e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, October 22, 2008 2:25 p.m. - - - PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN BILL GREEN COUNCILMAN WILLIAM GREENLEE COUNCILMAN CURTIS JONES, JR. COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN BRIAN J. O'NEILL COUNCILWOMAN MARIA QUINONES-SANCHEZ COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO BILL 080744 - An ordinance amending Chapter 19-2400 of The Philadelphia Code, entitled "Hotel Room Rental Tax"... BILL 080745 - An ordinance amending Bill No. 070994-A (approved December 21, 2007)... - - - 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 e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated
Good afternoon, everyone. This is a public hearing of the Committee of the Whole. I would ask Mr. McPherson to please read the title of Bill No. 080744. MR. McPHERSON: An ordinance 8 amending Chapter 19-2400 of The Philadelphia Code, entitled "Hotel Room 10 Rental Tax," by providing for an additional excise tax on hotel room 12 rentals and designating the expenditures for which such tax will be used, all under certain terms and conditions.
I believe our first witness is Mr. Dubow. (Witness approached witness table.)
Good afternoon, Council President Verna and members of Council.
Please identify yourself for the record e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 and proceed with your testimony.
My name is Rob Dubow. I am the City Finance Director. I have combined testimony on Bills No. 080744 and 080745 and we have proposed amendments to 080745, and they're technical in nature.
I would then ask Mr. McPherson to please read the other bill. MR. McPHERSON: Bill No. 13 080745, an ordinance amending Bill No. 14 070994-A (approved December 21, 2007), entitled "Authorizing the Director of Finance, Commissioner of Public Property and other officials of the City to execute either directly or through the Philadelphia Authority for Industrial Development various agreements, instruments of conveyance and other transactional documents by and among the City, the Commonwealth of Pennsylvania and the Pennsylvania Convention Center Authority related to the development, e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 construction, financing, operation and management of an expanded Convention Center.
There are three amendments. " It's changed to "City," and the word "term" is changed from capital to lower case. The bills that I'm testifying about today are essential for the expansion of the Convention Center. Bill 16 No. 080745 contains the provisions of the operating agreement that will govern the funding and operations of the expanded Center. As you may know, projected costs for the Convention Center expansion have grown from 700 million to approximately 790 million. The initial 700 million was to be funded by bonds issued by the state that would require e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 the state to pay approximately $64 million annually in debt service. As part of that funding agreement, the City agreed to extend its financial commitment for the Center from Fiscal Year '20 to Fiscal Year '33. But instead of being responsible for the Center's debt service plus operating deficits, the City would be responsible for a set amount, $15 million each year. The City was trading an unpredictable cost that would have ended in FY20 for a fixed cost that would end in FY33 and was getting the benefit of having the expanded Center. 2 percent increase in the hotel tax to be divided among the Convention Center and GPTMC and PCVB, the agencies that market the Center and help book its customers. Beginning in FY13, e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 the amount of growth that the two agencies will receive will be shared with the City to be used for support of the expanded Center. The second item is an extension of the City's $15 million commitment to the Center from Fiscal Year 2033 to Fiscal Year 2040. While the City will eventually put an additional 105 million into the Center, it will not incur any costs beyond those included in the initial expansion deal for years. 1 17 million. 18 And the final item is an 19 extension of the repayment period on the 20 state bonds to 2040. 21 The proposed bills that you are 22 considering today would authorize the 23 City's portion of the new funding 24 arrangement. 25 Bill No. 080744 would authorize e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 an increase in the hotel tax rate effective January 1, 2009. 2 percent. The new tax revenues would be split among the Convention Center, the Greater Philadelphia Tourism Marketing Corporation, the Philadelphia Convention and Visitors Bureau and, under certain terms and conditions, the City. The Convention Center will receive 11/30ths of the new tax revenue. GPTMC and PCVB would divide evenly the other 19/30ths of the new tax revenues through 2012. 5 percent and above six percent over the amount they received in the preceding year. The City will receive the growth between two and a half e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 percent and six percent. 3 million for the Convention Center. Bill No. 080745 extends the City's financial obligation of million 9 to Fiscal Year 2040. Like the earlier 10 financing plan, this arrangement would 11 end the requirement that the City pay for 12 the Convention Center's debt service and 13 operating deficit minus the Center's 14 portion of the current hotel tax revenue. 5 million in '09 and no more and no less than 15 million each year after that through 2040. The new financing plan also provides the City with some oversight of the Center's budget. The City will be able to review the budget and make recommendations to the Commonwealth about potential changes. The Commonwealth will have to provide a written explanation if e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 it decides not to accept the City's recommendations.
