Because a18 20 percent participation rate this year19 would be about $750,000 or more.20
So about 7 or22 $800,000. For the last year, for three23 quarters, you did $540.24
So it doesn't2 sound like a real conversation.3 Thank you, Madam President.4
I'll have to check9 and get back to you. It was a10 subcontractor that worked on a technical11 contract we had with our imaging, but12 I'll provide the name.13
Okay. I'm14 at a loss to understand the leverage, the15 role, the leadership of the department in16 helping MBEC, and now, OEO understand how17 each department head achieves those18 goals.19 So a different question: The20 1.5 million in contracts, those were21 contracts that included what? And22 complete the sentence. The $1.5 million23 contracts included contracts such as...?24
Such as... our25 86 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 imaging program.2
Imaging, yes. Our4 medical consultants. And of our medical5 consultants, we have three medical6 co-chairs, of which two are minorities.7
No. So I will have10 to get you additional information,11 because the Medical Panel, there are two12 contracts with co-chairs, and we recently13 hired an alternate, and two of those14 three are minority positions.15
Okay.16 Before my bell rings, let's go to Wolfe17 Block, which dissolved. On of18 the budget, it says that received19 $55,000. With the recent news that Wolfe20 Block is disbanding, what is the process21 for the I.D. of the next law firm that22 secures that opportunity?23
The Law Department24 will hire or make recommendation for25 87 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 replacing Wolfe Block.2
So that3 responsibility falls squarely in the Law4 Department?5
Okay, all8 right. So what you owe us is the9 breakout and breakdown of contracts for10 the 1.5 million, correct.11
And so who19 ultimately has responsibility? Does OEO20 have responsibility or does the21 department head have the responsibility?22 'Cause we're getting -- OEO has yet to23 become before us. And more and more, the24 hour are pointed towards OEO.25 88 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 (Timer bell rings.)2
So we need3 to know where the responsibility and4 accountability lie with regard to5 honoring these goals.6
Okay. I'll provide7 the information you requested, and I'll8 also provide you where we've had meetings9 with them in regard to these contracts.10
Okay.11 Madam President, here is my ask. My12 learning in the nine years I've been here13 is that when we allow departments to come14 back with information, we do get it.15 Sometimes it's well after the budget and16 we've moved on to another challenge.17 So my ask in this instance is18 that we make room for this leadership to19 come along with OEO, because, more and20 more, we're hearing that OEO is21 responsible; yet, when we look at the22 level of the goals attainment, I'm23 perplexed as to why that department head24 hasn't met the goal yet OEO is25 89 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 responsible.2 So we need to have both3 department heads at the table to see how4 we can work through what we see here on5 paper.6
Madam13 President, I'd like Mr. Dubow to come14 back to the table, please.15 COUNCIL PRESIDENT VERNA:16 Mr. Dubow?17 (Mr. Dubow is not in the chambers18 at this time.)19
Well, while20 I'm waiting for him, don't -- the21 question I have is very important, but I22 will follow-up on this MBEC.23 COUNCIL PRESIDENT VERNA:24 Certainly.25 90 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1
Who does2 the -- who's in charge of the procurement3 in your department and putting out the4 RFPs and that kind of thing?5
Our human resource6 does most of our requests for proposals.7 But when there's a technical --8 a request for a technical support, we9 work with the assistance of DOT.10
Is there11 any outreach to vendors to let them know12 that a contract is coming up? Is there13 an outreach?14
For any vendors that19 have called us during the year, we keep20 track of them and we send them letters as21 well. So if anyone's called and said22 that they're interested in working with23 the Pension Board, when the opportunity24 comes, we send out a letter.25 91 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1
Okay.2 We'll come back to that.3 (Mr. Dubow returns to witness4 table.)5
Mr. Dubow,6 earlier, we talked about the article in7 the paper relative to Harrisburg's8 concerns about the Philadelphia financial9 situation.10 Isn't it true that the11 Pennsylvania Taxpayer Relief Act allows12 for the City to enact a wage tax or a13 business tax if the -- if there's a14 greater -- a 2 percent greater reduction15 in total tax collections?16
