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.
And I heard you say that and then I wrote down something you said that the loan had been repaid many times. Either you said that or Mr. Knudsen said that. And I was trying to -- so what do you mean when you say that? 67 11/13/02 - FINANCE - BILL 020675, 020676
Just to try clarify, when he says repaid, he means the money is set aside and the City earns the interest off that, but PGW still has the use of those funds. It hasn't actually transferred into the possession of the General Fund. That's what he's talking about when he said repaid. So it's segregated but not transferred.
That's the way we utilize it, yes. But part of the ordinance, I think, was that the ultimate repayment meant that the loan was repaid and at that point in time we would have to come back to Council for re-authorization if we needed it. This was the basic working relationship we worked out with the Finance Director, that it was a segregated account and that we initially would have repaid it in its entirety by January of 2003. And with Council's approval, we got an extension on the ultimate repayment to August of '06.
In the materials that you sent over to us with the pretty -- what is this, like magenta? It's a very pretty blue color. 68 11/13/02 - FINANCE - BILL 020675, 020676 On you have a question and answer section 3 here. The question is, "What happens if PGW does not complete the bond issue in December?" Your response is you've been directed by the Board as well as the PUC to provide for various services. And then it goes on, "To that end, PGW will have funded construction activities this fall and winter from its own operating funds flows. If the bonds are not sold, company will not be able to reimburse itself for these advances and will not have sufficient funds to operate the utility throughout the winter heating season." Do I read that to mean that you're using operating dollars for capital purposes?
There's a lot of segregation going on over there. You don't have to respond. That's fine. 69 11/13/02 - FINANCE - BILL 020675, 020676
PGW has a segregated Capital Improvement Fund which still had, as we speak, about $34 million in proceeds from the June 2001 sale. We plan to have -- the projects that we have identified in our 2003 Capital Budget are to the tune of about $80 million for the current Fiscal Year. We expected that some of those costs would have been incurred up to about 30 to 40 million which would have exhausted the Capital Improvement Fund proceeds available. As we speak, PGW's other liquidity that it has on a short-term basis is in fact the commercial paper letter of credit and this revolving loan that the City has provided. Both of those loans are fully outstanding as we speak today, and we expect it on a daily basis will make some inroads, but they will be outstanding until the better part of the winter season is over. So what we need to do is we need to have the proceeds from the bond sell, the new money issue deposited into the Capital Improvement Fund so that at this point in time PGW can then reimburse itself for the capital expenditures it will have already paid for out of operating funds up to the point that the bond 70 11/13/02 - FINANCE - BILL 020675, 020676 is sold. So we're trying to reimburse ourselves for the 30 to $40 million that we'll have spent from September up to January 1st. If in fact we don't get that replenishment of the capital funds, there will be severe pressure put on us to make the January 2nd debt service payment. So that right now what we're trying to do is find out basically whether or not we can go to market, have this instrument placed and the proceeds available. Otherwise, PGW will have to go back to the drawing board and really reign in its spending at this point and take a hard look at the capital expenditures over the next four to six months so that we live within our means.
Well, I understand the need for the capital. I guess what I was trying to understand was how is it that you're able to use operating funds for capital purposes? And if that's what it is that you're doing. Now, is that what you're doing?
On a daily basis that cash being fungible from all sources, that's a true statement. We do use operating funds. But on an annual basis -- 71 11/13/02 - FINANCE - BILL 020675, 020676
Well, based on legal opinion we have from counsel that, as I pointed out, we true up on an annual basis that only capital expenditures can be drawn out -- the proceeds from capital bonds being issued by PGW can only be utilized for capital purposes. So on an annual basis we true up that cost. On a contingent basis, on a daily basis -- currently right now, just as an example, PGW is currently earning probably about 1.46 percent overnight on any investment it might make. The Capital Improvement Fund is set aside in an account that earns almost four percent. So it would be imprudent at this point in time to draw money to reimburse ourselves for capital improvements when in fact I'd give away about 250 basis points and interest earnings. But going back to your point, PGW only uses capital proceeds for capital projects. On an interim basis, PGW does in fact borrow on a 72 11/13/02 - FINANCE - BILL 020675, 020676 intra-fund basis the capital proceeds to pay for O&M expenses. And then as we go through the year and legitimize capital spending over the course of the year, those funds are put back into the capital program proceeds account and/or they're used to pay for their capital projects as they're expended. So that PGW at the end of any fiscal year can never use operating funds over and above anything that it has drawn out of the capital fund for capital projects. There's a reconciling process that exists.
I'll be interested, and if you would request of the appropriate people, I'd like to see the legal opinion about that.
Thank you. Did you have a forward purchase agreement transaction over the summer?
Yes, we did. I think we closed on that transaction August 22nd of 2002.
The benefit to the company was that it took its singing fund reserve -- 73 11/13/02 - FINANCE - BILL 020675, 020676 actually there's two components, there's two ordinances still outstanding, the '75 bond ordinance 4 and '98. Under the '75, the earnings on the restricted account for PGW reside with the City. And then the '98 ordinance changed the language so that those funds in fact accrued back to PGW. But the combination or this forward purchase agreement was that the 1975 and 1998 ordinance we put out about $60 million of PGW sinking fund deposit. We were, on a net present value basis, given back by investment bankers $20.1 million for the transaction. This was to offset some of the margin loss we had during the 2002 fiscal period so that the $20.1 million went into project revenues to assure that PGW would maintain its bond coverage.
So what were the proceeds to PGW as a result of the forward purchase agreement?
The forward purchase agreement, PGW received 20.15 million.
And that money went directly to PGW? 74 11/13/02 - FINANCE - BILL 020675, 020676
As I said, a portion of it was our money to earn and a portion was granted back by the Finance Director through the City of Philadelphia.
And how was it granted back? Was there a transfer ordinance?
Not to speak for the Finance Director, but it's my understanding that she had some unencumbered appropriation powers since it was early on in the fiscal year and there was room in the budget to make that transfer. That was done out of the grants and indemnity account.
Well, I guess what I was trying to understand was -- I think we did one of these in --
'95, I seem to recall that there was an actual transfer from the City to PGW. We received the money in and then we sent it back out. In this particular instance, you did not follow that procedure? Is there anyone from finance here?
No, but it's my understanding 75 11/13/02 - FINANCE - BILL 020675, 020676 that that did happen, that transfer did happen.
Again, because it was early on in the fiscal year and we had some appropriation room where we were able to make this transfer without doing the appropriation transfer, but we're probably going to have to come back --
The fiscal year was a month and a half old at that point.
Correct. It's based on the budget that was approved, the 2003, PGW revenue budget.
I don't know the exact amount. Again, I don't want to speak for the Finance Director, but the amount that was 76 11/13/02 - FINANCE - BILL 020675, 020676 transferred was approximately $11 million.
Councilman, if I may, just to maybe shed a little light on this.
This transaction that took place, as I pointed out, was done on a net present value back to PGW or to the City of Philadelphia. We put the $60 million in potential reserves out for -- I think it was almost years 12 because of interest rates. So that at the end of 17 13 years, this will revert back to PGW's coffers for 14 interest earnings. 15 What happened was on a net present value 16 basis, the investment banker and the transaction 17 that was just completed provided to the City of Philadelphia that $20.15 million. So it's we got an advance on earnings for the next 17 years. So it's not like the City of Philadelphia used any of their funds per say out of the General Fund. There was a deposit made into the fund, 20.15 for the proceeds of this transaction. The City through the Finance Director granted back the applicable portion of this to PGW. 77 11/13/02 - FINANCE - BILL 020675, 020676
I understand that. I'm following the transaction, I'm following all the balls. What I'm trying to understand is in the previous situation exactly similar to this, the City received the money because I think, it's my understanding at least, that it is the City's money; it's not PGW's money. It should come to the City and then it should be transferred out in accordance with normal procedure and provisions of the City Charter. Sorry to be so technical about it. That didn't happen in this particular situation, and I'm trying to understand it. Is anybody from finance over here or get them over here? I mean, I'd just like to understand how the money is moving around because I have this little tendency to watch it.
Because the 1998 ordinance of which a part of this sinking fund reserve, the language was changed in the ordinance 23 so the money is no longer to accrue to the benefit to the City. It's to accrue to PGW. That was an ordinance change in 1998. 78 11/13/02 - FINANCE - BILL 020675, 020676
But wasn't part of this transaction covered by the '75 ordinance?
Then the portion that was covered by the '75 ordinance, did we have a transfer ordinance for that amount? I think the answer is no, right?
I wasn't privy to the transaction, but to the best of my knowledge, no, that did not happen. I'm just assuming right now that the transaction --
I want to talk about the 1995 transaction. I'm assuming that that probably happened later in the fiscal year where appropriations transfer was needed at that time.
Beginning, middle, end? You want to grant money out from the City, you have to do a transfer ordinance.
What I will do is -- 79 11/13/02 - FINANCE - BILL 020675, 020676
What I would suggest is you get somebody from finance over here to explain what finance did.
Would you like to have that today or can I do that at a later date?
Actually, I'd like to have it right now. And while we're waiting for that, as City Treasurer and for what you might be aware of, can you tell me about any other transactions that have taken place over the last couple years that may or may not have required Council approval? Are you aware of any?
Are you aware of any other transactions or transfers of funds that may have required Council approval for which such approval was not requested?
Did you have any pension obligation bond transactions recently?
We had a DECO transaction, Detachable Call Option where we sold the call options -- 80 11/13/02 - FINANCE - BILL 020675, 020676
It was a detachable call option. It was the 1999 pension bonds which had a call option in 2004. We sold that call option for a premium payment of approximately $6 million. What we gave up was our right to call those bonds in 2004. And that happened in July.
Do you know if any notice or any other information was sent over to City Council about that transaction?
There was a briefing of the Finance Committee on that transaction.
Do you remember who was there? 81 11/13/02 - FINANCE - BILL 020675, 020676
Yes, Councilwoman Blackwell, and I think Charles McPherson was present.
Well, the Councilwoman is the Chair of the Committee, and Mr. McPherson works on the Council President's staff. I don't remember anything about a briefing about that particular matter. To the best of my recollection, I think I was here almost all summer. I have a very exciting summer life.
Let me say to my colleague that all meetings, all briefings to which we are invited, we the invite the entire committee. It makes it easier.
I'm sure the Chair does. This is no issue with the Chair or about meetings or anything else. Any other transactions this past summer? During the course of the past year? Aviation fund? Enterprise bonds? Water Department?
There was an airport Swaption 82 11/13/02 - FINANCE - BILL 020675, 020676 done.
The airport signed a swap agreement with J.P. Morgan. In that swap agreement, we received an up-front payment of roughly 6.5 million. That was, again, to take advantage of the current low interest rate environment. Again, we briefed the Finance Chair on that transaction.
What happened to $6 million in savings from the pension obligation bond and the $6 million in savings from the aviation fund?
Again, the $6 million on the pension bond, that's an approximate number. It could be a little bit more than that. Currently, that investment is sitting in a CD to mature in April. At that point in time, it will be used to offset the City's payment to the pension fund.
Why was it placed in a CD. 83 11/13/02 - FINANCE - BILL 020675, 020676
At the current time, we got a higher interest return on the CD than what we were getting in money markets for our daily cash investments.
And what happened to the $6 million from the aviation fund savings?
That went into the aviation's operating account. I can't attest to what they used the monies for.
Any other transactions you want to tell us about today?
Because there aren't anymore or because you don't want to tell me?
I was just checking. Want to see if you're paying attention. Let me ask this question. Somewhere between the treasurer and the Finance Director, is there a particular policy with regard to whether or not you need our approval to actually engage in a 84 11/13/02 - FINANCE - BILL 020675, 020676 particular transaction? Is there a policy related to sharing information about these transactions and how they take place in a complete written explanation as to what the transaction is, what the savings are, where you anticipate the money going if you know about it, whether or not you have to get our approval or not? Is there a standard practice or policy?
There's nothing written, but what we have developed internally, if we -- if bond counsel in our Law Department deems that we do not have to get Council approval for a transaction, we do provide information to the Finance Chair and allow for any other representatives of City Council to be present. But we do run those briefings through the Finance Chair's office.
Thanks. Is anyone coming over from Finance to help you out?
While we're waiting, Councilman Kenney, do you have any questions?
Well, a number of 85 11/13/02 - FINANCE - BILL 020675, 020676 the questions that Councilman Nutter touched on. It had to do with the allocation or the expenditure that the City apparently made on the research of a potential sale or other disposition. And I know that Mr. Knudsen and others have indicated that they had very little or any knowledge of it. I know press reports have indicated upwards of a million dollars in fees for Lehman Brothers to do this work of non-existent or apparently nonexistent documents that can't be shared with the Board of Directors of this $3 billion company called the City of Philadelphia. So I guess we wait until the Finance Department person comes. Maybe they know where this document is or what its disposition or how much we paid. It is very, very unsettling and disturbing to see and hear at a public hearing that basically the Appropriations Committee of Council is a meaningless body that probably should be eliminated the way we're going. I am just fascinated that over the summer while we're not in session there's this continuing activity going on outside the government. I mean, it just flabbergasts me that we're in this situation. It's 86 11/13/02 - FINANCE - BILL 020675, 020676 amazing. I think we need to wait for Finance. As a mater of fact, I'm very glad that representatives from the City Controller's Office are here for the next hearing. Maybe they can learn about creative accounting in government and look into some of this stuff themselves. But this is just unbelievable to me sitting here listening to this line of questioning and getting very little, if any, answers and a lot of misdirection, frankly. So I'll wait for the Finance Department.
I'd like to go back to a couple other questions. In your book you state that Black & Veatch stated, and it's on , that PGW will receive 15 million per year in permanent base rate increase on a levelized basis over the 2006 through 2008 period. That's a very strong "will." I mean, don't you have to go to the PUC to get that? Do they know something that we don't know?
Black & Veatch was hired to perform a feasibility study for the bond per the ordinance and the Finance Director needs 87 11/13/02 - FINANCE - BILL 020675, 020676 that as a precursor to coming to Council for approval for the funding. Black & Veatch, as its assumed here and the report was made I think available to Council was one of their assumptions that in 2006 as a result of some cost increases that PGW had incurred prior to that was not on target to repay ultimately all of its short-term debt by 2006. So one of the assumptions that they made as an alternate scenario was that they wanted to assure everyone that, based on the 2001 report, PGW was on target to get out of short-term debt by 2006. And what they assumed was -- and maybe the language is a little less clear. Their assumption was there would be a $15 million effusion in three components and/or, which would be go to PUC for rates, come up with other revenue enhancements in the intervening time to provide that, or identify cost savings all to the tune of about $15 million. So you're absolutely correct, if in fact the only thing that we do other than cut costs and try to get another revenue enhancement, again, it's only their assumption of what they have in place that we would have to go to the PUC and request the base rate increase for a component of that, not all 88 11/13/02 - FINANCE - BILL 020675, 020676 of it.
So the assumption is that you will have to get a rate increase of 5 million a year? 6
No, it's an assumption 7 that we will be provided some source of funding 8 either through rates, through revenue enhancements 9 or cost savings. It's not directly a rate increase. 10
So let's go back to 11 cost savings which we've been hearing years and 12 years and years about cost savings. What are you 13 doing to cut costs, and how can you share that 14 information with this Council? And the areas where 15 you want to cut and the dollars associated with that cut. Because it seems that historically the route to take is to go and raise the rates. And then with the high rates we already have, the public can't continue to bear the financial burden of PGW. And PGW has to find a way to generate funds to keep it running without raising the ratepayers. They can't continue to pay these high rates.
I fully agree with your position. This management is committed not to raise rates, and we're going to do everything we can not 89 11/13/02 - FINANCE - BILL 020675, 020676 to. In fact, we'd like to at some point actually reduce rates if that's a possibility. I think the issue that we talked about earlier of reducing costs, we have reduced personnel costs substantially over the last two and a half to three years.
But you've already increased salaries, so what is the --
The increases in salaries have been substantially less than -- the reductions in personnel have more than offset any increases in salaries. Increases in salary have been a very small part of that overall savings. And basically the policy has been, what increases there have been, remember 1300 of our 1700 employees are in the union. They have had no increases across the board for two years and they'll have a 2 percent in the third year. That's what we negotiated. What they do have are progression increases. If they're in their position long enough, they have longevity and so forth. And that's about a half a million dollars a year for the union. For management, many management have not had an increase since April of 1999. Those 90 11/13/02 - FINANCE - BILL 020675, 020676 increases that we have put in place reflect changes of responsibilities. We have consolidated positions. Put, essentially, one person into two people's position, given them some amount of an increase but essentially saved on the position that we eliminated. That has been our general practice over the last several years. We have looked at these refinancings as a major benefit. We are looking at our collections from our customers. We have a substantial number of customers, as I indicated earlier, who do not pay their bill. That was possible because the computer system didn't track them well. One of the issues that we have, and Councilwoman Blackwell and I have been in conversation over this, we have our credit and collection effort and the computer in place to track people now very successfully. It was so successful that we ended up actually turning over 30,000 customers off this year. One of the problems in service right now is that a lot of these people want to get back on for the winter. Be that as it may, we didn't have that possibility over a two, two and a half year period. We have it now. So what we're trying to do is change an attitude toward PGW 91 11/13/02 - FINANCE - BILL 020675, 020676 which is from an attitude of entitlement by some large sector of our customers to a responsibility for payment. We'd like to move as many people as we can into the CRP Program. By and large we know that there's a large population of people who are low income who will not come into the CRP Program. We've got to create enticements for that so that we start to address some of these issues on a systematic basis. The other problem that we have is a very small percentage of our overall costs, if you put labor aside, a very small percentage, about $40 million is what we use to essentially operate the company on a day-to-day basis. We committed three years ago to reduce that number by million, 18 that and labor together. So we put a hundred 19 million and this 40 together. Out of $140 million 20 three years ago or two and a half years ago, we 21 committed to take out 25 million, which was about 20 22 percent, a little bit less, 15 percent. We were 23 successful in doing that. 24 The only problem this year was that we 25 turned around at the end of the year and because of 92 11/13/02 - FINANCE - BILL 020675, 020676 the deterioration in the financial markets, our pension costs were substantially more than they had been in the last four or five years. So we took a little bit of a hit there. But we are doing everything we can to drive the costs out of PGW and be more efficient. There's no question that productivity has gone up substantially there. Our field forces are doing many more jobs a day than they did two years ago, three years ago.
The cost to transfer regulation to the PUC has been in the millions. Have you a final bottom-line number of how much it cost for that transaction?
I think we supplied to the Commission for our expenses so far to date something over the last two and a half years of about $10 million for all of the mandated programs. What I think in that analysis one has to include are some of the what we'll call opportunity costs, the benefits of having that group oversee us at the present time. I mean, we faced -- because of the service problems that we were facing last year, we were facing a penalty of almost a million and a half per year in terms of being forced to out-source our 93 11/13/02 - FINANCE - BILL 020675, 020676 phone center if we didn't get it under control. So there's a bit of a carrot and stick with the PUC. We were able to address that problem. We did not incur that penalty, so that was a kind of a benefit that our being with the PUC sort of forced on us. But to answer your question directly, the major expenditure that we're facing right now is not the PUC; it the legislature. The legislature mandated that we would offer choice to our customers starting in September of next year. That initiative is going to cost us something on the order of 5 to $6 million. That's the major component of the number that we gave.
This is the choice for them to choose a gas supplier?
That's correct. So the computer systems, the training, the education of our customer base, all of that we're estimating at about $6 million. And that program is underway and is successful. We now have a pilot program in place for our commercial and industrial customers who choose their own gas supplier. And that is up and running right now and we'll get the benefit of this over the next year. 94 11/13/02 - FINANCE - BILL 020675, 020676
Francois Dutchie from the Law Department is here to respond to your question about the appropriation transfer.
My name is Francois Dutchie. I'm the Divisional Deputy City Solicitor for Financing Contracts with the Law Department.
Sure. It's F-R-A-N-C-O-I-S, and the last name D-U-T-C-H-I-E.
With regard to the issue that's been raised about the transfer that was done in the recent forward purchase agreement, the Law 95 11/13/02 - FINANCE - BILL 020675, 020676 Department believes that one or more of the amendments to the '75 ordinance contained a specific provision to authorize the Finance Director to make such transfers. We are having someone --
I'm afraid I don't have that information in front of me at the moment. We are having someone in our office look into that right now, and we would like to get a memo to the Committee within the next hour or two.
Well, I do appreciate that. I figure anytime you ask a question of the Finance Department and they send someone from the Law Department over, it must be a pretty serious matter. So your testimony is you believe you had the authority to do what you did although you're not clear at the moment as to what that authority was, and you think within the next hour you'll figure that out and then you'll send me a memo about it; is that the deal?
Basically that's correct. It is the recollection of someone in the Law 96 11/13/02 - FINANCE - BILL 020675, 020676 Department that there is an amendment that contains this authorization, and we are attempting to find that and get that to you as quickly as we can.
And do you believe that this -- because the earlier testimony which you may not have had the benefit of because I know you guys are not sitting over in the Law Department listening to this testimony, the previous testimony was that part of this transaction was actually covered by the 1975 ordinance which does require that the money come to the City and then a subsequent granting of those dollars and a portion covered is by the '98 ordinance to which you're referring to, the unknown --
No, no. The amendment that I'm referring to is to the '75 ordinance, not the '98 ordinance.
Completely amends the '75 ordinance and gives the authority, that's what you're saying?
But we're not clear at the moment what the language is?
And so you're going to have a memo over to the chair when?
Thank you, Madam Chair. Perhaps you have the ability to answer this, perhaps you don't, Mr. Dutchie, but I'm wondering whether or not you feel or in your opinion there would be any harm incurred if this transfer of dollars went through the Appropriations Committee of City Council as opposed to directly from the Finance Director to the Gas Works. Do you see any major problem with having that issue come before the Appropriations Committee?