Since the Commonwealth will have full responsibility for covering the Center's deficits, however, it will have final oversight of the Center's budget. The new Convention Center agreement also states the City will not be required to make any additional appropriations for the financing, operation or management of the Center beyond the million annually through 14 2040. 15 Finally, the legislation authorizes the Finance Director to determine the appropriate allocation of FY09 Convention Center costs between the City and the Commonwealth. Those costs will be split so that the City is responsible for the portion of the Center's costs incurred during the portion of the year during which the existing lease and service agreement is in place, and the Commonwealth will be e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 responsible for payments under the new funding agreement for the portion of the year during which the new operating agreement is in place. The lease and service agreement will be replaced with the new operating agreement once the Commonwealth issues its bond to fund the expansion. That concludes my testimony, and I'd be happy to answer any questions.
Thank you very much. Mr. Dubow, what are the permitted uses for funds going to the regional attractions' marketing agency and tourism agency?
The permitted uses are for the two agencies. Permitted uses are for GPTMC and PCVB.
After e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 FY 2012, there is a formula which uses a base amount to determine what revenues go to the marketing and tourism agency. Please explain how this base amount is determined and how and why the receipts and their distribution vary from year to year.
Sure. The base amount will be whatever amount the two agencies receive in 2012. In the following year, they will receive all growth up to two and a half percent above what they received in 2012 and all growth over six percent. The year after that they'll have the same kind of collar on their growth and it will be off the amount they received in 2013. So, for example, if hotel taxes increased two and a half percent -- if hotel taxes increased three percent off the base year of 2012, they would each receive a two and a half percent increase. The amount above that two and a half percent would go to the City. The e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 following year the amount they receive would increase off of the amount that they received in 2013.
All right. Section 19-2404 provides that the funds for the Convention Center Authority generated by the hospitality promotion tax shall also be used by the City to support the expanded Convention Center. Are they to be used to support debt service? Are there other proposed uses? If these funds are to be used to incur debt for closing the gap and financing for the expansion, shouldn't the tax imposition be conditioned on its use?
That portion that will come to the City that is to be used to support the expanded Convention Center is not related to the debt service. That's money that will come to the City, and we can use it really for any expenditure that is tied to helping the Center in any way. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745
You're talking about the .44. Yes, that is part of the deal, and that amount was required to help close the funding gap. That amount, plus the growth that we assume that it will achieve each year, was required to fill in the gap.
The legislation says that the funding should be divided between the three entities. It doesn't specify how.
Thank you, Madam Chair. Could you expand on that? Are these percentage -- splitting up of money between the different organizations, is that required by the state legislation or is that something that we can change by e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 ordinance at any time?
That division is -- the state legislation says it has to be divided by the three. The specific division is not in the state legislation.
So it has to be divided between GPTMC, the Philadelphia Convention and Visitors Bureau and the Convention Center itself. None of that can come into the General Fund?
Well, it has to be used for those two entities and to support the expanded Convention Center. So it can come into the -- a piece of it can come into the General Fund, but that piece has to be used to support the Center. And the way that this legislation is set up, there is that percent between two and a half percent growth and six percent that could come to the General Fund to be used to help support the Center.
But we could e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 make it whatever percentage we wanted, that's our decision in terms of the splits, in terms of percentages; is that correct?
So could we use the money in the General Fund to provide the police who are at the Convention Center?
Can we use it to support the fire station that is close to the Convention Center?
Well, but we could do it any time. We could do it this year.
