approximately $2.5 million. I'd appreciate an explanation on how this award to this sole-source vendor occurred prior to today's hearing and the approval of these expenditures.
My name's Joyce Wilkerson. I'm the Mayor's Chief of Staff. I don't know if you've received a letter; there was a letter that was sent to the 11/29/2000 WHOLE - STADIUM BILLS Council President that included the letter, I guess, that was provided to the sole-source vendor. I've brought extra copies.
It was a letter that explained the process that was used. If you don't mind my distributing it.
No. In fact, I'd like to have one too. I don't remember it.
When we had the last briefing, the question was raised about, you know, why was the award letter issued and what was the authority for that, the letter? And also, you wanted a copy of the letter that was actually issued. An explanation of the process is included in my letter, and a copy of the award letter. And Rob Dubow can answer in more detail -- provide a more detailed explanation about --
I, unfortunately, had not received this letter, and I guess it was appropriate to send it to the President, but I honestly -- 27 11/29/2000 WHOLE - STADIUM BILLS
The Administration normally responds when the questions come up like that.
Yeah. The issue -- and, obviously, I don't have time to read this letter at the moment. In following Councilman DiCicco's questioning, I understand that this contract was let out without competitive bidding, it was a sole source, and apparently there was a deal to make temporary repairs to the seams of the existing surface, and I understand the value of that repair was approximately 30 to $50,000, and the vendor made the repairs with the stipulation, if they got the deal, there'd be no charge to the City of Philadelphia for those particular repairs. I have a problem with that in the fact that it's a sole-source deal, but I guess the basic question here is that the repairs, from what I understand, and the consultant's report have no 24 technical data to support the decision. And in my conversation with the City Solicitor, it's 28 11/29/2000 WHOLE - STADIUM BILLS basically just a decision whether to replace it or to -- to keep it is just a call, a call. And my comments are that the repairs apparently meet the conditions of the lease. Since there's no technical data to support a decision to replace it, why would we be spending $2.5 million to replace the turf if the turf there, after repairs and continuing repairs, could meet the conditions of the lease? I just don't understand why even if the potential of a suit from a athlete that's injured, if he's injured or she's injured on a particular surface that meets the terms of the lease, I have a tough time spending $2.5 million in replacing something that is in excess of what the lease requires.
Councilman, I'll try to answer that question, and that's several questions that you have just asked. To my knowledge, there was no deal in any way with the vendor of the Astroturf product that's down right now concerning not payment of repair costs for an award of the contract. We had an independent design firm go out and evaluate, I believe, eight different 29 11/29/2000 WHOLE - STADIUM BILLS products as far as -- replacement products for the turf. We narrowed that down to two products that we thought could possibly work, and those two products we discussed with both the Phillies and the Eagles. One of the driving decisions concerning the product that we selected had to do with the convertibility of the stadium. As you know, Veterans Stadium has telescopic stands that have to get pulled out and put back, depending on whether the Eagles playing or the Phillies are playing. And a lot of times, because there may be a game on a Monday night, a football game, and a Phillies game the following day, these conversions have to take place very quickly, in less than 17 hours. 18 So we had to find a product that we 19 could use that could meet that requirement, as 20 well as be something that the teams would accept 21 as a playing surface. Also, the surfaces have to 22 be accepted by the National Football League and 23 also the Major Baseball Association -- I think 24 that's MBA. The Astroturf that was down there was 30 11/29/2000 WHOLE - STADIUM BILLS at the end of its useful life. It had to have repairs done. Those repairs were being done on an as-needed basis. But essentially, it was evaluated to be at the end of its useful life. One of the problems with the turf isn't the surface itself but the padding below the surface. It's a padding that's used that provides resiliency and also cushion to both teams in a playing situation, so that when they do fall, you know, if they get hurt, it's part of the cushion of the product. The padding itself was, in the opinion of our consultants, was completely gone, as far as any resiliency left in the product. And the surface itself, in many, many areas, had been worn to the point where it would be very difficult to repair it in any way. And so, whether we were to continue on with a three-year scenario, where the teams stayed there for either three years or ten years, it was felt by all that that surface needed to be replaced, even if it was only for three years. It was at the end of its useful life.
The fact that the 31 11/29/2000 WHOLE - STADIUM BILLS vendor that made the repairs got the award, and in fact, if the vendor hadn't gotten the award, we would have gotten a bill for the repairs of approximately 30 to $50,000. You're not aware of that?
No, I'm not aware of that, that we would not have to pay that bill if they got the award, I'm not aware of that.
Well, then, unfortunately, I'm disappointed that you're not aware of it, but I was briefed by the City Solicitor and the Stadium Manager yesterday, and in fact, that's exactly what occurred. And, also, the consultant's report on the fact that the useful life of this surface has ended its life is beyond. There's no technical -- there's no technical information to support that. There's nothing suggesting that there's a thickness of a certain number of millimeters when it was first installed versus the condition of it today. I was told yesterday that it was just basically a call that the surface -- that the playing surface needs to be replaced. And in my opinion, if the repairs of 32 11/29/2000 WHOLE - STADIUM BILLS that particular field meet the terms of the lease, I can't imagine spending $2.5 million, even if we had to spend another $100,000 in the next three years to repair it and keep it to the terms and conditions of the lease agreement. I think that's money better spent than spending 2.5 million. And to the Chief of Staff, since we haven't had an opportunity to read this letter, I'd appreciate you explaining to Council how this deal occurred, how a award has already been given before you have the money authorized to make the repair.
I've asked Rob Dubow, the Budget Director, to provide the technical explanation.
Good afternoon. Rob Dubow, the City's Budget Director. Councilman, what we did was partially certify a contract against the existing stadium capital appropriations under the theory that if this legislation is approved, we would reimburse the General Capital Fund from PAID.
One of the things that -- you know, after the meeting we had last week, 33 11/29/2000 WHOLE - STADIUM BILLS we have held up on even taking this partial step. There are any number of projects that need to proceed at this point if, in fact, there are going to be repairs made during the period between seasons. We've held off on that and are not doing design work on them and are not, you know, have not retained the experts to prepare the bid packages because we understand that, you know, that Council interpreted, you know, this step as an act of bad faith, and so it held up on even taking this interim step. There are time constraints, however, if the bid packages are to be put in place so that the work can proceed timely. You know, we do need to, you know, sooner rather than later some go-ahead. It was our assessment that this is a way of not committing fully to the project but not losing so much time that, in fact, you blow a whole construction season.