Now,18 wouldn't it be foolish for Council not to19 set the process in place to -- given the20 financial condition of the City, the21 financial condition of this country,22 looking at all of the options we may have23 in an unusual circumstance such as we24 have, wouldn't it be prudent for us to be25 92 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 able to put everything on the table so we2 could at least look at what our options3 are?4
Yeah. I think we've5 said all along that all options should be6 on the table. So I think it is7 appropriate to look at everything. And8 we just need to, you know, fully9 understand all of the consequences or10 potential consequences of what we might11 do.12
Yeah, but13 the State legislature gave us that14 provision in the Act, so they can't blame15 us for taking advantage of their16 recognition that you could need that to17 enact the taxes. So why would they look18 to punish us if we are following the19 rules?20 We're following the rules. They21 said, "Under these conditions, you can22 look at these taxes." And what we're23 asking -- when we submit our resolution24 is that we're asking for you and all of25 93 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 the parties concerned to give us the2 information so we can make an intelligent3 decision.4
So the7 notion that the consequences in8 Harrisburg will be dire seems a little9 disingenuous since we have the right,10 under their legislation granted to this11 city, to do it.12
So to keep14 saying that is a little disingenuous to15 me.16
Well, I mean, it's17 what we've been hearing, and we wanted to18 make sure that people understood that19 that's a potential consequence. I20 understand what you're saying, but --21
Well, we22 understand what you're hearing and we're23 also hearing something also. Everybody's24 hearing different things from different25 94 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 people, so evidently, everybody's saying2 different things to different folk.3 I just want to be clear and the4 record to show that we have the option of5 looking at this wage tax based on the6 rules set forth by Harrisburg. Maybe the7 people who are making the comments don't8 know that the rule exists and we might9 have to remind 'em, okay?10 Thank you.11
The14 Chair recognizes Councilman Green for a15 point of information.16
Thank you,17 Madam Chair.18 Mr. Dubow, would you agree that19 it would be extremely irresponsible for20 the Administration, or any of their21 allies on City Council, to be lobbying22 State legislators against a potential23 wage-tax increase or lobbying for a24 potential property-tax increase, given25 95 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 that we don't know what the unified2 position of the City will be when it3 comes out of this body?4
That's not anything5 that's been going on. I mean, what has6 happened is --7
That's not my8 question.9 Would it be extremely10 irresponsible for the Administration to11 try to have this fight in Harrisburg12 rather than have the discussion here in13 City Council, in this body?14
That's not my17 question.18 Would it be irresponsible of the19 Administration to be encouraging State20 legislators, or people from the General21 Assembly, to make comments such as those22 that were made in the Daily News today?23 Would it be irresponsible?24
For them to make25 96 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 those comments? No, it --2
For the3 Administration to be lobbying for a4 property tax against a wage tax in5 Harrisburg, would that be irresponsible?6
You're asking, would7 it be irresponsible to ask people to make8 those comments if they're saying --9
Can I finish,12 please?13 If they made those comments to14 us and they're telling us that would be15 the repercussions of what we're doing, I16 think it's responsible for us to want17 that knowledge.18
Would it be19 irresponsible for you to be lobbying them20 for one tax over another? Not you21 personally, the Administration, to be22 lobbying them to favor the property tax?23
I don't think we24 would lobby them to favor any tax.25 97 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1
Would it be2 irresponsible if you were trying to wage3 a battle in Harrisburg on which taxes4 will be raised versus having the5 discussion and dialogue here in City6 Council? It's a yes or no question.7 (Indiscernible; parties talking8 over each other.)9
... but I would like12 to give full answers.13 I think it's not something that14 we're doing. We're not going to lobby15 for a tax. Whether it's irresponsible or16 not --17
It is your18 testimony that nobody from the19 Administration is --20
-- for a tax24 increase? No.25 98 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1
--2 encouraging this property-tax-versus-3 wage-tax discussion in Harrisburg?4
My testimony is that9 that these are things that people told to10 us --11
