COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON PARKS, RECREATION AND CULTURAL AFFAIRS - - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, January 27, 2005 1:10 p.m. - - - - RESOLUTION 040912 - resolution authorizing the Committee on Parks, Recreation, and Cultural Affairs to hold hearings to investigate the reasons for millions of dollars in outstanding payments to subcontractors who took part in the construction of Lincoln Financial Field... PRESENT: COUNCILWOMAN BLONDELL REYNOLDS BROWN, Chair COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN RICHARD T. MARIANO COUNCILMAN FRANK RIZZO COUNCILMAN JACK KELLY COUNCILWOMAN JANNIE BLACKWELL COUNCILWOMAN MARIAN TASCO COUNCILMAN FRANK DICICCO - - - - V A R A L L O Incorporated 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2 I N D E X RESOLUTION 040912 LUIS CRUZ............................ CARLOS MATOS......................... 6 REPRESENTATIVE THOMAS BLACKWELL, IV.. 42 MARK ROSENBERG....................... 47 7 PAULA MILBOURNE...................... 57 THOMAS CIRIGNANO..................... 61 8 JAMAL JOHNSON........................ 76 JIHAD ALLAL.......................... 83 9 MICHAEL KUNTZ........................ 92 DENNIS BIGGS......................... 95 10 CHRISTOPHER LEE..................... 113 JOSEPH BANNER....................... 137 11 SHERYL MCKISSACK-FELDER............. 188 CHARLES ANG......................... 204 12 3 01/27/05 - PARKS - RES. 040912
Good afternoon and welcome to the City Council Committee on Parks, Recreation and Cultural Affairs. I recognize the Members of Committee. To my right is W. Wilson Goode. The record should reflect that Councilman Rick Mariano, sponsor of the resolution, will be speaking this afternoon. I would now ask the Clerk to read the title of the resolution.
Resolution 040912, a resolution authorizing the Committee on Parks, Recreation and Cultural Affairs to hold hearings to investigate the reasons for millions of dollars in outstanding payments to subcontractors who took part in the construction of Lincoln Financial Field; and further authorizing the Committee to issue subpoenas to compel the attendance of witnesses and the production of documents and other evidence.
Thank you. We will now move to our witness list. The following individuals will be 4 01/27/05 - PARKS - RES. 040912 called in this order, unless I'm advised otherwise. Luis Cruz of Cruz Construction, if you would please come forward. We welcome you to the witness table.
Councilwoman, if I may make a statement before we start.
Absolutely. Councilman Rick Mariano will offer remarks prior to opening testimony.
Thank you. I just want to take this time, since I was the sponsor of this resolution and the person calling for these hearings, to say there's nothing archaic or mid-evil about these hearings. Being a person that has a background in construction, I think I understand construction. But if I understood it a lot better I wouldn't be sitting up here. I'd probably be sitting on the other side of the railing and would still be in the business. Believe me, it is a tough business. The contractors here that have issues understand 5 01/27/05 - PARKS - RES. 040912 what kind of business it is. This isn't a shot at the Eagles. We're all happy for the Eagles. My problem is I want to make sure Terrell Owens plays in the Super Bowl, and Mr. Banner assures me he will make sure he plays there if he's well. I think that's it. We just want to make sure everybody gets a fair shot here. We went through a lot of blood, sweat and tears, these two Councilpeople sitting next to me and some other Members who can't make it today. Some are listening downstairs. These stadiums were a vision for this City, and we want this City to do well. But this has to be an all inclusive package of goods. Councilman Rizzo, thank you for joining us. We want to see everyone have a piece of the pie. We don't want to come back years later and say, it's a shame. It's good for us that the Eagles are doing so well right now. This is a very confusing process, 6 01/27/05 - PARKS - RES. 040912 the way this is structured, and who is paying who and who is not getting paid. Nobody is going to happy today. There's no way that everybody is going to leave here happy. Now, I can put that in vernacular that's better for me and these construction workers. I won't. But you can't please all the people all the time. We're just trying to make sure there's a fair shake so people like Luis Cruz, who is a genuine part of the community, and many of you other people out there understand that it's important that a guy that looks like Luis, sounds like Luis, talks like Luis gets his fair share of the economic pie. If he doesn't, there's no sense for us building stadiums. Nothing against the players. They deserve every penny they get. I'm not one of those Monday morning quarterbacks. I know I can't play professional football, or I'd be playing it because the money is great. They earn every penny they make. You earn every penny you make. But if we decided not to pay 7 01/27/05 - PARKS - RES. 040912 Donovan McNabb or Terrell Owens his money, guess what? You couldn't get out of these Chambers. It would be crowded. Luis Cruz and the rest of the people in here deserve all the money they can. This isn't all the Eagles. I'm not blaming it on the Eagles. The Eagles have been very forthwith with what they've been telling us with Judge Lord. We appreciate his representation and McKissack and Turner and Keating. We're gong to find out no matter how long it takes to make sure the Luis Cruz's of the world get a fair shake. Louie, you're on now. Thank you.
Thank you, Councilman Rick Mariano. Allow me to acknowledge the presence of our majority leader, Councilwoman Jannie Blackwell, and the presence also of the new State Representative, Representative Tommy Blackwell. Welcome. (Applause.)
I am told that there are contractors in the audience of my 8 01/27/05 - PARKS - RES. 040912 gender who will be invited to speak on this very, very important issue. So with that, we will proceed. Luis Cruz, Cruz Construction. Please state your name for the record and please proceed with your testimony.
Good afternoon, Councilwoman and Members of the Council. My name is Luis, L-U-I-S, Cruz, C-R-U-Z. Thank you, Councilwoman. Good afternoon, distinguished Members of City Council. I would like to thank you all for the opportunity to speak on this matter that has quite literally placed my business, my family and myself in serious financial jeopardy. I especially want to thank my Councilman, the Honorable Richard T. Mariano, who has shown great courage and commitment by standing up for me and the other contractors who helped to build the Lincoln Financial Stadium for the Eagles, against the recommendation of political insiders not to get involved. 9 01/27/05 - PARKS - RES. 040912 (Applause.)
I just would like to start by saying that I am very proud of our team and what they have accomplished in our building that we helped build for them. No 7 one could be happier about their success and the way the stadiums have contributed to the strengthening of this franchise. We support this team. I support this team, and we are some of the Eagles' biggest fans. I am the president of Cruz, Incorporated, a second generation business that was founded by my father over years 15 ago. In 1989, I started my own business with 16 the dream of becoming the largest Latino 17 construction company and the largest employer 18 of minorities in the area. I have paid my 19 dues economically, socially and politically 20 and have earned the right to participate in 21 the building of the new stadium. 22 The importance of access to 23 contracts on publically funded projects 24 remains a serious issue for the minority 25 firms, and it is even more painful when you 10 01/27/05 - PARKS - RES. 040912 land a contract, meet and exceed the expectations, and then do not get paid for successfully completing ahead of schedule the terms and commitments required of us. Cruz, Incorporated was contracted by TKM, KUD and the Eagles management to provide various site work projects, bulk excavation demolition, paving curbs, utilities, et cetera, required to complete the Lincoln site by August 1st, 2004. The work was completed on July 17th, 2004, two weeks ahead of schedule, so that they could accommodate the world soccer game and the Bruce Springsteen concert. There were flaws in the original site drawings, which led to grade and reengineering. We had to redesign the parking lots, et cetera and additional paving modification. These change orders were approved and signed off on by Turner Construction and acknowledged by KUD and the Eagles management. We were instructed to do whatever needed to be done with additional labor and premium time and were assured that 11 01/27/05 - PARKS - RES. 040912 it would be approved and paid for by Turner Construction and the Eagles management. I have all the appropriate signatures and documentations to substantiate the approved work orders. Based on our confidence and the directive given by Turner Construction we completed the work on time. At the completion of the project, when our companies expected to receive the benefit and fruits of our labor, Turner Construction transformed into, let's make a deal. And the games began. We asked for payments, punch lists appeared, mostly of irrelevant issues. Although more money is due than the value of the punch list, payments were stalled until we completed them. Now we must spend more money just to get paid less profits now. When the first punch list was completed, a second one got published, even more irrelevant than the first and unrelated. And the war began. Letters go back and forth. Weeks zoom by and interest on borrowed funds rises, and still there are no responses, at 12 01/27/05 - PARKS - RES. 040912 least partial payments, on the undisputed items because it would disavow the ultimate agenda to confuse and delay payments. Now that the owners have issues with TKM, all the contractors' payments are being held up because Turner Construction Company will not pay anyone until they can assure themselves that their own payments from the owners are assured. Now we are negotiating pennies on the dollar in order to get the money that is due to us. Thank you.
You're welcome, Mr. Cruz. You care to make any comments, please? Please state your name for the record.
Carlos Matos. Luis Cruz is a neighbor and businessman in my ward district. It's shameful that when they talk about minority contractors and how we need to get them 13 01/27/05 - PARKS - RES. 040912 involved and that there's been certain allocations of federal dollars and state dollars that have been allocated for projects such as this type of magnitude. I don't know how many millions and millions of dollars they've got, but some of that money was supposed to assure that minority construction folks could participate in it. Knowing their financial ability not to be able to carry jobs of that magnitude, you pair off with people that can, so that they can meet the minority standards. After all that is said and done, the minority folks are hired. Then there's certain payments that are agreed to. Then they're forced into getting further squeezed about the money they've bidded for the project. If there's other needs, then other squeezes are put onto these minorities to do other relationships with people of multi-million dollars who happen to have a wife or a niece or someone who can qualify some minority person to then force them to do business with those people as 14 01/27/05 - PARKS - RES. 040912 well. In the situation here with Cruz similar circumstances have happened to him, where he as a minority was forced to do business with other people, and now he's in debt to these people who can afford the loss. But if doesn't get paid, he can't pay these people, and these people are going to come after him, and they can very well do without it. What this venture has done, thinking that it was something that was going to help our community, because Luis does employ people from our neighborhoods, is now costing our brother here to go out of business, which means that we've lost about eight or 10 jobs and he has had to let these people go. What is the benefit of all this that we're doing? Because we're not really gaining from it. No matter what the game is played, whether it's Banner, whether it's Turner or Keating, they got the political friends. This is how they get these jobs. Then their favorite contractors get these jobs. In order 15 01/27/05 - PARKS - RES. 040912 to qualify they have to pair off with some minorities to do this and to do that. For them to try squeeze a brother who is for real, who is creating jobs, who is bringing economic development into our communities -- because when we have people working in the community, that means they're going to buy from the grocery store, that means that they're going to be able to afford a house. They're going to better keep our neighborhoods and so on. That harmony of life has been disrupted because someone wants to be a pig and not pay for work that was done. I think that that's shameful and disgraceful and I think that people should be held accountable to that. That's what I have to say. Thank you.
We thank you for your testimony and we want to welcome to our Council hearings Councilwoman Marian Tasco. Councilman Rick Mariano.
Thank you. Luis, a couple questions. Explain 16 01/27/05 - PARKS - RES. 040912 to me for the people here that may not understand all the ins and outs of the construction industry, did you do all the work that you want your money for? I mean, you're not asking for something that you didn't do?
That's correct. Our work was completed. They're parking on our parking lots. They're getting revenue from it, you know, from the day that the concerts came in. That they have a few issues, absolutely. But the thing is, is nobody is coming to the table and saying, okay, X, Y, Z. Let's go back and forth. None of these things are being done. It's just confusion, confusion, confusion. You know, mixing it all up, pointing fingers this way. Nobody knows who. But the fact of the matter is that it's on my dime. Instead of saying, okay, X amount of dollars is going to be allocated for this, we're going to pay you everything else, I'm being held up all my money. But yet the work that we did is being benefited by the Eagles. They're making money on those parking lots. They're getting those fees. I'll easily 17 01/27/05 - PARKS - RES. 040912 switch. We can use the parking lots.
It's not work that we can be arguing about over whether you should have hired workers for premium time or anything like that? It's stuff that was in the general scope of the original contract, or was it extras?
That's right. The dispute is the extra work that we were directed to do so they could be able to have these additional events.
Turner Construction gave us the directive to proceed and do this work. We got what they call an SIS, which is a Superintendent's Instruction to Subcontractors. They get an order by KUD, who gets an order from Eagles. Eagles tell KUD, I want this done. KUD tells Turner to get it 18 01/27/05 - PARKS - RES. 040912 done. Turner comes to us and tells us, we want it done.
Luis, the people that are authorizing this, to do this, and you pay your workers the next week -- you have union workers. You have to pay them and you have to pay them the union rate. These are authorized people. It's not just somebody that shows up one day. It's not the guy that dresses in the swoop outfit. It's actually a guy that you've been dealing with and he says, I'm authorized, Luis. You need to do this work. Please do it. Is that how it went? Help me, because I don't know.
We had specific instructions. In fact, we would get our instructions from their executive, who would tell their field person -- we were only allowed to acknowledge one person on the field.
It was Mr. Bob Hoffman who would direct his field superintendent. 19 01/27/05 - PARKS - RES. 040912
Bob works for Turner. The additional work that we did would dig into my pocket. In other words, when we were asked to expedite the schedule, we were on schedule. I don't have no 9 documentation and they don't have any documentation that said, Luis, you need to expedite. You need to put more workforce. You need to put more men on the job because you're behind schedule.
You lived up to your end of the contract and you had authorized signatures to do this work?
Because you're smart enough. I was in this business. My first job I ever did, I thought I was doing the contractor well, and somebody signed something. I learned that lesson in 1977, that you can't do that stuff. It's a trick that people do to people. Who was that guy? 20 01/27/05 - PARKS - RES. 040912 I don't know. He's gone. She's gone right now. You're smart enough to know, I'm not questioning you. I just want to state that for the record.
That's correct. In fact, at this moment I've been told by Turner Construction, who said as early as Friday that there is no issue with the dollars that are owed to us. It's having the Eagles management acknowledge that they're going to cut the check for it. In other words, Turner Construction, TKM and KUD acknowledged on our amount and the work that we did. They acknowledge it. And they say, no, we understand that we owe them that money. It's we're waiting for Joe Banner from the Eagles to say we're going to cut the check.
That's Cruz Construction alone? 21 01/27/05 - PARKS - RES. 040912
We're not talking about any of these other guys here beside you and AP?
Do you know the ballpark figure for everybody besides you and AP?
Point of information, Councilman. At what point did the delay in your payments commence?
Give us a more definitive date. Was it a year ago? Was it 18 months ago? 22 01/27/05 - PARKS - RES. 040912
We've been done for about months. About 16 months ago the delays 4 started. 5
One follow-up. 11 Please define for me, for persons like myself 12 not in the business, what is a punch list? 13
A punch list is, in other 14 words, you complete your project, but you 15 might have not screwed in that little corner. 16 It doesn't affect you moving forward with the 17 project, but little things that didn't get 18 done that you have to go back and correct. You might not put a cap on that lid. You might need to paint that little stripe that you missed. That's what a punch list is. They got that their certificate of occupancy. They were able to use the stadium. Our punch list didn't stop them from being able to use the stadium, use areas that we 23 01/27/05 - PARKS - RES. 040912 worked in. It was just things that we had to go back and take care of, but minimal items. It's been minimal items. Unfortunately, it's been used as a tactic to hold payments.
Obviously you most likely have never run into a situation of this magnitude of a slow pay. Would normally in lesser number, if there was a delay, would you calculate interest in for the delay and would that be appropriate to do that here where when you are eventually paid, that there should be some add-ons because of the delay, or does your contract prohibit you from doing that?
Councilman, that door is 24 01/27/05 - PARKS - RES. 040912 open. But unfortunately, then you have to go through legal means. I've basically just taken the road that I'd just like to get paid my money. Am I out a considerable amount of money from borrowing money against this? I am. Over $100,000 dollars.
I appreciate your compassion, but I think you should be made whole, if that legally is possible.
I understand. We're getting there. But don't surrender too quickly. Thank you.
Councilman Rick Mariano, continue your line of questioning.
Councilwoman Blondell Reynolds-Brown brought up a good point. The punch list, I'm very familiar with punch lists, again. What punch lists do, Councilwoman, is, proceed, but we've got to go back to this stuff. The punch list, you usually come back. 25 01/27/05 - PARKS - RES. 040912 But for something like this it would be open, a hospital, an office building. People would be in there, then workers would come in under a little better conditions and do the stuff. That doesn't keep you from getting your certificate of occupancy.
If I may add, Councilman, the punch list is when you've finished the job, they go back and see there's a couple items that may need to be patched up again. We're talking a considerable amount of money here. We're talking about 450-some thousand dollars versus a punch list that may be $10,000, or even -- let's go to a $100,000. It doesn't mean that you have the right to hold all of the money for work that hasn't been accomplished. The purpose for holding that money would be so that if he doesn't come back and finish that punch list and they have to get 01/27/05 - PARKS - RES. 040912 someone else to come in and do it, that money that they held would be enough to cover the list that needs to be finished.
Mr. Cruz, let me go a little further on in this long and winding tale here. You helped them and you helped the people get the stadium opened quicker for Bruce Springsteen and the soccer game, and then when you're done, that's it? It's all done? They don't need Luis anymore? You take your trucks and your front-end loaders and you leave and then suddenly you don't get a check? Take me down that road. What happens? Like you were expecting, this is good. Things are getting slow, but I have checks coming in. What happens?