Could I get an answer to this question? After the repairs, the value, as I understand it, of the repairs is between 30 and $50,000. Do those repairs today meet the lease of the that the Phillies and the 34 11/29/2000 WHOLE - STADIUM BILLS Eagles have with the City of Philadelphia? (Witness comes forward.) (Panel confers off the record.)
We had to discuss something. My understanding is that if a determination is made that the playing field is not in a good and playable condition, that it would be because the pad underneath is -- no 13 longer has the resiliency it needs or the surface itself is worn to the point where it doesn't provide proper traction or any of the other play characteristics of the field. Then, in fact, we would in fact be in violation of our lease to keep it in a good and playable condition.
Could you provide the Chair the technical data to support that decision.
Because I was, again, told yesterday that the consultant's report provides no technical data to support the 35 11/29/2000 WHOLE - STADIUM BILLS decision. So I don't know how we could make a decision for -- to spend $2.5 million for three seasons without any technical support to make -- to support that decision. And if, again, it's just a giveaway, then let's be honest about it.
You're welcome. The Chair recognizes Councilman Cohen.
I'd like for a moment to follow up the question of Councilman Rizzo. Is it your judgment that the $2.5 million that Councilman Rizzo was referring to was part of what I understood was a commitment of $6 million per year for annual repairs?
Is there a general lease requirement with respect to repairs?
And is there any provision for any amount of money to be paid? Or is it just a description of conditions that have to be maintained?
Has the cost of that been generally within about 6 to $7 million a year?
There's been, actually, a lot of variation. There were some years where it would be more than six, some years where it would be less.
Well, was this repair work that was done, that Councilman Rizzo is alluding to, was it considered to be a part of the requirement of the lease?
Do we go through any process that determines whether or not it's required by the lease, or is it possible for the 37 11/29/2000 WHOLE - STADIUM BILLS teams to call up and say, We would like to have a color change, and will you do that for us? And then you say, Yeah, sure.
No, I don't believe we would go that route to change colors. The repairs actually would have to be done under the terms of the lease in order to keep the field in good and playable condition. The $30,000 that was spent to repair seams or to repair some of the portions of the turf -- and I believe it was in a very isolated area, if I'm not mistaken -- would have to be done in order for the City to --
What is the portion that Councilman Rizzo was referring to in addition to that? I will yield to you, Councilman Rizzo. 'Cause I understood you referred to something involving $2.5 million.
Councilman, the 38 11/29/2000 WHOLE - STADIUM BILLS scenario is that the playing surface needed some immediate repairs because on national television, there were comments made about the uneven seams on the pitching mound and some other areas of the playing surface. A vendor was called in and the vendor made the repairs. The value of those repairs, the temporary repairs, is between 30 and $50,000. How I understand is that the vendor that got this letter of intent made the repairs, said there will be no bill if we get the deal. If we get the deal for $2.5 million to replace the playing surface, you won't get a bill. And I asked specifically during the briefing if we -- if that particular company did not get the deal to put this new $2.5 million playing surface in, the City then would, in fact, get a bill for between 30 and $50,000 for those temporary repairs to meet the terms of the lease agreement after the repairs were made. I was told that the playing surface met at that time the terms of the lease agreement between both the Phillies and the Philadelphia Eagles. The replacement of that playing surface now is beyond 39 11/29/2000 WHOLE - STADIUM BILLS the terms of the lease.
That was my understanding. Is there any disagreement by the City as to that?
Yes. My understanding is there is -- we do have a disagreement with that statement. We felt, our consultant, after evaluating the field as part of assessment report and also doing the investigation into the replacement products, we did feel that we had to replace that field in order to keep it in a good, playable condition.
I -- I -- I again ask you, if you're telling me that you based this decision on a consultant's report to spend $2.5 million, nowhere, from what I understand both verbally and reading, in the report does the consultant apply any technical data specifications of the turf when it was originally installed, readings at various locations throughout the playing surface of the condition of it today. There is no technical data, and I've asked for the technical data to support the decision. The decision was based on, Well, you 40 11/29/2000 WHOLE - STADIUM BILLS know, let's change it. We can either say yes or we can say no, so let's just spend it, let's just spend it to make the place look pretty. I was told that part of the decision was the image of the City. Well, when the Good Year Blimp of the old Vet, I hope that the camera person then turns the camera to the two new stadiums we're building, and I think that will neutralize any criticism that we get about the condition of the existing stadium that we only have to live with for three more years, hopefully.
We will provide you with all of the technical information that supported the decision.
Well, I think the basic issue raised by Councilman Rizzo is that in view of all of the discussion in March about the repairs that might have to yet be done, it does seem like a question of whether good faith was complied with when the project cost you $2.5 million, almost half of the average annual repair costs, was entered into without any knowledge by City Council. And I think, from my point of view, that seems to be a very basic issue 41 11/29/2000 WHOLE - STADIUM BILLS raised here that Councilman Rizzo was raising and saying, Prove to us that it was really necessary. And there doesn't seem to be any proof that it was necessary.
We will get the additional information that supported -- there are a number of discrete studies that support the Ewing Cole report. We have given the Ewing Cole report -- my understanding is, there are various technical experts, you know, engineers and others who have reports and documentation that support the conclusions in Ewing Cole.
No. There was a report distributed in the fall -- where are we now -- in September that had provided a discussion of the conditions at the Vet. It was circulated to Councilmembers at the time the Administration sought an increase in the bond authorization limits. What we have circulated more recently are refined numbers for short-term repairs and long-term repairs.
It seems to me you 42 11/29/2000 WHOLE - STADIUM BILLS didn't need long report; you just needed some information saying, This comes to our attention that such-and-such is required. Before we proceed, we want to make sure that Council is fully advised. The letter could have gone to the President of City Council, and she undoubtedly would have asked for some proof as to its need, and you would have furnished it, if it existed, and if it didn't, then there would have been discussion. There's a concern that it seems that Councilman Rizzo raises is a constant refrain from this side of the City government that the Administration makes its decisions, ignores us completely, and later comes in with some kind of story that this was really needed. For example -- and now I go to your question, Madam President. I thought your first question today was superb. I have to say, Mr. Hankowsky, while your manner was fine and professional -- (Laughter.)
I thought your answer had absolutely nothing whatever to do with 43 11/29/2000 WHOLE - STADIUM BILLS the question, and it didn't answer the question at all. And that was -- you know, she was asking you what -- how do these bills carry forward the process that was characterized by the legislation we passed last March? And your answer had nothing whatever to do with that question. You told us about PAID, many more things than the involvement of PAID was concerned. Could you go to your first question, Madam President?