Well, you're asking will we be using it for that, right? We e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 don't have that money yet. You're asking is it used for that.
If we pass the tax, can we change the percentages to provide for the support of City resources that support the Convention Center today?
Why aren't we recommending that we do that? Why is it the position that we shouldn't be using this tax to support the Convention Center other than providing the percentages that are to be provided to GPTMC or PCVB?
Because the reason it's split the way it is is when you have an expanded Convention Center, in order to book it, you need more marketing support and you need more support on the e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 booking end, so each of those two entities is getting more funds under this proposal.
I'll have someone from GPTMC if you want to ask GPTMC questions. They're testifying later.
Okay. But, I mean, in other words, they don't promote the Convention Center or --
Well, the Convention Center's Visitors Bureau does. I'm just trying to understand how we reach these percentages and think that these percentages reflect the priorities that Philadelphia should have for spending these dollars. That's why I'm asking you, not GPTMC.
Right. And part of what they do and part of their role is to draw people to the City, including to the e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 Convention Center, and they will have an expanded role with an expanded Center.
I'll ask them specific questions about their missions and budgets and other things, but in your testimony you say the new financing plan provides the City with some oversight of the Center's budget.
Are we provided with any oversight over GPTMC's budget or PCVB's budget?
I think we have membership on PCVB's Board. We appoint people to PCVB's Board. We have membership on each Board. So we get oversight through that.
And does the state legislation limit our oversight authority to the oversight authority that is in the state or, say, could this Council still hold hearings, request budgets, look at expenses, et cetera? Is there any limiting of Council's normal e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 authority where City dollars are going or where our tax dollars are going?
On the Convention Center, the final approvals of the Convention Center budget rests with the Commonwealth.
No. I understand that. I just mean our regular oversight authority. Is there any limit to our oversight authority, our ability to get the budget information, see where dollars are being spent?
Bear with me one second. Most of my questions are for the other agencies. Those are all my questions for now. Thank you.
I'm sorry. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 Has there been any discussion with the surrounding counties about getting them to contribute to the resources of either the Convention Center Bureau or the GPTMC, which does spend the dollars that our hotel tax provides promoting the region?
I haven't been involved in any discussions about that. I don't know whether there have been any that I have not been involved with, but I have not been involved in any discussions about that.
Is there a reason that we shouldn't use the passage of this as leverage to get the counties to impose a similar tax so that they could also contribute to the pool of resources that is promoting the region?
Well, I guess the only issue would be if that resulted in a delay of moving forward with the deal, then that would probably damage the Center's bookings two years from now. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745
Okay. So when would we have to pass this out of Council?
We would like to have it passed out actually within a couple of weeks.
I think these are serious issues and shouldn't be brought to us with two weeks to go. But thank you.
Mr. Dubow, let's refer to Bill 080745. Are the revenues of the hospitality promotion tax dedicated in perpetuity to the Authority?
From the hotel tax? Probably a little over 2 million to start 25 for each of GPTMC and PCVB and probably a e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 little over 2.3 million for the Center. So total would be maybe 6.3 or six and a half million in the first year.
Can you tell us what the projected total annual payments that the City will be required to make?
What are the other sources and amounts of funding?
For the expansion? There's $64 million in debt service annually from the state. There is a reduction in the Convention Center's operating deficit of between $1.4 and $2.1 million depending on the year, and then there's the hotel tax increase. Those are the primary sources.
Thank you. Are there questions from members of the Committee? e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 Councilman Green.
Thank you. One of the questions I have about the percentages that we're setting out so many years in advance and agreeing to cap ourselves at six percent and give people -- so essentially limiting what we get to three percent of the growth, 3.5 percent of the growth, and giving the balance to GPTMC and the Convention Center's Visitors Bureau is inconsistent with a budgeting-for-outcomes approach where we would require people to come back and demonstrate their effectiveness, their effective use of City money or of money that we tax and then pass on to people. Is there a reason that we've sort of built in an increase that will last forever rather than sort of giving it to ourselves and then having people come back and justify it in the future? In terms of an approach of governance, it doesn't seem to me to make a lot of sense e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 to just say forever we're going to give people everything above six percent and cap ourselves at 3.5 percent. You know what I'm saying?