When did you expect that, Luis, like right after August?
So that would 27 01/27/05 - PARKS - RES. 040912 have been by October of '03? By the time the team played their first regular season game you thought you would be sitting in the stands enjoying this, right?
At least 95 percent paid off of everything that was still outstanding.
We won't get into the fact that they wanted the minority contractors to buy a season box. We won't even get into that. That's another animal.
It's not good to talk about boxes in this building. Luis, keep going. So what happens? Who do you go to? What do you say?
Mr. Hoffman, raise your hand so I can see who we're talking about. Don't hide behind the pole. This is your shot. minutes of fame. You're going 6 to be famous. 7 So you go to him and you don't get 8 paid? 9
We wouldn't get paid. 10 Their position was the Eagles haven't paid us. 11 We're waiting for payments from KUD and the 12 Eagles. 13
Did you ever 14 deal with the Eagles directly? You never did, 15 right? Always Turner?
They cut us a few checks directly in the beginning of the project. Since it was such a substantial project for us, we were having some cash flow problems. We had about men on the site. We're really 21 rocking and rolling and they weren't 22 processing our paperwork, in fact, in time. 23 But they needed us to get the work. They 24 expedited a check within a week for us and we 25 were able to get some cash flow. In fact, I 29 01/27/05 - PARKS - RES. 040912 have copies of that check because it was a handwritten check straight from the Eagles.
But you never really had a contract with the Eagles, right?
They cut us a handwritten check so we could be able to continue and not delay the process. Now there's no incentive because we're done. They're using our work.
Let me get back to where we were. So you don't get paid. You go to Mr. Hoffman and you say, where is my money? Is that what you said?
That's right. Basically he would quote me, our contract reads, pay when paid. So when the Eagles pay Turner, then Turner will pay us.
But, Luis, how do you know when the Eagles pay Turner?
You don't. Do you know it today if the Eagles ever paid 30 01/27/05 - PARKS - RES. 040912 Turner?
So what happens? Then you just start trying to get other work somewhere? You have to pay back banks. You already paid off union operating engineers and laborers, who, by the way, make 30-some bucks an hour or more. So you're hitting into the kids' college fund at this point, or you didn't get that far? What do you do?
We're past the kids' college fund. We're breaking every piggy bank.
What's happened is, fortunately we were able to have a financial institution give us a line of credit because of how our company was growing and how it was expanding.
With your trucks and your equipment and your garage and 31 01/27/05 - PARKS - RES. 040912 stuff?
The house and everything else. Basically that's what we've been living off of because the last year we haven't been able to get any work because we don't have the funds to be able to run the work. Because it's just at the end of the day not every client is going to cut you a check every week. We're out here fighting two wars; one, trying to find work where the client is going to pay you quickly, and, two, is trying to get paid by the Eagles so we could be able to at least exist and keep living. Right now we're at the verge where -- no offense -- you're going to lose the contractor who's invested 15 years of his life building his company here. Little by little we were structured to fail. We were taken and said to, we're going to look out for you. We're going to work with you. We're going to take care of you, and at the end of the day we're out to hang. It's an oxymoron.
That's why I'm angry and 32 01/27/05 - PARKS - RES. 040912 that's why I'm here today. We're talking about trying to develop the community.
He lives right in my neighborhood. He's in my neighborhood. He employs people from the neighborhood. I'm telling you, it's an economic factor that has affected the whole entire community, whether people want to believe that or not. He is an asset to our community because he employs people from the community. He is a legitimate guy who's trying to make legitimate money and hire people and give people an opportunity that other people aren't willing to do. He's done that. And because of somebody's inability to get this thing straightened out, they've taken a legitimate, hard-working brother -- because he also contributes to the community in other ways. The thing is, like, you have people who do business. If somebody in the community needs a little help with their house because their heater broke or something broke, you 33 01/27/05 - PARKS - RES. 040912 call a guy like Luis up and you say, come here, Papi. You're benefiting from the community. We need a little help here. This woman needs a water heater or whatever. But we're losing all that, the good that we have, because of somebody's greed not to settle on a debt that's been paid. It's been paid. For the life of me I don't understand it. I can't figure this out. They're hurting. They're hurting my people. They're hurting them. We can't allow that to continue to happen. You got Joe Blow over who's got a wife -- (Applause.)
-- who's got a million dollar business and she's considered a minority because she's a woman. Nothing against women, my God, but I'm sure we have a lot of poor that can qualify for those kinds of things.
You're saying that Luis is a legitimate minority contractor. He's from the neighborhood. He's done everything. 34 01/27/05 - PARKS - RES. 040912
There are legitimate women in our community, legitimate women, poor, black, Hispanic, white female that could qualify for these jobs but don't have the financial ability that other women have because of their husbands or their brothers or whomever to set them up in business. So the real women that should be getting these jobs are being deprived of those opportunities. That's what I'm trying to say.
Thank you, Mr. Matos. I want to thank the Councilman and Councilwoman. I've been monopolizing this. They're going to have things to say. No 17 matter how long this takes, we're going to find out where this road takes us. If it's the Eagles, it's the Eagles. If it's not the Eagles, we want everybody to know that. If it's the people in the middle, if it's Turner, we're going to find that out. We have some powers here. We're going to exercise those powers to make sure. I've been around this business since 35 01/27/05 - PARKS - RES. 040912 I was years old. I know the game. I go up in business and I hook up with Carlos, and Carlos is a minority front. You're not a minority front. You are actually the kind of person that we should be fighting for here. We want white guys in business and women. That's why I stress that Carlos loves women. We know that. We just want to make sure that you have a chance to keep building and helping your community. Thanks for staying in the City in Norris Square. We're going to help you here as much as we can.
Just one point, 16 Councilperson. 17 Turner Construction got this job 18 because of their size. They're one of the 19 largest construction management firms in the 20 country. They're a billion dollar organization. They have the financial resources to be able to do the right thing. They themselves have said, we all agreed that this money is due. What I can't understand for the life of me is, then if everybody 36 01/27/05 - PARKS - RES. 040912 agrees that that money is due, why don't they just cut it and then continue down the road, keep negotiating with the Eagles, and then they'll hash it out down the road? Why destroy me for months when it's always been 7 due? 8 I never lied about the amount. I 9 never lied about what we had done, where we 10 were at. It's like I'm being punished. It's 11 like I'm the sacrificial lamb. It's okay. I 12 mean, our 15th anniversary was last year and 13 I'm back to the stage I was 10 years ago in 14 capacity. That's sad, because we had gotten 15 to a point where we had evolved to be able to 16 make a difference, to be able to go out there 17 and become a GC and to be able to help our 18 people. I belong to the Contractors Roundtable Council. I've been an MBEC member for about 15 years. I believe in the cause. But if the powers that be just don't help us, I don't know where everything is going. Thank you.
Let me say that 37 01/27/05 - PARKS - RES. 040912 we will underscore and echo Councilman Rick Mariano's remarks. It's imperative that we get to the core of this. And it is not okay. You say it is okay. It is not okay that we have to have this kind of discussion months 7 later. We thank you for your testimony. 8
We have a 11 sequence here. I have to now ask you to have 12 a seat. 13 Councilwoman Blackwell would like to 14 offer some remarks. 15
Thank you 16 very much. We are very happy to be at this 17 hearing and certainly to be one of the people 18 who signed on to this legislation and who joined Councilman Mariano sometime ago to make this press statement. Let me say that we want to say that we have worked with Cruz Construction and Luis Cruz for quite some time. We know of his commitment to his community. We know of the professionalism of his company, and we feel 38 01/27/05 - PARKS - RES. 040912 that it is absolutely unconscionable that any small company should have to come to us and continue to appeal over and over and over without their issue being revolved. It is so unfair. It reminds me -- I always go back to Lucien Blackwell -- when we started set-asides in the City. We're almost back where we started, and there's no reason for it. This is a City that's supposed to be about inclusion. Minorities make up a great part of this City, a great part of City Council, and it is absolutely unfair that Lou Cruz has to come to a hearing to try to get other contractors and other interested community people to come here so that he can get paid. I'm hoping that, Madam Chair and Mr. Chairman, that before our hearings end, that we will hear from the Eagles and find out just what we have a right to expect and try to resolve the issue of Lou Cruz and Cruz Construction Company and the others getting their money, getting paid. That's what it's all about. 39 01/27/05 - PARKS - RES. 040912
We are going to hear from everyone. We ask that you respect the proceedings that we have underway. Every single person will get the opportunity to register their sentiments on the record. However, it's imperative that we do it in an orderly fashion. I have a script that I'm going to follow. I'm now going to ask State Representative Tommy Blackwell to please come forward because he is on a schedule, give him the opportunity to speak. You gentlemen will certainly have the opportunity, but I must do it in the order that has been presented. I would like to ask the former witness, Luis Cruz, to please come forward and just answer a question for clarification on the record for my colleague, Councilwoman Marian Tasco.
Hi. How are 40 01/27/05 - PARKS - RES. 040912 you? I just want to be clear for the record of what the amount that's due in terms of the total amount of the contract. You were paid for the majority of the work. What is the balance due and what is that for? I'm not real clear about that.
The balance due to us is $457,000. Now, that's Cruz AP Joint Venture that did the project. There's other contractors here that are owed substantially a lot more than that. But I can only speak for ourselves here.
Okay. Was that a sufficient amount for you to do the work?
If we would have gotten paid all our money, I'd be fine. You've got to understand, you grow with that amount. Remember, it was a joint venture, so my partner got some of it. We got some of it. Our company grew. We were one of 41 01/27/05 - PARKS - RES. 040912 Philly's top 100 in 2003. Our company grew a couple hundred percent like that. So what I had to do, I had to buy newer equipment. I had to upgrade our offices. I had to get more staff. There's a lot more money involved that. Now, all of a sudden, the job is done. You're out there looking for more work because you've got all these bodies to feed. You have all these notes to pay for and you're not getting paid.
So this balance is to help keep you going until you go to the next job?
So the balance you are is the 400-some thousand dollars out of the $18 million contract?
Thank you. I just wanted to be clear on what the issue was.
Thank you for 42 01/27/05 - PARKS - RES. 040912 your testimony. Any other questions from Members of the Committee? (No response.)
Allow me to please recognize Councilman Frank DiCicco, who has joined us as these hearings. Thank you again. Please welcome State Representative Tommy Blackwell. Offer your remarks. (Applause.)
Good afternoon. I am State Representative Thomas W. Blackwell, IV. I'm here to offer my support and my comments for the minority contractors because, in essence, that's where I come from. We come from the same backgrounds. I, as a former chief negotiator for a union, it boggles my mind how you can have a contract consummated, hand shakes all around on it, and yet when you complete the job, everybody is satisfied but the people who actually did the work. That boggles my mind. 43 01/27/05 - PARKS - RES. 040912 I think in some ways when you have situations like this, you're not just looking at the contractors themselves. There are families involved here, people that they hire that they have to feed. (Applause.)
Now, I support the Eagles. I want to see them win just as much as anyone else. Probably more so because I was around last time and I suffered through that 27 to 10 loss. But let me say this to you: I watched my father for many, many years sit right here, second seat, fighting for the very same thing that we're here talking about today. It's a sin before God that this same question comes up again. I, for one, am sitting here thinking, they got state money, they got City money. They get money from everywhere. Big contractors. It seems to me, because of what's happened here, that there needs to be another clause in these contracts, that when a job is completed, if everyone is not paid, those 44 01/27/05 - PARKS - RES. 040912 primary contractors that are on the job do not get an opportunity to join another job where there is state money, City money or federal money until everyone is paid. (Applause.)
The only way minority contractors get another job is they have to put bids in. If they don't have the money to put bids in, they can't get the job. They won't even qualify to bid. I mean, you're not talking about people who did not complete their work. We're talking about the American dream here. You have primary contractors killing the American dream. And you know what you have? Modern day slave labor. This was done free because they haven't been paid. That's a sin before God. This is why a lot of minority contractors don't like to deal with the City or the state or any government because we don't protect them once they have the job done. Someone has to speak up for these people. I, for one, am going to do that. 45 01/27/05 - PARKS - RES. 040912 Because like I said, that's where I come from. I've negotiated many contracts that have affected lives of thousands, not only in the City and state, but across this country and some parts of this world. My union took very good care of me. I've been gone from them for years. They 9 call me, I'm going back. Because they gave me 10 a good living. These are good people. Remember, these same people have to pay the water bills that are going up. Their gas bills are going up. The electric bills are going up. If they do their part in trying to earn a living completing their jobs, why aren't they being paid? It's a simple question. I've done my job. Now pay me. If you hire me, I shouldn't have to wait until you to get paid in order for me to get paid. That's not the American way. I'll say this in closing, unless everyone is paid when a job is completed, those people involved do not get another contract. Thank you very much. 46 01/27/05 - PARKS - RES. 040912 (Applause.)
We thank you for your testimony and are just encouraged, delighted and thrilled to see the Blackwell tradition continue. Any questions from Members of the Committee? (No response.)
Next up we invite Mark Rosenberg, APG America. The panel will include Tom Cirignano of Hispanic Ventures. Paula Milbourne of Seal Tite Company. Please come to the witness table. We welcome you to these Committee hearings. As the sponsor of this resolution 21 has indicated, we do have a woman of color who seeks to participate in this world of construction as well, so we welcome you to these proceedings. (Applause.) 47 01/27/05 - PARKS - RES. 040912
We ask each of you to state your full names for the record and proceed with your testimony. We will hear all the testimony first and then we'll open it up to questions. Mark Rosenberg, APG.
Thank you, Councilmembers. My name is Mark Rosenberg, as I just said. I'm chief operating officer of APG America, the subcontractor who did the glass and glazing work on the Philadelphia Eagles stadium, the project known as the Lincoln Financial Field. I'm privileged to have the opportunity to speak to you today on behalf of dozens of local subcontractors who performed work on the stadium and who are still owed millions of dollars for the work they completed in a skillful and timely manner 48 01/27/05 - PARKS - RES. 040912 more than months ago. The construction of Lincoln Financial Field was a process that spanned over four years and cost over $500 million, including a taxpayer subsidy of over $175 million, $85 million from the taxpayers from the State of Pennsylvania and $90 million from the taxpayers of the City of Philadelphia. The hard work of thousands of individuals produced a world-class stadium enjoyed by the Philadelphia Eagles and people from all over the region. But with those taxpayer subsidies came a reciprocal promise from the Eagles organization of new jobs, of new revenue for the City, of new and paying construction contracts for the local union contractors. As the Committee is aware, Kajima Urban Development, or KUD, was hired by the Philadelphia Eagles in 2001 as the stadium development company for the Lincoln Financial Field. Subsequently, KUD hired Turner Construction, Keating Building Corp. and the McKissack Group, collectively known as TKM, as 49 01/27/05 - PARKS - RES. 040912 the primary contractors to manage the construction. The subcontractors on whose behalf I speak to you today performed the actual construction work. We dug the holes. We poured the concrete. We erected the steel. We glazed the walls. We painted the walls. We laid the carpet and rolled out the grass. All of these subcontractors unfortunately have similar issues in getting paid. Based on the information collected today, the total sum due in owing subcontractors is in excess $54 million. Rather than parade each subcontractor up to make a statement for the record, we ask for your indulgence to hear a prepared summary of the common harm suffered. At this time I would like to read into the record and submit the following joint statement that has been signed by of the region's leading construction companies, a number of whom are minority-owned businesses and each of whom is still owed significant money on the Lincoln Financial Field project. The lack of payment has created real 50 01/27/05 - PARKS - RES. 040912 financial hardship for not only these companies, but for the people within these companies, people who have wives and husbands and children and mortgages and monthly bills to pay. This is real people's lives. If you will, I'll read that statement.
This is entitled, Subcontractors Joint Statement of Facts Concerning the Lincoln Financial Field Stadium Project. "Whereas the undersigned companies generally understand these facts to be true and correct based upon our knowledge and belief at this point in time. Whereas each of the undersigned companies, which are in total, collectively 20 the subcontractors, contracted with or received direction from joint venture, formed between Turner Construction Company, Keating Building Corporation and the McKissack Group, known as Turner/Keating Joint Venture in association with McKissack Group, TKM, or any 51 01/27/05 - PARKS - RES. 040912 of them, or contracted or received direction from the Philadelphia Eagles, Kajima Urban Development, or any of their respective related companies, agents, employees or servants or served as a subcontractor and performed and furnished certain work materials to construct the Lincoln Financial Field, located at 11th Street and Pattison Avenue in Philadelphia, Pennsylvania, known as the project. Whereas, despite many disruptions on the project, the subcontractors, many of which were local small businesses and minority contractors, expended extraordinary efforts and costs so as to allow the stadium to be substantially completed on schedule at least by August 2nd of 2003. Whereas, the stadium has been open for over 18 months and has generated significant revenue for the owner and reportedly has increased the value of the Eagles franchise by more than $200 million, yet the undersigned subcontractors have not been fully paid for the valuable work 52 01/27/05 - PARKS - RES. 040912 performed and materials furnished for the project. Whereas, funding for the stadium was derived in significant part from City and state taxpayers, and construction of the stadium was accomplished by the subcontractors through the dedicated effort of the local union labor. Whereas the subcontractors have suffered and continue to suffer substantial financial hardship as a result of failure to receive payment in full for materials and services provided under their respective contracts or at the direction of TKM, KUD or the Eagles. Whereas each subcontractor generally had the following common experiences on the project: Number one, throughout the course of the project the subcontractors expected that they would be provided accurate, detailed and sufficient information as to design of the project and the scheduling of the work so as to allow them to build the project in an orderly and efficient manner. However, many 53 01/27/05 - PARKS - RES. 040912 of the subcontractors were provided incomplete schedules and designs. As a result, numerous change orders and change directives were issued, all of which unnecessarily complicated the subcontractors' work and caused excessive and extra cost. Number two, to accommodate and meet the aggressive project completion timetable set by the Eagles, KUD and TKM, the subcontractors expended extraordinary efforts to keep up with all of the design changes and building scheduling problems. In spite of these problems, and as a direct result of the subcontractors' hard work, the stadium opened on schedule. Number three, in July 2003 the Eagles held numerous open houses attended by tens of thousands of people, and on August 3rd, 2003 the stadium held its first sporting event. The Eagles were able to use and enjoy the stadium for multiple uses, including soccer games, concerts, Eagles home games and other events. Nonetheless, to this day, the undersigned subcontractors have not been fully 54 01/27/05 - PARKS - RES. 040912 paid for contract retention on the base contract work for change orders provided on the project. These monies are due to the subcontractors. Number four, after the stadium opened, numerous lists were given to the subcontractors asking that the subcontractors perform additional task items outside the scope of the subcontractors' contracts.
