Committee Hearing, October 22, 2008

Thank you very much. Councilman Green, you 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 be recognized?

Thank you. Thank you for your testimony today. Can you tell me what the total budget of the Convention Center Authority is annually?

For the construction?

No; your total budget.

Could you clarify?

Total budget for your operating expenses.

For the construction we're about -- our operating budget, we're about million. 18

$18 million. You may do this, I don't know, but if you haven't, can you please provide the Chair with a copy of last year's detailed budget and the upcoming year's detailed budget for the Convention Center Authority?

Certainly. We'd 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 happy to do so.

Thank you.

Thank you. The Chair recognizes Councilman Goode.

Thank you, Madam President. Very quickly and just for the record, this is the first update that we've received on the Economic Opportunity Plan. How often will we be receiving updates?

Consistent with the ordinance, you will receive monthly updates. We also have an Oversight Committee, that a report goes to them -- comes from them. That includes a couple of Councilpeople who are on that Oversight Committee. Monthly updates you will receive.

So for the record, City Council will receive one in November and in December and each month e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 until this is complete?

That's correct.

Thank you. Thank you, Madam President.

You're welcome. The Chair recognizes Councilman Jones.

Thank you, Madam President. As we proceed with the construction, we have greater opportunities before us to increase our participation numbers?

We have awarded the contracts, and the contractors had to comply with a program, our diversity program. What we are doing now is, in the process of construction, opportunities avail themselves --

Change orders?

Exactly. And we are very aggressive on utilizing minority 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 for all of those kinds of things, whether it's printing. I mean, someone, an engineer says, Oh, I need these documents, we try and turn that toward a minority or female printer. So any of those opportunities that are tangential to the construction proper we are aggressively pursuing, because in addition to these numbers that we're giving you, what we are also attempting to do, as Council made it clear that they wanted us to comply with, is to build capacity so three years from now we don't find ourselves with numbers that look like this.

So to speak to my colleague's interests, we will continue to try to build upon the 18 percent in ways through change orders, additions and things like that?

Yes, sir.

Second thing, as we look down through the trades and where we see good participation but e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 yet some of them are not yet fulfilling any of their minority and female kind of goals, we have an opportunity going forward as we let these contracts to monitor that and increase that as well?

Yes, absolutely, but I think we all want to chime in, because we've got anecdotal stories regarding it. We'd like you to also keep in mind that we began September 2nd, and we expect to have on that site in terms of at the end of it approaching 2,000 bodies that will have come through that construction site, and we will use every opportunity, just like on the contracting side, to do the same for the skilled trades.

And the reason why you see several areas that have zero participation, it represented firms where only had one or two people at a time. And so we've identified that activity, and from this point on, it will be more e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 of a steady flow of a workforce that exceeds the two to three limit. So we will have an opportunity to make sure that minorities and females are participating fully on that activity.

Point of information.

So to speak to --

The Chair recognizes Councilman Goode.

I understand your desire and goal to increase participation as much as possible, but do you actually know how many minorities and females are in each trade?

No, we don't.

Thank you.

Are there any other questions from members of the Committee?

I wasn't done, Madam President.

Oh, e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 I'm so sorry.

He had a point of information.

Sorry.

To speak to the spirit of both of my colleagues' points is that we had an agreement that was one of the first pieces of business that this Council had, and that it is true that by virtue of the will of the owner does affirmative action and diversity and inclusion actually happen. So I guess one of the things that I want to have on the record is that we are going to encourage these unions, skilled trade unions, to continue in this good effort, and I think that both on the contracting side but also on the workforce side, that we are going to encourage that as the owners of the job.

Absolutely. We heard you in December and we hear you loud and clear 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

Thank you. Thank you, Madam President.

You're welcome. The Chair recognizes Councilwoman Brown.

Thank you, Madam President. I just approached my colleague, Councilman Goode, to make sure I'm clear, because I heard all contracts. What you're talking about now is purely and strictly for the construction phase of this effort, correct? It has nothing to do with furnishings and artwork. That comes later, does it or does it not?