Well, I guess the answer is, this is local legislation. We could come back and review it at some point in the future if we wanted to.
Thank you. Are there any other questions from members of the Committee? (No response.)
Our next witness. MR. McPHERSON: Ameenah Young. (Witnesses approached witness e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 table.)
Good afternoon. Kindly identify yourself for the record.
Good afternoon. I am Ameenah Young, CEO and President of the Pennsylvania Convention Center Authority. Madam President, City Council members and their staff, hospitality colleagues and citizens, we are here today to testify in support of the hotel tax and to update you on the construction of the expansion and the adherence to the ordinance regarding inclusion diversity and the Equal Opportunity Plan. Today I am joined at this table with Joe Resta, the Project Executive; Jim Roundtree, the Director of Diversity for Expansion; and in our audience I have the President of -- I mean, the Chairperson of the Pennsylvania Convention Center, Mr. Riley, and I also brought our CFO, Madeline Apollo. I'd like to start by having my e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 colleague, Joe Resta, explain the construction, where we are to date, the two major contracts, what it involves and the participation. Joe.
Thank you, CEO Young. I'm Joe Resta, Project Executive, Pennsylvania Convention Center. We are currently in the basically deep foundation phase of the project. The project itself is split into two very large contracts, the first of which is the superstructure contract, which has been bid and awarded. The Keating Joint Venture was the recipient of that contract, and they are actively engaged on site working. So basically that portion of the project consists of the foundations for the projects, the concrete superstructure and the steel superstructure for the entire expansion. The second contract, Contract e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 2, which has also been bid and recently awarded yet again to the Keating Joint Venture, is essentially the general construction portion of the contract, which is the exterior skin, roof of the building and all of the interior fit and finish of that. So what you see on site today are caisson excavation, caisson drilling. You'll see grade beam forming and reinforcing steel installed and concrete being poured, and actually see partial demolition of the westerly wall of the current facility to accommodate the bridge that will in fact occur over 13th Street, similar to the bridge that is over 12th Street in the existing facility. That is essentially a synopsis of where we're at in construction. The summary of the minority and women business participation has been provided. I will basically present in summary, and if we have any questions regarding the e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 particulars for the respective contracts, we'd, of course, be willing to answer them. But Contract 1, as we've testified, awarded to the Keating Joint Venture. Total awards, $154,893,000. Minority business participation, $28,772,957, representing 18.5 percent of the contract value. Women business participation, $22,220,150, representing 14.3 percent of the contract value. Combined awards is $50,993,107, representing 32.9 percent of the contract value for combined minority and women business participation. Contract 2 as projected, it is basically very recently, within a day, of being awarded. The contract value, $294,499,000, $60,772,000 of which, or 20.6 percent of the contract value, will go to minority subcontractors. Women business participation on that is currently set at $24,871,741, representing 8.4 percent. Of that, there e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 are some footnotes on the further documentation provided with a commitment from the contractor to get to approximately percent women business 6 participation. So we currently stand for 7 combined minority and women business 8 participation on Contract 2 at 9 $85,643,741, representing 29 percent of 10 the value of that contract. In the 11 aggregate, we essentially have combined 12 $136,636,848, representing 30.5 percent of the contract values for the project. We also have two other initiatives along with subcontractor participation. It's workforce utilization and an apprenticeship program, and I actually would like our Director of Construction Diversity for the project, Mr. James Roundtree, to present on those two issues.
