COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE - BUDGET - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, March 27, 2007 10:25 a.m. - - - PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN WILLIAM GREENLEE COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN FRANK RIZZO BILLS 070114, 070115, 070116 RESOLUTION 070128 - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2
Good morning, everyone. This is the continued public hearing of the Committee of the Whole. Our first department to testify is the Procurement Department. Please approach the witness table, kindly identify yourself for the record and proceed with your testimony. COMMISSIONER HAGAN: Good morning, Council President Verna and members of City Council. I am Janet Hagan, Acting Commissioner of the Procurement Department. With me today is Deputy Commissioner Sandra Early. I am presenting for your consideration the Procurement Department's Fiscal Year 2008 budget request. The Procurement Department is requesting a total appropriation for all funds of $5.4 million, of which $5.2 million is in the General Fund. The General Fund budget for Fiscal Year 2008 provides $2.8 million for Class 100 3 3/27/07 - WHOLE - BILL 070114, ETC. payroll expenses supporting 62 employees, $2.3 million for Class 200 purchase of services, and $74,000 for Class 300 and 400 supplies and equipment. This budget represents an overall decrease of $13,000 from the Fiscal Year 2007 projected obligations of $5.2 million. The Grants Revenue Fund budget provides $50,000 for Class 200 purchase of services. The Water Fund Budget provides $67,000 for Class 100 payroll expenses for two employees, and the Aviation Fund provides $73,000 for Class 100 payroll expenses for one employee. The Fiscal Year 2008 Class 100 General Fund budget is decreased by $13,000 from the FY07 projected payroll expenses. The net decrease is due to the four percent wage increase effective July 1, '07 offset by a decrease of two positions in Procurement's staffing level. We had a number of accomplishments such as the 4 3/27/07 - WHOLE - BILL 070114, ETC. implementation of a new policy and procedure for the deposit of bid security checks. Benders original bid security checks are now deposited by the City of Philadelphia and the deposits and returns are handled through the accounting system. This policy was implemented February 1st, 2007. We have had continued success with the Small NTI Demolition program and, to date, have awarded $1.4 million in contracts, representing 55 percent of the total small packages to SBA and MBEC certified vendors. Through our small order purchases, SOPs, program, we have awarded 767 SOPs totalling $4.1 million in Fiscal 2006. Awards to SBA, certified MBE, WBE, DSBE vendors accounted for 53.2 percent of all awards made and totaled $2.2 million. Procurement completed a competitive RFP and awarded a contract for Internet auction services for surplus 5 3/27/07 - WHOLE - BILL 070114, ETC. inventory. Based on revenues generated from our pilot program, we expect to increase revenue from surplus vehicle and heavy equipment sales by at least 30 percent. One of our current objectives is WebProcure. In conjunction with the upgrade of FAMIS 4.2, Procurement is pursuing plans to migrate from the use of ADPICS, the main frame purchasing system, to a browser-based application. The new application, WebProcure, offers the City several opportunities for process improvement and enhanced reporting capabilities. In partnership with the MBEC, Minority Business Enterprise Council, Procurement continues to work diligently and proactively to increase the awards going to certified minority vendors. At pre-bid meetings, vendors are encouraged to seek minority participation and are introduced to minority business. Procurement continues to partner with 6 3/27/07 - WHOLE - BILL 070114, ETC. MBEC in training programs designed to educate minority vendors about the bidding process and opportunities with the City. Madam President, this concludes my testimony, and I will be glad to answer any questions you or other members of City Council may have regarding my testimony.
Thank you very much. On of your testimony, you mention small NTI demolition bid packages. COMMISSIONER HAGAN: Yes.
Now that the bulk of the City's demolitions are back in the General Fund with the L&I budget, how is this program being implemented or impacted? COMMISSIONER HAGAN: Excuse me. What was the question?
On , you mention small NTI demolition 7 3/27/07 - WHOLE - BILL 070114, ETC. bid packages. Now that the bulk of the City's demolitions are back in the General Fund and L&I budget, how is this program being impacted? COMMISSIONER HAGAN: I believe that right now L&I was working with Hill International, the company that put the packages together, and it's my understanding they may continue to do so. I would be glad to get back to you after I confer with L&I to be sure.
Well, I don't understand. You mention small NTI demolition bid packages. COMMISSIONER HAGAN: Yes. They were packages that were specifically labeled "small bidding packages" because they were under $500,000 and they usually only had about ten properties listed in those bids. It was to give an opportunity to the small demolition vendors to bid as primes on smaller packages.
8 3/27/07 - WHOLE - BILL 070114, ETC. Interesting. On of your testimony, you mention Internet auction services and you expect revenue from surplus vehicle and heavy equipment sales to increase by at least 30 percent. Did you notify Finance of this and did they include this increase in their revenue estimates? COMMISSIONER HAGAN: I would have to get back to you with that.
Well, I will tell you that the revenue estimates show only $700,000 per year in FY07 and the same amount in FY08 through FY12, and I was wondering if you can explain that since you're going to be indicating that the increase of the sales would be at least 30 percent. COMMISSIONER HAGAN: And that was based on the pilot that was done for six months. That was already included in the previous fiscal.