These lists were in many cases excessive, untimely and otherwise improper. For example, many of the subcontractors were directed to perform routine maintenance and repair work or to address damage due to normal wear and tear that was beyond the scope of the work required under the original contracts. Number five, many of the undersigned subcontractors were also assessed unsupported, untimely, excessive and otherwise improper back charges that were apparently being used to reduce or to avoid altogether the amounts owed to the subcontractors. For example, for some of these 55 01/27/05 - PARKS - RES. 040912 subcontractors, a significant amount of these back charges were assessed in the summer of 2004, nearly one year after the stadium opened. " 10 That's the end of the statement. 11 I'll just finish up with my general statement. 12
Thank you. 15 The subcontractors have been told 16 that their claims for money owed would be 17 addressed in a non-violent mediation scheduled 18 to occur sometime in early 2005. We obviously want our claims to be resolved as quickly as possible and are willing to participate in such mediation, but frankly are skeptical, given that the stadium has been open for more than 18 months, has been enjoyed by millions of fans, has been the home to two NFC seasons, home to two NFC championship games and the 56 01/27/05 - PARKS - RES. 040912 proud home of the NFC champions, the Eagles. All of this and the subcontractors still have not been paid. There were promises made by the state to help fund this stadium. Promises by the City to help fund this stadium. Promises by subcontractors to build a quality facility in a certain amount of time. All of these promises have been kept. On the other hand, there were promises made to the state and to the City and to the workers of this region by the Philadelphia Eagles organization. The promise to pay your obligations or to make certain that these payment obligations are addressed have gone largely ignored. These promises have either been broken or have yet to be kept. We hope by shining some sunlight on this problem that people of goodwill can see their way to honoring their promises. I thank you for your time.
Thank you, Mr. Rosenberg. Again, we will hear all of the 57 01/27/05 - PARKS - RES. 040912 testimony and then move to questions from Members of the Committee. Thank you. Ms. Paula Milbourne.
Good afternoon, Council. My name is Paula Milbourne, and I'm with the Seal Tite Company. We've been in business for approximately years. It was 9 started by my dad. He had another company 10 prior to that. My dad is 78 and he still kind 11 of works in the business, or keeps me working 12 anyway. 13 Seal-Tite and myself personally have 14 been hurt financially by not being paid for 15 the work that was completed and accepted by 16 TKM Management, et al, all those other folks, 17 BBJ and KUD. 18 To take on a project such as the 19 Eagles stadium was prestigious for our 20 company, a representative of the minority community. My concerns are that these construction management companies need minority participation. However, if Seal Tite had had any key insight or working knowledge that TKM did not pay their bills, Seal Tite 58 01/27/05 - PARKS - RES. 040912 would not have signed a contract to work on such a project. What it has caused is financial strife. Seal Tite's goal was to pay our trade payables and make a modest profit. However, this has been impossible. It is a shame that I have to beg for Seal Tite's money to try to stay in business at the same time. It appears that the one way to get rid of minority participation is to eliminate minority businesses. (Applause.)
Let me say this in closing: All of us, we do have bills, et cetera, et cetera, but the financial impact of not being paid, we can't go to the same resources or have the same lending institutions that many of the large companies have. I've gone to many meetings and things like that and I know that people have said the lending institutions here support minority businesses. They don't support construction businesses. I've been told that 59 01/27/05 - PARKS - RES. 040912 to my face. I've gone to Wharton SBDC, Temple SBDC. Don't believe any of that stuff. I've been through that. Put together financial packages. It don't work. I don't care how good your credit is. You ain't going to get the money. The bottom line is, is that for minorities being in business -- and that's where I'm speaking from -- it is very, very difficult for us not only to stay in business, but to maintain a status quo. I really plead to Council to really help us to get paid so that we can continue to be a viable part in the construction projects that are ongoing in the City. At this point, I'm at the same point as Luis Cruz. I've had to cut back and not be able to participate in many of the projects. Where am I going to get the funding? Can't get the funding, can't get paid. You can't show your PNL to a bank and it's negative. And that's what has happened. The other thing is that for many of us, yes, we have families and what have you, 60 01/27/05 - PARKS - RES. 040912 and I can really speak to this, that my mother is in a nursing home. Me not getting paid is impacting my keeping her in that nursing home. THE AUDIENCE: Turner has got to pay.
I would just like to say thank you for letting me say what I had to say. Thank you very much.
Again, as Councilman Rick Mariano pointed out, the purpose of these hearings is to get all the information on the record. Much work was done by his office to work this through and work this out prior to us coming here today. We're here. Every opportunity is to get all the information on the record so that, as Councilman Mariano said, we get to the core and center piece of this problem. So stay tuned for questions. I want you to pronounce your name so that I don't butcher it. Thank you.
Good afternoon, 61 01/27/05 - PARKS - RES. 040912 Members of City Council. My name is Tom Cirignano. I'm with the minority firm of Hispanic Ventures, and performed the painting at Lincoln Financial Field. I'm here today for one simple reason: To ask your help to get us paid. To ask you to look into the situation, to stop the finger pointing between the Eagles, KUD, TKM and get the people who did all the work and gave the Eagles, the City of Philadelphia, the fans a class A stadium done on time to get them paid. To us it seems simple. We had a contract. There were authorized, signed and approved changes. The work was satisfactorily performed, and then no money. It is not the case where we are being told it is an issue with the work or the paper trail, but we are told that TKM, KUD and the Eagles are having their own issues. That is not our problem. It has gone on long enough. We need to be paid. As a minority firm who has climbed the ladder for over 23 years, who has managed to miss the pitfalls, who has made personal 62 01/27/05 - PARKS - RES. 040912 and family sacrifices to get what we believe was a great honor, the painting of the stadium, dealing with Mrs. Lurie and the color changes, meeting the challenges of scheduling, putting on more manpower than ever before, in excess of a hundred men at crunch time, and then to be left hanging for hundreds of thousands of dollars is not right. For some contractors, they are no 11 longer, and it's no fault of their own. They could just not hang in any longer. For us it's a nightmare. The years of climbing the ladder, building relationships with banks, bonding companies, suppliers and the men has been seriously damaged. We are no longer looked at as favorably as we once we are. To say the least, it has taken the wind out of our sails. People need to be paid so they can take care of their responsibilities, to pay the benefits to the guy who broke his back and worked all kinds of hours so they can get what's rightfully theirs and their families. We respectfully ask for your help. We have 63 01/27/05 - PARKS - RES. 040912 hit a road block. We ask nothing more than what we deserve, to be paid. Thank you. (Applause.)
Hello. We love and need your enthusiasm, but we will have order. I started with Luis Cruz. His outstanding non-payment is $457,000. What is it for each of you so that we can keep a running record here? Mr. Rosenberg, the total unpaid as it stands, to your knowledge, is what?
And again, that commenced around August the 3rd, to your best knowledge?
Thank you. Questions from Members of the Committee? Councilman Rick Mariano.
Thank you, Councilwoman. $650,000? You must sleep well at night thinking about all that and paying your bills. I've met many of you before, in and out trying to work this out so we didn't have to go through this whole dog and pony show, but I guess that's what's going to happen. It is hard for us that don't do this every day. And as hard as it is, for people in here to be emotional, we understand that. The Councilwoman is doing a great job letting everybody being heard. 65 01/27/05 - PARKS - RES. 040912 I think, ma'am, when you started talking about your mother and how it affects the quality of life for the people that you are a caregiver for -- and there's stories probably from each one of these gentlemen on each side of you that they probably don't want to get into. When you started this process -- this is the same question I asked Mr. Cruz -- you never had any dealings with the Eagles personally, did you?
Yes. We were certified by MBEC and MBEC recommended us and we signed with Turner.
Your contracts -- again, this is another question I asked Mr. Cruz -- this is the basic contract. Are we talking about any extras like Cruz was talking about?
We do caulking and waterproofing. But we did the sealing work.
Through many color changes and scheme changes. We'll get to that later. So you met that same handsome guy hiding behind the pole over there, Hoffman --
-- who signed your work orders, said everything was fine, come for the big pay day. You said you were into $103,000?
You thought that was going to be the cherry at the end of this apple pie, this great American apple pie that you fought so hard by being -- you know, 67 01/27/05 - PARKS - RES. 040912 taking care of your mom and your dad and your being a woman of color and having a chance to get a piece of this economic pie, that's the piece you were going to use to build your business and advertise possibly, use the money. A lot of people who aren't in construction, it's not free to bid on jobs. It costs some money, and the bigger jobs, you have to get prints and draft things and things printed up, that costs money. You can't be an entrepreneur like one of my sons, you go around, you drop a flyer here and a flyer there about being a D.J. You have to have architects that are shielded and they have to know what they're drawing. It costs money to make money. You're to the point now where you're probably not going to be able to make any more money until this nightmare goes away. Am I correct?
That's correct. I think one of the biggest risks that all of us face, our subs, is reputation risk. I think 68 01/27/05 - PARKS - RES. 040912 that if you don't have your reputation to stand on, you don't have anything. I don't care how much money you have in the bank. We're all failing, and now we don't have the reputations that we so built up through the years. People don't look at us in the same light. Would you?
No. I do get it. Councilman Rizzo whispered in my ear when you were speaking. He said, we tend to refer to this as the Linc because we tend to butcher things in Philadelphia with names. Lincoln Financial Stadium, maybe Lincoln Financial Group, who has a big reputation, that paid a lot of money to somebody -- it wasn't me and I don't think it was anybody at this table who has the naming rights for this thing -- might want to have something to say about their name being basically drug through the mud with a part of the community that we should be helping. I went to that game last week. That was a great game. It was a pride to know that 69 01/27/05 - PARKS - RES. 040912 my brother actually worked as an electrician on that stadium. He got paid. Because if he didn't get paid, he wouldn't have come back the next week. That's one of the good things of being a member of a union. You unfortunately pay those workers, and you have to pay them no matter what happens, even if you don't collect your money.
I think Councilwoman Brown said it the best. State Representative Blackwell, it was an honor to hear him speak. We need to find out something here so that this never happens again. I will tell you, I'll be 50 years old in July. I was enamored being a Councilman my first four years. The Governor that was the then Mayor, at the end he had to push to build two stadiums. Sometimes I like to say things that aren't necessarily true, but I think if I keep saying them, they become true. I used to say, Mayor, we need to build two stadiums; one for the Phillies and one for the Eagles. Because we were briefed one time 70 01/27/05 - PARKS - RES. 040912 down at Senator Fumo's office -- Councilman DiCicco was with me -- with people from the Eagles. They made a whole lot of sense that they should build two stadiums just in the pure sense that you can't watch a football game the same way you watch baseball. At the end -- and Councilman DiCicco of course will speak for himself -- we were pushing for that. At the end of the Rendell Administration it looked like this was going to happen for two stadiums. It never quite happened. Then when the Street Administration came in, it came. And it's like yesterday to me. Again, I'm excited as a Councilman. But I'm in my second term and I'll think, oh, we're going to build stadiums. My brother, Luis Cruz, all these people are going to be getting jobs, and this is a good thing. Now, we're cherries in all this. Maybe Councilman Cohen will be here, but I won't be here for the new stadiums when they build new ones. So now I understand that we gave a lot of stuff away. One of my big 71 01/27/05 - PARKS - RES. 040912 things was, we should possibly name the whole complex Veterans Stadium Complex, Lincoln Financial. They got their money for Lincoln Financial. They got their money for Citizens Bank. That was the deal the Phillies and the Eagles made. We were happy to let that happen. We could argue all night that some Members of this Council wanted to put roofs on the old stadium, Veterans Stadium, while there were pipes leaking and rats running around. We didn't want that. We wanted that, but we gave the store away. I thought we should honor veterans by making sure that it was Veterans Stadium Complex. I was told specifically by then Solicitor Nelson Diaz. I wrote him a letter. I talked to him on the record, off the record. We negotiated that away too. So maybe next time -- and this is not being facetious -- there's not going to be a next time in my lifetime -- these stadiums better last. We have to make sure that you get your piece of this pie, no matter what happens 72 01/27/05 - PARKS - RES. 040912 here. Now, the way the process and the way that the Councilman has this set up, we're doing this on purpose. The reason we're taking the workers, we want to get to KUD after we talk to Turner and we want to talk to the Eagles last because the process is working up. It's coming from Luis Cruz and your group up to TKM, to KUD, to the Eagles. The buck doesn't move down. It moves up here. Again, I'm not blaming the Eagles. When it gets time for Mr. Banner and his associates to get up here, and Judge Lord and the lawyers, we need to have some answers to these questions. So if everyone sticks around and we get through this process through the auspice of the good Councilwoman, we're going to find out just why you didn't get paid, or we'll just keep having hearings and hearings and hearings. I will tell you, a lot of these guys over here wanted to picket that game last weekend. We asked them not to picket. I said, look, if you are going to picket, I'll 73 01/27/05 - PARKS - RES. 040912 be there with you. I'll stand there with you because I love you and it's the right thing to do, but let's let the Eagles have this day. Let's let the Eagles have their championship. I was so sure they were going to smoke Atlanta. I was positive. Just as I'm sure they're going to beat New England. I'm positive.
But Carlos Matos, Luis Cruz and the three people up here, I don't think either of you can afford to go to Jacksonville now to do any picketing down there. But maybe we'll just hop in that Crown Victoria I have and we'll all go down. We can fit six people in that and we'll split the gas money. We've got to figure this out. We're serious. Let's figure this out. Thank you for your help. )
I have been very remiss. I failed to acknowledge the presence of Councilman Jack Kelly, who's been hearing the testimony at least for the last half hour. Please recognize Councilman Jack 74 01/27/05 - PARKS - RES. 040912 Kelly. (Applause.)
Any other questions from Members of the Committee? (No response.)
We thank you very, very much for your testimony. I'll say again for the record, Councilman Rick Mariano did all that he could do so that we would not have to get to this juncture. It's unfortunate that it's redundant because we've heard like stories. I've heard them for the past five years. The purpose of the hearing is to get everything on the record and hear from all sides so that we can move to a resolution 18 that's a win-win for all parties involved. Thank you for your testimony.
Can I ask just one question, something I forgot? Did you guys reduce the price of the money you would have took in order to settle? Did anybody say, look, instead of taking $600,000 dollars, I'll take $500? Did anybody 75 01/27/05 - PARKS - RES. 040912 do anything like that out of you three?
Unfortunately, as you know, in construction that occurs. For ourselves, we'd be thrilled if that process started to take place.
Did TKM or KUD or the Eagles or anybody ask you to do that?
What are they going to give you, Eagles hats? What are you getting? What else could they give you?
They couldn't promise us any money, so that's not a negotiation.
In other words, it's always about the Benjamins. That's what it's about here. So don't take less.
Everyone in this room, I think every contractor is willing to take a cut. That's just construction, 76 01/27/05 - PARKS - RES. 040912 unfortunately.
Mr. Rosenberg, thank you very much for your testimony. I want to take the liberty of the Chair and invite up Jihad Allal (ph), Contractors Roundtable, and Jamal Johnson, Contractors Roundtable, so that we can hear your testimony prior to bringing up TKM and KUD. Please state your full name for the record and who you represent.
Jamal Johnson from the Contractors Roundtable, Councilwoman.