That's correct. That's correct. The data that you have in front of you is purely the construction contracts.

So at what juncture in the construction phase then do you let the world know that a new phase of this is about to happen and thus 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 need professionals or skilled persons in these next new set of areas of expertise?

It will basically work out as it falls in sequence with the appropriate time in construction. Furniture, fixtures and equipment routinely are not purchased prior to having them available to be delivered to site in a scheduling --

I want to follow. You say are not purchased?

They're not routinely purchased right with the construction.

I understand that.

They're purchased at a later date.

That I get. So my question is, at what juncture do you then let that world know we are now ready for what you bring to this effort? 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 basically --

Is it six months out? You say that the end date is 2011. So let's presume it's 6/2011. Back into it. Does it become January 2011 or December '10? When does it happen?

Some of the longer lead items on FF&E would probably commence in the springtime of 2010 and really commence through the summer to coordinate with the installation schedule.

And what we'll do is like we did the outreach for the construction, we'll begin a process where we identify who is available and who has experience, et cetera. We'll do the kind of outreach that we consistently did with the construction; that is, once a week have informationals regarding what's going on, letting them know the timing of what's happening, what's expected of them, how they have to fit into 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 entire schedule and what we're doing. So we'll start that about that time.

Okay. Thank you very much. Thank you, Madam President.

You're welcome. Are there any other questions or comments from members of the Committee of these witnesses? The Chair recognizes Councilman Clarke.

Yes. Thanks, Madam President. This will be the last question. In terms of building capacity as we're on the job or prior to, is there a process -- we all know, anybody that has an understanding of this industry -- and I think you alluded to it earlier on -- that part of our problem is that the companies out there don't have the capacity to bid as primes on these significant jobs. Is there a process e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 that we have put in place leading up to this Convention Center that would enhance the capacity of those companies prior to the letting of the contract, since we all knew that was going to be a problem going in?

I will say from an organization standpoint, we have not. We are purchasers in the marketplace. We try to do everything we can to reduce the impediments that historically has been in the way of most of the small businesses. But part of what we see now is more of a business decision on how far or how fast they want to grow and where the grasp of the activity is. We can go down some of these categories and tell you that we actually had to ask the general contractor, both in the outreach stages and as we got close to the bid, to consider reducing the size of their packages that they were going out, because once we heard in the marketplace what they were actually e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 trying to obtain as far as packages was concerned, we asked them to reconsider so that some of the firms that came to the table would have direct relationships with them versus second or third tier. I think when you go through this list and once you talk to some of these individuals as we progress, they will tell you that they will benefit in the long run by being minimally a second tier. We don't think we have any third-tier contractors on here yet. That may be a process that they have to go through, but right now our aim was trying to get first-tier and second-tier contractors, and that's why we really -- although I said earlier we did not encourage, we did not discourage joint ventures, because one of the things that they have to do after this is market their skills, and it's becoming increasingly difficult for individuals to market as part of a joint venture when you're marketing to the same client that e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 your partner is and then they start telling what they did versus what you did. And that's been a very difficult hurdle for most of the small and medium-range businesses to overcome.

Okay. Thank you, Madam President.

The Chair recognizes Councilman Green.

Thank you. Just one final question. Can you tell me, of the additional money that you're going to get, the Convention Center Authority, what exactly is it going to be used for?

Are we talking about the construction monies?

From the tax.

It is essentially -- the budgetary requirements of the project are going to be -- the financing for that will be funded -- the annual debt service will be funded from 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 increase in the hotel tax.

So 100 percent of the money you'll get from the increase in the hotel tax will be going towards financing for the expansion itself?

It's my assumption that that is correct, but that is really probably a question for the Finance Director whether it's 100 percent of whatever percentage --

Well, it's your budget, though. I mean, you're getting the cash.