Well, I would appreciate if you could get back 9 3/27/07 - WHOLE - BILL 070114, ETC. to us on that because -- COMMISSIONER HAGAN: I'd be happy to.
-- it certainly does not indicate that in the budget. COMMISSIONER HAGAN: Okay.
Can you explain how the Internet auction works and how do you make the public aware of the auction? COMMISSIONER HAGAN: I will have Deputy Commissioner Sandra Early answer that question. She's been more involved with that.
Very well. DEPUTY COMMISSIONER EARLY: Good morning.
Please identify yourself for the record. DEPUTY COMMISSIONER EARLY: Sandra Early, Deputy Commissioner of Public Works Division responsible for 10 3/27/07 - WHOLE - BILL 070114, ETC. surplus property disposal. We currently have awarded a contract with a company called GovDeals Incorporated that handles the Internet surplus auction. We advertise as the City in the newspaper, letting the public know to go to our website, where they link to GovDeals Inc. GovDeals has done a mass publishing of the fact that they are now handling the Internet auction service for the City of Philadelphia. Bidders go on the site. They register. And we now have an auction on Phila.gov, and that links you to GovDeals Inc., which is a company that does a lot of business with government entities in helping them to get rid of their surplus properties by Internet auctioning. They advertise also in newspapers and they research to develop a broader base of interested parties.
Thank you. 11 3/27/07 - WHOLE - BILL 070114, ETC. DEPUTY COMMISSIONER EARLY: You're welcome.
On -15 of the detail, your advertising and promotional activities account runs approximately $1.9 million per year. Can you give us a breakdown of the amount each paper receives and the type of advertising for FY06 and your estimate for FY07? COMMISSIONER HAGAN: We would have to get back to you with that information.
I would appreciate that. COMMISSIONER HAGAN: Thank you.
Thank you, Madam President. Commissioner, Deputy Commissioner, good morning. I'm going to describe a concept that I've been discussing with the operating departments 12 3/27/07 - WHOLE - BILL 070114, ETC. and it has to do with our Police Department and trying to provide the Police Department for the best value equipment that they need and it has to do with unmarked cars. And I keep hearing -- and I haven't called you, but I keep hearing that Procurement could be the obstacle. And I know you guys don't ever want to be an obstacle. You want to be a part of the solution. I would like the Police Department to list the type of vehicles that they need and go into the used car market and buy used vehicles that would be owned by the City of Philadelphia, because we presently lease vehicles and those vehicles that we lease are relatively new and they really truly do not blend into the community. And the ramifications of a leased vehicle being damaged or mishandled because of the severe service that the police service requires, that there could be penalties associated with the condition of the 13 3/27/07 - WHOLE - BILL 070114, ETC. vehicle when it's returned. So my concept is that the Police Department list 50 used vehicles that they need and they have an employee of Fleet Management go to the auction, just like new and used car dealers do, and buy those 50 vehicles. Once they become known, that they're taken back to the auction, just like any other used car dealer disposes of vehicles, keep cycling in, cycling out, instead of spending $20,000 on a leased vehicle or the purchase of an unmarked vehicle, a brand new Chevy Impala or Crown Victoria. I'm wondering how you could structure a process where the Police Department or Fleet Management -- I know the Police Department presently has very deep-cover cars that they purchase and buy. No one even knows. They're serviced in remote locations. But how could we get structured a program where the Police Department would provide a list of vehicles? They could physically 14 3/27/07 - WHOLE - BILL 070114, ETC. go to the Manheim Auction or to wherever used vehicles are sold to buy an F-150 pickup truck, a five-year-old Toyota Camry. Why is there some suggestion that that would be a difficult process for Procurement to set up? I just can't imagine that there would be any obstacle that would stand in the way of a program like that. And, again, the concept would be that the commanders of the Department that use unmarked or surveillance vehicles, once they've moved it around the City and it becomes a known vehicle, that they would just take it to the auction and get whatever they can for it. If it's involved in a vehicle accident, if it's beyond repair, that they total it just like any other car. Again, I would like to see a used car fleet within the City of Philadelphia that's used by the Police Department rather than leasing or buying new vehicles. COMMISSIONER HAGAN: According 15 3/27/07 - WHOLE - BILL 070114, ETC. to the Charter, everything that we purchase is through a competitive bid process. So there may be an obstacle there. What I would like to do, based on what you're suggesting, is meet with the Police Department, Law Department and Fleet Management and discuss the possibilities to see if there is some way to purchase used vehicles that they could use for undercover.
Would bidding at an auction be considered competitive bidding? COMMISSIONER HAGAN: I would have to check that with the Law Department, but the way the Charter is written, competitively bid processes are put out, they're advertised in the newspaper. There are also requirements of bid security and performance security. So under the present circumstances, I would not know until I refer to the Law Department.
Is leasing a 16 3/27/07 - WHOLE - BILL 070114, ETC. loophole? COMMISSIONER HAGAN: No. We do lease some equipment, but it's on a competitive bid process.
Leasing is competitive bid? COMMISSIONER HAGAN: Yes, it is.