Your honorable Councilwoman Blondell Reynolds Brown and your colleagues, we just want to bring to your attention that Philadelphia has been very unfriendly to the African-American construction community, Hispanic. If you don't believe me, you can go 77 01/27/05 - PARKS - RES. 040912 out and look at the public works jobs. You can look at the private sector jobs. You can look at Corporate American Retrofits down Center City. We've been excluded on a substantial basis from these jobs, particularly the public works jobs, because these are the jobs that we usually get opportunities to work in. Even the public works jobs now over the last, I'd say, under Rendell's Administration and under John's Administration, we've been pretty much involved in the lack of participation. These reasons may be a lack of reaching out. It could be a lack of public officials vying for us. It could be just blatantly racism. Probably all of the above. All we know is we're suffering from lack of progress in the construction community. If it continues, this trend continues, we're actually suffering from genocide on the construction. We can't learn state-of-the-art construction technologies in the high-rise buildings going up. We won't be able to hand 78 01/27/05 - PARKS - RES. 040912 our skills down to our children. We're asking the public sector, public officials, we're asking the private sector, the large contractors to let's turn this trend around. Because if we continue it, we're going to be pretty much left out of the construction industry businesses. It's not like we're doing swell in Philadelphia when it comes to construction. You see the sites going up. We're asking you to turn this trend around. Right now our Contractors Roundtable, we have a sponsor where we sponsor the Tools for Guns initiative. If we don't have these opportunities to do these construction projects, particularly the multi-residential projects -- if you go down, for instance, Richard Allen, if you go down to Lucien Blackwell, we're not working there on a substantial basis. You might see one or two of us, if that many. But in terms of seeing large volumes of youth working, we can't hand them skills. We can't hand them tools. We can't hand them hammers. We can't hand them 79 01/27/05 - PARKS - RES. 040912 meters because we're not on there. Businesses, it is a known fact, hire people that look like them. We're not out there on those jobs. They don't look like us on a substantial basis. We haven't particularly been on the private sector jobs, but the public works jobs are the ones that we really try to go after, but we just haven't been on them. The economic impact of the public works jobs, we're not feeling them. You go to the Lucien Blackwell Homes, you don't see an economic impact of the African American community on those jobs, particularly public works. You go down to City Hall projects, Constitutional Center, a lot of us didn't feel an economic impact of that job. I'm not anti-white. I'm not anti-union. But Rick Mariano, his people are working. Mr. Rizzo, his people are working. South Philly is working. Northeast is working. But when it comes to the inner City of West Philadelphia, the inner city of North 80 01/27/05 - PARKS - RES. 040912 Philadelphia, our youth are not working. Our youth are going around shooting people for a $50 loan because when they come to us and ask us, could we get on this job, do you have any work for us, or can we get a job, we can't even give them no employment because when we go to get these jobs, we've got all kinds of obstacles. We've got all kinds of hindering issues that prevent us from doing this work. We have the skills. We have the expertise. We have the knowledge. We have the skills. We got the wherewithal to do these jobs. But when it comes down to us actually getting on them, the public works jobs, mind you, we're not on them.
We're asking you as the Philadelphia public officials that represent us to stop this trend, because everything is not fine and dandy in our community. We can come here and we can laugh and joke and smile. But our community, we're not doing fine and dandy at all. When it comes to these economic contracts, we're not just suffering on a 81 01/27/05 - PARKS - RES. 040912 construction level, in professional services, legal services, accounting services, engineering services, all across the board. In Philadelphia we're not really doing that well, black Philadelphia. So we don't need to be down here smiling, handshaking, like everything is fine and dandy when you look at our community. We're trying to for the sake of our future, for our youth, because we're in our 40s and 50s. It hasn't been looking good for us for the last eight years under the Rendell Administration and the years under John. Construction has been very unfriendly to us. We was working when Goode was here. We were getting public works jobs. We were on those sites. All of a sudden, soon as Rendell came, the jobs started going to groups that don't look like us. I'm not anti-union either. I'm just pro African-American. There's enough work in this City for everybody. Keating used to reach out for us, Dumus (ph), Dale (ph). All of them used to reach out to us. Now there's only a few 82 01/27/05 - PARKS - RES. 040912 select contractors involved with negotiating deals. But us in terms of a wide spectrum of African American contractors, we're not involved in these deals.
To your knowledge, are any members of the Contractors Roundtable involved in any activities specifically at the stadium?
Just one or two. And the one or two that was there suffered financially and are on the brink of going out of business. So it's not just the Eagles. We're talking about construction across the whole board. We're just here to ask you to turn this trend around, because if you don't, 10, years from now you're just going to see 2 19 percent of us on these construction sites. We 20 need the public officials. We need the private sector. We need Keating. We need Dale, all you guys, to reach out. They got this cliche going around, one City, one dream, one town. Well, let's make that cliche a real cliche instead of just 83 01/27/05 - PARKS - RES. 040912 what it is, a cliche only. That's all I wanted to say as a representative of the Contractors Roundtable. We want to see Philadelphia as a whole benefit from the public works jobs, particularly on the construction level.
For the record, that was Jamal Johnson. Mr. Allal, are you prepared to offer your testimony, please?
Yes, ma'am. Thank you for giving me the opportunity to come and speak to you this afternoon. I'd also like to remind all the leaders here that when this project was funded and they came and they asked for over $300 million dollars to do these two stadiums, the City Council was here to support that. At the last minute they came in with an MBE plan and said that they were going to assure that minority businesses were included in this 84 01/27/05 - PARKS - RES. 040912 project. That happened at the last minute. On this project, on Turner's job, I personally had a company, A-Plus Construction. They called us to come when they first put the office trailers there. They asked us to supply a carpenter to do something, maybe put up some drafting tables. So we went down there to do something that should have took one man one day's worth of work and ended up turning that to $12,000 on drafting tables and miscellaneous stuff around the offices. But that wasn't my first business relationship with Turner. That was my second. My first business relationship with Turner almost occurred the same way. Turner was doing West Park, a PHA project, and they called us in to do almost something similar, to do some miscellaneous construction work. That contract turned from maybe $100 to maybe $100,000. But it took two years for me to get my money. And that was after the carpenters union closed on my bond, my fringe benefit bond, which we always talked about union and contractors. 85 01/27/05 - PARKS - RES. 040912 One of the most significant things about unionized workers are for a company, a company has to put up a bond to ensure that those fringe benefit hours are paid to the union. Well, my bond was put up by the GBCA, General Building Contracts Association, and that subsequently got called because Turner didn't pay me. I had to go to a PHA board meeting, every board meeting, for, I think, almost six months when they finally had them pay me. If it wasn't for Carl Green taking the lead, I wouldn't have been paid. I'm really here today not just to relate my story to you, but to stand up for Luis Cruz. Because Lou Cruz, one thing that is significant that I want you all to focus on is that Luis is from a Latino community and I'm from the African American community. When Luis was riding high and the Eagles and Turner Organization had him in the paper as a minority contractor, Luis reached back for us. (Applause.)
At that time in our history in Philadelphia we were the 86 01/27/05 - PARKS - RES. 040912 Contractors Roundtable, members that you see, along with Ms. Sacaree Rhodes, we were taken in all across the City. We did the Constitution Center. We did this and did that. It wasn't a coincidence that they were touting Luis as one of their success stories. But we were going to picket them. However, because Louie asked us to give this process an opportunity -- which I fully support because I think it takes that type of leadership. Nobody likes to fight, but somebody has to know how. Nobody likes to be put on the burner, but somebody has to pay the cost when things go wrong. One thing that's significant about Luis Cruz is when he was on top he didn't foresee none of these problems. None of us did. But he was willing to reach back. He personally funded the Contractors Roundtable to get organized where we are today. And that says a lot. One other thing that we need to think about. If Luis goes out of business -- 87 01/27/05 - PARKS - RES. 040912 which will happen if he doesn't get paid. I know the attorney said that there's some settlement offered maybe sometime in 2005. But that might as well be 2015. Because when you need money to settle all your outstanding debts -- he needs it now. What we need this leadership to do is tell Turner, look, this is unacceptable. I want this man paid. Or we as a body, we want this man paid. Let them go to the bank. (Applause.)
On all these contracts, they have contingency and general conditions and they have a profit line. Let Turner pay him from their profit. TKM and Keating, let them pay him now, arrange for a bank to pay all these outstanding bills and let them dispute that when that arbitration comes up and let them take the hit. Furthermore, if they're not going to do that, then let's give them a taste of their own medicine. Let's put them out. Let's ice them from all City work. (Applause.) 88 01/27/05 - PARKS - RES. 040912
Madam Chairwoman and Members of Council, Turner, on their web site, they build this up as a City. Turner isn't just a United States large construction company. They are a global construction company. They do over $5 billion a year in construction. They are big business. Now, they've come a long way since there was a Mr. Turner, believe it or not, and he was a member of this association on 18th Street. But they've come a long way since that. But this City that Turner constructs, is a City that they have. That is a City where racism is allowed. That's the City where discrimination is tolerated, and that's the City where the poor are treated unjustly. We cannot have that. We are not here talking about what's good. We're talking about the taxpayers dollars that they took from us to build the stadium. We're talking about how they teach this guy. Luis Cruz, he'll suffer another loss if this company fails. By the way, it's a second generation 89 01/27/05 - PARKS - RES. 040912 company. That's a lie. He's a second generation company and his company is located in the neighborhood. I've been in his office. When you ride there in the summer, there's little kids playing in the street, young boys walking up and down, young girls walking up and down. They see those guys coming up with those trucks. He's an example. He's an example for those future generations that won't go to college, that don't want to lead a life of crime. He's an example of a successful businessman. We talk about crime every day. We talk to drugs. One of the things that leads -- and I can tell you this from my own example. Almost 30 years ago, I met Jamal when I got out of the service. I can tell you, when I got out the service, one thing I learned was that you lead by example. By him being a businessman, that is an example that young kids will never say anything to him, maybe even go up and shake his hand, but they will see that and they'll know that and they become businessmen and business women. We've 90 01/27/05 - PARKS - RES. 040912 got to make sure that survives. We're here to implore you to say to Turner, your City that you built, the type of business that you do is unacceptable and whatever you got to do, straighten this out. (Applause.)
Thank you, Mr. Allal. We want to thank both of you gentlemen for your very, very important testimony. Thank you very, very much. If we can please invite to the witness table, Michael Kuntz of TKM, Dennis Biggs of KUD International and Bob Hoffman of KUD.
Good afternoon, gentlemen. I called three names and we have five, so I need to ask each of you to state who you are and let's start with that, please. And identify who you representing.
My name is Dennis Biggs. I represent KUD International. (Audience outburst.)
Christopher Lee, counsel for KUD. 91 01/27/05 - PARKS - RES. 040912
We are now going to continue with the testimony. Thank you, gentlemen. I would ask that you please state your name for the record and your affiliation.
Michael Kuntz, vice president and general manager, Turner Construction.
Excuse me, Madam Chair. Can I ask one question so that they can respond to it?
Surely. As soon as we get who they are on the record.
Thank you, gentlemen. We want to ask Councilwoman Majority 92 01/27/05 - PARKS - RES. 040912 Leader Jannie Blackwell --
We have not heard testimony from these gentlemen, I should state.
Alright. I hope that somebody today will answer the question of why the prime and the minority contractors -- why everybody is being asked to lower their prices. They still haven't gotten paid. I just want to know why should they? Why is everybody being asked to lower their prices? That's everybody who's appeared and everybody who's owed money. That's what I'm told. They're all being asked to reconsider prices and I want to know why.
Thank you. Mr. Biggs, would you please proceed with your testimony. Do you have written testimony? State who's offering testimony.
Good afternoon. Thank you. As I stated, I'm Michael Kuntz. I'm the general manager from Turner Construction company here in Philadelphia. 93 01/27/05 - PARKS - RES. 040912 TKM, a joint venture of Turner Construction Company and Keating Building Corporation, in association with the McKissack Group, is proud to have built a world-class, state-of-the-art stadium for the City of Philadelphia and the NCF Championship Philadelphia Eagles. Lincoln Financial Field has been widely recognized as the best stadium in the National Football League, being called the jewel of the NFL by Fox Sports' Chris Cullen. Notwithstanding a large number of last minute changes by the Eagles and its development manager, Kajima Urban Development, and some of the worst weather for construction in Philadelphia's history, TKM and its subcontractors delivered the stadium nearly two weeks ahead of the scheduled completion date. TKM is seeking payment from Kajima and the Eagles for the work performed by TKM and its subcontractors. TKM and Kajima have been working through the dispute resolution of these funds through the dispute resolution procedures 94 01/27/05 - PARKS - RES. 040912 provided in the contract between TKM and Kajima. Unfortunately, these procedures have not resulted in the payment of funds from Kajima and the Eagles as we had anticipated. The failure of Kajima and the Eagles to pay all the funds for TKM for work performed by our subcontractors, including base work and retainage that is not in dispute, has resulted in direct impacts to TKM subcontractors, as we've heard today, in their contracts with TKM. Each of the subcontractors agreed that the subcontractor would not be paid until TKM had received payment for the subcontractors' work from Kajima. As a result, their failure to pay hurts both TKM and our subcontractors. Simply put, TKM and our subcontractors provided an outstanding facility to Kajima and the Eagles, and TKM and its subcontractors are entitled to be paid the money for the work we performed. We are in a dispute resolution 24 process, as contractually allowed. We have made some progress in recent weeks, and I 95 01/27/05 - PARKS - RES. 040912 applaud Mr. Biggs for coming to the table with us in trying to work through the process. We hope to continue that process after these hearings. Thank you.
Thank you, sir Is anyone else prepared to testify? Mr. Biggs, KUD International.
Good afternoon. My name is Dennis Biggs with KUD International. KUD International and its role as program manager for the Eagles was contracted to deliver the project on time and on budget. As with all major construction projects, there are contractual requirements that must be met by each and every party in order to declare that the project has been successfully completed. As many of the subcontractors are infinitely aware, the completion of Lincoln Financial Field was marred by a rush to finish that we believe can be attributed to certain parties within the construction team. The acts of those parties have probably damaged 96 01/27/05 - PARKS - RES. 040912 many other subcontractors as well. Unfortunately these claims and counter-claims exist primarily within the construction team led by TKM. Our contract with TKM required them to deliver the project, meeting all of the conditions outlined in the agreements by a certain date for a guaranteed maximum price. Although the project was safe for occupancy and able to be utilized for the holding of the Eagles events, items remain that still need to be completed. KUD and TKM led extensive efforts on the project to employ local contractors, and in fact, helped this project to exceed the goals that were set within the EEOP. We believe that, for the most part, the subcontractors who worked for TKM on the project did so with diligence and professionalism commensurate with the industry standards required for a major project of this type. Unfortunately, there appear to be circumstances that exist on the project that 97 01/27/05 - PARKS - RES. 040912 have affected some of them negatively. KUD is committed to continue to work within the terms of the agreements, including the required process for dispute resolution, in trying to resolve the outstanding issues on the project so all of the parties involved can receive what they are contractually due. As Mr. Kuntz stated, a mediation process is currently underway. It is currently underway. It is not delayed until the summer of 2005, as some have suggested. It is currently underway to address the issues that are being discussed today. The process is ongoing, and recently, as Mr. Kuntz has stated, we have begun to make progress. You've listened to people today who have probably created as much confusion in your mind as answers. And we find that that's somewhat symptomatic of what we've been dealing with over the last six to eight months. I believe one of the groups said that they believe that the total of claims on the project total $54 million --
Excuse me, sir. 98 01/27/05 - PARKS - RES. 040912 Are you saying that we are confused by the testimony that came before?
No. I just think there are several issues that might not have --
It sounded like you said we were confused by the testimony that came before.
The number that the subcontractors stated that are owed to them is $54 million, approximately $54 million was one of the testimonies. KUD is only aware of approximately $12 to $12-and-a-half million of issues that exist.
$12 to $12-and-a-half million that exist. Of that amount, $6.4 million is for contract work and retainage to subcontractors.
Can you explain 99 01/27/05 - PARKS - RES. 040912 retainage to the people in here?
Retainage was amounts withheld in the final completion of the work.
Luis Cruz finishes his work. The parking lot is ready to roll. What can't be finished about that? They park cars on it. It's striped. The drains drain. Where is the money for Luis Cruz? I'm just starting with Luis Cruz. (Applause.)
What retainage does Mr. Cruz have for 200-some thousand dollars? What retainage?
Let me ask you a question. I wanted to wait, but I just can't take it anymore. Where does KUD come from? Is it a minority held firm? Who is KUD?
KUD is located in California, and we're a subsidiary of Kajima Corporation.
So guys come from Japan, go to San Francisco, come here and don't pay Luis Cruz, right? Is that pretty much it?
You saw what happened over there. What bull crap are we dealing with here? Where is Luis' money? Where is his money? Do you have his money? Do you have Luis Cruz's money?
Who has Luis Cruz's money? Does Mr. Banner have it back there?
There is money held out by the Eagles on the balance of the project.
So the Eagles 101 01/27/05 - PARKS - RES. 040912 have Luis Cruz's money? I can send everybody else here home. The Eagles have Luis Cruz's money. Is that what you're telling me?
Why don't we pay him? You're saying there are monies for Luis Cruz on his contract balance. So in the vernacular of people who don't do this every day and don't screw people with contracts, basically you owe Luis money. Your company from San Francisco to Japan owes Luis from Norris Square money. Luis, who I know. Luis, who gives money to everybody that needs help in my community, not a Hispanic community, not a white community, not a black community. A community. You're coming from Japan to San Francisco to Philadelphia and you're not going to give Luis from Norris Square his money? Come on, man. It could be Luis from South Philly, but it's Luis from Norris Square. Where Luis' money? Do you have Luis 102 01/27/05 - PARKS - RES. 040912 money? Does the Eagles have Luis' money? That's the answer we need here.