We're not getting direct construction cash from the hotel tax. It funds debt service.

But it's going into the Convention Center Authority, right?

If funds debt service.

And it's only debt service? Okay. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745

Yes.

So it could be old debt service or expansion debt service. That's the distinction you're making, but 100 percent will go to debt service?

The construction funding comes from the bond issues that are sold by the Commonwealth. To pay for those bond issues, the debt service kicks in to pay the annual debt service for bonds.

Okay. Thank you.

Any other questions or comments from members of the Committee? (No response.)

Thank you very much. Please remain just in the event that there are other questions that may come up.

Yes.

I'm e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 sorry. Councilman Green.

I'm sorry. Could we get the CFO of the Convention Center to just answer that question? I understand she's present.

I'm sorry, Councilman. Would you repeat that question?

I just want to know where the extra hotel tax is going in your budget, whether it's --

I'm going to allow our Finance Director to come up and speak to that, but I'm going to stay here with her. (Witness approached witness table.)

Thank you. It really doesn't go to a specific line item. What happens is, there's a calculation that's actually done by the Commonwealth. They take the debt service of the bonds that they e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 generate. They offset that with the revenues the Convention Center generates, offset what the hotel taxes that the Convention Center receives, and there becomes a net bottom-line number that has to be funded. This hotel tax will just become part of that equation. It's not really earmarked for a specific line.

So it goes into your General Fund, and assuming the bonds were issued at a lower rate or whatever, for some reason the costs come in less than expected, et cetera, then it would be in your general operating budget as sort of excess cash flow, then you could either choose to -- what would you do with money if it ended up --

It's not at our discretion to use. It really becomes part of the debt service calculation. Like we couldn't use it for our operating budget or anything like that. It becomes -- it reduces the debt service, in effect. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745

So you'll use it to pay down bonds quicker if there's extra money; is that your testimony?

That's really at the Commonwealth's discretion. It's their bonds. It will just become part of -- there will be a lesser amount they'll have to fund us each year.

So just so I'm clear, though, it's your testimony that it goes into your general budget and then when the budget gets approved by the Commonwealth with input from the City, that's when we'll see how it's actually spent?

Correct.

Thank you.

Thank you. Thank you very much.

Thank you.

Any other 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 (No response.)

Seeing none, I would ask Mr. McPherson to please call the next witness. MR. McPHERSON: The next group is Bill Fitzgerald, Meryl Levitz, Manny Stamatakis and Tom Muldoon. (Witnesses approached witness table.)

Good afternoon. Who is first?

Good afternoon. My name is Bill Fitzgerald. I'm the President of the Greater Philadelphia Hotel Association, also General Manager of the Doubletree Hotel. The Greater Philadelphia Hotel Association represents 87 hotels around the region, including all the hotels in Center City, Philadelphia. Our members employ over 14,000 residents of the Delaware Valley, and we hold over 30,000 guest rooms. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 I'm here today before you to address the City Council Ordinance No. 4 080744, which proposes a 1.2 percent tax increase on hotel room rentals. As a long-time member of the hospitality industry of Philadelphia and as its representative here today, I want to plainly state our support for this proposal. We believe a tax of this size and nature will provide the right return on the investment for our industry by ensuring the expansion of the Pennsylvania Convention Center and by dedicating additional dollars for regional tourism and marketing to shore up the success of that expansion effort. You might wonder, how can an industry support a tax on itself? The answer is quite simple. Because in this situation, it is an opportunity and not a hardship. Via an expanded Convention Center, we should see hotel development grow as much as 2,500 rooms in Center City, which will create an additional e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 1,800 new jobs. Along with this development and new jobs, hotel revenues are projected to grow over $150 million. This expansion will also create compression, which will benefit hotels outside of Center City, such as properties in the Airport area, University City and Northeast Philadelphia. A 1.2 percent tax increase translates into an average of about a $1.40 more per night per room. This is an increase we, as well as our guests, can live with. Not to mention a raise in the tax will impact Philadelphia's rank among hotel markets only slightly, maintaining our region's competitiveness among some of the most in-demand travel destinations nationwide. Our City's hotel industry is willing to take on an increased room 23 rental tax because we believe it is not only the right thing to do for the City, but because we know it will lead 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 attraction of premiere, large-scale conventions at the expanded Convention Center and better overall marketing for our vibrant city and our region. It is a win-win for the hotel industry, and we are fully supportive of this measure.