Could we lease used vehicles through, let's say, a car dealership that has a large inventory of used vehicles? Could we lease used vehicles? COMMISSIONER HAGAN: I would think that if we did it, it would be done in the same way we do our competitive bid.
Could you please kick that around a little bit within your own organization and provide it to the Chair? The wish would be that Fleet Management -- and, again, I'm not making decisions for the Police Department. They can say they don't want 17 3/27/07 - WHOLE - BILL 070114, ETC. to do this at the end of the day, but I would like to be able to at least present to them a plan where they could go out and inventory 50 used vehicles five, six years old, from three years old, from trucks to, you name it, that we would physically own rather than lease. Because from what I'm hearing, at the end of the day, there are penalties associated with leased vehicles. If there's a dent in it when you bring it back or there's a cup of coffee on the leather seats that spilled, that all of those little glitches, all of those little issues, eventually somebody has to pay for that, and that can be very expensive, from what I understand. Again, I don't pretend to know the ins and outs, but, again, I'd like to see a process where we could have an inventory of used cars and instead of spending $15,000, we could possibly buy a four-year-old Toyota for seven or eight. So if you could provide that to 18 3/27/07 - WHOLE - BILL 070114, ETC. the Chair of this Committee, it would be greatly appreciated. COMMISSIONER HAGAN: Yes, I will.
You're welcome. The Chair recognizes Councilman Greenlee.
Thank you, Madam President. Good morning. I just have an MBEC question. I see Ms. Nichols here, too. Maybe she wants to participate in the answer. But you say about working diligently to increase the awards going to certified minority vendors. Do you have any figures that kind of shows what success rate there has been there? COMMISSIONER HAGAN: What percentages go to minority firms?
Yes. And how much has it increased, if you have 19 3/27/07 - WHOLE - BILL 070114, ETC. that recently. COMMISSIONER HAGAN: Currently, I have for Fiscal Year 2006 what we obtained in participation, but I don't have how that increased from 2005, but I could get that for you.
If you could get that, yes. But if you could give me whatever you have. COMMISSIONER HAGAN: For Fiscal Year 2006, for services, supplies and equipment, there were 332 awards totalling $101,993,438. Approximately 10,700,000 went to minority vendors, which was 10.5 percent; to women was 4 million, which was 3.95 percent; and for disabled it was zero. On the Public Works side, there were 171 awards and the total amount of the contracts were 141 million, 16.3 million going to minority firms, that was 11.6 percent; 10.9 million going to women-owned firms, and that was 7.7 percent; and 297,000 going to disabled, and that was a 0.2 percent. 20 3/27/07 - WHOLE - BILL 070114, ETC.
And you can get the comparison figures for the year before or maybe a couple years before? COMMISSIONER HAGAN: Yes.
I appreciate that. And just along the same lines, you talk about the training programs. Do you have any figures or could you get us as far as how much that has been successful in getting minority vendors to at least participate to try to get these contracts? I don't know if you have those kind of numbers. COMMISSIONER HAGAN: No, we do not.
Have you seen or do you know -- has there been more, even if you don't have raw numbers, have minority vendors actually been involved more trying to get the -- you talk about introducing the contractors to certified minority vendors. Are there more of them participating, attempting to 21 3/27/07 - WHOLE - BILL 070114, ETC. get these contracts; do you know? COMMISSIONER HAGAN: More of them usually come to the pre-bid meetings. Whether they actually end up participating, I don't know.
It would just be interesting to see if the outreaches that you seem to have have had any real success in real numbers. Ms. Nichols, could you answer that at all? Good morning.
Good morning. My name is Carolyn Nichols. I'm the Director of MBEC. I was pulling out my numbers to see if I could find -- hold on. Let me get a piece of paper.
If you have that, that would be great. 22 3/27/07 - WHOLE - BILL 070114, ETC.
For Public Works in 2005 for MBEs, participation level was 10.68 percent, million plus; for SS&E 5 for MBE was 8.44 percent, about 10 6 million; and for DBE, participation for 7 2005 was 5.6 percent, over 7 million; and 8 for SS&E was 6.01 percent and it was 7.3 9 million; and for DSBE in Public Works, we 10 have 0.3 percent, 31,000. And I don't 11 have anything in SS&E. So that's what we 12 did in 2005. So there was somewhat of an 13 improvement.
Yeah, a little bit. We're kind of holding steady, but we're moving slowly. Concerning the outreach, in FY06, about 900 vendors attended these various "navigating the procurement process" workshops that we had during that year, and what we tried to do at MBEC is kind of concentrate on the underrepresented vendors. The Hispanic 23 3/27/07 - WHOLE - BILL 070114, ETC. and Asian vendors were participating at less than seven percent. So we kind of tried to up the outreach. And as a result, in FY06, the number of certified Hispanic vendors increased by ten percent to 83 firms, and the number of certified Asian vendors increased by percent to 9 103 firms. 10 And the other thing that we're 11 doing historically -- and the disparity 12 consultant, DJ Miller, found this to be 13 true as well in the 2004 report. Historically, there's been a low participation even for certified vendors. Somewhere between 40 to 50 percent of certified vendors have actively been participating in bidded contracts. So we're trying to -- we're doing things like surveying the vendors, trying to find out what is the barrier, what is the difficulty to help work them through the process so that they will get more active. So it's kind of different 24 3/27/07 - WHOLE - BILL 070114, ETC. levels of outreach that we have to do that kind of the traditional workshop, introductory, this is how the City does business, and then trying to do more match-making, which is kind of the state of the art of kind of outreach in a lot of the jurisdictions. You try to match vendors with City departments that are actively bidding so they get -- needing services so they get to know the ins and outs. And then external match-making, we try to match vendors with private sector opportunities, including financial institutions if there's a financial barrier that's stopping them from bidding. So we're kind of a multiple approach to get the vendors more active in the process.