The Eagles have it, right? Are you saying the Eagles have it? Now, Mr. Banner and his guys are coming. They're going to tell us the Eagles have it or they don't have it. Before we did this stuff, I told everybody, do not come in here and bullshit me. Don't waste my time. (Applause.)
This isn't for the audience. This is so they understand that I and the rest of these people are stone serious. I'm just the guy that knows the words, okay? That's where I came from. Where is his money?
Who has the money? If you don't have the money, who has the money? 103 01/27/05 - PARKS - RES. 040912
As I said, part of the money is from a contract balance amount that we are aware of.
Contract balance amount, that's money that you owe Luis, right?
That's money that is owed from the Eagles to KUD to TKM to Luis.
But it's not money for work that Luis hasn't finished, correct? He's done? He did his work?
I have a series of questions to ask before you conclude your testimony, if we allow you to conclude your testimony. The first is, your business is not in danger going out of business, is it?
That is yet to be seen. When do you anticipate closing the books on this project?
You have no 8 answer whatsoever as to when you plan on closing the books on this project?
We had hoped to close the books on this project by this time. The level of disputes between the parties --
How long do you usually leave the books open on a project?
Projects of this type, major construction projects for virtually all kinds of clients are open a year, months 18 after completion.
They generally have some conflict resolution built into them contractually and there are several parties who sign off on it, as you stated in your testimony. Who in that process represents the taxpayers? Is it paid?
You can't answer that question? You do know that there were tax dollars in the project?
Essentially if you're not aware of anyone representing the taxpayers in the dispute to close the books on the project, what you're saying is you spent the taxpayers' money first to keep the profits for yourselves?
What we're saying is that you didn't spend the taxpayers' money first. We all participated in the project, and some of that money that is owed to these contractors is our money that we put in the project. Do you disagree with that?
Did PAID close their books? 106 01/27/05 - PARKS - RES. 040912
You talk about the disputes that you all are in arbitration about. Was it at all possible to settle the disputes as they came up, or were they just all piled on the back end of the project to be dealt with at the end? Was there a process where they could have been settled on an ongoing basis?
The vast majority of all the issues along the course of the project were solved on a timely basis.
The disputes that are currently being discussed are related to acceleration to complete the project and they are related to claims that came at the end of the project. 107 01/27/05 - PARKS - RES. 040912
Cost, claims from subcontractors who believe that they should be getting more money from either TKM, the Eagles or from KUD.
Should be getting more versus money that they earned and deserve?
Well, that's the purpose of the mediation process, is to determine if their claims are valid.
If a subcontractor was asked to respond to a change order, what is the process for issuing that request? Is there a contract? Is there an amendment to the contract? Are the specifics spelled out in a way that they understand it? Is there documentation to support it? If there's documentation to support the change and the cost associated with it, what is the dispute? Did not the contractor understand what they were agreeing to? Or is there something in writing that says that you 108 01/27/05 - PARKS - RES. 040912 asked them on the change order to perform something different than they were asked to originally? Is there a contract?
Who raises the issues about the reasons? Who is raising the issue?
There's a dispute between KUD and ourselves over the validity --
It comes down from KUD to Turner, to TKM, and then we instruct the subcontractors.
You discussed changing maybe how the windows are going to look? 109 01/27/05 - PARKS - RES. 040912
Well, when you got into the dispute, when you got into the request for change, you had a discussion with KUD, and you decided you were going to do B and not A.
Well, if there was a request for a change, and KUD agreed -- did they agree at the time?
There is no dispute with the entitlement. The dispute centers around this: KUD instructed us to change the contract work, change something in the stadium. We then issued an SIS, as Luis said 110 01/27/05 - PARKS - RES. 040912 earlier, a subcontractors' instructions, to have them do the change work. The subcontractor followed what he was doing. We authorized that. Kajima authorized us. Now we sit here and those funds are in dispute. Most of them center around the overtime and the acceleration to finish the building on time.
None of that request was discussed when you were making your request for the change? You all are experienced contractors. You know what goes into that.
That's why we go through a process where I get written authorization from KUD.
What is the dispute? If you said that they asked you to do something and you did it, what is the dispute?
That's why we're going through the resolution process because we don't understand that in a lot of cases.
You don't 111 01/27/05 - PARKS - RES. 040912 understand why they're questioning what you changed?
KUD, why are you questioning it, if you said you would agree with the change?
Councilwoman, this is exactly the dispute. The format that was used to authorize the work that Mr. Kuntz is discussing was conditional upon review of the contracts. So in order to resolve the issues, we need to have a dispute resolution process.
The question is, as Councilman Goode said, both of your companies are not going to have any financial impact negative? Neither company will have a significant financial impact. You will not go out of business because of this dispute. But your dispute has a significant impact on the subcontractors who don't have the support and the wherewithal to continue in their business. They just make it from contract to contract when you all are in dispute because you couldn't decide when you 112 01/27/05 - PARKS - RES. 040912 made the change. You should have settled the issues at that point, the impact you have on the subcontractors.
That is exactly why we've elected to proceed in the mediation process.
See, you all are sitting in the office building in California and Philadelphia. You go to work every day and your families are fed and you don't have any financial impact. While you all are taking time to do that, this poor contractor can't make the next payroll. So you all need to find some way. (Applause.)
You all just can't sit there and say, well, we'll settle this between now and next year. These people will be out of business.
Councilwoman, may I 113 01/27/05 - PARKS - RES. 040912 interject for one moment?
My name is Christopher Lee, and I'm counsel for KUD. The mediation process has been ongoing. As a result of this Committee and Councilman Mariano's involvement, the mediation process, through the mediator, who is probably the best mediator, I think, in the eastern part of the country, we've been working diligently to address these issues. The whole focus of the mediation has been shifted to address precisely what your concerns are. We have made substantial progress over the last several months, as I've indicated to Councilman Mariano's office. We are not quite there yet in terms of getting the kinds of results that you are looking for.
We're just looking for you all to find the money to pay these people that you have stated that you owe them. That's all.
If I may, Councilwoman. On the attorney here, he's right. We did speak. Just bear with me one minute. I told you, once we open Pandora's box, and we start getting here, everything is going to break loose. Now, just one last thing. I'm going to ask everyone to abide with me, since we have everybody sitting here. It all seems to be blamed on Mr. Banner and the Eagles. Can we get them up here to answer questions at the same time? Maybe if we all sit at the same table we can get these people their money and we can do stuff. What I just heard Councilwoman Tasco go through -- and that was a legitimate question from her -- you asked them to do something. They do something. They go to the worker. The worker does it. They come back to you and say, I'm done. Where is my money? You go to him and say, where is the money. You say, well, let's talk about the money. It's not my fault. It's the Eagles. 115 01/27/05 - PARKS - RES. 040912 (Applause.)
Councilman Rick Mariano, the answer is yes. I just need you to please define substantial progress. What does that mean, given the testimony we've heard and where we're not with regard to payment to these subcontractors?
First let me say that mediation by Pennsylvania statute is a confidential process. It is the basis of mediation. I am a mediator. Most construction cases these days are resolved through mediation because it involves open and frank discussions in the safety of an umbrella of confidentiality so that there is not posturing, and reasoned minds can come together and have a practical resolution. I will say that is what we have been doing. There is a contractual chain from the Eagles to my client, KUD, to TKM, and TKM then in turn contracted with subcontractors. So 116 01/27/05 - PARKS - RES. 040912 there's issues between all of them. They are very complicated. We have been focussing on a process to agree what we owe to TKM with respect to the work done by them, sometimes on their own or through their own subcontractors, so that we could allow that money to go to them, to meet with the subcontractors.
But I think you missed the point of Councilwoman Tasco, her point. It was a very deep and important point. While we're sitting here in Council and having hearings and you're back in your office building here, in California, Japan -- that's where you're from. That's great. We've talked. I like this. Can't we get a bank? Can't we pay these people and then work it out? Can't we trust them? Luis Cruz isn't going anywhere. That cute lady right there, she's not going anywhere. She's been around. She's worried about her mother in a senior citizen home. Let's have a heart. How about if we do this: 117 01/27/05 - PARKS - RES. 040912 How about if we take your salary from KUD and pay her mother's bills up? (Applause.)
Why don't we do that? You don't want to do that. You'd be a fool to say that. You're not going to take my salary. I've got bills to pay. I work for this. You work. She worked. She did it. Let's pay her. Where's the money? Where's the money?
I have a quick question. In your negotiations, are the Eagles included with these negotiations, the mediation process?
As I informed Councilman Mariano's office, they have attended the sessions. They are not parties at this point.
They are not parties, but they have attended? 118 01/27/05 - PARKS - RES. 040912
What timetable are you on, if there is any? This can go on and on and on. It seems to me almost like England. Once they get something, they never, never give it up. They'll go and have meetings after meetings after meetings until it takes someone like the IRA to blow up a couple buildings and then they do something. This is the thing, if you're going to just procrastinate, it will never be solved.
This is the best part. The subs aren't a part of these meetings either, the guys that are owed the money. She's not in that meeting. Are you in that meeting? It's your money. It's your mother in the home. Give the lady her money.
The subs have been invited into the process by the mediator. A large number of them have agreed to participate in the process. They are in the process with the 119 01/27/05 - PARKS - RES. 040912 mediator.
They're in the process with the mediator. Are there any subs here who can dispute that? Nobody invited you, Luis? I guess they don't know where Norris Square is. It's way left of Japan, Norris Square.
May I ask a question? You said that the Eagles are not in the meetings. Who is the dispute between? Is the dispute between TKM and KUD?
The present mediation which has been commenced is to resolve issues between KUD and TKM in the mediation process. What I will tell you is there are issues that go over the place.
Can I ask you a question, KUD? Have you been paid for the work done on the stadium? Have you received all of your money from the Eagles?
Is that in 120 01/27/05 - PARKS - RES. 040912 dispute?
The amount that's due will be paid to the subcontractors for the work that's still yet -- to complete their contracts.
What's the base price of the contract? Let me finish. You're the contractor.
You're the development manager. The contract was between the Eagles and Kajima?
Then you pay TKM, and TKM pays the subcontractors. Now, you got your money to pay TKM?
Where are you 121 01/27/05 - PARKS - RES. 040912 going to get that money from?
Now I'm starting to wonder who's really confused. We were confused. I think you're confused, and now I'm confused because you're the guy holding the money. Who's confused here? I think your client is confused.
Please. Mr. Biggs is trying to honor his statutory obligations with respect to the mediation process and --
And we're trying to honor Luis Cruz, and her bills that are due.
Councilman, we have spent, 122 01/27/05 - PARKS - RES. 040912 well, the better part of the last month --
And if your client had done his job we wouldn't be here today wasting everybody's time. Let's call it what it is. You're wasting our time because you're shucking and jiving for some money. There's no cameras here. I'm not playing to anybody. I don't do that. Let me tell you what's happening. You got money. You're holding it. You're holding the guy's money. In the neighborhood I came from, you hold my money too long, somebody is going to get cracked on the side of the head. Now, we can't really crack you on the side of the head, but we're going to beat you up in here. I told you before you came in here, don't bullshit us. Somebody is lying. Somebody is lying. What's going on?
The monies that we've received, which are part of the process that has been reviewed by PAID every month --
Do you owe her or Luis Cruz any of that money? 123 01/27/05 - PARKS - RES. 040912
Where is that money that you owe to Luis and that lady there?
When are the Eagles going to give you that money? If the Eagles owed me money, I'd certainly be at Mr. Banner's door every day. I'd be standing outside that stadium saying, give me my money so I can pay this lady, whose mother is in an old-age home. Come on.
But when we look at the total amount of money that the subcontractors say is being owed, it is much greater than the contract amount that is due from the Eagles or due from us to TKM. We're trying to ascertain why that is.
You know in the basic contract how much Cruz and she is owed, 124 01/27/05 - PARKS - RES. 040912 don't you, and what you owe him? Do you owe him or her money that wasn't from the basic contract?
That's really convenient, isn't it? Because you're the guy holding the money.
Please let us hear from Councilwoman Tasco and then Councilman Goode.
I lost my train of thought. I want to go back to the accounting process. Where are the record keepers? Who kept the records? Who's reviewing the contracts? Who's reviewing the change orders? Who is trying to balance this out? Is there someone trying to do that? Business people normally don't do business without signed contracts and documentation and accounting systems in place 125 01/27/05 - PARKS - RES. 040912 to account for what you're asking for. Is that taking place?
Yes. As a matter of fact, there are many of these people involved in the process.
So if you asked Mr. Kuntz, a subcontractor based on his request to make a change, and you gave him a change order, there was a cost associated with that change order. The contractor did the work. You ought to have a clear record of how much each contractor did at the end of the day. I mean, you just don't run a project and don't monitor the cost. Back to the lawyer. If the Eagles owe you money, and it's the money that belongs to the contractors, why don't you just ask the Eagles to pay the subcontractors, then take that away from the money that they owe you? (Applause.)
Well, I can't fully speak for the Eagles. We have been focussing all of our efforts on a mechanism to get the people in this room paid the legitimate amounts that 126 01/27/05 - PARKS - RES. 040912 they are found to be due.
At what point do you think that's going to take place?
I will tell you, as a mediator, one of the issues is to try to control people pointing fingers at each other. He's asked us to try to refrain from that. You have legitimate questions. There is no doubt about that. And we are trying to be very forthright. We've worked with Councilman Mariano to try to keep him abreast of our efforts. I sincerely hope that they will be very successful in the next couple of weeks. The mediator has a process to hopefully conclude by the end of March. I think he's a little bit optimistic.
We do not want you to point fingers. We're just trying to get a process that happened that we seem to think -- maybe government can be really disorganized, but we never expect private industry to be disorganized. You all count your dollars, every penny. You don't waste anything. It seems to 127 01/27/05 - PARKS - RES. 040912 me that there ought to be some clear documentation on what happened. I think it's unfortunate that we're in this place. We did build two stadiums. We built the stadium, and we end up with the people we wanted it to help the most are the ones who are getting hurt. (Applause.)
Mr. Biggs, did you state in response to a question that you believe that all the contract balance is owed to subcontractors? I believe I heard you say something to that effect.
All the Eagles' contract balance is owed to the subcontractors?
Did you made that statement? If you made it, you made it. If you didn't, you didn't.
Let me start at a 128 01/27/05 - PARKS - RES. 040912 different point. Do you believe that the contract balance held by the Eagles is sufficient to satisfy all the claims by the subcontractors?
Do you believe that all of the contract balance held by the Eagles should go to the subcontractors?
Let me ask the question again to make sure that you actually said yes. Do you believe that all of the contract balance held by the Eagles should actually go to the subcontractors? I'm talking about the amount of money held by the Eagles as a contract balance, which is not sufficient to meet all of their claims. But even it being not sufficient, do you believe that the total contract balance that exists now should go to the subcontractors?
Of course you can. You have an opinion. I didn't ask you whether it will go there, I didn't ask you how the dispute will end up. I asked for your opinion. Do you believe that all the contract balance should go to the subcontractors, knowing that the contract balance is not sufficient to meet all their claims? Do you believe that amount that does exist as a contract balance should in fact -- the 100 percent of that total -- go to the subcontractors to meet their claims?
Yes. I believe that the contract balance that is currently owed by the Eagles will eventually go to all those contractors.
I said, do you believe that all of it should go, not whether it will go. Do you believe all of it should go? I know your lawyer doesn't want you to answer the question.
The value that's in the 130 01/27/05 - PARKS - RES. 040912 balance will end up being paid to those subcontractors.
I understand exactly what you're saying, and you understand exactly that you're not being responsive to my question. My question is not whether all the money will go there, but whether all the should go there. And now your lawyer can answer for you about whether your position is when a contract balance can't meet all the claims of the subcontractors, whether all of it should be dedicated to those claims?
I'm asking your opinion and I'm asking the position of your company.
I will tell you that there are subcontractors that are owed money. There's no question about that. Turner had a contract with them. Turner could pay them. They say that we owe them something. KUD says the Eagles owe us something. That is being sorted out. 131 01/27/05 - PARKS - RES. 040912
So you know what the next question is. After we figure out not just how much money there is, which we may know in terms of contract balance, whether we go above that contract balance, whether we go below that contract balance, the issue is also not how much, but who gets paid?
My question is, are you trying to take part of that contract balance or are you dedicating it to the claims of the subcontractors? That's a question that you can answer if you just choose to be honest.
The contract balance that exists is designated for all those subcontractors. All that money is going to go to those subcontractors. We know that there will be additive change orders, either funded by the Eagles or funded by KUD or funded by TKM that will be required to make up the balance, should it not be there for all those subcontractors. That's what we're going through right now with the mediator. 132 01/27/05 - PARKS - RES. 040912
I'll ask one more question in that context then. So in addition, as I said before, to answer the question how much that goes above the contract balance or not, the mediator will decide who gets paid?
The reason mediation is used so much in construction, particularly on large, complex projects, it is enormously complicated. Mediation is much quicker than arbitration, which if there is no voluntary agreement between the parties, will last years. And it's not a fun process. It's not recommended by anybody. Precisely for that reason, the mediator has been focussing on a mechanism to focus on subcontractors who have balances owed and provide a mechanism for money to flow to them. That process is not complete. With all due respect to the Council, 133 01/27/05 - PARKS - RES. 040912 some of the questions I know should be asked, and they are very legitimate questions, but it will force the participants, the witnesses, at least at this level to start fighting among themselves.