Thank you very much.

Thank you, Councilwoman Tasco and members of City Council. My name is Meryl Levitz. I'm here as President and CEO of GPTMC representing its 13-person Board and its 45-person staff, some of whom are here today. Our Chairman, Manny Stamatakis, is also present, as is Nelson Diaz and David Hyman, two of our 13 Board members. We appreciate the opportunity to speak to you in support of the hotel room rental tax. Philadelphia has become an overnight sensation. That is why for the second time in ten years the Hotel Association has championed an increase 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 the tax to their own customers, a very unusual thing to do. In 1998, they advocated a one percent increase and saw it pay off with an immediate, continuous, significant and measurable return. " Philadelphia began its change from a two-hour tourist stop to a premiere visitor destination and next great city. Before we began advertising, only 12 percent of Philadelphia's overnight hotel visitors were tourists. Now 35 percent of them are, with 25 percent of them coming individually and ten percent as part of groups generated by the united work of GPTMC, the PCVB and the hotels themselves. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 In 2005, the hotels came back to GPTMC and the PCVB to begin work on a second increase, with the intent of being able to stay competitive, capitalizing on momentum and meeting the marketing needs of the City's new investments in all the other buildings, not only the Convention Center, but also Please Touch Museum, National Constitution Center, Franklin Square, President's House, the relocation of the Barnes and the development of the Centennial District, for example. And that's in addition to the marketing of Philadelphia's neighborhoods, green spaces, restaurants, shops, galleries, as well as blockbuster exhibitions such as America I am, Cezanne and Beyond, Galileo, the Medici and The Age of Astronomy. These wonderful attractions need a strong Philadelphia brand to help them succeed. The stronger and more well known and well liked the brand, the more value they each have in the eyes of the beholders and the better chance they each 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 of being successful. In addition to being able to ensure that we are marketing the City's new investments and building the brand, GPTMC will continue to market our city neighborhoods. From University City to Center City from Centro De Oro to Midtown Village and South Philly and North Philadelphia, GPTMC connects the dots for the tourists who don't see neighborhood boundaries but are seeking that authentic experience in one of our great neighborhoods. Every day GPTMC reaches out on the City's behalf to tens of thousands of people in media to entice them, invite them and enable them to come to Philadelphia for a weekend, a getaway or a vacation. And they are coming and coming back. Four million more of them means $25 million more per day circulating, 58,000 jobs in the City and a lot of goodwill and new friends for our city. They're reading about Philadelphia e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 on the web and in the New York Times, the Boston Globe, the Washington Post, Food and Wine, Rolling Stone, USA Today and airline magazines. They're seeing our Philly's More Fun advertising on cable and network TV, on billboards, in movie theatres, on Google, radio, direct mail, e-mail and mobile messaging. They're hearing about it through their AAA travel planners, hundreds of whom GPTMC talks with each year. You're probably not seeing much of this advertising because you are already here, and we spend all of our funding outside the area.