Would you qualify that as being -- have you had some success in that?
We're moving along slowly, as you can see. Are we making quantum leaps? No, but we're 25 3/27/07 - WHOLE - BILL 070114, ETC. moving along and we're learning more and more. A lot of what I'm doing this year is best practices to try to find out what works in other jurisdictions and using that knowledge and incorporating it in here to see if we can get better at what we do. So we're inching along.
All right. I got you. All right. Thank you all. Thank you, Madam President.
Commissioner, just for the record, I know you said you do this, but I just want to state it. Besides internally in Procurement looking at this process on the purchase of used vehicles for City use, it might not be a bad idea even outside the Police Department on occasion. Could you ask the Law Department, please, to give you an 3/27/07 - WHOLE - BILL 070114, ETC. opinion on how we can do that? And then we can look at together, if there is an obstacle, how to deal with that obstacle. So if you could request the Law Department to give you some guidance on that would be greatly appreciated. COMMISSIONER HAGAN: Yes, I will.
You're welcome. The Chair recognizes Councilman Goode.
Thank you, Madam President. Good morning, Commissioner. Are you aware of the Finance Department's testimony yesterday with regard to a report on participation by disadvantaged businesses? 27 3/27/07 - WHOLE - BILL 070114, ETC. COMMISSIONER HAGAN: Excuse me. What was the last part of your question?
Are you aware of the Finance Department's testimony yesterday with regard to the latest report on participation by disadvantaged businesses? COMMISSIONER HAGAN: I did receive the final copy of the report yesterday, which I haven't reviewed. I was, in conjunction with Carolyn, answering some questions about the Procurement Department in relationship to that report.
We were told yesterday that the report was not done, the information was not available and would not be available until the end of the week. Is the information now available? COMMISSIONER HAGAN: I'm not aware that it is. I'm sorry.
The information is available? 28 3/27/07 - WHOLE - BILL 070114, ETC. COMMISSIONER HAGAN: I'm not aware that it is. I received a revised report, just the preliminary. I'm sorry. I think I used the word "final," but it wasn't final.
Well, whether it's final or not, yesterday we were told that information was not available. Is information available today? COMMISSIONER HAGAN: I am not sure.
I was listening to some of the numbers that were put out there. Can you tell me what the overall participation was for minority business enterprises the last calendar year -- the last fiscal year? COMMISSIONER HAGAN: The minority participation for the last fiscal year?
Yes. COMMISSIONER HAGAN: For services, supplies and equipment -- 29 3/27/07 - WHOLE - BILL 070114, ETC.
I want the total number. COMMISSIONER HAGAN: The total number?
Yes. COMMISSIONER HAGAN: I'm sorry. I didn't add the total numbers. I just gave the participation for each group, but I could get that back to you. I can give you an approximate.
So you don't know what the total participation by minority business enterprises was? COMMISSIONER HAGAN: For --
What's the total for-profit contract amount? COMMISSIONER HAGAN: For services, supplies and equipment for Fiscal 2002 --
No, no. 25 For-profit contract dollars that went out 30 3/27/07 - WHOLE - BILL 070114, ETC. last year, how much was done totally and then what percentage of that was done with minority businesses, what percentage was done with women businesses, what percentage was done with disabled businesses. COMMISSIONER HAGAN: I would have to get that information back to you.
You don't have that information? COMMISSIONER HAGAN: I don't have that available with me at the moment.
You don't have that information in front of you? COMMISSIONER HAGAN: No. I don't have the -- I only have it broken down.
I'm not asking for it to be broken down. I'm asking for it to be added up. COMMISSIONER HAGAN: For the total for minority participation, which includes only services, supplies and 31 3/27/07 - WHOLE - BILL 070114, ETC. equipment in Public Works contracts, it's approximately 22.1 percent; for women-owned, WBEs, it is approximately 11.7 percent; and for disabled, it's 0.2 percent.
How did you arrive at the percent figure and 11 9 percent figure? 10 COMMISSIONER HAGAN: Excuse me? 11
How did you 12 arrive at the 22 percent figure and the 13 11 percent figure? 14 COMMISSIONER HAGAN: These are 15 the committed dollars at the time of the 16 award. 17
And that's 18 the total amount? What's the total 19 dollar amount that was contracted last 20 year? 21 COMMISSIONER HAGAN: The total 22 dollar amount is approximately $243 million.
That's for what? 32 3/27/07 - WHOLE - BILL 070114, ETC. COMMISSIONER HAGAN: That's services, supplies and equipment in Public Works, the total amount awarded.