I recall it, I believe. I thought I said, Councilman, and perhaps I was not clear -- I think you need to make a distinction between the various components of this Vet repair transaction. Component one is, how do we pay for it? Up to this point, prior to today, the actions that we have taken collectively, starting with the spring action, the fall action, the voter referendum, had anticipated the use of the Capital Budget to do that. I think we all acknowledged that that was less-than-satisfactory course of action. 44 11/29/2000 WHOLE - STADIUM BILLS So we have developed this alternative so that the source of funds would be paid bond issued proceeds and that we will preserve, save for other uses, the Capital Budget authority.
If I can continue. I'd like to finish my response, please. Thank you. So, one is how do we fund it, and this legislation amplifies how we fund it. So I was trying, in part, to respond to my testimony because my testimony was quoted back to me. The second is this issue of what are we fixing, what are we going to spend the money on? And we basically believe now that we have two scenarios or two lists. One is the 19. 7 million, as was just discussed. It's kind of a worst-case, or the 80 million. Which list do you end up going with is a function of a decision that is before us, but not today, which is the decision of, are we extending the useful life for 3 years or for 10? Once we make that decision, three versus ten, then I think you likely would then 45 11/29/2000 WHOLE - STADIUM BILLS need to memorialize that decision with the teams, if in fact that is possible, in what is, you know, called for in the legislation, an amendment to the Vet lease. And then -- and then, seek Council approval for that amendment, which is required. I'm not, you know, somewhat -- someone will be back, because that will be a necessary step. And with that would be whether it's attached to it is the list or the 80 list. 11 So I thought I was trying to be 12 responsive to kind of cover the components of what 13 has transpired. 14
In carrying out the 15 terms of the lease, where would the funds come 16 from? 17
I think I can say that 18 -- and, obviously, someone else can jump in -- 19 the City built the Vet and has the --
I'm not asking for that; I don't need a long history. Where did the fund come from the annual report?
Under the Capital 46 11/29/2000 WHOLE - STADIUM BILLS Budget.
What was ever done in March to justify the Administration thinking that this is the time to shift three years, the next three years from the Capital Budget to PAID? What Councilman Nutter raised, and I believe it was he who raised a whole series of questions about not taking all of the money out of the Capital Budget --
-- for that 80 million and then stripping the City so it wouldn't have money for anything else. I didn't hear anything from him with respect to taking funds for annual repairs from a bond issue. Isn't that what you're proposing?
Yeah, I think I'm going to ask Rob to step up because maybe we're misunderstanding each other, and I think Rob seems to understand the question better than I do, so 47 11/29/2000 WHOLE - STADIUM BILLS I'll let him respond.
In the spring, when we were testifying about the Capital Budget, one of the comments from Council was, why are you eating up our limited debt-incurring capacity with this requested 80 million in repairs? Why don't you examine whether there are ways to finance these repairs that don't involve eating up debt- incurring capacity?
Eating up debt-occurring capacity. Because if we run it through the City's General Capital Fund dollars, it eats away at the 324 million or 342 in --
That's right. But if we fund it through PAID, it doesn't go against that debt-incurring capacity, so we thought by going through PAID, we were actually responding to your concerns that -- Council's concerns about our debt capacity.
And what's your proposal with respect to if it's only going to be needed for three years, that would be -- 5
Unless there's no 12 stadium deal under your version. 13
That's right. Our proposal 14 is whether we need to do 80 or 20. 15
So let's say at 20, 16 what is your proposal in this scenario? 17
So that we don't use up debt-incurring capacity. That's 20 million --
I'm talking about what was said related to the $80 million, a huge new amount of capital investment that's going to be made.
This 20 is essentially a 49 11/29/2000 WHOLE - STADIUM BILLS portion of that 80. The 80 was if we're there --
But it's not a portion of the 80 if we're only dealing with the three-year lease.
Well, it is because it's the amount of that 80 that we need to do if we're in the facility for three years.
But you would need to do that approximately anyway. You've told me that each year, it's either a little more or a little less than 6 million. And 3 times 6, when I went to school, added up to 18.
And that's awfully close to the 19.7 over a 3-year period.
Well, yeah, but it's still $20 million that we now can use our debt-incurring capacity for other things. In other words, it's 20 million more that we can use in the City's General Capital Fund.
So you are expressing in this bill a whole new idea that the annual costs for repairs ought to be funded by 50 11/29/2000 WHOLE - STADIUM BILLS bond issue instead of coming out of the Capital Funds.
Well, it's not a whole new concept; it's a concept that was actually raised by Councilmembers in the spring.
I didn't hear a year about these annual expenditures to maintain a lease.
I heard something with respect to an $80 million figure that the Mayor wanted to guarantee to the teams, which would be spent to refurbish the Vet if there were no new stadiums.
The 80 million for 10 years was 8 million a year; 20 million for 3 years is a little under 7 million a year.
When you suddenly bring in that, in view of the fact that the Mayor at one of our briefings said that we might think in terms of negotiating a new lease for the three 51 11/29/2000 WHOLE - STADIUM BILLS years. Why would we negotiate a new lease for the three years? Is it to free the teams of the obligation of pay that 4 million to 6 million that should start rolling into the City, beginning in February, from the super boxes? Is that what you're aiming to do, to negotiate a new lease that will relieve the teams of that payment during this three-year period?
I don't think so. I think when we -- 'cause I -- I don't want to --
Well, if I could -- if I could be responsive. I don't think we're talking about, quote/unquote, renegotiating a new lease; I think what we're talking about is, in the scenario of new stadiums, is negotiating what would be the Vet lease termination amendment. And by "termination," in other words, new stadiums are coming, we're going to end your obligation to be in the Vet, our obligation to maintain the Vet, you go in the new building. We're going to have to think about 52 11/29/2000 WHOLE - STADIUM BILLS things to address in that amendment because now we're in a construction cycle. So, okay, we think that's going to happen in 2003 and 2004. But if a crane falls down and there's a construction delay and the time is longer and there's a (unintelligible) about what happens in that scenario. So it will deal with how do we end the relationship. But this -- this 20, or 19.7, has simply to do with what Rob said, which is to eliminate any further draws on the City's Capital Budget to do repairs to the Vet for the next several years, use the PAID technique, and have those dollars available for whatever the Administration and Council wish to use the Capital Budget for.
Well, may I ask you, has there been any discussion whatever between any of the teams and the City? And by the "City," I mean including PAID, PIDC -- I don't want any technical separations. Has there been any discussion between those groups with respect to the 4 million minimum payment, somewhere between 4 to 6 million, we're told, due to the City 53 11/29/2000 WHOLE - STADIUM BILLS beginning February 2001 in relation to the super boxes?
The only discussion has been the City and PAID, and everyone saying to the teams, We're not prepared to discuss it.