We briefed people on20 our budget, and we were told -- and this21 was unsolicited. We were told that we22 would get in real trouble if we increased23 the wage tax. And, yes, that was24 unsolicited.25 99 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1
Mm-mm, yeah.2 Legislators told that to me too in the3 context of casinos, which is -- at the4 time we were up there.5 I'm just saying if it's6 discovered that the Administration is7 trying to wage this battle in Harrisburg,8 I think that would be extraordinarily9 irresponsible, because this body may not10 agree with the Administration's decision,11 and as Dwight Evans said in the paper,12 the Chairperson of the Appropriations13 Committee, when we finally have a budget14 out of this body, this city needs to15 speak with a unified voice as to what we16 want, and it may not be what the17 Administration wants.18 So let's not lobby for something19 that is not going to get through this20 body. It's a waste of time and money.21
I agree that we24 should speak in unified voice when we25 100 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 have a budget.2
It seems to7 me, given the crisis that we all talk8 about to recognize that we're in this9 city, it seems to me to be narrow -- a10 narrow focus to only put your bet on one11 tax, which some of us believe is quite12 onerous on people that we represent,13 given the crisis. Maybe under normal14 circumstances, we wouldn't do this, that15 we put ourselves and the Administration16 included in the position of having all17 options open so that we could make a18 prudent decision about what to do rather19 than try to set the tone that only one20 tax should be given -- implemented.21 And so, I just want to let my22 feelings be known about this, because I23 think that, given the State's action to24 allow us to take the action if we need25 101 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 to, it seems to me that we ought to look2 at that too.3 Thank you.4 Thank you, Madam President. I'm5 done.6
Thank you,9 Madam Chair.10 I was not here when questions11 were being asked about the 2.2 million12 for the -- basically, the Board of13 Pensions and Retirement last year14 testified that 2.2 million of Class 20015 was to purchase an off-the-shelf package16 which should be Oracle-based.17 Total appropriations were 3.718 million last year for Class 200. And19 1.5 million -- there was an underspend of20 1.5 million.21 So what was the Class 20022 spending going to be last year? Do you23 know what all Class 200 spend was?24
You're asking -- we25 102 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 budgeted for the new payroll system that2 we did not purchase. So your question3 is: Of the Class 200, what those funds4 were expended for? Is that what your5 question is?6
Class 200 --10 2.2 million was being put aside for this11 package.12
But you only14 underspent by 1.5 million, you're only15 planning to underspend by 1.5 million.16 So explain to me essentially where that17 $700,000 went.18
A lot of it was used19 for the imaging package, but I'll have to20 get a breakdown for you.21
Okay. If you22 could please provide that to the Chair.23 And then also, do you have an24 ROI for the investment of -- what do you25 103 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 expect the return to be for an investment2 in a payroll -- pension payroll system?3
It's ROI,6 return on investment. How many years7 will it take us to pay back the purchase8 of that payroll system through the9 gaining of efficiencies in your10 department?11
It would be difficult12 to say because I believe that, based on13 what we've seen in speaking to other14 cities, the implementation itself would15 take anywhere from 18 months to three16 years.17 So it would probably be three to18 four years out before we could give you19 an estimated savings, but --20
So you're21 spending $2.2 million without knowing22 that it will provide more efficiency?23
Oh, it absolutely24 will provide more efficiency.25 104 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1
Some of the7 efficiencies would be that you currently8 receive a benefit statement from us each9 year. And I will tell you that about 2010 percent of them are inaccurate because we11 cannot include any purchases of service12 or any adjustments for leaves of absences13 and those kind of things.14 So you're getting a benefit15 statement, but it says you're going to16 get 200,000 a year. And then if you17 purchase military service, it could be18 $2500 a year. So almost 20 percent of19 those are wrong. That's one of the20 things that you'd see a difference in.21 The other thing is, we'd be able22 to calculate for a person if they called23 in estimates on in a really quick24 turnover time. So a person could call in25 105 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 and say, "If I got a 3 percent increase2 over the next three years and I require3 retired at age 62, 63, 64, what would I4 get?" Those would be things you would be5 able to get within a matter of minutes6 rather than a matter of weeks.7 And so, we'd be able to provide8 more services, we'd be able to provide9 more information. Um --10