So you don't have the other categories? You don't have information on other categories in front of you? That's not the total amount of contracts awarded last year. COMMISSIONER HAGAN: Yes, it was. The total amount of the contracts awarded for Fiscal 2006.
So it doesn't include the other categories? COMMISSIONER HAGAN: Categories such as?
Professional contracts. COMMISSIONER HAGAN: No. 20 Professional services, no, it does not.
But that is generally what is included in the report. COMMISSIONER HAGAN: Professional services currently do not come through the Procurement Department 33 3/27/07 - WHOLE - BILL 070114, ETC. for bidding. We approve the contracts and we get an e-mail notification. So they're not included in my dollars. I only included the dollars here for the procurement contracts that we actually put out through our department for bid.
For 2006, we did put out a preliminary report which did have the numbers, and then the report that we're going to give to you shortly has an update on the numbers. But for FY06, we have as a total, which includes Public Works, SS&E, personal/professional services, miscellaneous order purchases, small order purchases and also investment commission consultant fees, I have a number of $587 million.
And what 34 3/27/07 - WHOLE - BILL 070114, ETC. percentage of that went to MBEs?
I'm sorry. For MBE? I'm sorry. MBEs it's 13.5 percent. Sorry about that.
For each category, for MBEs I have 76 million. I'm just rounding it off. It's 76.6 million for MBEs.
76 million 35 3/27/07 - WHOLE - BILL 070114, ETC. out of 587 million?
Yeah, out of 587 million. For WBEs it's 36.2 million, and for DSBEs it's 332,000.
So out of $587 million only $332,000 went to disabled businesses?
So out of $587 million in contract, only $332,000 went to disabled-owned businesses?
Do you expect the final report to shift these numbers at all significantly?
Not significantly, no. As I was telling Councilman Greenlee earlier, we're kind of inching along. It's not a quantum leap, no, but it's within that range. It's probably closer to 21 percent.
Okay. Thank 36 3/27/07 - WHOLE - BILL 070114, ETC. you. Thank you, Madam President.
You're welcome. The Chair recognizes Councilwoman Miller.
Thank you. Thank you, Madam President. I have a question as it relates to minority participation in the Public Works Division. Can you give me some figures on how many MBE, WBE, DBE firms are participating in some of the Public Work and capital projects, and also what is the policy on granting firms waivers where they don't have to use a minority firm? COMMISSIONER HAGAN: The figures I could give you for Fiscal 2006 for Public Works, the total contracts that were awarded were 171. The total amount is 141 million. For the MBEC participation, it was 16.3 million, which 37 3/27/07 - WHOLE - BILL 070114, ETC. came to 11.6 percent. For the WBE, it was 10.9 million -- these are approximate numbers -- and it was 7.7 percent. And for disabled, 297,000 for 0.21 percent.
Can firms still get waivers and not have to use minority contractors? I ran into that once on one of the contracts in my district, that the firm could actually get a waiver. And I called, I think, Gamble -- I'm not sure which Procurement Commissioner was there at the time -- to have a discussion, because I just wanted to know why were people able to get a waiver. COMMISSIONER HAGAN: Approximately 95 percent of Public Works contracts, there is participation that are in the contract. As far as the granting of a waiver not to put ranges on a bid, I don't have that information.
You're not familiar with that? You're saying you don't know anything about that kind 38 3/27/07 - WHOLE - BILL 070114, ETC. of policy? COMMISSIONER HAGAN: No. 4
Carolyn Nichols, the MBEC Director. In The Philadelphia Code under 17-509, as well as in the Executive Order, there are provisions for waivers, and I might add that it's more of a legal requirement so that the program is narrowly tailored to meet the legal requirements. You have to provide for a waiver. Not that it's something that we seek, but we have to have that available. And it comes up in situations based on certain factors. You would look at the feasibility of the project. For example, if it's a single source kind of situation where there's a special service or good that can only be obtained from a certain vendor or a contractor can only provide a certain skill, then maybe in that set of circumstances. Everyone involved would look at it to determine if a waiver is important 39 3/27/07 - WHOLE - BILL 070114, ETC. under those circumstances. And also I think under federal guidelines, federal projects as well, there may be a need to provide waivers. And also I think the City Solicitor may also make the determination that if there's some type of conflict with applicable laws or material damage to the City or something like that. In other words, there's a legal bases for the waiver. Then that's the analysis that we would all go through. We'd work with Procurement. We would work with the department. It's not just something that's just tossed out willy-nilly. It's something that we would look at it and consider very seriously, and it's something -- it's not anything that we would tolerate in a cavalier manner. In other words, a contractor says, I'm just not going to use minority women or disabled-owned firms for no good reason. That's not what it is. And I know that a lot of people 40 3/27/07 - WHOLE - BILL 070114, ETC. when they hear the word "waiver," they think it's some kind of arbitrary, capricious kind of just waiving it off, and that's not what it is at all. It's a serious deliberative look at the factors to determine if it makes sense, if it's in the best interest of the City in a particular project to use that option. But as the Commissioner said, in 95 percent of the projects, there is participation and there are ranges set by MBEC on those projects.