What does that mean? It means that the City is insisting on the payment of that money?
No. What I mean, Councilman, is that the (unintelligible) people have said -- the (unintelligible) people have raised previously with us, let's start talking about the Vet lease amendments. We said, We're not doing that now. What we want to do now is figure out the nature of a transaction for new stadiums. And we'll deal with the Vet lease amendment later. Later is upon us, but we haven't had a negotiation on the Vet lease amendment, we have not.
Well, I don't know -- you may interpret something as a negotiation and something else as a conversation, so I don't 54 11/29/2000 WHOLE - STADIUM BILLS know whether that means there's been no talk. Is the City in a position where it is expecting to get paid that 4 million-plus beginning with February?
I mean, at this point -- at this point, the lease is the lease.
Because, I'll tell you, I can't understand for the life of me why these two bills are before us today, in view of the stadium bills, in view of the confidence expressed by the Administration that the stadium bills will pass. We'll see about that one way or the other. But in view of that, and it's right on our schedule, beginning tomorrow, what sense do these bills make?
Because the Administration is not presuming that Council is going to approve the stadium deals.
We have an obligation to begin making repairs to the facility in the event there are no new stadium deals. We want to 55 11/29/2000 WHOLE - STADIUM BILLS put in place a financing mechanism that will enable us to do that. And that's why we're here today. (Unintelligible, parties talking over each other.)
Very respectfully to you because you know how highly I regard you --
I that think that answer's hogwash. The answer -- everybody's going to know the answer by December 14th, and you're sitting there seriously expecting me to say that this is the serious reason we can't wait. You'll know by probably December 7th, because Mayor Street certainly knows, in his role as Councilman Street and President Street, that Council can't pass something without it having been passed, you know, after it came out of committee successfully.
And I think you have something that you're not telling us as the 56 11/29/2000 WHOLE - STADIUM BILLS purpose of these bills.
If in fact this isn't necessary because there are stadium transactions concluding, it is within the purview of City Council simply not to pass this legislation. That's the answer. You know, we are putting -- we are trying to put in place a facility that will enable us to finance stadium repairs, if in fact there are no new stadiums funded. If those deals are going to pass, City Council can simply not approve these transactions or not approve them, you know, in the -- you know, not approve the transactions.
Well, I am very fearful that these two bills could be interpreted to permit the City Administration, without further contact with City Council, to declare the current leases terminated and to be authorized to renegotiate a new three-year lease. And it is my strong view that the purpose of such a renegotiation would be mainly to relieve the teams of that obligation with respect to those payments beginning in February. I can see nothing else that makes any sense whatever in having these 57 11/29/2000 WHOLE - STADIUM BILLS bills presented to City Council at this time. Thank you, Madam President.
Thank you. I didn't hear all of Councilman Cohen's questioning. Before I left the room, I did hear some of it. Isn't it so that the Administration does not have the authority to waive the flip without coming back to City Council?
I think that's right, Council President, yeah. I mean, what I did say was that, in all due respect, and I have great respect for Councilman Cohen, but the bills in front of us today do nothing but address how we fund the repairs. They don't give us, the City Administration, authorization to change the Vet lease. We have to bring you in a lease amendment, and that amendment would include, if anybody would want to touch the sky box revenue provision. I mean, the lease has to come back here. There will have to be an amendment, and Council will have to vote on it, consider it and vote on it and act on it.
I don't want to be belabor an issue, but I'd just like some 58 11/29/2000 WHOLE - STADIUM BILLS clarification on the turf replacement issue. And I hate getting back to that, but what is the life expectancy for a new turf?
I believe at this point in time, we're told that the life expectancy is about six years.
Six years. And how old is the turf that we presently have?
It's just about six years. We may have a year on the warranty of the original turf product, but I don't even think it's a full year left on the warranty.
The original turf that's down right now, when it was installed, I believe we were given a seven-year warranty on it. At this point, it is now six years or a little over six years old, so it's at the end of the warranty period, or useful life period. I would equate this to -- it may sound a little silly, but when you get a 60,000-mile warranty on a pair of tires and if you drive it and at the end of 50,000 miles, your tread's gone, 59 11/29/2000 WHOLE - STADIUM BILLS and you go to trade it in, you still have a 60,000-mile warranty but your tread's gone anyway. Maybe it will give you 50 cents, you know, towards the purchase of a new tire, as the balance of the warranty. And that's sort of what I equate this to as well.
And didn't it have a fire on the field at one time, if my memory serves me, as a result of -- what was it, a parashooter that came down and he had flares, and didn't it burn the -- pardon me? Didn't they burn part of the turf?
I just checked with Greg Grillone, who is the Stadium Manager, and tells me yes, it did happen. There was a section of the field that was scorched, but that had been repaired.
Okay, can we put the issue of the turf to bed? 60 11/29/2000 WHOLE - STADIUM BILLS One more question about the turf, and then we're going to conclude the issue on the turf.
Thank you, Madam Chair. Can I get the mic. on? Thank you. I'm not clear on how we left this issue. Could you please, Chief of Staff, are we putting this project -- I understand the deal's been awarded, but are we putting this project on hold? Or what exactly are you doing here as a result of this conversation today?
We are not moving forward with any of the construction, you know, any of the item we're proposing right now until we reach some kind of resolution with respect -- with City Council with respect to the items of work. We will also be providing you with technical data supporting the turf replacement, further technical data supporting the turf replacement. We -- you know, I mean, we have construction, it needs to happen as soon as the season is over, but we will not, you know move forward and, you know --
Again, just briefly 61 11/29/2000 WHOLE - STADIUM BILLS so I understand when we close this conversation, this letter of intent award of a contract to a vendor, how do you put that on hold?
We will call the -- I can find out technically. We will call the vendor.
So you're going to put that on hold? As far as the vendor is concerned, he's going to be notified that we are not going to move forward on this project?
Yeah, we will do that. We -- you know, let me repeat, though, that we have timing constraints on all of this.
And, you know, in making the commitment to Council that we will put these items on hold until there's some kind of agreement, you know, we have to also agree that there are timing constraints. We're going to need some kind of signoff. We have a requirement to do repair work and maintenance work at the Vet, one way or the other.
We have a stadium that 62 11/29/2000 WHOLE - STADIUM BILLS has structural problems with it, we have stands that need repair. There's going to have to be work done to maintain this facility.
And so we can put the -- you know, we can we can put the items on hold, we can, you know, shorten the -- you know, try to further shorten the construction schedule, but these are not items that --
Well, I'm not suggesting that everything on the list be put on hold; I'm suggesting that the playing surface issue be put on hold until the technical data that supports the decision is provided. So I asked the decision so you would be able to make it clear to me and the members of Council on exactly how you plan to move forward on this particular issue. Thank you Madam, Chair.