Would you be11 able to provide it with fewer people12 through attrition?13
Okay. And so16 what changes in workflow -- two question.17 What will the savings be for this18 investment? And what changes in workflow19 processes would you implement in your20 department in order to take advantage of21 this technology?22 In other words, typically, we23 build software to follow our current24 workflow processes instead of going with25 106 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 the commercial, off-the-shelf solution2 and changing our workflow processes to3 create efficiencies.4
I think the5 efficiencies would be that we would not6 have to wait a month or two for a person7 to receive their first benefit. And8 there's a supplemental payment made for9 the first partial month and a full10 payment made for the second month.11
I'm asking18 for the efficiencies within your19 department.20
-- I'd2 actually like to see what you actually3 think it's going to save.4
And then6 we'll talk to Mr. Frank about how long it7 would take to implement if we started8 today.9
Thank you,14 Madam Chair.15 Could I get Mr. Dubow back for a16 sec?17 (Mr. Dubow returns to witness18 table.)19
Thank you,20 Mr. Dubow.21 Early on in the questioning, I22 had alluded to a story that appeared in23 the Daily News this morning and did not24 specifically comment about what was said25 108 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 in the story, but since the issue's been2 raised again, I just want to read you a3 couple quotes.4 First of all, the headline is:5 "Council Wage Tax Push Gets Harrisburg's6 Cold Shoulder." There's a couple quotes7 in here from various legislative leaders.8 "Senate Majority Leader Dominic9 Pileggi, a Delaware County Republican,10 told the Daily News that he would11 strongly oppose anything that would have12 an impact on raising the Philadelphia13 wage tax.14 "Senator Jay Costa, an Allegheny15 County Democrat, who recently took the16 minority position on the Appropriations17 Committee said that a City wage tax hike18 would go against the goals of the gaming19 law. 'My guess is that many people here20 would view it as a violation of trust and21 in conflict with the tax reduction goals22 of the gaming law,' Costa said in his23 statement."24 Steve Miskin, who's a spokesman25 109 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 for House Minority Leader Sam Smith, a2 Jefferson County Republican, predicted "a3 heated debate in Harrisburg if the City4 tries to raise the wage tax.5 'Suburbanites really have no say in6 Philadelphia's overspending over the7 years,' Smith said. So the question8 arises, should they pay more than they9 already do?"10 Of course, our own state11 representative, Dwight Evans, who's12 probably our best friend in Harrisburg13 issued a statement basically saying that14 there's some concern that he has.15 Now, let me explain to you what16 my experience is relative to the17 legislature, and I've been around some of18 these people for 30 years. The heads of19 these caucuses, the leaders in both the20 Senate and the House, are not bad people.21 They really -- many of them I know22 personally, and they like Philadelphia.23 But they represent a caucus,24 they represent their members who have25 110 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 varied opinions about Philadelphia, many2 of them misguided, but regardless of the3 misguided opinion, they have them.4 So I think what they are telling5 us here, in addition to the fact that6 they're being very clear about any7 attempt to raise the wage tax, they're8 saying that they can't hold back their9 caucuses. They will try. Dwight Evans10 will stand up and do his best, as he's11 done his entire career, to hold off12 anything that's negative towards13 Philadelphia. But there's a limit on14 what they can do.15 And tomorrow, it's likely we're16 going to pass a resolution that's going17 to potentially start this wage tax ball18 rolling, and it's going to be rolling19 downhill. It won't be with my support,20 but it's going to start rolling downhill.21 And I just want to make sure22 that people understand, the public and23 our members understand, that there's only24 so much friendly leadership can do. And25 111 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 all these people, whether they're2 Republicans or Democrats -- Senator3 Pileggi a very big fan of Philadelphia,4 Sam Smith is a very big fan of5 Philadelphia. But the members in their6 caucus, I don't believe, will stand for7 it, and I believe they're telling us that8 clearly up front.9 So I just wanted to put that on10 the record since it was raised for an11 additional time. I think these12 statements are very clear, and I don't13 see any way of reading them any other14 way.15 Thank you.16