So are there any standards or policies that relates to advertising when there's a Public Work contract? I know that in -- we always question whether the company has really tried to solicit bids from minority contractors. COMMISSIONER HAGAN: When the bid is open and the vendor has submitted their participation, then the Minority Business Enterprise Council does review the participation to determine whether 41 3/27/07 - WHOLE - BILL 070114, ETC. they have been responsive and responsible, and in their sometime determination, I believe they do look into how many people were contacted to provide the participation for that particular bid.
Because that's actually one of the areas that we believe could use a little bit more effort, and also around the issue of workforce diversity. I've run into situations on a public contract where the minority contractor actually has the bid or won the bid and has the job, but then they have an all non-minority workforce, which really creates problems in certain neighborhoods. So workforce diversity I believe needs to be a part of some type of policy. And we were actually having meetings related to -- I know that over at RDA they do have some type of policy that also deals with the issue of workforce diversity, and I can give you 42 3/27/07 - WHOLE - BILL 070114, ETC. the name later of that person, because that person was a part of our meetings. COMMISSIONER HAGAN: Okay. Thank you.
Councilwoman, I wanted to add that that policy is looked at and primarily in Economic Opportunity Plans, which, as you know, is the subject of legislation before this Council right now to incorporate that more actively in City contracts. And looking at the workforce and also employing community residents around the project is also something that is an integral part of the Economic Opportunity Plan. So that kind of policy you're talking about is considered in that process.
Okay. 43 3/27/07 - WHOLE - BILL 070114, ETC. Thank you. Thank you, Madam President.
You're welcome. The Chair recognizes Councilman Rizzo.
Commissioner, I'd like to go back, because I'm going to need some additional information, and I just tried to have a brief discussion with the Budget Director to identify where -- is Procurement involved with the vehicle leasing program? I believe there's a program with Enterprise or Budget or one of these large companies that the Police Department leases or other City agencies lease vehicles. Do you do that lease? COMMISSIONER HAGAN: We did have the contract -- and I would have to check that for you -- where they did rent vehicles, yes, on a daily, monthly basis, and I would just have to check to see whether that contract is still in place. 44 3/27/07 - WHOLE - BILL 070114, ETC.
Well, what I'd like to know is how -- I have information that the very deep-cover vehicles the Police Department does through maybe an agency of the government and does that deal themselves, but I'm talking about the more general application, like when we see an unmarked car in one of the districts. My point is, I think we need to know what exactly does leasing cost the City of Philadelphia, what are the ramifications for vehicles that are damaged. I'd like to get a feel for what the cost of that program is. And I'm not sure whether it is run through Fleet Management, the Police Department itself, but I would assume that the document was prepared through the Procurement Department. So if you could help me. If you're not the agency that handles that, if you could identify -- maybe the Budget Director can -- who exactly administers 45 3/27/07 - WHOLE - BILL 070114, ETC. it. I'm just curious. Is it a small program? Is it a big program? Is it a few vehicles? Is it several hundred? Because that will help me make a decision on how involved I get in trying to develop this used car purchase program. So if you could provide that information to the Chair or we could talk on the telephone in between just to give me some general feel for the leasing program for these vehicles. COMMISSIONER HAGAN: Yes. I will do that.
You're welcome. Are there any other questions from members of the Committee? (No response.)
Seeing none, thank you very much. COMMISSIONER HAGAN: Thank you.
The next department to testify is the Sinking Fund Commission. Good morning. Please identify yourself for the record and proceed with your testimony.
Good morning, Madam President and members of City Council. I'm Carl Coin, Executive Director of the Sinking Fund Commission, and I am here to testify on behalf of the Commission on our Fiscal Year 2008 Operating Budget request. The Sinking Fund Commission's total Fiscal Year 2008 budget request, all funds, totals 486.4 million. The General Fund portion of this request totals 196.8 million and includes 89.8 million for capital leases and 107 million for debt service and other debt-related expenditures. The Class 200 request provides for payments on leases for facilities such as the Municipal Services Building, 47 3/27/07 - WHOLE - BILL 070114, ETC. the One Parkway building and certain correctional facilities. This line item also provides for lease payments on the stadiums, as well as the Neighborhood Transformation Initiative borrowings and the Cultural and Commercial Corridor program. The 200 Class combined request reflects a $4.3 million decrease mostly due to a decline from the estimated obligations on the 2003 Justice Lease Revenue Bonds. The request in Classes 701 and 702 totals 87.8 million and provides for the General Fund's portion of the interest and principal payments on the City's general obligation bonds. These two classes combined reflect an increase of 11.6 million from Fiscal Year 2007 estimated obligations mostly due to provisions for the 2006 general obligation debt issue. In order to meet the City's annual temporary imbalance between the payment of obligations at the beginning 48 3/27/07 - WHOLE - BILL 070114, ETC. of the fiscal year and the receipt of taxes and other revenues early in the calendar year, it is expected that the City will issue tax revenue anticipation notes early in July 2007. These notes would mature prior to June 30, 2008. The request in Class 703 for 14.5 million provides for the payment of interest at a rate of approximately five percent on these short-term notes, estimated to be in the amount of 290 million. The Sinking Fund Reserve payments, Class 704, provides for payments of guarantees on economic development bonds of quasi-governmental entities. The Fiscal Year 2008 request in this line item includes possible payments on Philadelphia Parking Authority bonds. The Sinking Fund Commission request from the Water Fund for Fiscal Year 2008 totals 183.5 million, all in Class 700, for payments on debt service on water and sewer revenue bonds and 49 3/27/07 - WHOLE - BILL 070114, ETC. general obligation bonds. This represents a 6.1 million increase in the Water Fund request from Fiscal Year 2007. This increase is due to a new revenue bond issue to be made in 2007. The total amount of this borrowing will be 325 million. The Commission requests from the Aviation Fund for Fiscal Year 2008, the 101.2 million, all Class 700, is to provide for payments of regularly scheduled Airport revenue bonds and general obligation bond debt service. The increase of 8.3 million over the Fiscal Year 2007 estimate is due to the provision for a year's debt service on a new Airport borrowing in 2007 to fund improvements at the Airport. The total amount of this borrowing will be 200 million. The Commission's Fiscal Year 2008 request of five million in the Car Rental Tax Fund is to provide for lease revenue bond payments on the sports 50 3/27/07 - WHOLE - BILL 070114, ETC. stadiums from vehicle rental tax revenues. This concludes the written portion of my testimony. I would be glad to answer any questions that Council may have relative to the 2008 Operating Budget request of the Sinking Fund Commission.