I would like to ask that we be allowed to work out a protocol with the Office of the Council President so that, you know, that as items surface, you know, we provide the technical information that, you know, that Council has asked for, that, you know, if we can develop a 63 11/29/2000 WHOLE - STADIUM BILLS process that would enable to us move quickly in response to the timing constraint, that we do have it. Short of having full hearings, it would be helpful.
You're welcome. The Chair recognizes Councilwoman Blackwell.
Thank you, Madam President. I just want to follow up on some of the things that we are talking about in terms of this interim period. So until the stadiums are built in 2003, will both teams still pay their annual rent under the current lease agreement or the percentage of ticket sales? Or what happens during this interim period? And what about this -- any maintenance issues during the interim period?
Well, again, you have 64 11/29/2000 WHOLE - STADIUM BILLS leases in place between the City and the teams. The legislation before you now does not change that, it does not amend, it does not alter those leases. Even though we've used the technique of having PAID become, you know, the landlord of the building for PAID to have a right to issue debt, et cetera, the City leases the building back to PAID -- excuse me. PAID leases the building back to the City, the City remains the landlord to the two teams, and the current two team leases remain in effect, as they stand today. If the City wishes to change those leases to terminate them, to alter them, they will bring amendments back that would authorize that; they will come before this chamber, and Council will have to, you know, review, comment, and then agree or disagree on doing that. So that all of the current lease relationships -- them paying rent, us having to maintain, those all stay in effect. This legislation doesn't affect that.
One more question. How much will it cost, or would it 65 11/29/2000 WHOLE - STADIUM BILLS cost, to demolish the Vet in 2004? And if the new stadiums are built, will some of the proceeds from this bond be used for the demolition costs, or would a new bond be considered? What about demolition costs?
Let me try to answer those, I'm doing this off the top of my head 'cause I didn't bring that file. I think the estimated cost to demolish the Vet is approximately $12 million -- I think that's about right. But there's additional costs on top of the 12 because, actually, if you finish demolishing the Vet and you then look at what you have, you have a hole in the ground, because the field sunk, so there's also a cost to fill the hole and create, you know, the normal condition which, I think, is 4 or 6 million. I can get you precise numbers. I'm doing this -- I don't have those files with me. The intent, if we build new stadiums, is to pay for that cost as part of the overall cost that are being proposed in the ordinances that you'll be considering tomorrow for new stadiums. It's not out of this money; it would be 66 11/29/2000 WHOLE - STADIUM BILLS out of the new money.
Okay, okay. Thank you, Madam President. I'm done.
Mr. Hankowsky, I'd like to go back to the start of today's hearing and try to get a somewhat better understanding of your response to the Council President's question, which, I believe, revolved around the provisions of Bill 82, which, to some extent, I think, are what caused us to be here today, at least conceptionally, although it does not appear that we're necessarily following some of the other provisions of Bill 82.
I'm sorry, Councilman. I just missed the end of that. I apologize.
That's okay. I wanted to ask you about your response to the Council President's question at the beginning of the hearing with regard to some of the specific provisions --
-- of Bill 82, 67 11/29/2000 WHOLE - STADIUM BILLS which, I think, conceptually at least, are a part of the reason that we're here today, although there are some other components of the provisions of Bill 82, which I'm trying to understand, as to whether or not we're following those provisions as well.
So for instance, I think the Council President read earlier that part of Bill 82 talks about up to $80 million in capital repairs, restorations, and replacements to be made to Veterans Stadium shall be decided by agreement among the City, acting through the City Commissioner of Public Property, the Eagles, and the Phillies. And the list of the said capital repairs, restorations, and replacements shall be attached as an exhibit to the agreements with the Eagles and Phillies, which shall be subject to approval by resolution of City Council prior to its execution and delivery. Now, are we following that particular provision through this process today?
If I could, Councilman, only because I sort of feel I'm beginning to tread 68 11/29/2000 WHOLE - STADIUM BILLS into the question of how you interpret the ordinance and the legality of the ordinances. And I'm often happy to respond in many areas, but I think on how this is, I would ask if Paul McCarthy, of the Law Department, could actually sort of review what legally we think we're doing with ordinance, if that would be helpful, in response to that bill.
What I'm struggling with is, we -- I think we think we have attached a list to this bill. And so I -- but I want to -- I'm not sure -- I can't do it, to be honest with you, chapter and verse of Bill 82. And so perhaps Paul could help me explain what provisions of that bill we think we're actually implementing with that legislation, which I think is the question.
Right. Well, let me make sure that I understand what I thought I understood back on March 1st, and then you can tell me where you think that I'm in error. It was my recollection back at the time, and there have been subsequent discussions, 69 11/29/2000 WHOLE - STADIUM BILLS that the Bill 82 process was envisioned to entail that the City and the two teams would mutually agree upon a list of capital repairs or improvements, which would be attached as an exhibit to the agreements amending the leases with each of the teams. Subsequently, those agreements would be included, as with the exhibits, would be a list of the capital improvements, which would be submitted to us for approval by resolution. Council would then adopt the resolution and these amendments, and then the City and the teams would execute the agreements. Now, I mean, is that a correct characterization of what the provisions of Bill 82 were, that we approved back in March?
This is Paul McCarthy, good afternoon. I am a Divisional Deputy City Solicitor for the Law Department. Councilman, that's a correct description of the process set forth in Bill 82.
Okay. Can you tell me, based on what we have in front of us, how we are either in compliance with those provisions; or 70 11/29/2000 WHOLE - STADIUM BILLS to the extent that we're doing something different, tell me what the difference is.
We are, at this juncture, Councilman, doing something different. The reason that we are doing something different is that Bill 82 anticipated a process with the teams and negotiations with the teams about the scope of repairs. We invited the teams to participate in that process; they declined to do so. Consequently, having no agreement with the teams, there is no amendment to the leases that we might offer to you at this time. Nonetheless --
Well, hold your thought right there. I thought I heard earlier in the testimony that the list in front of us -- there's a list in black and white, and then there's the list of those items with the yellow and gray boxes that lays out a schedule. I thought I heard earlier testimony that indicated that that list was an agreed-upon list between the City and the teams; is that correct?
Forgive me, that's accurate. There are, of course, two scenarios 71 11/29/2000 WHOLE - STADIUM BILLS here. There's the 3-year scenario at $19.7 million; there is the 10-year scenario at up to $80 million.
Now, the language of the bill, though, didn't anticipate any particular timeframe scenario; it just laid out the scenario. Is that correct?