The19 Chair recognizes Councilman Green for a20 point of information.21
Madam22 President, the point that our Majority23 Leader is trying to make, I think, is a24 very important one, and that is, the25 112 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 State law authorizes us to increase the2 wage tax; they don't have to vote on it.3 It authorizes it under two4 circumstances: One, if the revenue's5 down 2 percent; or, two, which we clearly6 meet, a fiscal crisis is present.7 A fiscal crisis is present.8 We've heard testimony from the9 Administration to that effect for the10 last two weeks. In fact, Councilman11 Kenney consistently points out that we're12 in an international financial crisis of13 historic proportions.14
A meltdown.17 I'm sorry Councilman, that's correct.18 So my point here is that it is19 irresponsible of this administration not20 to be lobbying for whatever comes out of21 this body to push one proposal versus22 another proposal.23 This administration has to24 understand that Council may not agree,25 113 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 and this administration has to use its2 lobbyists that we appropriate funds for3 to represent what's going to come out of4 this body.5 Thank you.6
The9 Chair recognizes Councilman Jones for a10 point of information.11
I think we're12 way off point with this testimony. We13 have begun and shot the first volley in a14 discussion that we will have for several15 weeks going forward. Both sides of the16 issue, whether it should be a wage tax17 increase or a real-estate tax increase18 have their merits and detractors.19 And I don't think it's fair for20 us to wage that battle right now, at this21 point in time.22 I will also say that to my23 esteemed colleagues in Harrisburg with24 whom I've developed a relationship over25 114 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 the years and trust their judgment on a2 lot of matters, but when it comes to what3 Philadelphia does and what we do and how4 it impacts our city should be our primary5 concern versus Lackawanna County.6
Thank you13 very much.14 I do agree with Councilman Jones15 relative to our own self-destiny.16 However, when we go to Harrisburg and ask17 for specific things to help us get out of18 this budget mess and we ignore clear19 warnings from various leaders around the20 State that something negative will happen21 if we pursue this potential course, I do22 think we are not creating our own23 destiny.24 We are asking for assistance in25 115 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 sales tax, we are asking for assistance2 in pension regulations. If we were doing3 this in a vacuum, we could have this4 debate.5 But when three legislative6 leaders, four, make it very clear that7 this is a misguided approach, I just want8 to make sure the record's clear that if9 we go that way and the bad things happen,10 that those who are promoting it should11 stand up and take credit for it.12
Point of13 order.14 COUNCIL PRESIDENT VERNA:15 Councilman Goode.16
(Inaudible,17 off mic.) ... for the Board of Pension18 retirement.19
Can we move22 on?23 COUNCIL PRESIDENT VERNA:24 Please.25 116 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 Councilman Green, I believe it2 was -- you were -- it was your turn? You3 wanted to be recognized?4
Yes, Madam5 President.6 So the question I had for7 Mr. Dubow was: Is it responsible for8 Councilmembers to fan the flames in9 Harrisburg?10 Thank you, Madam President.11
Thank12 you.13 Are there any other questions or14 comments?15 (No further questions.)16
Seeing17 none, thank you very much.18 MR. McPHERSON: Sinking Fund19 Commission is next.20 (Witnesses come forward.)21
Good22 morning. Welcome. Please identify23 yourself for the record and proceed with24 your testimony.25 117 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1
Good morning, Madam2 President and members of City Council.3 I'm Carl Coin.4
Excuse5 me. To those leaving, please do so6 quietly. Thank you.7 Please proceed.8
3 million. 2 The Class 200 request provides3 for payments on leases for facilities4 such as the Municipal Services Building,5 the One Parkway Building, and certain6 correctional facilities. 2 million and provides for18 the General Fund's portion of the19 interest and principal payments on the20 City's General Obligation Bonds. 2 In order to meet the City's3 annual temporary imbalance between the4 payments of obligations at the beginning5 of the fiscal year and the receipt of6 taxes and other revenues early in the7 calendar year, it is expected that the8 City will issue Tax Revenue Participation9 Notes early in August of 2009. 1 million all in4 Class 700 for payments of debt service on5 Water and Sewer Revenue Bonds and General6 Obligation Bonds. 6 million, all Class 700, is to15 provide for payments on regularly16 scheduled Airport Revenue Bonds. 6 million over Fiscal Year18 2009 estimate is due to the provision for19 a year's debt service on a new Airport20 borrowing in Fiscal Year 2010 to fund21 improvements at the Airport. 5 This concludes my written of my6 testimony. 9