Good afternoon, Madam President and members of City Council. We provided for you a breakdown of the workforce that has been e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 participating on the project since the end of August through September, and our growth figures for that. Although we're about percent into the total contract, 6 you will see for year to date it's been 7 11,172 hours, with 4,128 going to 8 minorities and females. 9 The next page, we have a 10 breakdown by hours and by people. If I 11 can bring your attention to the first 12 column where it says Skilled Workers, you will see that total skilled workers to date is 8,193 and a half, but African American males making up 1,732, which is roughly percent; Hispanic males at 509 17 hours, which is roughly six percent of 18 those hours; with females 487, 19 representing six percent of that, and 20 this gives us a total of 33.1 overall in 21 the skilled area. The laborer trades represents 2,978 hours, with African American males doing 805 hours, representing 27 percent; Hispanic males doing 585 hours, e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 representing roughly percent; and we have females at that particular time -- that's a typo. Pardon. That is a typo, because they've done more than eight hours, because we've actually had seven females on the project. So I'll have to get you another version of this that will give you the total hours of females that worked on the project. To date, skilled and laborer minorities and females worked 11,172; African American males, 2,538; Hispanic males, 1,095; and females, 495 hours. That's better. The actual workforce, African American males, we had 37; Hispanic males, we had 17; females, we had seven, and we had a total workforce of 138. Seventy-two have been Philadelphia residents, 60 have been other Pennsylvania residents, and 36 has been other workers from around the area. The last page is a breakdown of the project by apprentice, and to date, e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 we had apprentices on the project that 3 performed 747 hours, or roughly 9 4 percent. And if we didn't have any -- 5 laborers didn't have any apprentices on 6 the project. And so to date of the 7 11,000 hours, 6.9 percent have been 8 worked by apprentices. 9 I'm available for any 10 questions. 11
Thank 16 you. 17 The Chair recognizes Councilman 18 Clarke. 19
Thank you, 20 Madam President. 21 Good afternoon. A couple of quick questions. Mr. Roundtree, you probably can answer this. You were involved with the Phillies and the Eagles or the Stadium Oversight Committee? e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745
Right. I recall seeing you at the meetings. In terms of the percentages in contracts -- and I understand if you can't recollect those numbers, but off the top of your head, could you recall what the numbers were in contracts, WBE versus MBE?
Can you recall generally what the traditional numbers are? Because you've been involved in a lot of construction projects.
This number -- let me cut to the chase. This number on WBE seems -- it's great. Let me preface that by saying it's great, but traditionally you don't see the WBE e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 number higher than the MBE number.
In this case, it's the same. The WBE number is not higher than the MBE number.
That's not normal, from my perspective. Is that normal?
No. It's not provided in this document either, Councilman. In both instances, the minority activity, the minority business exceeds women business participation. It exceeds it greater in Contract 2 than Contract 1.
In the first one, about four percent, but we're working on some other areas that will increase it to a -- we're looking to try and get that number over 20 percent, but right now it's a little less than four percent. Minority businesses are 18.5 and the women businesses are 14.3. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 Now, for Contract 2 --
I guess in political terms, that's within the margin of error.
All right. One, let me say that the percent, I'm 10 extremely concerned about that number. 11
And I guess 14 I'm okay with the WBE number, but the MBE 15 number -- is there a reason why we can't 16 get a higher number other than the 17 traditional? Because this was supposed 18 to be the make or break deal, and we went through a couple of months of some real arm twisting among members, even against some of the members to be supportive, and the unions were supposed to pitch in, and I understand that our ability to get this thing done was with this new found spirit. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 Can you just for the audience, fundamentally what is wrong? Why can't we get above percent? What is it? Is 5 it the availability of the contractors? 6 And you know I can, for purposes of 7 disclosure, I've called you about a 8 couple of contractors that I know that 9 have done significant and substantive 10 work on a large scale, and I got a little 11 frustrated because I couldn't understand 12 if these people, who have done work for 13 the Housing Authority and a number of 14 other developments, they weren't able to 15 get involved, then who can get involved. 16 Now I'm hearing this 18 percent number. 17 I'm trying to understand, what is the 18 underlying problem?