The mediation will fail and then you're looking at two or three more processes. We do not want that. I don't think the Eagles want it. Nobody wants that. We want a quick process to get the subs paid amounts that they are legitimately owed. We'll sort out the rest after the fact.
Maybe you can answer the question that I asked Mr. Biggs before. What role is PAID playing in this process and what role is PAID playing in the mediation?
I do not know. I don't think Mr. Biggs knows. That's probably a question for the Eagles. 134 01/27/05 - PARKS - RES. 040912
I asked another question with reference to the contract balance. What percentage of that money do you consider to be taxpayer money?
We're not aware of how the funding mechanism occurs. I'm not aware of how the funding mechanism occurs between the different entities.
So you don't know? You have no conception whatsoever what percentage of that should or is considered to be taxpayer money?
Well, other than the public information about the amount that the City and the state participated in the overall project.
I understand that. Your lawyer has said that the mediation process is an extremely complicated process, and I'm assuming he was not just talking about how you come to a resolution, but also the process that was followed throughout the project. I'm asking whether 135 01/27/05 - PARKS - RES. 040912 you took into consideration at all throughout that process what public benefit was supposed to come out of this project? In other words, you didn't decide to use the subcontractors out of the kindness of your heart.
We put it in the deal and that's why we put our money in the deal. At what point did you take it out? Or is our money still in there? Or is there still a public benefit that is due? In other words, should we be suing to be part of the mediation?
Thank you. Do any of you happen to know when the contracts were developed and the agreements or when the City agreed to do the financial structure for the stadiums? Maybe 136 01/27/05 - PARKS - RES. 040912 this is a question for someone from the Law Department or maybe it's a question for the City representative. Following up on Councilman Goode's line of questioning, was there any waiver that you would know of that would prohibit us from filing any sort of a lien, mechanics lien or something to that effect?
I didn't know if you would be. I just wanted to raise that question. Maybe we need to ask the Law Department about that.
Are you referring to the City filing a lien, Councilman DiCicco?
We'll discuss that with the City's Law Department. Thank you.
You're welcome. Any other questions from Members of the Committee? 137 01/27/05 - PARKS - RES. 040912 (No response.)
We want to ask you gentlemen to please stay close. We want to invite up Mr. Joe Banner, Philadelphia Eagles, please, to the witness stand.
Good afternoon. If you all would please state your name for the record and your affiliation, please.
Thank you very much. I have to admit I came down here not really looking forward to this. It may shock you to hear me say this, I'm actually glad we're having these hearings, because the truth is, there's much that I'm learning that I didn't know before today. I had some prepared remarks. Frankly, most of them are irrelevant. I'm 138 01/27/05 - PARKS - RES. 040912 going to read two sections because I think now they are relevant to what I've heard today. You have my word. I will sit here as long as you want me to and give you a direct straight answer, whether you like it or not. You may not like all of them. So ask me anything you'd like to ask me for as long as you'd like to ask me. Here are the two sections I do think are relevant, having listened to this, that I'd still like to read you from my prepared marks. We recognize that there wouldn't be a Lincoln Financial Field and there wouldn't be an NFC championship Philadelphia Eagles team without the support of City Council, the City of Philadelphia, Mayor Street and the State Legislature. So we're greatly appreciative of that. We accepted some responsibilities and made some commitments in return for that, and we want to tell you that we feel like we've kept those commitments and just give you a little detail on that and then I'll answer 139 01/27/05 - PARKS - RES. 040912 all your questions. As part of our commitment to the City for the development and the construction of Lincoln Financial Field, the Eagles adopted ambitious goals for participation for MBE, WBE and DBE, generated and supported by City Council and something we were anxious and happy to cooperate with. I am pleased to report to you that more than 50 percent of the contracts awarded on this project were given to qualified firms, and approximately 30 percent of the workers were minorities and women. We were also successful in achieving minority hiring goals for the operations of our stadium, which continue to this day. We believe our percentages in fact exceed those achieved by the City in its own contracting directly for its own projects. We're very proud of this. To have this project portrayed, including these unfortunate disputes, as a project that has been anything other than successful in terms of minority and female 140 01/27/05 - PARKS - RES. 040912 workers would not be fair to the project or the Members of City Council and the State Legislature who supported this project, and part of the reason was for those reasons. We have been successful there. We do need to close this project out and resolve these disputes, and be able to say that without any qualification that this has overwhelmingly been a successful project in these areas. As I am sure you all know, the Philadelphia Eagles are not in the business of building football stadiums. For this reason, five years ago the Eagles hired KUD International, a company that was experienced in building sports facilities to carry out the design and construction of Lincoln Financial Field. One of the reasons we hired Kajima was because they built the San Francisco 49er baseball park and they produced the highest minority participation in construction projects for anything that had been built in the United States at that time. We also put together the 141 01/27/05 - PARKS - RES. 040912 Turner/Keating partnership and were greatly influenced, especially by the Keating part of that partnership, having at that point an outstanding record of minority participation in projects throughout the City. So the original team that we put together was put together very conscious of this being an important agenda to the people who were supporting our project and the commitments that we made that we felt obligated to keep. Pursuant to an agreement that has been furnished to City Council with KUD, the Eagles would hire KUD, who would then hire the architect to design the stadium, and KUD would hire the general contractor to construct the stadium.
That agreement called for the stadium to be fully completed by a certain date, and to pay all stadium construction costs for a guaranteed maximum price. In fact, our stadium lease with the City, which you all approved, obligated us to build the stadium with a guaranteed maximum price. Pursuant to its agreement with the Eagles, KUD hired an architect for the 142 01/27/05 - PARKS - RES. 040912 stadium, and KUD contracted a partnership, as you've heard, of Turner/Keating/McKissack to be the general contractor to build the stadium. As you know, that's a joint venture of Turner Construction, Keating Building Corporation and the McKissack Group. Pursuant to this contractual arrangement, it was TKM that hired and contracted the subcontractors to engage and do the work at Lincoln Financial Field. As of today there is substantial work that remains to be completed at the stadium or that needs to be corrected because it was not constructed correctly. It is our belief that TKM should pay the subcontractors that you heard testify today, as well as others that are owed money. They should also immediately remedy the incomplete and defective work at our stadium. We agree with the testimony of the subcontractors that you heard earlier today. Our contracts with KUD and TKM provide them legal recourse in arbitration and mediation to recover the money, if it turns out that it isn't owed. But if the money is owed, there's 143 01/27/05 - PARKS - RES. 040912 no reason in our opinion that money shouldn't be paid. If Turner thinks they didn't owe the money, their contracts provide ample opportunity for them to recover that money. It was stated earlier, this is a global multi-billion company that has contracts with these people. We believe they should be getting paid. As of today the amount of money that the Eagles hold as retainage is considerably less than the estimated cost of completing what we consider to be unfinished work and conducting the defective work that was done in the stadium. Any further payments by the Eagles at this time would be in excess of this guaranteed maximum price. Accordingly, the Eagles' position is that we do not owe any money at this time. I'm sure you'll ask me some specific questions on this when I'm done, and I'm going to be happy to give you all the details about Luis Cruz and any other people you'd like to ask about. Like you, the Eagles are concerned that these subcontractors with legitimate 144 01/27/05 - PARKS - RES. 040912 claims may not be getting paid in full. However, the Eagles must retain the money they have in order to correct the defects that still exist in the stadium, unless Turner is going to come in and correct those defects on their own, at which point in time we would be more than happy to release the retainage that we currently hold. Once again, let me just state for the record that the Eagles contracted with KUD, and that the retainage held is significantly less than the cost to complete the current outstanding issues. The Eagles do not owe additional money to this project at this time. I thank you for the opportunity to present this opening statement. I welcome whatever questions you'd like to ask me.
Thank you for your testimony. Did you have testimony, sir?
Very well. 145 01/27/05 - PARKS - RES. 040912 Could you please tell us what the retainage amount is?
We believe the retainage is a little over $5 million. Turner and Keating and the Kajima Group think that it's closer to $6. We agree it's in that range.
Excuse me. Can I just paint the complete picture? The whole contract was for $368 million. We have paid $363 million to the parties that you heard here earlier who are not in a position theoretically to pay these subs the money that they seem to agree is owed.
You did say that the Eagles agree with the testimony of the subcontractors?
We don't know exactly 146 01/27/05 - PARKS - RES. 040912 if the amounts they're quoting are the right amounts. We agree with the position that they should determine with Turner whether it's $500, $700 or $100. They should rectify those numbers. Turner should pay those amounts. If Turner believes they have a claim against either KUD or the Eagles, as has been stated, there's already a process that has begun. I heard the question asked. The Eagles are not even a part of that process. It's between those two parties. We've been allowed to sit in and observe, but that is a dispute between those two parties. So we've been allowed to sit in and give information we've periodically been asked to provide or questions so that the arbitrator is getting the full picture. But as you heard them agree, this is a dispute between the two of them. The part that we agree with is that Turner should sit down with these subcontractors, come to a legitimate understanding as to what they're owed and they should pay them. If they didn't owe them the 147 01/27/05 - PARKS - RES. 040912 money, they have recourse with either KUD or KUD and the Eagles to prove that they didn't owe that money, and then they'll get reimbursed. But we don't see any reason that those people shouldn't be getting paid by them at this time. (Applause.)
Where is the money that Mr. Banner says you guys have?
We do not have the remainder of our contract retainage money. I cannot pay the subcontractors.
What are we talking about, the retainage money that Mr. Banner just said was $5 million? 148 01/27/05 - PARKS - RES. 040912
The total that we think, the base contract money and retainage all owed is $7.7 million. We have not been paid that.
Do you have any money that the Eagles gave you that you owe Paula, Luis or anyone else that you could pay them?
Out of $363 million that the company has been paid, which Mr. Banner alluded to, is the cost of the stadium.
No. It's been paid out to the subcontractors. We have $400,000 left out of $363 million.
Then where does all this other money come from for Paula and Luis and all those people? 149 01/27/05 - PARKS - RES. 040912 He made it pretty clear. He's sitting right there two people away from you and the judge. What's the story?
I have not been paid all the contractor retainage money from KUD.
Can I just add something that's relevant? We also entered into -- as KUD can acknowledge and I think the people from Turner -- because we were in this exact same position in June. Our position at that time also was that we were retaining less money than we needed to fix the stadium. We were approached in the interest of trying to resolve these subcontractor issues and get some of the things fixed at the stadium, to enter into an interim agreement in which we released $6.6 million with the understanding that that would be used to resolve these subcontractor 150 01/27/05 - PARKS - RES. 040912 disputes.
Now I'm confused. Everything we do, Mr. Banner, is from you to KUD to Turner, and maybe to Paula and Luis, but they don't get there stuff. Now all of a sudden you give money -- you forget KUD and you give it right to him?
That money was paid, as we understood it, to finish some work at the stadium and to resolve at least some of these problems with the subcontractors. I suspect if you bring the subcontractors back up and ask them if they've been paid any money in June or July -- and I'd be happy to provide the proof that we paid the $6.6 million -- you're not going to get any yeses to that question.
Again, Mr. Banner, so that I'm following this, $6.6 151 01/27/05 - PARKS - RES. 040912 million you paid directly to Turner?
Yes. And that was unusual, because of the nature and the purpose of that money, like I said, was to finish some items in the stadium and to resolve some of these subcontractor disputes in that one instance.
And that was at the end in order to get going in August of 03, correct?
No. This was in June of '04. This has been going on for a year and these guys aren't getting paid and we're not getting our stadium fixed.
We paid that money directly to Turner. We paid to it Turner, who was supposed to fix items in the stadium and pay the subcontractors.
Short of having walnut shells, these are shells. This is Eagles, KUD, TKM. I'm going to put a quarter under there and I'm going to take that and 152 01/27/05 - PARKS - RES. 040912 move it around. It's called a shell game. Every con artist on the avenue knows that game. I knew it when I was six years old. This is a shell game. Where is their money? She needs the money. He needs the money. Do you have his money?
Mr. Banner is correct. The Eagles paid us $6.6 million under the interim agreement. We distributed that to the subcontractors, except for $400,000 of the $6.6 million.
You came here and you don't have the list and he's testifying for something that he did? He seems like a very nice guy, but somebody is 153 01/27/05 - PARKS - RES. 040912 BSing somebody here.
Would you? Like, in ten minutes? Can we get it before anybody leaves and goes home? Now, before Mr. Banner told us about the money that he gave directly to Turner, Keating and McKissack -- usually they go through you guys. KUD, are you holding any money.
I know the Eagles are. I got you with the retainage. KUD, are you holding any money that you've got to give to them to give to Paula and to Luis?
I think what you heard was that the Eagles paid the money to TKM. You're elevating the form over the substance. 154 01/27/05 - PARKS - RES. 040912 It really went through the KUD contract, but this was paid directly to TKM. It was supposed to be paid so that work would be completed, and I think Mr. Banner should really advise you what happened.
I don't think Banner is lying. I don't think he's lying. I think there's some confusion here, but I know Paula don't have the money and Luis doesn't have his money.
To try to simplify, start with the subs. Starting with the subs, there are some disputes between the subs, I assume, and Turner.
Is that true, Turner? Are there disputes? Are there disputes with Paula over her work? Is there a dispute with Luis Cruz?
Councilman, there's approximately 60 subs on the project. I don't 155 01/27/05 - PARKS - RES. 040912 have the detail off the top of my head.
You're not prepared to answer any questions that I ask you.
Councilman, I want the judge to provide this overview for us, and then further questioning by you, Councilman Goode and Councilman Frank DiCicco.
I just wanted to try to explain. We've identified there's disputes between some of the subs and Turner. The Eagles don't really know exactly what those are. That wasn't their job to work with the subs. I suspect that there are some disputes between Turner and KUD. And we will see whether there's any disputes in the future between KUD and the Eagles. But all of those levels of dispute have to be resolved, and there are thousands and thousands of pages of documents and work orders and records, and that's -- you asked for a simplified description. 156 01/27/05 - PARKS - RES. 040912 I don't think it's a shell game, Mr. Councilman. I think what you're hearing people testify to is disputes at various levels.
Okay. It's not a shell game. Turner could not tell me if we owed Paula for something she may or may not have done. But I think he told us that Luis Cruz doesn't owe you any work, correct, Turner? Does Luis Cruz owe you any work?
No. Well, there's a couple outstanding punch list items, but they're minor in nature.
Couldn't you have paid him $200,000 so he can feed his family?
That wasn't the final settlement. I offered to do that while we went through the dispute.
Was that for him to not come to this hearing, to not do anything? What about the guys that have been with him all along that are sitting back there? Are you going to offer them something?
Point of order, Madam Chair. I'm just trying to get back on track with the statement Mr. Kuntz had made relative to the statements that Mr. Banner made, that the $6-and-a-half million was turned over to Turner, either through KUD or directly. That to me, if I do my math right, makes the project of $368 million somewhat whole in terms of dollars and cents.
There's still the $5 to 158 01/27/05 - PARKS - RES. 040912 $6 million out there in addition to that.
Mr. Kuntz, if I heard you correctly, you said that you believe after the $6-and-a-half million had been spent, there's a balance of $400,000. What does that represent? Because that's when the debate began and I kind of lost you.
Mr. Banner is correct. It was an interim payment in an effort to get money to the subcontractors. We distributed those funds. Of the $6.6 million that we were given, we currently still have $400,000 of that that was not distributed. There is still an outstanding balance of $7.7 million in contract and retainage that we do not have from KUD.
Now I understand. The numbers weren't adding up. If you got $6-and-a-half million and the subs were paid and you only have $400,000 left, based on today's testimony, we are going to be way short. Is it safe to say that the majority of that disputed amount, whether it's the $5 159 01/27/05 - PARKS - RES. 040912 million or the $7-and-a-half million that is due the subs, is it primarily for change orders and others, or is it change orders and work that has, in the opinion of TKM and others, has not yet been completed to the contractual agreements?
Councilman, as we sit here today, we think that there's $15.5 million, rough numbers, owed to the subcontractors.
Based on our accounting, yes. TKM is owed another -- we feel -- $3.3 on top of that. We're not talking about that. We're talking about the subcontractors. Of that $15.5 million, there are $7.5 million -- once again, round numbers, but pretty close -- in change orders that we are in the dispute resolution process with KUD. That leaves a balance of roughly $7-and-a-half million of base contract work and retainage -- work is complete -- that is not in dispute that we have not been paid. 160 01/27/05 - PARKS - RES. 040912
Thank you, Madam Chair. Mr. Banner, thank you for your testimony. I think you cleared up a lot. I don't believe that the other gentlemen at the table are going to dispute a lot of what you said. But just to review some of what you just said, you have paid out maybe 99 percent of the maximum contract amount?
And you're not going to go above your maximum contract amount, and you're not obligated to go above the maximum contract amount?
If there were Eagle approved change orders we would be obligated to pay them.
Eagle approved change 161 01/27/05 - PARKS - RES. 040912 orders above and beyond that somebody could demonstrate originated by us, change of scope, change of work, we would be obligated to pay those. Some of those have happened and we paid them. Our own position is we paid in full on that basis.
The assumption is if you've paid out almost all the monies you're obligated to pay under the contract amount, that the public money is spent?
I meant to say this because it's come up obviously a couple of times. The nature of the structure of the Phillies deal and the Eagles deal were quite different. The Eagles received $85 million from the state towards the construction of the stadium. From the City we received the land and the money to clean up the land, which is obviously the very first money spent, and that was audited extensively by PAID. We were required to have people on site, produce extensive paperwork, bills, et cetera. There was no more City money in the construction of our stadium. 162 01/27/05 - PARKS - RES. 040912 There's some future operating money that would have been spent at the Vet that's getting transferred over as part of our contribution. So the City part of the contribution was spent on the clearing of the site, and at that point was fully spent. And it was monitored very closely and extensively.
And you believe that you fulfilled all the public benefit criteria that was attached to that public investment?
I do in the broader sense. But I'm certainly not sitting here, even though I believe that this responsibility at this point is ours, thinking that we can wash our hands of this and say we've done everything until this is resolved. But yes, I do. I believe that we, from the attractions and the events and the quality of our team and our building, to the minority hiring that we committed to, I believe we kept the commitments that we made.
Out of $363 million you paid out, do you know how much of 163 01/27/05 - PARKS - RES. 040912 that KUD has paid out?
I do not. I have no 4 reason to think it isn't all of it, but I don't know that.
Can KUD respond to that question? Of the $363 million that the Eagles gave you, how much have you paid out?
There are not tens of millions of dollars that have not been paid out?
We paid out all of the 164 01/27/05 - PARKS - RES. 040912 amounts to TKM, which went to the subcontractors, except for what was included in our contract that had to be paid to architects, to other design professionals, consultants involved with the project.
Okay. TKM, of the money that the Eagles gave to KUD, and KUD gave to TKM, have you paid out all the money?
Okay. I think in the end the record may not reflect that all the money is not in fact spent.
I'm sorry. Except for the $400,000 I alluded to earlier under the interim agreement.
Is all of it obligated or is all of it paid out? 165 01/27/05 - PARKS - RES. 040912
Okay. Going back to Mr. Banner for a second. The Eagles have paid and are willing to pay all change orders that were Eagles approved?
KUD, are you willing to pay all change orders that were approved by KUD?
What we haven't done is finalized the change orders. That's the process that's ongoing right now. As soon as we can close those, yes.
Repeat that for me. Repeat your answer. My question was, are you willing to pay out all change orders that 166 01/27/05 - PARKS - RES. 040912 were approved by KUD?
And I said that what we were doing right now in the process of mediation is creating those change orders so that they can be paid.
And that money is going to -- without giving a definitive answer or having to -- that money is going to exceed the whatever little amount of money that the Eagles may owe you?
If it does not create a change order to the Eagles then it would create an excess demand, which would require us to fund that amount.
Do you expect that it's going to exceed whatever small amount of money the Eagles may owe you? In other words, they're change orders that were approved by KUD that the Eagles are not responsible for that is not going to come from whatever money the Eagles owe you. Are you going to pay that money?
If when we get done with the process of issuing change orders the 167 01/27/05 - PARKS - RES. 040912 answer is yes.
Mr. Banner has been very helpful in his testimony in terms of saying what he's paid, what he's responsible to pay, what's outstanding. There's not much of a dispute between what he says is outstanding, what you say is outstanding. He's been very clear about what change orders, that they didn't approve all the change orders. It's very clear that somewhere between KUD and TKM there were change orders that were approved. As you said, you thought that we were confused by the testimony from the contractors. You purposely tried to confuse this panel by suggesting that you were going to pay for the change orders that you approved from the Eagles money. (Applause.)
The change orders that are approved through the mediation process, some will flow to the Eagles.
I'm talking change orders that were approved in the 168 01/27/05 - PARKS - RES. 040912 subcontracting process. I know you claim you're all still working on the mediation, but you did in fact approve some change orders.
Change orders that we have executed, change orders that we have executed, have been through the process and have been funded by both the Eagles and KUD in the part of the $363 million that Joe mentioned that he has paid. All of those have been paid.
I understand all that. My question to you -- and I don't know whether you're going to answer it directly or not, but we can get some answer from you that will be helpful in this process. I'm assuming you know that there are change orders that you approved as KUD that will exceed the amount that is owed to you by the Eagles. Are you then responsible for that and will you then in fact pay it?
Councilman Rick 169 01/27/05 - PARKS - RES. 040912 Mariano.
We're getting somewhere, but we're obviously not getting Paula's or Luis Cruz's money. There's more questions. I'd like to thank everyone for being as honest as they can. I'm not totally satisfied, but I'm going to ask Councilwoman Brown to reconvene this when we're done here, when she says it's time for it to be done. We're going to come back in about three weeks. Will the Eagles, KUD, TKM, will you guys come back in three weeks, if she picks a date? If it's two weeks and three days maybe, whenever she can get us a date? Because this is total BS. Tempers are hot in here. The brother is right. It is a shell game. I wanted to blame Joe Banner, but I'm not. I think he's being pretty honest here. Like Councilman Goode says, it looks like you got that little pea under that shell. You got it, KUD. We don't have to be rocket scientists. We don't have to be team leaders. We don't 170 01/27/05 - PARKS - RES. 040912 even have to be Councilpeople to understand this. You contracted with her, Paula, Luis Cruz and everybody else, not the Eagles directly, not you directly, them. But they work for you and you work for them and the Eagles gave you the money, right?
Okay. Then why would you approve work orders or anything that's over that amount? Mr. Banner already said that they were Eagle approved change orders, and I suspect they are ones that the people that work for the Eagles or someone working for them says, we don't like this here. We want to change that. There were changes down there. I know there were changes down there. My brother worked on the job. There was changes a lot. All of those changes are being taken care of?
All of the changes that have been brought to the table by the Turner organization were either part of a change 171 01/27/05 - PARKS - RES. 040912 order already or in the process and have been. We have disputed a lot of those change orders, that they are owed by Turner under their contract to us.
So you're saying Turner approved those change orders that you may not have approved, correct? Is that a safe assumption?
Every one of these could be a different story. There are items where Turner's people signed approvals to go ahead.
Okay. Now, that means that Turner's on the ball for that one, correct? Turner, are there changes that you approved that he's saying, we're not giving the money for these? Why did you approve these? This is totally ridiculous. And if there is, how are you still in business? Why would you ever do a change order that you know you're not going to get the money from him, unless you know down the road you're going to screw him? Did you know that? Did you say, I'm going to screw 172 01/27/05 - PARKS - RES. 040912 Paula and Luis? I hate to use that word, but with my limited vocabulary. Are you going to screw him? Are you going to screw her? Did you sit down and say, let's sit down and hurt these people; let's not pay her so she can't pay for her mother in the senior citizens home; so Luis' kid can't have whatever Luis wants to give him; so Luis can't help Mr. Matos' community; so Councilman Mariano has a headache for three weeks worrying about this nonsense; you didn't do that, did you?
Then why would you help someone do work for you that you knew you were going to have to pay eventually, because you hoped he would go away and never back? Because his skin color is a different tone than mine? Does it have anything to do with that? Because that question has to be answered.
No, sir. Emphatically 173 01/27/05 - PARKS - RES. 040912 no. 3
When you're here testifying, the next process somewhere is probably a court case, so everything you say here is probably admissible in some court case. I was smart enough not to be an attorney because then I could say anything and I'd say, I don't know. I'm not bright enough to be an attorney. But there are some attorneys around here that got that figured out. You didn't do that, did you?
I'm not attorney either. And I'm not nearly smart enough to be an attorney.
Councilman, we've been in business for 97 years in this City. We're not bad business people.
I worked on jobs with Turner. They're a decent firm. They're a decent firm. They're not the worst, they're not the best, but they're getting better. I worked with them in the '80s and the '90s. They're good. I thought they were 174 01/27/05 - PARKS - RES. 040912 good. So I don't understand why you wouldn't pay a Luis Cruz or Paula. I'd pay it out of my own money. Because didn't somebody here say -- whatever the fancy word was -- if they pay them the money, they get reimbursed anyhow? Didn't I hear that somewhere? Mr. Banner?
That's my view. This stuff I learned today that I didn't know and there's probably a lot more I don't know. I'm not prepared to sit here and tell you exactly who owes the money. The subcontractors subcontracted with Turner, and they did the work for Turner and Turner needed that work to complete their contractual obligations. So my belief is Turner should honor those contracts and pay them. I understand there's a loophole in the subcontracting, that they technically don't need to pay them until they get paid, but that's what it is, a loophole. So they could pay them. If either of us owed any of that money or all of that money, they have recourse. And then instead of those guys 175 01/27/05 - PARKS - RES. 040912 being the ones holding the bag, one of us is holding the bag in the meantime. That's the way it should be.
Did the subcontractors do work without authorization? Is that what happened?
Yes, we are. Sir, we gave the subcontractors authorization and we felt we had full entitlement from KUD for that. Otherwise I would be out of business.
Is that the magic phrase, you felt you had full entitlement from KUD? KUD, does he have full entitlement from you? Were you entered in a contract with him?
Say that real loud so she can get that on the record. 176 01/27/05 - PARKS - RES. 040912
No. What's the disagreement here? It has to be this simple. I feel like I'm dealing with 12-year-olds. I mean, come on.
I have written authorization from KUD for those changes. $7-and-a half million. I have written authorization for $5.5 million.
Then, Mr. Businessman, you made a mistake, didn't you? Did you make a mistake? Did you authorize new work changes that you had money to authorize? Did you do that? Because if you did, then it's on you.
KUD? Are we going to go back and forth all night? They did, KUD, or didn't they? The Super Bowl is only two weeks away. I can wait.
Subject to the terms of our agreement, some of the documents were 177 01/27/05 - PARKS - RES. 040912 approved. Others with not.
Do we have a list of what's authorized and what wasn't?
Could you please answer that question, sir? Do you have a list of that which was authorized and that which was not?
At this point this is the street we've gone down. It comes down, Banner's telling the truth it looks like. You're his guy. They hired you. Strictly it was a smart decision on their part because they didn't want to deal with this great foresight. Besides signing Andy Reid and Terrell Owens, that was probably your third great decision. Now you've got that. You're the 178 01/27/05 - PARKS - RES. 040912 guy. You're holding the bag. It's not Turner. It's not the Eagles. You're in the middle.
You have made that conclusion. Contractually, that is not a true statement.
Contractually that document that he's referring to that is executed does not accomplish that task.
It tells us that the work has to be completed at the site for the job to be complete.
Is the work completed or not completed? That's the argument, correct?
That is the argument that relates to the subcontractors. That is not the argument as it relates to TKM and KUD.
Let's move the questioning to Councilman Jack Kelly. 179 01/27/05 - PARKS - RES. 040912
I just want to go back to Mr. Banner. Just clear something up for me. You presently are holding up $6 million, is that true -- $5 million perhaps?
And that is for what? For work not being completed or change orders that you would like to see or what?
It's either work that was not completed at all or work that was not done correctly to begin with that we now have to go get fixed.
Do you know how much they would cost if they were implemented by Turner, of the $5 million?
We think that number significantly exceeds $5 million. We believe it's multiples of $5 million.
Okay. I believe Turner, you have $7-and-a-half million? Is that what you're saying.
We feel there's $7.7 180 01/27/05 - PARKS - RES. 040912 million in base contract and retainage that has not been paid by KUD to us.
And Mr. Banner wants to see change orders or changes to the stadium which exceeds the $5 million that he's holding. It looks like someone is going to lose on this thing. We just don't know who it is at this point. The subcontractors, it looks like they're the ones not paid. But someone is going to have to take this up somewhere, probably in court. Thank you.
You're welcome, Councilman Kelly. Back to this question of the unauthorized list. Who has the list?
We have a list of outstanding estimates that leads up to a potential change order attached to those, so any documentation that relates to that particular item would be attached. 181 01/27/05 - PARKS - RES. 040912
Has that list been shared with the other party in this dispute, namely TKM?
They're being addressed on a per change estimate by changes estimate basis, yes, as we review them with the mediators.
I want to ask TKM -- and if I asked you this before, bear with me. I'm starting to lose my mind. I just realized I've been sitting in front of Councilman DiCicco's sign all along. If he's here, I'm sorry, Councilman for my bad behavior. I hope they don't think it was you. How much does TKM think they owe on the change list? How much do you owe the subcontractors? What do you think?
$7.5 million. And the Eagles are holding $5, maybe $6 for the retainage.
The $5 that Mr. Banner was referring to is contract work. 182 01/27/05 - PARKS - RES. 040912
So you're $7.5 million above that extra that you owe?
Now, somewhere along the line, somebody authorized some work. Now, the Eagles get a 100 for being smart business people for hiring them, in my simple book. You two guys, TKM and KUD, the San Francisco guys from Japan, you guys are going to eat this. Between you, you're going to eat this. Somehow you've got to decide. I know you can't say, fine. We'll split this up today. You will be fired by the time you get out to your car. And the same for you, right? As State Representative Blackwell said, this is a sin against God. This is a sin against humanity -- I'm serious -- to not pay that woman the money that she earned, to not pay that man the money that he's owed and all them other guys. They have to pay this stuff to people. They have families. Let's step back here and think about 183 01/27/05 - PARKS - RES. 040912 how we're going to do this. This is going to go on for years and years and years. Your lawyer was right when he came to my office. He said, let's do this in mediation. I had hoped we would get this done with just the threat of this hearing, because I know I'm missing something else today. What are we going to do, guys? Put yourself in her place. What does she do? I don't want you to lose your job, but I certainly don't want Luis Cruz to lose his wife and his family and his house. Because Luis Cruz can vote for me. You can't. That makes it real simple for me.
Over the next three weeks, what can we expect from each one of the parties? What can we expect to happen and transpire over the next three weeks?
Judge Lord, what do you think? You're like Yoda in this Council. You should be able to figure this out.
You're putting me in a tough position here, my counsel to City 184 01/27/05 - PARKS - RES. 040912 Council or to my client?
Well, your client. But your client happens to be a good corporate leader in this town. We have a wing dinger parade set up for him. He doesn't want us to talk about it because he doesn't want us to jinx him. We don't want that parade to be interrupted by protesters. And believe me, it will be interrupted.
I agree with Mr. Banner that Turner ought to pay these subs now and look to the KUD and the Eagles for adjustment. They're a big company. They can afford it. They're the only ones who don't have a GNP. He has a GNP. We have a GNP. He doesn't.
Mr. TKM, can you go back to Mr. Turner, Dan Keating and Barbara McKissack and work something out? Can you do that?
Before you answer the question, are all parties of TKM, have they been kept informed of every single step and move that it appears to be Turner as the lead person in this triad, have they been 185 01/27/05 - PARKS - RES. 040912 fully aware of every single agreement along the way leading up to these hearings?
Are there members of TKM here who would like to speak on that or not?
Barbara is here. Anybody here from Keating? (No response.)
So your answer is yes, all parties of your partnership were adequately, completely informed of every single step made leading up to today's hearing? Is that what I'm hearing?
State 186 01/27/05 - PARKS - RES. 040912 Representative Blackwell was right again. We should make it so that you guys can never do business with any City money or anything to do in this City again. I like Turner. I came from a union house. My brother is a union electrician. I get it. Guys have to be paid.
Please, if you would, step to the table. State your name for the record.
Excuse me, Councilwoman. Before we do that, can we get the guy from Turner. Can you answer me? Will you go back to Turner and say, look, this looks bad; if Tommy Blackwell or Rick Mariano or any of these people have their way, we may never be able to do business in the City of Philadelphia? I'm not 50 yet. Almost. I'm going to be around for a long time. I'll protest every one of your construction jobs for the rest of my natural life, unless you step up to the plate and try to do something. That's not 187 01/27/05 - PARKS - RES. 040912 a threat because I'm not making threats. Will you go back to your bosses and say, look, we look bad here? We look like fools. These reporters are writing stuff down. We look like fools. We'll do this every three weeks. It might come down where the Eagles don't have to come anymore. Maybe they won't have to come. It will just be us and TKM. I know Sheryl doesn't want to do this because I've had conversations with her.
My boss is certainly understanding the seriousness of this. We take it very seriously. We're working hard to try and get it resolved.
Well, work a little bit harder to resolve it, please.
Please state your full name for the record and your affiliation.
Sheryl McKissack-Felder. I have a twin. She's not 188 01/27/05 - PARKS - RES. 040912 Barbara. I am the president of the McKissack Group. The McKissack Group is a junior partner with Turner and Keating to provide construction management services for the Eagles stadium. As a junior partner, basically all we do is review information as it comes to us. We don't make decisions with respect to how contracts are purchased, with respect to subcontractors, who gets paid or anything like that. I have to say that I have worked with Turner on other projects and am currently working with Turner on other projects. And I have not seen that they do not know what they are doing. Obviously they do. They have had a tremendous, 100-year track record in maintaining a database of information for all of their projects. This is a situation, however, where we are the construction manager holding contracts, and as we get paid, we pay the subcontractors. As a joint venture partner on this 189 01/27/05 - PARKS - RES. 040912 project with Turner, McKissack provided staff for which we were reimbursed for every hour that they worked, and reimbursed for their direct salary, plus whatever benefits came with that salary. Then in addition to that, there was a fee that would cover our overhead and then whatever profit was in the job. Our initial fee for the whole group was close to $10 million, of which McKissack's fee would have been $1.7. Of that fee, we have been paid $600,000 and are still owed another million, but it has been decreased to $500,000.