Okay. So what is the difference and why is it different and why are we -- I mean, I thought I heard you say earlier you asked the teams to participate and they didn't participate; therefore, you don't have amendments to the lease.
But now we have an 72 11/29/2000 WHOLE - STADIUM BILLS agreed-upon list based on the early testimony not upwards of $80, but $19.7 million. So, I mean, we either have an agreed-upon list or we don't have an agreed-upon list, and the difference is the price tag, correct?
Right. Let's stay with the two lists. The teams have verbally agreed that the 19.7 list is the list that would get the Vet through the next three years of useful life. The teams have not agreed or reserved their rights on any list that deals with ten years.
I think for what are fairly obvious reasons. On the three-year list, in terms of an amendment to the Vet lease, that list obviously is a list that assumes you're building new stadiums. 73 11/29/2000 WHOLE - STADIUM BILLS
So there actually has to be an amendment to the Vet lease that is more extensive than simply saying, Here is list of repairs, 19.5, 'cause it's actually going to be what I call "the unwind lease amendment."
It's says when they leave the current buildings, it says what happens in a (unintelligible) event, it says what happens in a delay. So the parties are now going to need to sit down and do that amendment.
I think all that we are seeking Council's support for today are: One, the putting in place of the PAID mechanism to finance it, so we're outside the Capital Budget; and, 74 11/29/2000 WHOLE - STADIUM BILLS secondly, that the list of 19.7 is a list that would allow the Capital Budget Office and Recreation to proceed with these repairs, part of this being the timing problem of just getting them done between seasons. It's a mechanical issue.
We understand that at the end of this process -- and I understand some of the frustration, because you really are, in effect, running in parallel here with two scenarios about what you're doing with the Vet that are based on another set of bills about, are you staying at the Vet or not. And, unfortunately, just given the timing of all of this and the Council's schedule --
-- you kind of have to do them in parallel. You could do them, if you had enough time (unintelligible), and then you'd actually know the answer and you wouldn't be dealing with two scenarios; you'd be dealing with 75 11/29/2000 WHOLE - STADIUM BILLS the one scenario.
Right. I'd like to go to the financing part of the deal, and I'd like to come back to where we are now for a moment. So now I need to ask the Treasurer a question.
Madam Treasurer, you were here at some time not too long ago, when we were having one of our many discussions about Veterans Stadium, and we had talked about the prospect of, I guess, this transaction. It may have been at the time of the approval of the question to go on the ballot.
And I think I asked you about the timetable for the bond issue, putting the issue together, getting it out to market, and then when you would actually have funds in hand. Can you take us back through that, 76 11/29/2000 WHOLE - STADIUM BILLS given that you're potentially on the verge of having a transaction ready to go.
The bond issue with respect to this financing, or with respect to the general obligation financing?
All right. We contemplate that if we have successful passage of this legislation, to be on the market as early as December 17th.
It's a few days after the legislation is passed and hopefully signed by the Mayor.
Gotcha, okay. And so you're in the market around about that time, and when do you actually have the money?
Okay. This transaction actually is being structured as a commercial paper 77 11/29/2000 WHOLE - STADIUM BILLS program, which is basically comparable to -- the best way to describe is, it's like a line of credit, it's debt. And the way it works is, you create a debt instrument in which you draw down the amounts of money you need to fund whatever capital program you wish, you need to fund. So in effect, we're not issuing an entire --
It's a debt instrument. It's not a bond; it's like a note. And what you do is, you actually --
Is that from a bank or from a private placement? Or, I mean, who's providing --
You're probably targeting similar investors who would buy bonds, except the duration is shorter. So while a bond could be anywhere from a year to 30 years, based on the structure of the transaction, commercial papers can be as short as a week to 270 days. So you're actually remarketing the note.
Tell me about the -- what's our debt service on that? 78 11/29/2000 WHOLE - STADIUM BILLS
It's hard to say at this moment because this is going to be a taxable available-rate debt, so whatever the prevailing market rates are in December, it's going to be what it is. We will go out into the market.
Because of the use. There's a -- and actually, bond counsel is not here, but there's actually a use with regards to the -- there's a private use issue.
That is correct, but there's an issue with regard who is benefitting from the use of the proceeds, who is benefitting from the expenditures that we're putting into the building.
Well, whoever benefitted from the expenditures, the $64 million of expenditures that made in the Veterans Stadium in the past 7 years, who benefitted from that? And they were all capital dollars, weren't they?
Councilman, not really. It was bad enough I tried to be a lawyer; 79 11/29/2000 WHOLE - STADIUM BILLS now I'm trying to be a bond lawyer.
This is what is generally characterized as the private payment problem, which is to say, when you've got -- if you try to do tax-exempt debt that way, you can't get payments coming back this way to the issuer from the private beneficiary of the tax-exempt debt. And there have been a series of rulings, including letter rulings, from the IRS that have really crunched down the definition of what this is coming back.
You got to tell me -- I mean, I don't know if I can do it as well as you do but, I mean, the --
The rent from the teams back, a piece of the concessions. I mean, in 80 11/29/2000 WHOLE - STADIUM BILLS other words, the current --
All right. But -- but the bond counsel's opinion in looking at this transaction at this point in time, based on the IRS rules, is that the materials of the Vet lease create private payment issues. And so what you need to do to finance this -- if this would have been the case had we done itself this through the Capital Budget. This is not a question of technique between PAID or the City.
Has this issue ever come up -- I mean, we've done capital expenditures to Veterans stadium forever.
It's because the IRS has changed its legislation over time. So in 1972, where it may have been permissible to use taxes-exempt debt, in today's environment, with the various legislation that has been passed by the IRS, we are not able to do that on a tax-exempt basis. So the laws have changed over time, and that's why we're doing it in tax-exempt -- in taxable note, because the laws, as they are 81 11/29/2000 WHOLE - STADIUM BILLS written today, do not permit us to use the tax-exempt -- our tax-exempt status to issue the debt.
So what would you have done if we had not gone through PAID and had just done the 40 million in repairs through the Capital Budget?
If we had done it through the Capital Budget, it would have still been taxable.
The GO would have been structured where you have a tax-exempt piece and a taxable piece, but it would be one transaction.
Mr. Hankowsky, you 82 11/29/2000 WHOLE - STADIUM BILLS had mentioned on a couple of occasions that the list represents an agreed-upon list between the City and the teams. Can you tell me what document is before us today that represents or articulates that agreement?
-- in an environment where you asked them to participate in one part, they said no, but now we're coming back and saying, but we like the 3-year part for 19.7, but we don't have a document that indicates that.