None of this increased buzz happens automatically. It's what GPTMC does 24/7. We do it with such partners as the PCVB. Together we are two sides of the same hospitality industry coin, wholesale and retail. And we work together to drive business here to the Convention Center and to all the other revenue-generating and image-enhancing buildings in our city, as well as to our e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 outdoors and our neighborhoods. People know now to come to Philadelphia for all kinds of reasons, dining, music, special events, festivals, arts, spectator sports, family activities, history, architecture and design, and they stay overnight because there is way too much to do here in a day or even two. And none of these wonderful options has a "visitors only" sign on it. Our residents have enjoyed more to do in recent years, because more visitors means more restaurants, shops and entertainment venues. With the additional revenue from the hotel tax, GPTMC can generate additional revenue for the City and jobs for the City's residents. Each media dollar we spend generates $185 in direct, indirect and induced spending, plus $13 in state and local taxes. And all of the tax revenue that we get will be spent on media. In 2007, 58,000 jobs were e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 supported by the tourism in our industry, and these are jobs in every sector, from high school grads at hotel front desks to the accountants and design consultants that our restaurants and attractions employ. This industry is inclusive and it's pervasive, and one of our biggest. We thank the Hotel Association for their confidence in our two organizations, and we thank City Council for being our co-funder in 1996. We thank Council for supporting the 1998 tax which made us a permanent organization, and we thank Council for funding the groundbreaking Philly's More Fun When You Sleep Over campaign after 9/11, nationally recognized as the most successful recovery campaign in the entire country and whose hotel package, "Philly Overnight," continues successfully to this day. Our city would not be an overnight sensation without you. The packet we gave each of you e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 gives background and great detail on all the topics we touched on above and more, and we're always available for questions. Thank you again.

Thank you. Mr. Muldoon.

Council President Verna, thank you very much for having us here today. The Philadelphia Convention and Visitors Bureau, a non-profit membership organization, is the official tourist promotion agency for the City of Philadelphia. It's also the primary sales and marketing agency for the Pennsylvania Convention Center. We compete with our counterparts worldwide for convention and tourism business, which ultimately generates economic impact and job growth and certainly leads to a better quality of life for our citizens. We do this with a top-notch e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 sales and marketing force that communicates with meeting planners and attendees, show organizers, tour operating companies, international visitors to get them to choose, meet or visit in our great city. We have a talented and diverse staff at the PCVB. Multi-cultural professionals are working at every level of our organization, from executive to administrative, and comprise 35 percent of the staff of the PCVB. We also strive to diversify our purchase, and have done so by spending at least 30 percent with multi-cultural and women-owned businesses in Fiscal Year 2008. Customer service is a core value at the PCVB. In fact, we were recognized as the best convention and visitors bureau in the country in both 2006 and 7 by independent surveys of 1,700 national meeting planners. The new room tax receipts will be used to continue to build on the great e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 success of the Philadelphia hospitality industry, which employs 57,000 people in the City. Future marketing efforts will have a substantial return on investment, which you can read about in more detail with what's been left behind. With the expansion of the Convention Center underway, consistent and strategic marketing of the Center and Philadelphia as a premiere convention destination is essential to meet the revenue goals in this billion-dollar business, which makes up 41 percent of all the room nights sold in Philadelphia. Competition for conventions is fierce. With the new revenue, we'll be able to have a consistent convention marketing program, focused on trade shows, national corporate and multi-cultural and life sciences and sports-related businesses. Ultimately, this will keep the Philadelphia brand and the expanded Center in front of the customer, setting us apart from 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 competition. Our primary competitors are spending millions of dollars to promote their convention centers and destinations. As an example, Boston is spending an additional $4 million annually in promoting their new Center. As the international marketing arm for Philadelphia, the PCVB has worked hard over the last seven years to grow international travel to the City, and it has paid off. In 2007, Philadelphia saw the largest increase in international visitors of all major U.S. cities, an impressive 27 percent. Long-term investment in the international marketing strengthens Philadelphia as a premiere destination in the United States. On behalf of our 1,000-member businesses and our Board of Directors, thank you for your serious consideration for this legislation.

Thank you. 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 there any questions from members of the Committee? The Chair recognizes Councilman Green.