Thank you. Can you break down your FY08 budget request by fund for interest, principal, et cetera, for existing debt through the City and/or Authority as well as the same breakdown for new debt to be issued in FY08?
The Fiscal '08 interest with 56,772,718 -- that's the General Fund.
$56,772,718. And the principal is $31,040,000. That's the General Fund. The Water Fund is 51 3/27/07 - WHOLE - BILL 070114, ETC. $93,373,857. That's the interest in the Water Fund. And the principal is $89,595,700. In the Aviation Fund, the interest is $65,670,092 and the principal is $34,980,000.
No. 12 Can you give us the existing debt through the City and/or Authority as well as the same breakdown for new debt to be issued in FY08?
Aviation Fund, the amount I have in here is $5 million for interest for the new issue and 2,000,500 52 3/27/07 - WHOLE - BILL 070114, ETC. for principal. And the Water Fund for the new issue, 8,938,368 for the interest, and no principal. Principal will be paid. First payment will be Fiscal '09.
Okay. Are you saying there is no new debt in the General Fund?
Have you included any savings from refunds, swaps, et cetera, in your FY08 budget request?
What are the series of bonds that might present a savings opportunity to the City in FY08?
That might have a refunding? I'm not sure I understand. Well, as far as the General Fund, I believe -- I just heard about this last week -- there will be a refunding coming 53 3/27/07 - WHOLE - BILL 070114, ETC. up next year, but as far as Fiscal '08 --
What issues? I'm not sure. It's in the very, very early stages. I can't --
And do you have any indication as to how much that would be?
Okay. Are there any questions from members of the Committee? (No response.)
Thank you. MR. McPHERSON: The next department is the Board of Pensions.
Good 54 3/27/07 - WHOLE - BILL 070114, ETC. morning. Please identify yourself for the record and proceed with your testimony.
I'm James Kidwell, Deputy Pension Director for the Philadelphia Board of Pensions and Retirement. MR. McDONOUGH: Chris McDonough, Chief Investment Officer for the Board of Pensions and Retirement.
Good morning, Council President Verna, members of Council. My name is James Kidwell, Deputy Director for the Pension Board. The budget request for the Board of Pensions submitted this year for FY08 is $10,286,000, an increase of 182,000 over our FY07 estimated obligations. The staffing, we're requesting an increase of two positions as a result of the number of participants currently 55 3/27/07 - WHOLE - BILL 070114, ETC. under the Pension Fund, which are 64,000 plus. The salaries and fringe benefits of the staff have increased 264,000 for FY08. We have reduced our overtime by an additional $20,000 in addition to the 40,000 reduction for last year's budget. DROP continues to -- the number of DROP retirements actually have increased this fiscal year. We're seeing almost a double above the normal number of retirements. On average, the DROP was about 120 a month. It's increasing to 230 for three of the last six months. This has created a need for additional positions in the Pension Board. And we have also increased the number of DROP payrolls because of the number of participants leaving at the end of this fiscal year. Our disability process, we have continued to receive cooperation with the Law Department and Risk Management to coordinate the overlap of benefits between workers' comps and pensions. 56 3/27/07 - WHOLE - BILL 070114, ETC. Progress has been made in opening communication and reducing the need to recapture funds or overpayment situations that occurred when the Board of Pension was not made aware of a person's eligibility for a workers' compensation. A Pension Board staff member will be dedicated to work exclusively with obtaining medical records from the third-party carrier and Risk Management, as well as the participants' departments. This assignment will include following up with the Board's medical panel chairs. Our retirement seminars for Fiscal '07, we continue to hold two-day pre-retirement workshops. We have increased the number to with an 19 average of about 60 persons per seminar. E. program has been in place for two years and is receiving much interest. These sessions target employees who are not eligible to retire but who are vested. The minimum age for participation is 35. 57 3/27/07 - WHOLE - BILL 070114, ETC. There have been very positive responses from the younger employees who have the information they need to plan for their futures. The Deferred Compensation seminars have expanded to include the Road Show and staff from the Pension Board and Great West have been out to department meetings with groups of employees. On the Deferred Comp side, the processing time for loans has dropped from 11 days to four. There are currently over 13,006 active members in Deferred Compensation, with a plan total of $470,850,000 as of January 2007. The Fiscal '08 goal was to increase participation by percent. 18 On the technology side, the 19 Board of Pensions is well on its way to 20 becoming paper free. Over 32,000 retired files, microfiche and microfilm have been imaged. Pension staff may now access file information from their desktops. Biweekly meetings continue with the Mayor's Office of Information 58 3/27/07 - WHOLE - BILL 070114, ETC. Services and more than 115 projects have been completed. With the current system being years old, these enhancements 5 will ensure a smoother transition when 6 the Pension Board moves to a new 7 Oracle-based payroll system. 2 million are included in 9 the budget to purchase an off-the-shelf 10 package to replace the antiquated system. 11 Pension has worked closely with MBEC to 12 ensure minority- and women-owned 13 participation with vendors being 14 considered. 92 percent for a trailing one-year period. Investment strategies for Absolute Return and Real Estate have been expanded over the last year. The Board is strongly committed to increasing participation of minority- and women-owned firms. 59 3/27/07 - WHOLE - BILL 070114, ETC.