So what is that based on? 83 11/29/2000 WHOLE - STADIUM BILLS
Yeah, it's based on -- a series of meetings were held between the teams that, I guess -- I mean, I have to be candid, that basically I initiated. And Mr. Tustin then proceeded with, along with the consultant. This was during a time when there were also parallel discussions about new stadiums, that at certain points were --
It's fine. It's -- there's an issue over on the other side of the room. They're just -- it's a -- you know, it's a other-side-of-the-room issue.
All right. I'll try not to. So we were trying to have Mr. Tustin have cooperative conversations with the teams about what would it mean if we fixed the Vet in a three-year sub period, while at the same time, we were having some very hard discussion with the teams about the negotiations for new stadiums. So it was an environment where people 84 11/29/2000 WHOLE - STADIUM BILLS sort of had to switch hats back and forth. That resulted in the working group -- meaning the representatives of the two teams -- and Mr. Tustin and Ewing Cole saying, Yep, this sounds like what we can do. And then I say to the principals of both teams, Okay, you agree this is the list? Yep, okay. And we're off, also trying to finish off that new stadium transaction. So -- I'm sorry.
We -- it kind of goes back to we need to do full Vet lease amendments. If it would be helpful, I think I could probably represent here that I could get the teams to put in writing that, in fact, this list is the three-year list. That sounds like something we should do, huh? We could do that.
That incorporate the $19.7 million in repairs, although that is, from all your meetings and discussions, an agreed-upon list, and you think that you can even get a letter from either, or the teams jointly, saying, This is the list, it's a three-year deal, these are the items that we're interested in, and everything else we'll deal with later on, if in the event that we don't have new stadiums. Is that accurate?
Right. I mean, there will probably -- the letter would probably have appropriate lawyer language --
-- that would say in the event new stadiums don't proceed, we reserve our rights, whatever lawyers put in letters like that.
Right. Now, what happens if the bill -- Bill 705 is the one with the authorization to finance and refinance the cost of rehabilitation to Veterans Stadium in an aggregate principal amount not to exceed $80 million; is that correct?
Okay. We have a list in front of us, though, that is, for all intent and purposes, $20 million. What happens to the other 60?
I think you have to kind of walk through the scenarios. If we build new stadiums, then we never plan to use the 60 on debt repairs, we're not doing 60 on Vet repairs.
And -- and the City's obligations to pay would get capped at repaying the 20. If we don't do new stadiums -- I doubt, by the way, whether we will get team concurrence on a list, you know, just to clear on that.
Correct. I think that's probably extremely accurate. So in that world, there may or may not be a lease amendment that the teams have agreed to, but we would then come back and say to Council, in addition to this 19, we probably 87 11/29/2000 WHOLE - STADIUM BILLS should now look at the other 60, because we don't want to be out of compliance with the lease.
I guess we could -- I guess we could actually set this legislation up to be either/or. We could actually use the 80 list that was already done. We don't actually. . .
I think what we would propose is to amend this to provide an either/or scenario. If there are two new stadiums, then we would do this list of repairs for $19 million. If not, then, you know, we are authorized to do the second list of repairs at $80 million. City Council has been provided with both renovation scenarios, and I think the most efficient mechanism is probably to structure this with the either/or.
Yeah. I mean, it just -- I mean, it leads me to just asking the question that if in the most positive scenario, if we believe that we're going to do new stadiums, 88 11/29/2000 WHOLE - STADIUM BILLS why wouldn't you just do a deal for $20 million and let that be the end of it? Because you know that if we don't do new stadiums, even if we did the 80, that may not accomplish what you want to accomplish, you're certainly not going to have an agreed-upon list, and you have to come back anyway. So why don't you have this bill just say 20? Because you know that's what you need and what you want to spend and what you have an agreement on.
Because I think -- I'm not sure -- I think there's -- I think there's various responses to this, I mean, some of which are practical. If you --
Hold on for one second. I want to ask the treasurer a question.
With this transaction 80, 20, whatever the amount is, what is the issuance cost if any?
It's hard to tell until we 89 11/29/2000 WHOLE - STADIUM BILLS actually size the transaction. We haven't gotten to that point yet. We're still putting together the structure of the transactions. Sizing's usually done right before the transaction.
Well, in the instance of a bond, you determine -- you make certain assumptions of what the market rate is going to be, insurance costs for the bond. You start putting together the cost for professionals. That sort of encompasses your cost of issuance. We haven't gotten there yet.
Well, for the terminology of the day, I mean, give me a ballpark figure on what you think we're talking about.
No. It's not part of the PAID aggregate amount, it's separate.
No, I'm saying, based on an $80 million transaction, it's 90 11/29/2000 WHOLE - STADIUM BILLS $700,000? But it doesn't matter the size of the --
It would be the same, it doesn't matter the size of the transaction.
It's part of the costs that's assumed in the debt service, so the PAID -- City.
No. The way the ordinance 17 is drafted, the $80 million is the (unintelligible), the aggregate amount for the project.
Right. Anytime you issue debt, there are costs associated with it, and so anytime we draft ordinances to Council to request approval to do capital projects to incur debt, we 91 11/29/2000 WHOLE - STADIUM BILLS carve out a portion. With respect to the cost of issuances, we don't know until we're closer to the marketing date.
So we could estimate, but that number will change, but it's not included in the aggregate amount for the --
What's the total cost to the City for the $80 million transaction?
Since it's a commercial paper program, it's going to be a variable-rate debt. I can't tell you right now until we're actually in market. And let me add that because it's a commercial program, our exposure is limited to how much we draw down. So, for example, if Month 1, we draw down $2 million, our obligations are that $2 million. Month 2, we draw down an additional 2 million, and now becomes net 4, so it's really would be very difficult to tell you what the exposure would be until we actually have the program running. And it will change based on our draws.
All right, thank you. 92 11/29/2000 WHOLE - STADIUM BILLS I think you were trying to answer the why don't we just do $20 million --
That's the list that we have and see what happens going forward because we don't know what happens after that.