Decreased by TKM for the fact that we have not been paid by, whether it's KUD or the Eagles. It has been reduced, because as a small business, whatever we put on our books as earned income, we have to pay taxes on. So right now we have paid taxes on over $500,000 that we have not been paid. So we are in a similar situation, and I'm sure Turner is and so is Keating. 190 01/27/05 - PARKS - RES. 040912 There is no reason for TKM to go and do extra work to benefit the Eagles and the Eagles stadium unless we're going to get paid for it. So the extras that we're talking about benefit who? The Eagles. Not Turner, not Keating, not McKissack or any of the subcontractors. And so we're looking at two issues here. We're looking at a base contract, and the little that I know of this -- because I am not very close to the details -- the stuff that Mr. Banner is saying that he wants us to come back and correct is after the stadium has been played in for two years. How do we go back and correct issues or problems in a stadium that's had 67,000 fans in it? So my frustration, from the way that I can see it, is that we have not been paid for the base contract and we have not been paid for the changes that we've had to make. Some in particular that I know of just from being on site, including adding 5,000 extra seats. Do you think TKM did that because we're going to benefit from those seats? 191 01/27/05 - PARKS - RES. 040912 Maybe we should own those seats right now. Maybe that would be an income situation for our group, and maybe we can pay the subcontractors if we owned the 5,000 seats. Everybody read in the paper about the change in the boxes. There were additional boxes added because the Eagles had to have more boxes. And these are just big things that everybody knows about. Then there were all the small things, rushing to get the job done so that the stadium would be ready for the Eagles to play in. This doesn't benefit TKM. This benefits the Eagles. So our stand and where we are now is we need to be paid for our base contract and we need to be paid for our changes. That's the bottom line.
Any questions from Members of the Committee? Councilwoman Jannie Blackwell.
Thank you very much. Certainly, again, as we spoke this morning and talked about working with 192 01/27/05 - PARKS - RES. 040912 contractors, we know of the fine work that Sheryl McKissack does, not only in our City, but across our state and country. And I think that she has articulated the issue well. We're at the core of it. It's not just minority contractors. Nobody is getting paid. I still don't understand why they've all been asked to take lesser money for an agreement. Can we have an answer to that issue and can we come to a conclusion today on when people will be paid? Thank you. (Applause.)
There's been a of couple things said here recently that I'd like to at least respond to. The characterization that was given of the stadium and the status and the repairs was very far from reality. There were seats added. It was 2,000. It was a change paid executed and has been paid 100 percent. There were 10 suites added. The change order was executed and it's been paid 100 percent. So I 193 01/27/05 - PARKS - RES. 040912 don't know what that was about. I'll bet there are people that have been in this stadium since it opened. The escalators haven't worked from the day we opened the building. Our score board has broken down about percent of the games that 8 we've played from the first game. We've been 9 trying to get them to fix it for two years. 10 We're not waiting for 67,000 people to be in 11 the building for two years to get them fixed. 12 We've been begging to get them fixed from the 13 first day the building opened. 14 Some of you probably sat in a suite 15 on a cold day and know that the heat doesn't 16 work properly in the suites. We've been 17 trying to get that fixed from day one when we 18 opened the building, not from two years later. 19 That was a characterization that doesn't match 20 with the facts. 21
He can respond. I'll 24 bet there are people in this room who have 25 been on the escalators in our stadium when 194 01/27/05 - PARKS - RES. 040912 they've broken down.
Mr. Banner, no 4 disrespect to you, but I suspect most of the people in this room can't afford a ticket to see the Eagles. I'm serious. I go someone because takes me. My brother.
The other point that I wanted to respond to. The term keeps being used that these people aren't being paid at all. I understand there's a legitimate dispute here, and I it's unfortunate and it should be corrected right away. But I also think it's only fair that we say that correctly. I mean, I think Luis Cruz himself testified to that, that he's been paid $18.6 million out of $19 million. And I think it's wrong that there's still $400,000 owed. You've already heard my view on how that should be resolved. But I still think when people refer to people aren't getting paid at all, there's a balance due. It's in dispute. We've got to accelerate, get everybody at the table, be objective, get this resolved. There 195 01/27/05 - PARKS - RES. 040912 is significant amounts of money that have been paid and very significant participation on this project.
Has this come down to, like, a personality crisis between the Eagles and TKM? Am I correct?
We have almost literally no dealings with TKM whatsoever and we haven't almost throughout the project. If I can kind of recap my view on what I think is simple, there is a legitimate dispute at the moment between two parties. There's a chance that it could take a turn that engages us, but at the moment I think there's a legitimate, honest dispute between two parties. It's a very complicated dispute, as you already heard. An arbitrator and a mediator is looking through thousands of documents and requested information and probably had to study 30 years to even follow the thing. So I'm not sure there's a way to cut through that part of it. So then the question is, is there 196 01/27/05 - PARKS - RES. 040912 something that could be done in the meantime so that the people that are stuck in the middle aren't stuck in the middle any longer. And that's why I believe the only reasonable answer to that question -- because the clear, direct authorization of the work and the clear contract that the subcontractors had was with TKM. If there was an additional authorization of that work from either KUD or the Eagles, as you've heard us both say, effectively established we'll pay it. So TKM gets reimbursed in that scenario.
How can you go two years without your score board working right? Who do you talk to about that, TKM?
TKM was involved obviously in its placement in the electrical work. But I will tell you that the company who installed it recently on their own volunteered --
Johnson Controls is a different part of the stadium. Dactronic (ph) 197 01/27/05 - PARKS - RES. 040912 is the company that did the stadium. They on their own came to us and offered to extend the warranty a year and leave staff at their expense at site for an additional year because they agreed that it's still not working right and they or TKM or anybody else involved can figure out what's wrong. A company doesn't come in and make that kind of offer.
I've just been informed that what Mr. Banner said is not true. We have not been paid for those seats and we have not been paid for those suites, number one. Number two, I think if we got paid we could fix whatever the issues were. It's hard to get contractors out to a job that they haven't been paid on in two years. That's a tremendous issue.
What do you do 198 01/27/05 - PARKS - RES. 040912 about the score board that he says the company called?
He still has 67,000 fans that come out there and has played two additional games this year. He needs to get it fixed if he doesn't want to pay the contractors who he hired to do it.
If it was done right the first time I don't need to hire anybody.
The construction is not done right, maybe. There are always issues in the field.
Can we ask about the heat? What happened with the heat? Why don't the boxes have heat?
This is not even a TKM issue, as I'm hearing right now. This is a side issue. We're talking about what's wrong with the base contract. Why can't Luis Cruz get paid for his parking lot? Why can't Paula from Seal Tite get paif for what she has done in caulking? All that is there. 199 01/27/05 - PARKS - RES. 040912
The work has been done. The only people benefiting from it right now are the Eagles.
Madam Chair, this is probably for you and everyone else in the room. It seems to me that the total cost for the stadium is $368 million. And that cost seems to be capped. I don't know if it was the City or this Council that approved it, put the cap of $368 million on it. Now, it certainly cost more than that evidently, from the testimony I heard today, that there's at least $7 or $8 million short to pay all of the contractors who were hired to actually construct this facility. $368 million is a capped amount. I think somewhere along the line someone has to come up with an additional 200 01/27/05 - PARKS - RES. 040912 $7 million. Now, I don't know if the City is involved in this. From the testimony I heard today, they're not. So I think it has to come from someone at that table. I think we could go on and on and on. And I think this is what it is, regardless of the innovations or the change orders and everything else that went into that stadium. I think that somewhere along the line someone has to come up with additional millions of dollars to pay, not only the subcontractors, but also the main contractors. And I think that somewhere along the line someone is going to have to do it, and who, I have no idea at this point.
That remains the mystery question. That goes back to the question I posed, and I heard from the Eagles representative. I need to hear from TKM and KUD per the Councilman's recommendation that we return here in the next 21 days, what can we expect to have transpired over the next three weeks? I need to hear from TKM and KUD as we move 201 01/27/05 - PARKS - RES. 040912 toward closing. Thank you for your testimony, Ms. McKissack.
What we expect to transpire over the next three weeks in anticipation of coming back here is that we will continue to work on settlement of subcontractors. To date, Mr. Biggs and I worked together and we have come to settlement agreements on subcontractors. We would 13 continue along those lines to continue to 14 settle more.
Yes, ma'am. We will continue along those lines. When we settle on the subcontractor for a final amount, we then need to be paid. If we do that, then the subcontractors will be paid.
I hope you are listening carefully. He's saying that they're 202 01/27/05 - PARKS - RES. 040912 settling on who's putting up the money. That's a great position to take. We're not going to be in a better place three weeks from now if you accept that answer.
KUD, in your estimation what do you expect to transpire over the next three weeks?
I think Mr. Kuntz is correct. The ongoing work that we're doing to try and reconcile amounts that are due to the subcontractors is paramount. That's number one. The issue about getting the subcontractors paid comes back to the amount that's owed from the Eagles to us, to TKM. And right now, as Joe has pointed out, there are deficiencies that can't allow the Eagles to distribute more money. So from our standpoint the money has to come from TKM.
TKM pretty much just said they ain't giving the money. Didn't I just hear that? 203 01/27/05 - PARKS - RES. 040912
Well, you're going to bring in a paper and go, we owe him, her, him, him so much, and we admit that we owe to you. Hey, Lou, we owe you money, but we're never going to pay you. We can't pay you because we don't have it. So we wasted three hours here today basically. He doesn't have any money in his pocket, she don't and them guys back there don't. Why waste our time? Somebody is going to have to eat this or you will never do business in the City of Philadelphia again. (Applause.)
I should just mention for the record that we have one more testifier after this, Charles Ang, so we want you to stay with us. We do know that you want to put remarks on the record. To all the parties at the table, are you prepared to submit weekly progress reports 204 01/27/05 - PARKS - RES. 040912 to the Chair to be shared with all Members of this Committee on the record?
With that said, then we will expect to begin to receive weekly reports from each of you, starting next Friday. Then I and Members of the Committee will make a determination as to whether or not you will be called back. You all will be recessed to the call of the Chair. Is that understood? We're tabling at days initial suggestion. 16
Thank you, 18 gentlemen. 19 We now invite up Charles Ang of Ang 20 Associates Structural Engineers. 21 Thank you for waiting, Mr. Charles Ang. We appreciate your patience. We want to ask you to please state your name for the record and provide your testimony.
My name is Charles Ang. 205 01/27/05 - PARKS - RES. 040912 I'm president of Ang Associates.
Before you get to your testimony, are you one of the subcontractors involved in this process?
I'm a different one. That's why I think I have this great opportunity to be able to express myself here.
I only ask because if that was the case I wanted to ask the members of TKM and KUD to stay.
I have to appreciate that I had this opportunity to come here because the labor group spoke up. I'm from the professional section, which is the weakest, as far as myself, is the weakest organization among the parties involved with the Eagles stadium. Now, I'm from the engineering section. My firm is a 28-year-old minority firm, and I was one of the earliest members of the MBEC. I was really going forward for the people here, for the minority groups, and I've come down here and worked for it and finally for 28 years I'm still in it. 206 01/27/05 - PARKS - RES. 040912 The reason I come here today, as I said, I'm very thankful that the labor group has brought up this issue to open it up to the public. I have the same problem getting paid as a minority professional. We as structural engineers, we did the job from the concourse level all the way down to foundation. This is my structural design work. The thing is, I work under a sub-consultant and I'm three tiers down. You have heard that the MBBJ as being the architect. HUD hired them to do the architectural design. MBBJ has to use engineers, and they hired OV (ph). These are all western state professionals. MBBJ is from Seattle and OV is the structural engineer hired to do all the structural work. Now, as you know, the stadium itself has the super structure, which is the steel structure above and the substructure was all the concrete work. As I mentioned before, from the concourse level all the down to the foundation, we always can say we did half of the work. 207 01/27/05 - PARKS - RES. 040912 When the workers presented to Ang Associates, we had to go through competitive bidding, even as a minority structural engineer. So they, by obligation, have to offer work to subcontractors, I guess, across the line. OV, being the prime sub-consultant structural engineer to MBBJ, they would come to Philadelphia and try to interview different minorities. We, because of our qualifications, we got selected by them to work with them. Now, in working with them, I have to give them a proposal to the sub. The sub here now is OV that we work for. MBBJ is the principal architect. They had the prime design contract from HUD.
When we got a contract we had some preliminary drawings. Naturally the job is very complicated. We know it's going to be fast tracked. I hope you understand the word fast track. It's alerted that this is going to be high speed. You have to put a lot 208 01/27/05 - PARKS - RES. 040912 of people in to crank it out to meet the deadline. They have a very short-term schedule to complete all this work. As you know, we do all this work ahead of the construction people. And fast track is that they even want to prime the thing out so that the packages can be processed right after the first part of the design is done. The construction foundation is the first one that has to go out. We happen to be the one to start from the bottom up. We are the ones caught in that. In my proposal to OV, I was very careful to say that I had to put a 30 percent contingency on my job. Engineers, usually we have to work on good faith. We took a job even when somebody says verbally or in writing, just a letter of agreement, we have to agree to go ahead, we move in and we start working. So the 30 percent was kind of ignored by OV. They are kind of using the words in saying that, well, this will be made up by doing the construction phase. Maybe when the thing gets piled we will resolve 209 01/27/05 - PARKS - RES. 040912 that. So for you people just at this moment, I still do not have an official contract, just to show you the good faith here. The stadium is already delivered. And here I still don't an official contract for my design. So to cut it short, the money that should be earned shortfalls in the design phase of $190,000. People were talking around here. I was here. You know the change orders and this and that, and we are involved from behind because they can talk a typical case. There's this underground pit, they built it wrong. The contractor put it in wrong. So we were alerted. We as a structural engineer have to run down there. And because there's going to be future damage or whatever, it can bounce back to us because it wasn't built as it was designed. So this is a typical case. That of course is not written in the contract anywhere, so we have to say, I myself was involved. Our top engineer had to be down 210 01/27/05 - PARKS - RES. 040912 there all this time to record. We want to get paid. This is one of those cases. So I was dividing them into a construction phase and a design phase. The design phase, because of all this fast track, we are not honoring without 30 percent contingency. Cover that amount. The construction phase again, the certain part that they did honor, like they mentioned about those approved change orders, we did, like, 20-some items. Do you know of those approved items, we only get 50 percent of the dollar? They negotiated you to death.
So that goes to your point, Councilwoman Jannie Blackwell.
So they're partner involved McKissack, Turner, that group. They were the ones doing the construction management, watching the job.
As I mentioned, this is just one of the cases that we have to go down there to do it, to make corrections. And they say, you didn't do it. Now, will the water 211 01/27/05 - PARKS - RES. 040912 still hold. What happened there. There's a certain pipe that's going through there. We have to check it to see if it will still be safe to leave them in there. This kind of thing happens.
Any questions from Members of the Committee? Councilwoman Jannie Blackwell.
I only wanted to thank Mr. Ang for helping to clarify some of this. Maybe if we had his testimony earlier we would understand a little bit more about what happens. It amazes me that it seems like so many other things in some ways non-negotiated -- hazardous is too extreme a word -- but arbitrary in some ways, like so many other aspects of what we do. I met Mr. Ang many, many years ago with Lucien, many, many many years ago, I would say or 30 at this point. It's 22 certainly a pleasure to see him again and to 23 know he's still doing good business in our 24 City. 25 Thank you. 212 01/27/05 - PARKS - RES. 040912
Just to show you again. Now, this is a tough business. I was one of the earliest Minority Council members and I came down here to rally for it. I know that's the best thing for the City. Unfortunately I was the only minority among the minorities when we were starting with belly hoppers and all that. It's a long struggle up to now. You can see how we can move from a small project to a big project. We still suffer. We're still not out of the woods.
Mr. Ang, I just have a question here. You had mentioned you had many change orders that you had to make for the stadium. Who approved those change orders?
This is very interesting. We're three tiers down. I am working for a sub, a sub structural engineer, and the sub structural engineer, he's a sub for MBBJ.
But it was approved by the three higher ranking 213 01/27/05 - PARKS - RES. 040912 organizations?
Now, I want to ask you something. You mentioned something about you had to accept 50 percent -- I don't know if the amount was approved or the work was approved -- on the amount that you submitted for those change orders. Was that every approved?
But you negotiated 50 percent of the approved amount; is that correct?
With OV all together, I was the minority part of OV Group hired to do the structural work. OV also has change orders, hundreds of items. Ang's office has, like, 50-some items. So they would go negotiate with them on my behalf.
And they accepted 214 01/27/05 - PARKS - RES. 040912 the 50 percent which came down to you?
We thank you again for your patience and for staying and for offering your testimony and another example of what has not happened with the subcontractors. Did you hear what our next steps will be? Each one of the partners has put on the record that they will provide us with weekly reports, and then the sponsor of the resolution will make a determination as to whether or not they are sufficient and direct us on whether or not we will reconvene. This City Council Committee on Parks, Recreation and Cultural Affairs is recessed to the call of the Chair. Thank you for your attendance.
I thank all the Members here of the City. I thought that is my duty to do that. (Council adjourned at 4:55 p.m.) 215 01/27/05 - PARKS - RES. 040912 - - - - 216 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Thursday, January 27, 2005, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON PARKS, RECREATION AND CULTURAL AFFAIRS _________________________ Lisa C. Bradley, RPR