Thank you very much for your testimony. As we have discussed really since January when you were both kind enough to come around and introduce your organizations and yourselves to me after I got into office, honestly, I believe that Philadelphia under-spends in terms of tourism and marketing promotion compared to what we could and should be doing to get people to come to the City of Philadelphia. So I'd just like to look into a few things and then maybe get you to talk about maybe some international marketing. But one of the questions I had was related to a statistic that you said, which is for every one dollar that you spend -- and this is to Meryl -- it's $185. Is that $185 spent in the City of Philadelphia? e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745

Yeah. In direct, indirect or induced spending, and as the --

And are you measuring that by dividing all tourist dollars spent or are you measuring that as -- in other words, you're saying when you spend a dollar, you're comparing that to $185 spent among every -- in other words, how do you break that down?

We hire two research agencies who measure advertising effectiveness and do focus groups and research on each campaign, and what they ask the visitor is whether they saw the advertising and all of that and then how much they spent while they're here. And clearly, when -- it might be even more now, because now that restaurants cost a little more and hotels cost a little more, it may be even more.

So with respect to -- you said you had -- can you tell me the breakdown, tell me what your e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 total budget is.

Our total budget is $12 million. It's been flat for a few years now.

And of that $12 million, how much actually goes into marketing?

A little over $10 million goes into the marketing.

And that's not including agency fees or --

It includes some agency fees, sure. Because we can't do everything in-house, we hire a number of firms, including minority firms, to do a lot of our advertising, promotion and vending.

Okay. I notice you have 45 employees, did you say?

Today, yes. We're not a membership organization. We're a marketing organization, so it's structured differently. 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 they only make up $2 million of your $12 million budget?

Yeah.

So roughly, everything other than staff salaries is spent on marketing, promotion dollars?

Right. We took in-house a lot of our web work, our research and our PR work. So in a sense, we're now an in-house agency for advertising, except we don't do TV production. We do a lot of our own communications and we do a lot of our own web.

Would you please provide the Chair with a copy of your detailed budget for last year and your current-year budget?

Sure. And it's posted online on our 990, but we're very happy to provide it as well.

With detail in terms of professional service fees, e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 breakdowns, everything like that?

It's more detailed than it needs to be.

Okay. Thank you.

And it's accompanied by our audit and our annual report.

Great. And I'd like to ask the same request of the PCVB.

Yes.

Thank you. So could you describe your mission, GPTMC, and who you're promoting and what your promotional area is and where your revenues come from.

Our mission is to promote Philadelphia and the countryside as a premiere destination for the leisure traveler and to build the brand for all market segments. In short, it really means increasing the number of visitors who come, the number of nights they stay 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 the number of things that they do. And then what was the second part?

You're promoting the region; is that correct?

Yeah, Philadelphia and the region.

So Bucks, Chester, Delaware, Montgomery Counties?

Correct.

Do you have any revenue from them into your direct operating budget?

We do, but it's not in the form of a hotel tax. They are capped by the state at three percent. If they were to raise their hotel tax to contribute to us, they would have to get the okay from the state. What we do with them is, when we do each campaign, they pay in by project. So it's a project by project. In addition, the state gives us -- last year it was $1.8 million to promote those e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 four counties.

I'm sorry. That three percent tax that applies in those counties, some of that comes to you now?

They use that for their own Convention and Visitors Bureau and their own Visitors Center, because they work on their own to promote travel to their own counties.

So just for the record, who is promoting just Philadelphia County with Philadelphia tax dollars? Anybody?

Well, we are and the Convention and Visitors Bureau. We both are.

But, I mean, there's no organization that's just promoting Philadelphia County?

For leisure? No. 23

But they use their tax in the suburbs to promote just their counties? e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745

Yeah. Although they employ and their hotels and restaurants employ Philadelphians, and 5 percent of their -- 6

I 7 understand. I'm just asking about the 8 particular uses of the various taxes 9 between the counties. 10

Okay. 11

So I 12 understand that there's -- when the 13 region grows, it's good for Philadelphia, it's good for everybody else in the region.

It is.

I don't dispute that at all. I'm just trying to understand the way the tax situation is working.

I didn't laugh.

No. That's okay.

Point of information, Madam Chair. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745

Yes. The Chair recognizes Councilwoman Brown.

Thank you, Madam President. While my colleague gets to that next question, I wanted to ask Meryl Levitz to complete that statement, because I do want to hear what percentage of Philadelphia residents actually work in the counties. We heard the flip side. You were about to tell us what percentage of Philadelphia folks work in the counties in the hospitality industry?

No. I was really going to go into our measures of how many of the visitors that the counties generate on their own come into Philadelphia. I think the Hotel Association has better data on workers, but, for example, on the Philly Overnight package, 13 percent of the packages booked through gophila from the four counties.

What e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 percentage?

Thirteen percent. And we know from the Phillies and others that 30 percent of the attendees are from the four counties. Thirty percent of the people who come to Penns Landing festivals are from the counties. We're their big city, and that's why our campaigns, even though we're a regional organization, our name, things like Philly Overnight, Philly's More Fun When You Sleep Over, Philly Te Llama, Philadelphia - Get Your History Straight and Your Nightlife Gay, Boundless Philadelphia and Philly Overnight, it's a Philly thing. Greater Philadelphia.

Thank you.

Thank you. We're their big city, and tourists don't really recognize city lines. Some of the time, as a matter of fact, they describe a Philadelphia trip as Philadelphia and Lancaster, Philadelphia and Gettysburg, and they see it as a seven-day thing e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 where they're swinging through and they spend four nights in Philadelphia and a couple nights on the road. It's in their heads what Philadelphia is.

Thank you, Madam President.

You're welcome. Councilman Green.

Are you aware of any -- was there any effort in order to get the surrounding counties to contribute to GPTMC or the PCVB in connection with the proposed tax increase on people visiting Philadelphia?

We have not stopped trying to get the counties to work with us on more promotional dollars. Because I really understand your point and I see it, and one of the things that the state is funding us for now, where the counties will have to pay in, is a program called Towns of the Countryside, and that would be state funded and then e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 funded with county money. But in terms of the hotel, we've had more success getting them to pay in on a project or campaign type basis than trying to get the state to re-legislate the hotel tax cap.

Okay. Thank you. Those are all my questions.

You're welcome. Are there any other questions from members of the Committee? (No response.)

Seeing none, thank you.

I have one.

I'm sorry. Councilwoman Tasco.

Ms. Levitz, when you were here during the course of the discussion around the $150 million cultural fund, we noticed that you brought a large number of your staff e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 with you, and I was really concerned -- and it may not have been all of your staff.

No. 6

I recognize that, but some. But I wanted to ask about the makeup of your staff, how many employees you have, what's the diversity of your employees and what are the categories of employment.

Thank you for the opportunity. We're laughing about it now. It wasn't so funny when it happened. In support of the arts and culture initiative, the $150 million bond, we, with the Greater Philadelphia Cultural Alliance, sent out a blast e-mail asking people to come and support it, and a whole lot of yuppies came. I mean, a whole lot of yuppies. And I think some Councilpeople thought they all worked for me. They didn't, but that was the impression that was given. So thank 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 very much for offering me the opportunity to clarify. We have 45 people. We have five vice-presidents. Two of my five vice-presidents are African American women. One of them started as my assistant. She's here today, Angela Val, and she's now Vice-President of Special Projects. We have -- I would say generally we average between and 30 13 percent of color, both in management and 14 staffing positions. As of today -- I 15 wrote this down. Wait, let me get it. 16 It's seven African Americans, three 17 Latinos and one Native American. We've 18 also engaged over 50 interns over the 19 last several years and then helped place 20 them, because we're really committed to diversity. We have in your packet a couple pages called GPTMC's Investment in Diversity Marketing, which outlines our vendor relationships, community e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 relationships and sponsorships and all of that, which total over $4 million just in the last couple of years. In addition, of our 13-member Board, four people: the Mayor, Melanie Johnson, Nelson Diaz and Bob Bogle. So that's a third, and we've always maintained that. Is there something else? Oh, additionally on our Board, there are two additional women. So we're good on that, too.