Right. I can respond, I think, in part to sort of some of the business reasons we're -- we want to do this, which perhaps the State from legal and otherwise. From the business perspective, if you're in a world where you're looking to increase the useful life of the Vet for ten years, you're going to develop a rehabilitation repair program, which is going to look at instead of just patching for waterproofing for our crack, we come in and do a more comprehensive, perhaps overall waterproofing to make sure that you don't get further deterioration -- you know, not just solve the problem in the short term, but solve it for a ten-year cycle. So what you want to do -- and one of the most difficult parts of this is doing this in way while the facility is, quote, occupied, with 93 11/29/2000 WHOLE - STADIUM BILLS your most significant window is a kind of January to April window. So that what you would might well want to do is not -- you know, the way this works is you take the -- I'm going to use 20 6 instead of 19.7. You don't just do the 20 and 7 say, Okay, now we're going to stay for 10 years, 8 let's add. You actually might change the way you 9 do even the first 20 because you're extending the 10 life for a different period of time. And so you 11 might want the capacity to award the contract to 12 fix all of the wires or, you know, replace the 13 transformers or whatever, and you think you should 14 do that now versus wait. 15 So I think -- 16
Does that change 17 the 19.7 number, or is that actually adding on to 18 the list? 19
I'm talking that you 20 might well want to be in a scenario where you were spending more than 19.7 in calendar 01. If you were doing the 10-year scenario, I think --
We're not doing the 10-year scenario. I mean, the 19.7 is not based on the 10-year scenario. 94 11/29/2000 WHOLE - STADIUM BILLS
No, no, no. I was saying, why do we have the bill allow up to 80. 'Cause if Council says, Let's not do new stadiums, then on December 14th, if that's still the schedule that we're all working from, then there would be a capacity to look at this and say what we need to do is really think about a 10-year cycle now and have a commercial paper program set up to do that, have the mechanics all in place to do that.
I mean, if somehow, some way, there aren't stadium deals down 14th, end of the year, whatever the date is going to be, I mean, don't you have a fairly significant amount of work that would have to be done to really figure out what we're going to do going forward? And the planning and the scenarios and what the real money is in dealing with the teams and what they have not agreed to in essence --
You'd be beyond 95 11/29/2000 WHOLE - STADIUM BILLS $19 million. I mean, you're not going to solve that problem in January '01 --
When the original assessment report was done, we went through and we did a visual inspection of every system within the building. We looked at the maintenance records of the work that had been done and in the maintenance to the equipment within the building, and we looked at the age of each one of the systems in the building and tried to make some determination as to what the useful life of that system was and what would have to be replace and what would not have to be replaced. And that's how the original assessment was generated. You're absolutely right. If we don't go forward with this, as we do the design packages for each one of these projects, we will then have 96 11/29/2000 WHOLE - STADIUM BILLS to do further in-depth investigation into each one of those systems to see in more detail what has to be done and what doesn't have to be done. You're absolutely -- that's exactly correct.
So I guess that -- my last question, at least for the moment, would be then, why don't you just wait, or why don't we do these relatively concurrent with the stadium proposals or transaction, know whether you have a stadium deal or not, and borrow through the commercial program what you need? As opposed to the mythical $80 million? If we have stadium deals, you're not spending $80 million at the Vet. More than likely, you're probably going to spend 20.
So then the bill 23 would say 20 and not 80. Or it may be a function of what the Chief of Staff Wilkerson talked about, which is a 97 11/29/2000 WHOLE - STADIUM BILLS bill that has either triggers in it or various scenarios based on actions to be taken.
My understanding is that it's -- you know and the Council President can verify this -- that the plan is not to report this out today, that she is interested in moving along the same track. And that by the time those bills are reported out, we may have clarity. So, you know, we may have to structure this as an either/or.
I mean, if the stadium bills on, you know, midnight of the 7th or, you know, whatever -- the 6th into the 7th, or if we're back in here on the morning of the 7th, I mean, if you know that those bills are going to be reported out of committee, then it seems to me that you do know what needs to be in here 80, 60, 20 whatever the number's going to be in here -- 80, 60, 20, whatever the number's going to be -- and you amend it to reflect the fact that you now know around the room the bill's coming out. 98 11/29/2000 WHOLE - STADIUM BILLS
That's right. If the plan is not to report these out today, then I think you're right, that, you know, as long as it's resolved one way or the other or with the mechanism that provides for both by the time it's reported out, that addresses the Administration's needs.
All right. Thank you. That's fair. Thank you, Madam President.
Thank you. Are there any other questions from members of the committee? (No further questions.)
May I ask the City Treasurer to please come to the witness table and explain the ordinances, please. Not the ordinances, but the amendments. I'm sorry, it's getting to be that time of day. (Witness comes forward.)
Okay. The amendment that we're asking to be considered is inserting a clause on , Section 3 of the ordinance that basically authorizes the financing of the 99 11/29/2000 WHOLE - STADIUM BILLS $80 million for the capital expenditures to the Vet. The clause reads that we wish to insert says "And amounts necessary to effect any funding," which is on the fourth line of Section 3 of the ordinance. What this clause allows us to do is to permit a refinancing of this debt prospectively. For example, if interest rates drop, it will give us the ability to go in and refinance at a lower rate, which would create savings for the City, so our cost of borrowing drops. Without this clause, this does not permit us to do this, especially if we borrow the full $80 million. That is why we're respectfully requesting this amendment. And this same clause is also in the lease on in the definition of "bonds." Under the definition of "bonds," we also want to include amounts for refinancing and refunding as well. Again, the City's always looking for opportunities to save us cost on this exposure as costs of borrowing, and this would permit us in the changing interest rate a (unintelligible) to 100 11/29/2000 WHOLE - STADIUM BILLS do that, if there are.
Thank you. Are there any questions from members of the committee regarding the proposed amendments? (No questions.)
Thank you. Is there anyone else to testify on these bills? (No response.)
Seeing none this will conclude the public hearing. We will now go into -- oh, I'm sorry. The Chair at this time would like to recognize Councilwoman Blackwell for a motion.
My understanding was that these bills were not going to be voted out of committee today, that they're being held?.
But we were going to amend the bills at this time.
Madam President, is a motion in order for the 101 11/29/2000 WHOLE - STADIUM BILLS amendment?
Thank you. Madam President, we submit an amendment to Bill No. 706 and 705.
705 and 706. I'm sorry. Have you made your motion? I don't think we hear it.
Madam President, we move that the amendments to Bills 705 and 706 be adopted.
In line with my view that the maker of the amendments have a right to submit amendments in whatever form they choose to, I will be voting for this amendment; it has 102 11/29/2000 WHOLE - STADIUM BILLS nothing to do with the merits one way or the other.
Thank you. All in favor of the adoption of the amendments will say aye. Those opposed, nay? The ayes have it and the amendments have been adopted, and Bill No.'s 705 and 706 will be continued until tomorrow morning at 9 o'clock. Thank you very much. We're going to recess -- the hearing and the meeting will be recessed until 9 o'clock tomorrow morning. Thank you. (Adjourned at 4:28 p.m.) - - - 103 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Wednesday, November 29, 2000, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE OF THE WHOLE BILL NO.'S 000705, 000706 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter