COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON FINANCE - - - Room 696, City Hall Philadelphia, Pennsylvania Wednesday, November 13, 2002 12:15 p.m. - - - BILL 020665 - an Ordinance declaring that it desirable for the health, safety and welfare of the people in the area served by Centralized Comprehensive Human Services... BILL 020670 - an Ordinance constituting the Ninth Supplemental Ordinance to the Restated General Water and Wastewater Revenue Bond Ordinance of 1989... BILL 020674 - an Ordinance authorizing the Eighth Supplemental Ordinance to the Restated General Water and Wastewater Revenue Bond Ordinance of 1989... BILL 020675 - an Ordinance constituting the Fifth Supplemental Ordinance to the General Gas Works Revenue Bond Ordinance of 1998... BILL 020676 - an Ordinance constituting the Seventeenth Supplemental Ordinance to the General Gas Works Revenue Bond Ordinance of 1975... BILL 020677 - an Ordinance amending Section 10-1001 of the Philadelphia Code... - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL, Chair COUNCILWOMAN MARIAN TASCO COUNCILMAN DAVID COHEN COUNCILMAN FRANK DICICCO COUNCILMAN JAMES KENNEY COUNCILMAN MICHAEL NUTTER - - - V A R A L L O, Inc. 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 (215) 561-2220 I N D E X BILL 020677 PAGE JOAN DECKER, Records Commissioner ........... BILL 020665 DONALD CRAMP, Hospital and Higher Education Facilities Authority ................... 11 JO WILLIAMSON, CCHS ......................... 13 BILLS 020670 and 020674 COREY KEMP, City Treasurer .................. 21 BERNARD BRUNWASSER, Deputy Water Commissioner 24 BILLS 020675 and 020676 COREY KEMP, City Treasurer ................... 41 JOSEPH BOGDONAVAGE, Vice President PGW ....... 43 THOMAS KNUDSEN, President PGW ................ 44 FRANCOIS DUTCHIE, Deputy City Solicitor ...... 94 3 11/13/02 - FINANCE - BILL 020677
Good morning. We would like to call our finance hearing into session this morning. We thank you all for your patience. We'll try to do one bill that should be very, very short first, and then we'll settle into the others. And that bill number is Bill No. 8 020677. Let the Chair note that for the purposes of a quorum, we have to my right Councilman James Kenney, to his right Councilman Frank DiCicco, also Councilman David Cohen, and so that gives us a quorum. We will read Bill No. 020677 and ask the Records Commissioner Joan Decker if she would come forward. This is a short hearing so we'll get this out of the way, if that's okay, and then we'll move forward with the others. The Clerk will read the title of the bill.
Bill No. 020677, an ordinance amending Section 10-1001 of the Philadelphia Code, entitled "Fees of Commissioner of Records," by providing for new recording fees, under certain terms and conditions. 4 11/13/02 - FINANCE - BILL 020677
Thank you very much. Commissioner, we thank you for you attendance and your briefing and we ask that you identify yourself for the record and make your presentation.
Good afternoon. My name is Joan Decker, Records Commissioner. And I have with me today the Administrative Services Director of our department Jean Ready. Good afternoon. Thank you for the opportunity to provide testimony in support of this initiative. I am here today to provide testimony for Bill No. 020677, fees ordinance for the Commissioner of Records, and I'm requesting your support for this important initiative for the Records Department. I would also like to acknowledge the presence of some members of the business community, and I would ask that they stand, please. Anthony Angelo and Don from Land Title Insurance Company, and also Mr. Christopher Smith from Chicago Title Insurance Company. We'd like to acknowledge their presence and also thank them for their continuing support of the efforts in our department. The Records Department is requesting an increase of $16 for deeds and mortgages and an 5 11/13/02 - FINANCE - BILL 020677 increase of $15 for all other document types. The fees will be used to support record improvement and customer service initiatives and will also allow the department to meet some budget requirements. Our focus is to provide continuous improvement in service delivery to the public, and it is possible to do this through continuous process improvement. With City Council support, the Department has made marked improvements in service delivery, including reducing the turnaround time to record and return documents from months to days. We want to continue to leverage the investments made in technology and automation. As you know, there has been quite an explosion in technology, and modern tools can continue to propel us forward in this electronic age. In fact, some of our commercial users are interested in engaging in electronic commerce with us and we want to be positioned to do so. We also want to stay competitive with our counterparts in other large cities. Our commercial customers include land title insurance companies, financial institutions, and law firms specializing in real estate. The business activity generated by these 6 11/13/02 - FINANCE - BILL 020677 commercial users requires a vibrant support system that can deliver services as quickly as needed in this competitive and fast-pace world. We want to continue to ensure that our land-related infrastructure is as, if not more, appealing than our counterparts as an incentive to do business. Companies conducting businesses in our City need quick and reliable service to compete with their respective counterparts. The additional revenue made possible will help us to implement the following planned initiatives: A document recording notice program that will send a notice to property owners each time a deed or mortgage is recorded with our department. This will enable property owners to detect fraudulent activity against property and to take immediate action prior to subsequent fraudulent activity that sometimes occurs. Automation enhancements that improve internal efficiency will also help us to further reduce the turnaround time, which is currently to days with the implementation of electronic recording minutes. 11/13/02 - FINANCE - BILL 020677 We also want to increase the amount of data available to customers in a convenient and accessible manner. We also want to preserve permanent microfilmed land records such as deeds and mortgages that are currently deteriorating. And finally, we want to enhance the parcel tax map data contained in Records Department's Geographic Information Systems. Most individuals really do not conduct this more than four or five times in a lifetime, so this would not be a continuing expense that your constituents would be subject to. The proposed fees are in alignment with the fees of other large cities and counties. For example, Camden, New Jersey, charges $60 for deeds, $95 for mortgages. New Castle, Delaware, charges $72 for deeds, $140 mortgage.
And Bronx and Queens in New York charge $100 deeds and $112 for mortgages. It is worth noting that other cities and counties also require additional fees depending upon the number of pages, names, and legal descriptions submitted; whereas, we charge a flat fee. 8 11/13/02 - FINANCE - BILL 020677 We have a number of characteristics that distinguish us from other cities and other Pennsylvania counties that need to be considered when establishing fees. Our recording volumes far outdistance that of all the other Pennsylvania counties with the exception of Allegheny, even though geographically we are a much smaller county. We are viewed as a national high volume financial transaction location. We have an extensive set of permanent land records to maintain, a county established by William Penn in 1682. And we are responsible for the registry unit, a unit that maintains the City's tax parcel maps that contain 750,000 parcels. Your approval will enable us to implement the planned initiatives. We are requesting your approval this Session with an immediate effective date. Thank you for your consideration and support, and I would be happy to answer any questions that you may have.
Thank you very much, Commissioner. I will note that yesterday I saw some of the old maps dating back to 1915 and 9 11/13/02 - FINANCE - BILL 020677 some of the -- I guess you don't call them films. I don't know what you call them.
Microfilms that are just unbelievable. As my staff attorney was saying, they smelled like vinegar. They're so antiquated it's just unbelievable. And so it was obvious, we could see the need and with the opportunity to have modern mapping and modern records. We applaud your creativeness and your checking around the country to see what works in keeping our City in line with what's happening in our country. Are there any questions for our Commissioner? (No response.)
Thank you very much. Commissioner, will you need a rules suspension.
Let the Chair 10 11/13/02 - FINANCE - BILL 020665 note that to my right is Vice Chair of this Committee, Councilwoman Marian Tasco, to her right Michael A Nutter. As most of you know, we have seven bills on our Calendar today. Five are bond bills. One is a bill sponsored by Councilman O'Neill, and the one we just heard was a Department of Records fee increase. Now we'll ask the Clerk to read Bill No. 11 020665, a bond bill. And certainly, we ask Mr. Cramp and whomever is testifying on this bill to come forward.
Bill No. 020665, an ordinance declaring that it desirable for the health, safety and welfare of the people in the area served by Centralized Comprehensive Human Services, also known as John F. Kennedy Community Mental Health/Mental Retardation Center for the Hospitals and Higher Education Facilities Authority of Philadelphia to issue its bonds and to loan the proceeds there from to finance and refinance a project for the borrower located at 112 North Broad Street, Philadelphia, Pennsylvania.
Thank you very 11 11/13/02 - FINANCE - BILL 020665 much. The Chair also notes that we spoke to the Councilman in the area last evening who obviously is very happy to support this legislation. Welcome to you all. Please identify yourself for the record and begin your testimony. Thank you, Mr. Cramp.
Thank you so very much. And we are particularly grateful for the hearing today so promptly requested, so promptly granted. We are a competitive organization, and to maintain our relationships with facilities in Philadelphia, your assistance is very, very much appreciated.
If I may read a formal statement as custom into the record in support of this.
Thank you. Madam Chairwoman, Committee Members, my name is Donald Cramp. I serve as a Chief Executive Officer of the Hospitals and Higher Education Facilities of Philadelphia. I wish to make a brief introductory statement in support of the proposed bill before you 12 11/13/02 - FINANCE - BILL 020665 today for Centralized Comprehensive Human Service, also known as John F. Kennedy Community Mental Health/Mental Retardation Center. The Centralized Comprehensive Human Services submitted an application to the Hospitals and Higher Education Facilities Authority of Philadelphia seeking the authority's assistance in this financing. The application was accepted. A public Tax Equity and Fiscal Responsibility Act, TEFRA, hearing on behalf of Centralized Comprehensive Human Services is scheduled for November the 25th in our board room in accordance with public newspaper advertisements. Today, we have the privilege together, and I do mean together, of assisting Centralized Comprehensive Human Service in their noble mission and the many people associated with this remarkable organization. May I close to express sincere appreciation, genuine appreciation, to each Member of the Committee and the Council on behalf of the Board of the Authority for scheduling of this hearing and assistance thereof. Thank you very much. 13 11/13/02 - FINANCE - BILL 020665
May I make an introduction for one more testimony, if we may take your time?
That would be conducted by Ms. Jo Williamson, the President, and longstanding president of much esteem and much respect in the community.
Thank you, Mr. Cramp. Good morning, ladies and gentlemen. Thank you for the opportunity to come before you today regarding the financing project that Centralized Comprehensive Human Services is requesting. The building that the financing covers is at 112 North Broad Street, a 12-story office building which houses eight floors of the mental health center and four floors of our non-profits, such as JEVs, the Philadelphia AIDS Consortium, the Youth Health Empowerment Project, and temporarily the City of Philadelphia Mental Retardation 14 11/13/02 - FINANCE - BILL 020665 Services. When Mental Retardation Services moves to their permanent location, Research for Better Schools will join us in December. The housing of this array of services enables 112 North Broad Street to be a helpful resource to the community. In addition, JFK has four satellite locations in North Philadelphia, two of which provide bilingual, bicultural services in the Latino community. We have an array of behavioral health services which includes outpatient care, family therapy, methadone treatment, special living arrangements, children services, psychiatric services, partial hospital services for special populations and severely mentally ill. We serve on average about 5,000 people per year; 67 percent male, 53 percent female. Ages range from infancy on up. We average about 2,000 new intakes a year and maintain an active case load of 3900 people. In addition to the services in the North Philadelphia area, we provide citywide services in emergency and drug and alcohol. The mobile emergency team operating 24-7 delivers crisis intervention services throughout the City, in the home, school, hostage situations, and anywhere emergency mental healthcare 15 11/13/02 - FINANCE - BILL 020665 is needed. We are very proud of our drug and alcohol services which fosters sobriety and in making a better life and becoming a contributing force in the community. Many of our graduates go on to school and the work force and are able to be better parents and role models to others. We also host several community support groups that assist people in attaining better lives. JFK feels accessibility of quality behavorial health services to consumers is our driving force and we are grateful for the opportunity to serve the citizens of Philadelphia. Thank you.
Thank you very much. I have merely one question. Can you tell the committee how much there will be in savings once the refunding takes place?
Thank you, Madam Chairperson. That is really the key reason we're here. This is a restructuring of the 1993 debt. And for an organization of modest operating funds, this should generate between 120 and $150,000 savings per year. And to an organization with a modest budget, that is a significant advantage 16 11/13/02 - FINANCE - BILL 020665 created in part because of the favorable interest rates that are now in place.
Thank you very much. Councilwoman Tasco, you have a question?
Good afternoon. Just for the record, could you tell me why -- it's more of a process question -- why the Hospital Authority is floating the bond for this organization? And what impact does it -- what is the relationship to the City and what responsibility does the City have if something should happen and they default on the bonds?
You asked the principal question, that is, the relationship of the Authority to the institution. Some authorities raise money through the bond market and then spend it, such as the Airport Authority. In our case, it might be better described as a conduit authority. In other words, the money that is generated is used by the particular institution, the hospitals and universities that we provide assistance to. However, the repayment of the principal and interest is a responsibility of the particular organization 17 11/13/02 - FINANCE - BILL 020665 that we bring before you. And quite often -- in my remarks, I make this important qualifier, that the responsibilities and the fiscal responsibility for repayment of the debt is not the responsibility of the City of Philadelphia, is not the responsibility of the Authority itself, so that if things go wrong -- and your question so very timely because of the Allegheny situation, if I may -- the responsibility did not flow to the issuer and did not flow to the City in this case. It was totally the responsibility of the borrowing institution. Your question is fundamental to our role. We are a conduit issuer, not on behalf of ourselves, but on behalf of the borrowing institution.
You only operate your services out of 112 North Broad Street? Do you have community-based programs?
Yes, we do. We have two in the Latino community, Fifth and Somerset and Sixth and Lehigh. One is a partial hospital program and the other is outpatient for adults and children. 18 11/13/02 - FINANCE - BILL 020665 We have another satellite operation at Broad and Poplar Street where we have methadone treatment, partial hospital services for severely mentally individuals who suffer both with mental illness and drug and alcohol problems. We also have a Health District at Third and Girard, we have a satellite operation there for both children and adults mental health service.
May I say something that the president cannot say? When we site visit each institution, in this case, I would just like the record to show how touched and meaningful it was, the use of the proceeds. The proceeds are really being used for the care -- it's a very modest, very modest setting, but the work that is done there is quite impressive. And when we went out to see how the proceeds were used, Ms. Williamson, then the president as well back in 1993, took us down into the basement and showed us the heating and the cooling and conference rooms where patients could be better seen. In other 19 11/13/02 - FINANCE - BILL 020665 words, the proceeds you are approving today are being used truly in the interest of patients. And those patients are also very disadvantaged patients, financially, socially. They are patients that truly benefit and they are the disadvantaged, generally, patient population.
Thank you. I wanted to know, one, personally; and second, I think it's good to have on the record rather than just have, you know, we're giving you the authority to issue these bonds to substantiate your request. So thank you very much for your services.
Thank you. Are there any other questions from Members of the Committee? Would you require a suspension of the rules?
Thank you very much. The Clerk will please read the titles of Bill numbers 020670 and 020674, water bond issuance. I believe Corey Kemp, our City Treasurer; and 20 11/13/02 - FINANCE - BILL 020670, 020674 Bernard Brunwasser, Deputy Water Commissioner, will be testifying.
Bill No. 020670, an ordinance constituting the Ninth Supplemental Ordinance to the Restated General Water and Wastewater Revenue Bond Ordinance of 1989, as supplemented; authorizing the Bond Committee, or a majority of them, to issue and sell, from time to time, either at public or private sale in one or more series or subseries, Water and Wastewater Revenue Refunding Bonds of the City of Philadelphia; authorizing approval of the form or forms of Bonds; providing that the Bonds shall bear interest at a prescribed fixed rate or rates or at variable rates which may be payable in different modes, and authorizing agreements to provide credit enhancement or payment or liquidity sources or swap payments for the Bonds and other certain actions, all under certain terms and conditions. Bill No. 020674, an ordinance 22 authorizing the Eighth Supplemental Ordinance to the Restated General Water and Wastewater Revenue Bond Ordinance of 1989, as supplemented; authorizing the Bond Committee, or a majority of them, to issue and 21 11/13/02 - FINANCE - BILL 020670, 020674 sell, either at public or private sale in one or more series or subseries, Water and Wastewater Revenue Bonds of the City of Philadelphia; authorizing approval of the form or forms of Bonds; providing that the Bonds shall bear interest at a prescribed fixed rate or rates or at variable rates which may be payable in different modes, and authorizing agreements to provide credit enhancement or payment or liquidity sources or swap payments for the Bonds and certain outstanding bonds and certain other actions, all under certain terms and conditions.
Thank you very much. Good morning. Please identify yourself for the record and begin your testimony. Thank you for coming.
Good afternoon, Chairman Blackwell and Members of the Committee of Finance. I am Corey Kemp, City Treasurer for the City of Philadelphia. With me is Deputy Commissioner Bernard Brunwasser of the Water Department. We are here to testify on behalf of Bill No. 020674 and 020670. 22 11/13/02 - FINANCE - BILL 020670, 020674 Council Bill 020670 will authorize the City to refinance the Water and Waste Water Revenue Bonds, Series 1993 and 1995 in an amount not to exceed $480 million. The 1993 bond issue cannot be currently refunded until March 2003 and the 1995 bonds cannot be currently refunded until 2005. Consequently, the Water Department is planning to utilize a swaption to take advantage of the current low interest rate environment and capture the savings that refunding of the 1993 and 1995 bonds would yield. The City will not execute this transaction unless the City receives a present value savings of at least 3.5 percent or $13.3 million. The industry standard is 3 percent. As of November 7, 2002, the present value savings was approximately $37.9 million. The swaption transaction does anticipate the Water Department issuing refunding bonds to mitigate basis risk if Salomon Smith Barney exercises its option on the swap. The second Council Bill 020674 authorizes the City to sell no more than $250 million of bonds on behalf of the Water Department to help fund the Water Department's Capital Budget 23 11/13/02 - FINANCE - BILL 020670, 020674 and Program. Mr. Brunwasser will go into detail about the Capital Budget and Program. This financing will fund the Water Department's Capital Budget and Program for approximately two years beginning in Fiscal Year 2004. All revenues pledged to secure the payment of the bonds will be derived from rents, rates, and charges imposed by the Philadelphia Water Department. None of the bonds that will be issued under this ordinance will have any recourse to the revenues of the City's General Fund. Finally, as required by the First Class City Revenue Bond Act, the Restated General Water and Waste Water Bonds Ordinance of 1989, in the amendment thereto as set forth in the general ordinance, the Director of Finance of the City of Philadelphia has transmitted a financial report regarding the financial viability of the Philadelphia Water Department's system and its ability to repay this additional debt. This concludes my testimony, and I'm happy to answer any questions we may have on this matter. We also will be requesting a suspension 24 11/13/02 - FINANCE - BILL 020670, 020674 of the rules at the end of this.
Good afternoon, Councilwoman Blackwell and Members of the Committee of Finance. I am Bernard Brunwasser, Deputy Water Commissioner, appearing before you this afternoon to testify regarding Bill No. 020670, to authorize the issuance of Water and Wastewater Refunding Bonds. These bonds would permit the Water Department to refund certain outstanding Water and Wastewater Revenue Bonds, series 1993 and 1995. Since the Series 1993 and 1995 Bonds were originally advanced refunding bonds, they are ineligible under current tax law to be advanced refunded a second time. However, a mechanism exists that may allow the Water Department to take advantage of the present low interest rates in the municipal bond market through the execution of a swap agreement, called a Swaption, with a counter-party banking institution. As the Treasurer has testified, the Water Department would receive an up-front payment that will approximately represent the present value savings that would be available to the Department if 25 11/13/02 - FINANCE - BILL 020670, 020674 it was able to refund the Series 1993 and 1995 Bonds in today's market. 9 million. The City Treasurer and the Water Department have set a benchmark of a minimum 3 1/2 percent net present value savings before this transaction can take place. Since 1993, City Council has authorized the Water Department to refinance more than $1,375,000,000 in revenue bonds which has resulted in a net present value savings of $63 million in debt service expense. Through these successful refinancings, City Council has greatly benefited all Philadelphians as the Water Department has been able to keep its water and sewer rates the lowest in the region. If the Swaption is exercised, it is the Water Department's intent to place the up-front premium payment, less transaction fees, into a professionally managed escrow account. There, the funds will earn the interest until drawn down beginning in Fiscal Year 2005 as a way to help moderate future water rate increases for our ratepayers. In this way, the water and sewer 11/13/02 - FINANCE - BILL 020670, 020674 ratepayer will benefit from this transaction until at least Fiscal Year 2007. The benefits of this transaction are very interest-sensitive and we will not know the exact amount of the Swaption premium to the Water Department until the day the Swaption is executed. That is why the consultant's report from Black & Veatch does not include any benefit from this transaction on their projected revenue and revenue requirement table, also known as table A. However, we do know that at the benchmark net present value savings threshold of 3 1/2 percent, the premium would probably have to exceed $13 million. Otherwise, the transaction would not take place. I think I'll go on now and talk about the new money ordinance, and that's Bill No. 020674 to authorize a new issuance of Water and Wastewater Revenue Bonds. This proposed ordinance is required in order to provide the Water Department with continued funding authorization for its Capital Budget and Program as approved by City Council and to replenish the Water Department's Construction Fund, which will be drawn down over the coming months. 27 11/13/02 - FINANCE - BILL 020670, 020674 As you may recall, the Water Department successfully issued debt last year. " Both of the other two rating agencies, Moody's and Fitch, confirmed their respective A3 and A- ratings while also complimenting the Department's performance. For your reference, I have appended the Water Department's section of the Philadelphia Planning Commission's Investing in Philadelphia, the 2003 through 2008 Capital Program, outlining our current approved program for infrastructure renewal and replacement. In addition, I understand that the City Treasurer has provided City Councilmembers with copies of the consultant's report prepared by the firm of Black & Veatch detailing our projected infrastructure needs and capital plans.
Based on our financial projections, we estimate that this plan debt issuance will finance our Capital Program for approximately two years beginning in FY 2004, as stated by the City Treasurer. 28 11/13/02 - FINANCE - BILL 020670, 020674 The current Fiscal Year 2003-2008 Capital Program emphasizes the renewal and replacement of the Water Department's vast infrastructure. Approximately $51 million per year will be spent to repair and replace water mains and sewers that are approaching the end of their useful life in order to prevent leaks and minimize unanticipated breaks. Approximately $4 million per year will be invested in storm flood relief projects in order to mitigate flooding and sections of the City that experience difficulties during major storm events. More than $22 million per year will fund our routine vehicle replacements, large meter rotation, and the engineering and administrative staff who work exclusively on capital projects. Approximately $50 million annually will be invested in the maintenance of our six water and wastewater treatment plants and our bio-solids recycle center to ensure that our drinking water continues to be safe, that our rivers and streams continue to become cleaner with each passing year. I want to take this opportunity to thank 29 11/13/02 - FINANCE - BILL 020670, 020674 you, Chairwoman Blackwell, and all the Members of your Committee for all the assistance you have provided to the Water Department over the years. Your help and cooperation has enabled the Water Department to better manage its rates and finances to the benefit of all of our customers. I will be happy to answer any questions that you may have.
Thank you, Commissioner Brunwasser. Councilman Nutter, you have a question.
Thank you, Madam Chair. I must say, Mr. Brunwasser, that was some of the more riveting testimony that we've heard here in recent times in Council, and I certainly look forward to your return visit to us at a future point in time. I'm going to take this testimony home and reread it. Let me ask you a couple questions about your testimony. First, how and when will you decide to execute this particular transaction, this Swaption?
Before we can execute the Swaption, we need authorization from Council and 30 11/13/02 - FINANCE - BILL 020670, 020674 also we need a signature, a signed ordinance by the Mayor. But our -- the transaction is predicated upon us receiving at least 3 1/2 percent present value savings. As I said in my testimony, that's roughly $13.3 million. Currently, the value of the swap was up to $37.9 million. So it looks more than likely that we will execute the Swaption as soon as we get the proper documents through Council and through the Mayor's Office. We're hoping to execute this transaction around November 25th, if all things go right.
Now, when you say the documents, are you talking about the two bills specifically that are in front of us, or are you talking about additional legislation?
So if I understood you correctly, if these bills go forward, then you're anticipating somewhere in the next two weeks in executing the transaction; is that the answer?
In the fifth paragraph of your testimony, Mr. Brunwasser, you 31 11/13/02 - FINANCE - BILL 020670, 020674 make reference to "If the Swaption is exercised, the Department intends to take the up-front premium payment, less transaction fees, and put it into a professionally managed escrow account." Who manages the account?
Councilman Nutter, that would be up to the City Treasurer to determine.
We haven't determined which financial institution at this point would manage that account.
I assume it's going to be one of the companies that already manages pension fund dollars. I mean, who would be a likely entity to do this? I mean, you're not going to bring somebody on new just to manage $20 million, are you?
Right now we have Salomon Smith Barney managing some of our Gas Works money, and also PFM manages some other Gas Works money -- I mean the water money. I'm sorry.
We're in water, right? 32 11/13/02 - FINANCE - BILL 020670, 020674
You really don't want gas and water kind of mixing. (Laughter.)
It's not a good thing. This report, the consultant report, the name of this firm is Black and Veatch, is it?
That's correct. They're an international firm. Their main headquarters is Kansas City.
I notice that. And I appreciate the international nature of what they do. What's their business?
Well, they are a large engineering firm. They have engineering projects all over the world, but also they do -- their management division is the division that we deal with routinely for bond engineering work. So what they will do, of course, is come in prior to a bond issue and review -- take a look at our facilities and give us a physical assessment of the facilities 33 11/13/02 - FINANCE - BILL 020670, 020674 of the Water Department and also do a financial feasibility: Can the department support the debt on the new bond issue? So first of all, they're telling the bondholder, This place is not going to fall apart while you try to earn interest on your bonds. And also, that the likelihood of prompt payment of principal of interest every six months or whenever is also likely.
Have they been doing work for the Water Department or the City for sometime?
So we have an 21 established, long history with them? 22
And, what, they're 24 under a regular contract with us? How does that 25 work? 34 11/13/02 - FINANCE - BILL 020670, 020674
A personal services contract. And we have a renewal contract. They're also our rate consultants. And in many ways both bond sales and rate projection go hand in hand. In fact, in their letter report there's an attached table which projects revenues and expenses, I believe through Fiscal 2008. Going a little bit further, you'll see that there are revenue requirements beyond our current rate schedule of increases beginning in Fiscal 2005 on out of approximately 6 percent increased revenue requirement. What we're planning to do with this Swaption premium is to invest that money after we receive it and begin to draw down, beginning in 2005, to mitigate the size of those rate increases.
Well, are you saying that you are anticipating a new series of rate increases at or around that time?
Yes. I would anticipate, based on the numbers today, that we will have to go out for some moderate rate increases beginning in Fiscal 2005 -- July 1, 2004, and that is a possibility. If for some reason there's 35 11/13/02 - FINANCE - BILL 020670, 020674 tremendous savings or we get another windfall of some type, theoretically you could push something off, but the way the bond engineers see it and the way we see it at the moment is likely to be some need for rate relief.
Aren't we in at the start or in the middle of current rate increase?
Is there a three-year rate increase that's going on right now?
We're in the second year. The third year begins July 1, 2003. And for a residential customer, typical residential customer will see a 1.5 percent increase in their bill, equivalent to about 65 cents a month. Senior citizens will see virtually no change in their bill 22 on July 1st.
Are there any 36 11/13/02 - FINANCE - BILL 020670, 020674 further questions from Members of the Committee? Councilman Kenney.
Yes. Normally with entities like the Hospital Higher Education Facilities Authority, they normally attach to their testimony a list of professional service providers that are involved with the deal. Do you have any similar such list or could you tell us who the bond counsels and --
Do you know who they are offhand and what the fees are associated with? That, you can give me at a later date, the fees.
Well, the fees haven't been determined yet, but I will provide that.
Is there a certain percentage that's applied to a deal like this?
Our normal rule is we like to keep cost of insurance to about 2 percent of the deal or less.
You want the names of the 37 11/13/02 - FINANCE - BILL 020670, 020674 professionals?
On the Swaption deal, the bond counsel is Klinebard Bell & Brecker. FAs are PG Corps and Phoenix Capital (ph) and the Swaption agent is Salomon Smith Barney.
And that's just for the water, that's for two water issuance.
That's just for the Swaption. For the actual variable rate bond ordinance, co-bond counsel will be Klinebard Bell & Brecker, Susan Evans, and the re-marketing agent again will be Salomon Smith Barney. And the rest of the financing team has not been named yet.
Thank you very much. Any further questions? (No response.)
Thank you very much. You already said you require suspension of the rules; is that correct?
Thank you, Mr. 38 11/13/02 - FINANCE - BILL 020606 Kemp. We will now have the Clerk read the title to Bill No. 020606 dealing with installment payments for senior citizens. And then we'll deal the last issue for which I understand we have a few questions.
Bill No. 020606, an Ordinance amending Section 19-1305 of the Philadelphia Code, entitled "Authorization for Installment Payment Agreements, Waiving Additions to Tax and Abating Interest and Penalties Otherwise Due Pursuant to Section 19-1303," by providing for installment payment agreements for senior citizens, under certain terms and conditions.
Is there anyone here who would like to testify on this bill? Is there anyone at all? (No response.)
This is for installment payments for senior citizens. This bill will be held at the request of the sponsor. The next is our fund bill, bills No. 25 020675 and 020676. Will the Clerk plead read the 39 11/13/02 - FINANCE - BILL 020675, 020676 title of both bills? And while he is preparing to do that we'll ask Mr. Joseph Bogdonavage, Senior Vice President of PGW and whomever else would like to testify on this bill to come forward. I see Corey Kemp our Treasurer. Thank you. Clerk.
Bill No. 020675, an ordinance constituting the Fifth Supplemental Ordinance to the General Gas Works Revenue Bond Ordinance of 1998, authorizing the Mayor, the City Controller and the City Solicitor, or a majority of them, to sell, either at public or private sale, Gas Works Revenue Bonds, Fourth Series, of the City of Philadelphia, in one or more subseries to be issued to pay the cost of certain capital projects and other Project Costs, as hereinafter more particularly described, and authorizing the application of proceeds of the Fourth Series of Bonds for such purposes; authorizing the City of Philadelphia to obtain credit enhancement for the Fourth Series Bonds; authorizing the City of Philadelphia to enter into Qualified Swap Agreements 40 11/13/02 - FINANCE - BILL 020675, 020676 or Exchange Agreements with respect to the Fourth Series Bonds; determining the sufficiency of Gas Works Revenues; all under certain terms and conditions. And Bill No. 020676, an ordinance 7 constituting the Seventeenth Supplemental Ordinance 8 to the General Gas Works Revenue Bond Ordinance of 1975; authorizing the Mayor, the City Controller and the City Solicitor, or a majority of them, to sell, either at public or private sale, Gas Works Revenue Bonds, Seventeenth Series, of the City of Philadelphia, in one or more subseries to be issued to pay the cost of refunding or redeeming all or a portion of certain outstanding Gas Works Revenue Bonds and other Project Costs, as hereinafter more particularly described, and authorizing the application of proceeds of the Seventeenth Series Bonds for such purposes; authorizing the City of Philadelphia to obtain credit enhancement for the Seventeenth Series Bonds, authorizing the City of Philadelphia to enter into swap agreements or exchange agreements with respect to the Seventeenth Series Bonds and determining the sufficiency of project revenues, all under certain terms and 41 11/13/02 - FINANCE - BILL 020675, 020676 conditions.
Thank you very much. Please identify yourself for the record and begin your testimony.
Good afternoon, Chairwoman Blackwell and Members of the Committee on Finance. I'm Corey Kemp, City Treasurer for the City of Philadelphia. With me is Tom Knudsen and Joe Bogdonavage of PGW. We're here to testify on behalf of Bill No. 020675 and 020676. Council Bill 020676 will authorize the City to refinance a portion of the outstanding 14th Series Gas Works Revenue Bonds in the amount not to exceed $200 million. The City on behalf of the Philadelphia Gas Works seeks to refinance approximately $180 million outstanding debt to achieve a net present value savings of approximately $11.8 million. This is a 6.68 percent present value savings. The industry standard for refinancing is 3 percent present value savings. The second Council Bill 020675 authorizes the City to sell no more than $125 million of bonds on behalf of the Gas Works to 42 11/13/02 - FINANCE - BILL 020675, 020676 help fund the Gas Works Capital Program. The Gas Works representatives will go into more detail about their Capital Program. The Gas Works does not anticipate seeking additional Capital Funds until Fiscal Year 2005 or beyond. All revenues pledged to secure the payment of the bonds will be derived from rates and fees charged or imposed by the Philadelphia Gas Works. None of the bonds that will be issued under this ordinance will have any recourse to the revenues of the City's General Fund. Finally, as required by Section 8 of the First Class Revenue Bond Act, Section 4.03A of the Gas Works Revenue Bond Ordinance of 1998 and Section 16 4.03A of the General Gas Works Revenue Bond Ordinance of 1975. The Director of Finance has furnished a financial report regarding the financial viability of the Philadelphia Gas Works system and its ability to repay this additional debt. This concludes my testimony. I am happy to answer any questions you may have on this matter. And, again, I will be requesting a suspension of the rules.
Thank you very 43 11/13/02 - FINANCE - BILL 020675, 020676 much. Can you explain if PGW is planning to acquire land as part of its program?
If I may, I didn't introduce myself. I'm Joseph R. Bogdonavage, Senior Vice President for Finance at PGW. As part of our PGW's capital programs that will be introduced to Council later this calendar year, PGW has a proposal to purchase or acquire a small piece of land adjacent to our Richman plant along the Delaware River. Currently, PGW has all of its facilities titled in the name of the City of Philadelphia. PGW right now, I think, is trying to acquire this one parcel of land I think that's currently titled to PIDC so that at this point in time, we did provide a very small portion of the proceeds of the new money funding issue to acquiring land. However, since the land may be in the title of the Philadelphia, there may be no 21 exchange of proceeds for the purchase of this land parcel.
Thank you. In view of the Company's recent turn-around, do you still hear in your circles talk 44 11/13/02 - FINANCE - BILL 020675, 020676 of selling PGW, or has that finally been -- has that discussion disappeared?
I'll defer that question probably either to Corey or to Mr. Knudsen, the president of the company.
Councilwoman Blackwell and Members of the Committee. My name is Tom Knudsen, I'm President and CEO of PGW. To address that question, as far as the company is aware, all activity on any proposed or suggested sale to PGW has been suspended. Lehman Brothers is no longer under contract. We know of no 14 activity or active participation on any parties right now.
Thank you very much. I believe you mentioned this yesterday. When did you say you anticipate repaying the loan the City made?
Per the agreement with the City Council of earlier in the year, we anticipate paying the loan back by August of 2006. But to that point, I'd like Mr. Bogdonavage to explain exactly how that's working right now. 45 11/13/02 - FINANCE - BILL 020675, 020676
Currently, with City Council's approval earlier this year, we had an extension of the repayment terms of the loan until August of 2006. As a result of Council's approval of this loan, PGW utilizes this $45 million as a revolving letter of credit or line of credit, and this loan is outstanding in its entirety during parts of the fiscal period and also its repaid in its entirety at points in time. Currently, as we speak, we have the full $45 million outstanding. Our agreement with the City Finance Director, Ms. Davis, is that on a daily basis PGW will put in any excess cash receipts that it receives through its payments from customers to repay this loan at a level that is commiserate with PGW's ability to have sufficient cash flow to pay our bills on a timely basis. But this loan has been repaid many times since it's been first made available in December of 2000, and it has been utilized over that course of time to its full extent for a better part of the last 18 months. So PGW is utilizing this now as a short-term component to fund its operating needs on a daily basis. So that anytime we have this loan outstanding, we try to 46 11/13/02 - FINANCE - BILL 020675, 020676 retire the outstanding portion of our interest-bearing debt, being the short-term commercial paper program that PGW also has outstanding to the tune of about $80 million.
Thank you. My final question is, would you explain for the record the recent implementation of the Weather Normalization Adjustment and how it works and how it impacts seniors and those on a fixed income?
Yes, I will. As part of PGW's most recent rate settlement with the Pennsylvania Public Utility Commission, we were granted in its entirety over the course of this fiscal year about $70 million in rate increases, base rate permanent increase, to help alleviate the cash flow and liquidity problems PGW has had in the past. The Weather Normalization is a clause that is probably going to take the single biggest risk away from PGW during its heating season. PGW will be the first LDC in the State of Pennsylvania, a distributing company, that has the ability to now put into place a Weather Normalization Adjustment. To try to be brief in how this thing works, the Weather Normalization Clause will only be 47 11/13/02 - FINANCE - BILL 020675, 020676 effective during the heating season. Going forward, this will be October through April of each year. And on the one month delay, what PGW is attempting to do is as a result of the warm weather that we've experienced over the four or five winter heating seasons, PGW has lost the ability to recover from ratepayers its margins to pay operating and maintenance expenses. What the Weather Normalization Adjustment will now allow us to do is that we will be able to pass on in times of warmer weather a slightly higher component of the bill to help pay O&M expenses which are fixed. And also in periods of colder weather, PGW will not be reaping any win-fall as a result of colder weather where we'd be billing customers in excess of their normal usage. So in periods of time when it is colder during a heating system, the customers will actually get a credit back on their bill. The biggest part of this is that have PGW will, based on a historical average of what a customer uses of their base load, we will now be putting together with an adjustment for weather on a monthly basis a component of their bill to recover our fixed O&M charges that were not utilized by the customer as a result of warmer 48 11/13/02 - FINANCE - BILL 020675, 020676 weather. Now, this clause has a 1 percent dead band it, so that anytime the customer uses in colder periods 1 percent or more will have a credit on the bill. Anytime the customer uses less than 1 percent in a month compared to normal weather, we will be adding a component to their bill to recover the fixed O&M charges. Now, this Weather Normalization Clause will apply to all customers under the general service category, which includes residential, commercial, industrial, the Housing Authority and also the City of Philadelphia. The impact that this will have on low income customers that participate in the CRP Program is minimal. Those customers will still have their asked-to-pay amounts held at the current levels. This will be passed through our gas cost rate. On the Senior Citizens Discount, those customers who participate in that program will have this weather normalization adjustment reduced in its totality in the bill by 20 percent as it currently is for all charges.
Thank you very much. Councilwoman Tasco. 49 11/13/02 - FINANCE - BILL 020675, 020676
Sort of like in layperson's terms so when our constituents call us, we can tell them because I can't tell them that.
I understand that, Councilwoman. Let me try a more poignant discussion. In the past winter of 2002, PGW experienced unprecedented warm temperatures in the most recent Fiscal Year. It was percent warmer 14 than normal. In the past three or four years, we 15 had probably been around 8 to 10 percent warmer than 16 normal. So what has happened is in the last year, 17 PGW did not bill the customers as a result of the 18 warmer weather about 10 cubic feet of gas usage that 19 normally would have associated weather patterns that 20 were normal. As a result of that, PGW did not get 21 the ability to bill to customers almost $40 million 22 of revenues that would have helped pay off all of 23 our operating and maintenance expenses and any of our principal and interest and other obligations. As a result of this Weather Clause, 50 11/13/02 - FINANCE - BILL 020675, 020676 taking that as a hypothetical, we would be able to recoup now 1 percent of that would now stay in the dead band. So we would be able to recover -- as I pointed out, it was 23 percent warmer during the heating season. We would be able to recover all but 1 percent of the 40 million by charging the customers for that usage that did not occur as a result of the warmer weather.
As an example, in the month of January last year, January was percent 14 warmer than normal. In that month, PGW would have 15 put through for the use of the 500,000-plus 16 customers we have of about 10 billion cubic feet of 17 gas. As a result of the warmer temperature in 18 January, we only put through the pipes for usage by 19 customers about 8 billion cubic feet. We lost the 20 ability to recover 2 billion cubic feet at $4 or approximately $8 million in margins that we would been able to pay our bills and also to pay back our short-term debt. So what we're now planing to do as a result of the approval by the Pennsylvania Public 51 11/13/02 - FINANCE - BILL 020675, 020676 Utility Commission is we will now be able to bill 3 that $8 million on a one-month delay to customers in the succeeding month. And to the converse of that, if in fact this year as the month of November is currently progressing -- it is about 5 percent colder than normal. So as a result, what we're planning to do, and hopefully this will come to fruition, in the first installment of this which will go out in the December bills to all customers that under the general service category, they will be receiving about a 4 percent discount on the usage that was put through the pipes to them because it was slightly colder. So PGW will not be recouping any win-fall of this. We will be returning anything above 1 percent on the heating load that this customer utilized back as a credit on their bill. So for an average customer in the month of November, we're probably looking, if it's 5 percent colder, we're probably looking at somewhere around 2 to $3 as a credit on the customer's bill. To take the extreme that occurred last year in 2002 because it was so warm, we were probably looking to recoup about $80 over the course 52 11/13/02 - FINANCE - BILL 020675, 020676 of the year on average or probably about to $10 per month. So that in the instant matter at hand, which is the current month, we're probably looking, if weather patterns hold, a customer will actually get a small reduction in their gas bill when the bill is delivered in the month of December.
That's definitely clearer. I appreciate that. Thank you.
As you know, the Gas Commission had not approved this program when you brought it to us. What is the difference in the program approved by the PUC and the program that you submitted to the Gas Commission?
Councilwoman, I'm not that familiar with what program was brought forth to the Gas Commission years ago, but as I pointed out, this PUC proposal that has been accepted and approved by them is the first in the State for any local distribution company. And I have personally no knowledge of what the differential may have been between this proposal and what was brought to the 53 11/13/02 - FINANCE - BILL 020675, 020676 Gas Commission in years past.
So are you saying that Philadelphia is the only utility that has this program?
In the State of Pennsylvania, I'm aware of no other utility that has a Weather Normalization Clause.
Do you have any notion that the PUC would approve this kind of program for another utility in the State? You cast it one way, and it can be looked at in another way. Why did they grant Philadelphia this consideration and not grant it to other LDC's across the State?
I'm not aware that other utilities have asked for this approval in the past. I think now that we've broken the precedent, there's probably other distribution companies in gas and also in electric that probably would be taking another look at this. I think the overriding issue for this that PGW over the last four or five years has had a tremendous exposure financially because of the warmer weather. 54 11/13/02 - FINANCE - BILL 020675, 020676 As part of the settlement that we reached with the Public Utility Commission in our base rate increase, this was the one reason why we did not pursue the full amount of the rate increase which PGW had originally filed at $60 million. We settled for 36 million only because we had the ability to have the Weather Clause in place which would mitigate any financial risk to us and also take away any win-falls into the future. But as a result of what's been happening to PGW and its attempts to get into the capital markets and the financial community, you know, senior management at the company, along with the Board of Directors, thought that this was a prudent way of approaching the thing going into the future so that we weren't asking for permanent base rate increases, but all we were trying to do is mitigate any financial exposure as a result of weather, which has been one of our biggest risks over the last five years.
I know a lot of this discussion has taken place before the Gas Commission relative to your budget, but because we do have an agreement ordinance passed by City 55 11/13/02 - FINANCE - BILL 020675, 020676 Council, I think some of the issues are very important to place on the record here in Council so that Councilmembers can have a clear -- somewhat of an understanding of the financial health of PGW and some of the issues that we have raised which they may not be privy to. So I'm going to ask you some questions mainly because I think we ought to know, the committee should know and also we ought to have it on our record. Is it true that PGW's financial forecasts show that it expects to have additional bonds again, requests in 2005 and December 2007?
PGW's financial forecast that was submitted to the Philadelphia Gas Commission and utilized in the Black & Veatch study based on the projected capital spending we have in our five-year forecast, there is the projection that we will be going back to the bond market, as you pointed out, in 2005. And I think the final year in 2008 we will be going back into the markets probably for issuances of about $250 million to fund capital expenditures over the next five years. Under the current plan we expect to be able with our rates that had been put in permanently 56 11/13/02 - FINANCE - BILL 020675, 020676 for reduction and short-term debt to turn some of that around, but you are correct that over the five-year horizon currently after this issue, if approved by Council goes forward, we'll have very close to a billion dollars of debt that will drop down to about $900 million after two years. But with another issue the horizon out to 2008 is that we'll have made very little inroads into reducing the long-term component of PGW's debt.
Do you have any idea about how we could begin to address lowering that debt without continuing to issue the bonds? Do we have any plan or strategy for looking to strengthen the health of the company?
Well, one way we'll do it is by the one bill that's in front of you, is by doing some type of refinances and refundings when the market is right, like right now. We're looking at a present value savings of $11.8 million. I don't have the number of what that would save on an annual basis, but I will definitely get that to you. We're constantly monitoring PGW's debt in terms of seeing which bonds we can refinance and lower that debt service. That's one way we can do 57 11/13/02 - FINANCE - BILL 020675, 020676 it.