It is the goal of the Board of Pension staff to continue to provide education and improved services to its members, and I respectfully request your approval of the proposed budget.
Mr. Kidwell, on of your testimony, you mention the returns that the Pension Fund has received during the last year. Can you explain for the record why the Pension Fund went from 53 percent funded to 51.6 in the last year? MR. McDONOUGH: If it's okay, I'll answer that question.
I beg your pardon? MR. McDONOUGH: If it's okay, I'll answer that question.
Yes. Just identify yourself for the record. MR. McDONOUGH: Chris McDonough, Chief Investment Officer of the Pension Fund. The funding level is based on 60 3/27/07 - WHOLE - BILL 070114, ETC. the asset valuation return, which is different than the market return in that the asset valuation return is based on a five-year smoothing, so it takes into account the returns of the Pension Fund for the past five years. And in doing so, the returns for the fiscal year ending June 30, 2002 are included, and in that year, the fund returned a negative 0.52 percent, which pushes the smoothing return down to 6.1 percent for the fiscal year ending June 30, 2006, resulting in a decrease in the funding ratio.
How are the money managers selected? MR. McDONOUGH: When we have a need for a money manager, an RFP is posted on the City's website. Responses are evaluated by staff and the Board's consultant. A reasonable number of applicants are selected for the Board's review. Typically if we're expected to hire one manager, we will present six potential candidates to the Board. The 61 3/27/07 - WHOLE - BILL 070114, ETC. Board will typically select two, three or four to come and make a formal presentation to the Board and then make a decision on which firm they select to hire.
How are they compensated? MR. McDONOUGH: They receive a fee based on the assets that they manage for us. It varies based on the strategy that they manage and the amount of assets that they manage.
How are they paid through your budget? MR. McDONOUGH: They are paid out of the Pension Fund assets.
On average, what is the total compensation paid for all managers? MR. McDONOUGH: For the past fiscal year, it was approximately $12.5 million.
Can you supply us with a listing of your 62 3/27/07 - WHOLE - BILL 070114, ETC. managers for FY06, their specialty, what they were paid and how they performed against their benchmarks? MR. McDONOUGH: Yes, I can.
Thank you. As far as their performance to the benchmarks, how has each manager performed for the last three years, last five years and since their inception as compared to the benchmarks? MR. McDONOUGH: Would you like me to supply that in writing?
That would be fine. MR. McDONOUGH: I will do that.
From an actuarial perspective, what are the consequences of the City not following its funding policy?
Essentially, there are two funding policies, the City funding policy and the municipal minimum obligation funding policy as required by 63 3/27/07 - WHOLE - BILL 070114, ETC. state Act 205. Under the City funding policy, it's like having a 20-year mortgage and you retire your unfunded liability a little quicker than you would under the minimum municipal obligation that allows for the unfunded to be retired a little bit slower. So it would be essentially under the MMO like having a 30-year mortgage and under the City funding policy having a 20-year mortgage.
Can you tell us why hasn't the Administration adopted the MMO as its funding policy?
I'm sorry to hear that. I really am, because everybody talks so highly of you and I know the people that really are contemplating DROP know that they could always get the right answers from you.
And I personally want to thank you. I think you do an excellent job.
You're welcome. Any questions from members of the Committee?
I thought maybe -- ditto. I was just hoping he'd stick around long enough for when we want to go, he'd be there. 65 3/27/07 - WHOLE - BILL 070114, ETC. Okay. Thank you so much.
This concludes our public hearing for today. The Committee will stand in recess until tomorrow, Wednesday, March the 28th at 10:00 a.m. Thank you very much. (Committee of the Whole adjourned at 11:30 a.m.) - - - 66 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on March 27, 2007, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)