Size, capacity. We've had a number of instances where we felt that we were on the brink of getting companies involved and for some reason or another, either the size and capacity or the dollar value between them and the low bid was so great, they couldn't agree to e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 terms. That's been really the significant portion of why we're below 4 percent at this point. 5
But that's 6 always the case. I mean, we knew that 7 going in. I mean, that's always the -- 8 I'm not going to use the term excuse, but 9 that's always the excuse that we give for 10 not reaching the appropriate number. So 11 we knew that going in. So why didn't we 12 come up with a mechanism, be it breaking 13 up contracts or -- I know in the stadium 14 we came up with some joint venture 15 arrangements that some people had some 16 concerns about the actual workforce. 17
Right, and this 18 number represents pure straight 19 contracting. There are no joint ventures 20 in this number. They're actually goods and services that will be provided by the specific firms. We did not pursue any joint venture relationships because of the activity that happened both with the stadium and the ball park and the e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 negative feelings that was left with those activities. I too reach some level --
I'm not saying all those feelings, because I sat on those committees, and I didn't necessarily -- there were a couple that there were some questions about, but I thought, from my perspective, it gave some contractors an opportunity because they didn't have the capacity to be in a joint venture that increased the number substantially in the stadium contracts. So I'm not saying I'm opposed it. I don't want you to think that I'm opposed to it, but if we're sitting at 18 percent and the joint venture arrangement gets us to 30 percent, what's the problem with that?
It really will depend on the tasks of the service that the minority or women business were providing in a joint venture, how you counted it. And I guess the negative e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 sentiment was that once a firm reached 51 percent, it was counted as a whole versus just a part. Where we are now, if you take a look at the firms that are participating, a number of these firms will be working at an activity that will increase their capacity. A lot of the companies have not worked at these levels before, and what we are hoping to do is, by this experience, provide them with an opportunity to be able to be primes at some other activity.
No, not necessarily the next expansion. We're looking for these firms to live beyond this expansion. This is --
No, no. I said next activity. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745
Excuse me. Excuse me. Councilman Jones has a point of information.
Is it true that sometimes it's more difficult to measure joint ventures because there is the bait and switch aspect of it and people have a propensity to put false firms in there? Has it been your experience over the years that that 20 has happened?
It has been my experience that most of the firms that participated in that manner have not had an opportunity to grow, because once the industry gets comfortable with joint e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 ventures, they won't allow the minority partner to bid as a prime. They will always use the experience factor of this partner as a gauge of his ability or her ability to do work. So it's been very difficult for people to experience opportunities as prime contractors once they step away from joint ventures.
Well, how do you get over percent? 13 I'm sorry, Councilman. 14
Just by that. The contractors looked at the areas that they think that they could fill out activities or get participation from, and based on that, we got the 18 percent.
I'm asking you, how do you get over it? If you're saying that you don't want to e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 entertain --
Let me clarify then. Please let me clarify. I did not mean that I personally, James Roundtree, did not want anyone to participate as a joint venture.
Okay. I just want to make that clear. The issue for us around joint ventures is providing meaningful and substantial work. First of all, none of the ventures presented to the Authority are joint venture for us to evaluate, and at the time we were entertaining outreach meetings, we were trying to get as many prime or first-tier contractors as we could and second-tier subsequently. But the key issue for us has always been trying to get minorities e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 and females on a different playing field, on different levels of the playing field, and joint ventures did not -- was not offered to us on this activity. We could only evaluate what was offered to us on this activity.
All right. Well, let me go back to my question that I just asked you. How do you get over 15 percent? 16
By identifying more opportunities that minorities or females can participate on this project based on the way the prime contractor saw it when they submitted the bid. And we've actively and continually pursue that cause. When we find that there's an e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 area that they haven't purchased or haven't brought out, we ask them to consider minorities and females in those areas, and we identify through the Philadelphia -- the Greater Philadelphia Urban Affairs Coalition firms that could participate on that level.
So in our process of or our schedule of subcontracted bid solicitations or prime, where are we at in that process that allows us an opportunity to identify additional minority contractors to get over that percent? I mean -- 16
At this point, 17 the contractor has submitted a bid to us. 18 We've evaluated it, and we're up to the point where we say that they have provided a best and good-faith effort. It's meaningful and substantial. However, if there are any other areas that are longer and longer range, would they consider minorities and females, and at this point, they have said yes, but we e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 have not identified beyond this percent. We were asked to present to you today the level of participation we have at this juncture.