Two additional women?

Women, yeah.

Most of them are men?

Well, yeah. But we do have three women, which isn't bad. And on our staff, I think we have 27 women of the 45.

Okay. Thank you very much.

Thank you. e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745

Thank you for your answer.

Thank you.

The Chair recognizes Councilwoman Brown.

Thank you, Madam President. I'm actually trying to find it in the testimony, because I learned I may have missed that. But for the record, share with us briefly how you ensure that all communities, all neighborhoods of Philadelphia are reflected in not only your advertising but the actual bringing visitors actually to the neighborhoods across the City. At one point it was a traveling bus tour, and that's not the proper name, but you actually had a tour where you would take persons to neighborhoods.

We have a number of them, and there are a couple kinds. Well, now there are really four kinds because of technological advances. 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 probably talking about the pod-casts and then the vod-casts in terms of virtual tours, but we also take media on tours regularly of the neighborhoods. We also offer them for consumers. And the neighborhoods are one of the main attractions to the media. When you read recently in the New York Times about Philadelphia, you may actually be reading about coming to Fishtown or Kensington or Northern Liberties, because it's the neighborhoods that are making Philadelphia look different than every other city in the country. People want an authentic, unusual experience. The other great thing about it is, now that we're getting so many return visitors to Philadelphia, the second time they come and the third time they come, they've already -- not that there's anything wrong with the Bell and the Hall, but they've already done those things and now they want to get off 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 beaten track and they want to explore their own likes and interests. And so through the strengths of the neighborhoods, we can set them off through gophila, which has about six million unique visitors a year. We can set them off and help them explore music through the neighborhoods, shopping, entertainment, the nightlife scene and, of course, food.

And so you have anchors in those communities that you partner with to help make those experiences real?

Many, yes.

All right, then. Thank you for your testimony.

Thank you.

Thank you. Councilwoman Tasco.

Yeah. I'd just like to say to the Philadelphia Convention Center -- 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 and Visitors Bureau.

I never get it right, Tom. That I was very, very pleased -- I want to go on record to say that the staff that served us when we had our National League of Cities' Women in Municipal Government Board meeting here this past summer, I really enjoyed working with them. We thought we had to do all of the work, but we were really pleased to know that the young ladies, Darnell and --

Yolanda.

Yolanda and the --

Mariah.

Mariah and their other staff members really took the reins, took over, planned everything for us, made all of the arrangements, and it really made it a pleasure to sponsor the Board meeting here, and I want to thank you for your cooperation in working e4ffaeba-8542-428e-98b2-46b40e7b2878 (215) 561-2220 V A R A L L O Incorporated 10/22/08 - WHOLE - BILLS 080744 and 745 out --

You should thank Wanda, otherwise I'm going to hear about this.

Yes. You're right. Wanda was it. I didn't forget you, Wanda. She certainly was very, very helpful in negotiating how we had to handle the arrangements and negotiations with the National League of Cities and with the City of Philadelphia, which is not easy. But I must say that you all stepped in and made it all work very well, and I want you to know that I really appreciate it.

Your second cousin is the National Council of State and Legislators. They're going to be here next July, so -- and there's going to be a lot of them.

Yes. And we did take the members through the neighborhoods of Philadelphia. We tried 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 get to every section of Philadelphia, the Navy Yard, the Ogontz, of course, you know. I took them through Logan and to West Philadelphia to the Please Touch Museum. We had a preliminary visit, and the Microsoft School. We wanted to get Bartram Gardens, but the time wouldn't allow us. But it was a wonderful trip, and I just want to say to everybody that the service you provided was outstanding.

Thank you very much.

Thank you very much. And thank you, too.