Thank10 you.11 What are the projected12 borrowings by the City in FY '09?13
Hi. Rebecca14 Rhynhart, City Treasurer.15 COUNCIL PRESIDENT VERNA:16 Welcome.17
In Fiscal Year18 2010, we have Airport Revenue Bonds of19 about 420 million and the -- we have20 Water Bonds that are being issued in a21 month, so that will be done in Fiscal22 Year '09.23 So for 2010, we also have the24 JJC Bonds, but those will be in Fiscal25 123 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 Year '09, within the next month, to fund2 the new JJC project. So I'm getting to3 the answer to your question.4 In Fiscal Year 2010, I think5 it's just the Airport Bond issuance6 scheduled at this time.7
Can8 you tell us what is the projected amount9 to be borrowed in the tranche?10
About13 350? And what is the projected interest14 cost of the tranche?15
Could17 you tell us how the City determines the18 amount it will borrow for its cashflow19 requirements?20
I could answer25 124 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 that question.2
We do cashflow5 forecasting in conjunction with the6 Budget Department, which projects monthly7 cash inflows and outflows.8
And that's what10 leads us to the process of what the right11 amount of the tranche borrowing is.12
Thank13 you.14 The Chair recognizes Councilman15 Green.16
Thank you,17 Madam Chair.18 Could you explain in your19 testimony what Class 200 combined20 requests reflects, a 2 million increase,21 mostly due to a rise in estimated22 obligations for the paid stadium lease23 revenue bonds? What does that mean?24
It's the -- the25 125 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 stadium bonds are -- were done through2 the Philadelphia Authority for Industrial3 Development, and there's a slight -- a4 $2 million increase in the variable-rate5 cost.6
They are. And we14 increased the -- just because of the15 market fluctuation over the last year, we16 thought it would be prudent to increase17 the budgeted amount to leave a little bit18 more room in case the variable rate19 fluctuated more than anticipated last20 year.21
So does the22 $2 million reflect current rates or23 predictive rates or what?24
Predicted.25 126 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1
It's actually2 more. It gives about a little under3 1 percent cushion for the higher rate4 than it is right now.5
No, the interest12 rates.13 So right now, we restructured14 the paid stadium bonds, so the interest15 rates those bonds are trading at is,16 like, half a percent right now. They're17 trading very well.18 But if interest rates were to19 increase to 1-and-a-half percent, which20 is not that outlandish --21
So then it's22 1 percent of the total outstanding debt.23
Is what25 127 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 you're --2
That we can hedge9 that risk? Well, the bonds do have an10 associated swap. There is no way to11 hedge a possible mismatch between the12 rate that we're receiving on that swap13 and paying out on the bonds.14 So no, there isn't.15
So you can't16 hedge it. So we're just -- we have sort17 of naked exposure to increases in18 Variable Rate Bonds.19
No. I'm sorry.20 It's not naked. We have the Variable21 Rate Bonds. Then we have a swap on those22 bonds, a derivative, which is -- we've23 had on since 2007, which, in normal24 market times, exchanges the variable rate25 128 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 for a fixed rate. So that is the hedge2 that you're referring to.3
What we've seen5 in the last year is the possibility that6 no hedge works perfectly and that there7 is a chance for that hedge to go in the8 slightest dislocation. And that's what's9 happened in the last year.10 So we wanted to make sure that11 we were prepared going forward in case12 that dislocation happened.13
So are there14 any other Variable Rate Bonds for which15 you're basically requiring extra money to16 put aside besides stadium bonds?17
Well, you're18 talking about variable rates that we've19 put a little bit of extra room in.20
I mean, we tried23 to be realistic with -- we have several24 swaps on several issues of bonds that25 129 4/15/09 - COMMITTEE OF THE WHOLE - FY '10 BUDGET1 we've tried to budget for in a realistic2 manner with a little bit of cushion. I3 would not say that it's, you know, that4 much extra cushion, though.5
What exactly6 is the extra cushion that you've built7 into this budget?8