And I'm 7 asking you today, how do you get over 18 8 percent? 9
And the process 10 that we will do is, we will go back to 11 them, look at where they are in their 12 purchasing area and identify items that 13 may be utilized to increase the level of 14 participation beyond 18.5. 15
Do you feel 16 confident that you'll be in a position 17 to -- 18
I feel confident that we can move it beyond 18.5. How farther beyond it, I can't tell you, but I am confident that we can move it beyond the 18.5.
Huh? e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745
Councilman Goode, do you have a point of information?
Thank you, Madam President. Two quick points. Ms. Young, could you remind us what the DBE participation goal was when this legislation was introduced in City Council?
Would you say the first part of your question again? I'm sorry.
Could you remind us what the DBE participation goal was when the legislation was introduced in City Council?
When we initially presented to you what our participation goals -- and as you recall, we had gone through a process where we had a firm come in -- we were somewhere around 11 e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 and 12 percent.
The original goal that was presented to us back in the end of November, beginning of December?
So that original goal of 11 and 12 percent was too low?
That was the goal then, and absolutely we have moved above that by 50 percent.
Second point, the numbers on the stadium project were inflated in terms of DBE participation because of the joint ventures; is that correct? In other words, you counted money that actually went to majority firms as DBE participation?
Yes. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745
Getting back to my point, so tell me how you're going to get above percent again. 7
I think I 8 answered that by saying that we will 9 pursue activities that have not been 10 deemed committed to other firms at this 11 point. And we don't know that yet, 12 but -- and you also asked me was I 13 confident we could do better than the 18 14 percent, and the only way you can do that 15 is by clearly identifying the specific 16 items, negotiating with them or having 17 them negotiate with minority and women 18 businesses that can perform the work and reap revenue from it that will tell us how successful we will be.
Then can you just tell me what percentage of those contracts that you may have an opportunity to increase?
No. At this e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 point, we don't have it. We've awarded in Contract 1, we have awarded the contract to the Keating group. It is up to them at this point to identify any additional areas that they feel that they can get participation on.
No, with our help and our suggestion. We meet with them on a weekly basis to determine where they are in their whole process, and once we identify areas where we believe that minorities and females can participate, we will strongly encourage them to do so.
Thank you. The Chair recognizes Councilman Jones. His light is on. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 (No response.)
Let me just clarify. I'm going to ask you a question about what you just said. You've awarded Contract 1?
On that contract, you have percent. I think 12 the Councilman was saying how can you get 13 that increased, that number increased? 14
Okay. 16 Because you have awarded the contract and 17 we accepted their MBE percentages, are 18 you saying you can't go back and require --
Because e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 you've accepted what they offered.
Right. But to the contrary, we can always go back and say -- it's been pretty much a give and take activity, where we identify items that can be purchased from minorities and females and then we identify who they are and have them begin the process of even negotiating with them or trying to get a competitive bid. But it is clearly a part of a collective negotiation versus require, because at this point, they have provided something that we believe represents up to this date their best and good-faith effort.
Are these companies, they will actually do the work and are not really -- they're not equity participants --
No, they are not. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745
No. They will be providing goods and services directly to the contractor, and we will be monitoring not only just the activity, but their payments.
How do you certify that they are minority companies? Do you do that?
No, we do not certify. We have the Greater Philadelphia Urban Affairs Coalition verifies the certifications of each one of the firms. As part of the best and good-faith effort, each firm that says that they are certified as a minority or female are required to provide to the Authority documentation to that effect. We then have the Greater Philadelphia Urban Coalition go out and verify that information and then write us to tell us what the strengths or weaknesses are of that activity. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745
You're welcome. Are there any other questions from members of the Committee? (No response.)
What is the projected date of completion for the expansion?
Right now it's projected in early 2011. It really is -- a precise date at this point, we just really awarded Contract 2. We have about 45 days until we get a schedule from contractor. It needs to be evaluated, coordinated with the schedule for Contract 1 and then a master schedule basically put forth. But it's essentially the end of January into February 2011.