Councilwoman Tasco, there's two elements to PGW's program. One is to contain and reduce our operating costs, our day-to-day ongoing requirements. And the other is that we have a substantial population that don't pay their bill or all of their bill and we have to find ways to make it possible for those folks to help us out more. We have a substantial receivable all of the time. It is that fact and probably that fact alone that keeps us where we are.
What is the -- I know we have a large population that's on the CRP program, but our rates are the highest in the state, PGW rates.
Higher than PECO. PECO has a low income population also. Why are our rates so high?
PECO Gas does not have the higher percentage of low-income customers as we, and 58 11/13/02 - FINANCE - BILL 020675, 020676 they also have the opportunity to spread their problems over a larger base and over a larger commercial and industrial base. So all we have by and large is a residential base, and it's that particular problem that we're trying to grapple with.
You talked about cutting costs. What are you doing to -- what are some of the costs you are addressing?
Well, to give you an idea, in I think it was 1988 or '89 we had about 2900 employees. When I came in early 2000, we had just over 2000 employees. Right now we have about 1750 employees. So we have been -- and this is a major variable cost. We have been steadily reducing the number of people and attempting to raise the level of productivity. So that's one way that we're attempting to address this issue.
We do know that there are a number of employees who have PGW automobiles. We raised that issue at the Gas Commission. What are you trying to do to cut the use of automobiles?
We have a major initiative 59 11/13/02 - FINANCE - BILL 020675, 020676 at the company looking at all of our operations, our field operations, which is where the bulk of the automobiles are employed. And by the springtime I hope to have some direction on that problem. We do have a large population of folks who have business reasons to have cars, in terms of responding to emergencies and so forth. We want to make sure that that number is to the minimum, and we're studying that problem right now.
You raised an issue, and I lost my train of thought when you were answering the question about the cars. We also know one of the costs you have is the cost of the insurance for retirees.
What has been done about that? Has that issue been addressed?
It's very high up on my priorities right now. We are in active negotiations and discussions with the PGW Retirement Association attempting to reduce the obligations that we have to this group, specifically for medical care. There's a group of retirees who are under 65 but who have retired as a result of our 30-And-Out Program who -- 60 11/13/02 - FINANCE - BILL 020675, 020676 from whom, if we were able to get certain concessions from, could save us well over a million dollars a year in healthcare costs.
No, that does not have to be. That is a negotiation between us and the association and their membership. That is ongoing right now.
Well, have you addressed the issue of the healthcare payments for new employees that will be retiring? I mean, is this going to be an ongoing issue?
No. There is a certain amount of grandfathering here, but every employee that's been hired since 1996 has none of the traditional concessions that prior generations of employees have had.
So at some point, you will no longer have that obligation.
It will be a period of 61 11/13/02 - FINANCE - BILL 020675, 020676 time, but ultimately there will be no obligation, that's right.
Thank you, Madam Chair. Mr. Knudsen, I'd like to go back to a question that the Chair asked with regard to the conversations that have been going on for sometime, and until your answer I thought was ongoing, which was analysis around a possible sale of PGW. When was -- your words were, "Those efforts have been suspended." When did that happen?
I think this is a question for the Administration. But my understanding was that somewhere in the April-May time frame.
But that is a responsibility that is not mine and has not been 62 11/13/02 - FINANCE - BILL 020675, 020676 assigned to me; it has been retained by the Mayor's Office.
Your response was, "Those efforts have been suspended." My question was, when were those efforts suspend?
And it's my understanding that there was a company providing either PGW or the Administration a report of, I guess, their evaluation or analysis of a possible sale; is that correct?
They were looking at a -- I think it was a much more broad mandate. They were looking at all options for some disposition of PGW. But it was Lehman Brothers, and they've been at it for something like a year. I don't know the disposition of the report. I have never seen it.
Do you know if they 63 11/13/02 - FINANCE - BILL 020675, 020676 were paid for their work?
I don't know that. I'm assuming they would have been, but I don't know that for sure.
No, I do not. But I will talk to the Finance Director when she gets back and try to get you some updated information on this whole process.
I'd also be interested to know want the company was actually paid for their work and if a final report or a preliminary report or if a draft report or if various sheets of paper were ever separately assembled or combined by way of a paper clip, staple, or glue. I'm trying to cover all the possible ways we might -- In the course of the company's work, was there ever a meeting or a discussion with PGW about what they were doing or how they were doing it or what all the options were?
Yes. The consultants from Lehman came to the company probably a year ago, more 64 11/13/02 - FINANCE - BILL 020675, 020676 than a year ago, requested information, financial data. We gave it to them, interpreted to them, and they went away.
I don't know. There may have been four or five, six meetings.
Was it only of a financial nature? Did they ever talk to you about the actual operations of PGW, delivery of gas, how you do what you do, how is the company functioning and operating?
Mr. Bogdonavage was more directly involved with them. I'll let him answer.
Councilman, personally, my knowledge is that we probably had two, three, four meetings with representatives, ongoing discussions by way of phone with Lehman Brothers, and they did run the gamut from financial to some operational discussions regarding PGW's overall operation as an enterprise.
Do you know why -- I don't know what they call this thing. The analysis or the evaluation, do you know why this process was suspended? 65 11/13/02 - FINANCE - BILL 020675, 020676
I do not have personal knowledge of why it was suspended.
Your testimony earlier with regard to the $45 million loan, now, I was trying to remember, and I think you made reference to it later on, we initiated this loan sometime in 2000.
I think the ultimate repayment at that time was January 2003, so about 15 months. 16
And then I know we 17 extended it and now it's anticipated that you're 18 going to repay it August of '06; is that your 19 testimony? 20
The final repayment is 21 planned to be in 2006 and, if possible, as a result 22 of whatever cash reserves PGW can compile at that 23 point in time. It may be made sooner. 24
And what do you mean 25 when you say the final repayment? 66 11/13/02 - FINANCE - BILL 020675, 020676
As I pointed out a little earlier in testimony, we use this as a revolving letter of credit. And our agreement, as I pointed out, with the City Finance Director is first of all we would try to keep this loan outstanding so we could reduce our interest-laden commercial paper program and keep that balance to a minimum. And to the extent that both of these are simultaneously outstanding, any receipts over and above any requirements on a daily basis we put back into a segregated account of the City which they sweep the interest, I think, on a monthly basis. So it's interest-free to us, but any repayments into the segregated account for the 45 million, the City puts into the general fund. So that at any point in time, this loan is either fully outstanding, and in many cases during the springtime we had the loan fully repaid. But it was out there as a letter of credit to provide working capital.