So could you venture a guess as to what the strategy was in the first 98 11/13/02 - FINANCE - BILL 020675, 020676 place to rather than send it through what would be normally -- I guess the concern is, and it's my continuing concern, frankly, that without public scrutiny of these public dollars -- they're public dollars, and public dollars should be dispensed and appropriated and dealt with in a public way. If the Councilmembers themselves aren't aware of what's going on, the public certainly isn't. And if this stuff is done and these kinds of actions are taken over the summer during the course of some belief that you have a right to do it or a legal right to do it doesn't make it right, doesn't it make it correct, and doesn't make it a kind of action that engenders a great amount of confidence in the openness of the government on behalf of its taxpayers and citizens. I can't see -- I can't imagine a reason why this very simple short public hearing of the Appropriations Committee couldn't have taken place and had this transfer accomplished in the same way in an above-board, open way that everyone would know about it. I mean, it's just my opinion, but I was elected to exercise that opinion and I just think these kind of actions are just really in the worst interest of an open government 99 11/13/02 - FINANCE - BILL 020675, 020676 that the people can understand. Thank you.
Madam Chair, I have two last questions. They'll be quick. I'm sorry.
Mr. Dutchie, when you do the research, when you find the particular provision -- and you're saying that it was in the 1998 General Gas Works revenue bond ordinance?
No, that's not what I said. I said that we believe that there are a number of amendments to the '75 ordinance. We believe that in one of those amendments the authorization that I spoke of exists. I'm not saying --
When you track that down, what I'd like you to put in the memo that you're going to send over to the Chair, I'd like you to identify the particular provision. I'd like you to go back to when we actually had the hearing on that particular bill which resulted in that 100 11/13/02 - FINANCE - BILL 020675, 020676 particular amendment, and I'd like you to tell us whether it was identified in that particular amendment that we were making a material change in authorization on behalf of the Director of Finance to engage in this type of transaction and transfer of funds as compared to what had been the practice under ordinance in previous situations.
Okay. But I'd like to know whether we were actually told that that's what was going on in that particular ordinance. The second question is -- and I know you're not from Finance, but you're representing Finance. What's the account code for the unencumbered appropriation?
I mean, you need an account code to make the transfer I'm assuming, right?
I mean, I might have some items that I'd like to get done, so I'd really like to have account code for unencumbered appropriation line item.
Well, I'll get that account code and include it in Mr. Dutchie's memo to you.
You might want to talk to your counsel about that. But if you want to send it over, I'd love to have it. I mean, I've never had access to $3 billion. Thank you very much. I'll look forward to getting the information through the Chair. Thank you.
Thank you, Madam Chair. Just one additional addendum to Councilman Nutter's request. I would like to hear from bond counsel on this in an official way. I would like to know what bond counsel's opinion on these actions is, whether or not they in fact concur with the supposed position of the Law Department which will be forth coming. I would like to know 102 11/13/02 - FINANCE - BILL 020675, 020676 what bond counsel thinks of this because I tend to think they may have a different attitude about --
Just to note, we spoke with bond counsel this morning on that, and she was in agreement that this was appropriate.
Thank you very much. Are there anymore questions? (No response.)
This will then end the stated hearing part of our Finance Committee. 103 11/13/02 - FINANCE - BILL 020675, 020676 - - - 104 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING COMMITTEE ON FINANCE - - - Wednesday, November 13, 2002 - - - Public Meeting conducted by the Committee on Finance, held in Room 696, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: BILLS 020665, 020670, 020674, 020677. - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL, Chair COUNCILWOMAN MARIAN TASCO COUNCILMAN DAVID COHEN COUNCILMAN FRANK DICICCO COUNCILMAN JAMES KENNEY COUNCILMAN MICHAEL NUTTER - - - 105 11/13/02 - FINANCE - PUBLIC MEETING
We will enter into our stated meeting. Bill No. 020606 is being held. We will ask the Vice Chair of the Committee to give us a motion with a suspension of the rules to report Bill No. 020665 out of this Committee with a favorable recommendation and a recommendation for suspension of the rules. Councilman Nutter, would you give us a motion with regard to Bill No. 020665 with a rules suspension.
Thank you, Madam Chair. Madam Chair, I move that Bill 020665 be reported out of this Committee with a favorable recommendation, a further recommendation that the Rules of Council be suspended so as to permit first reading at our next session. (Duly seconded.)
It has been moved and seconded that Bill No. 020665 be reported out of Committee with a suspension of the rules and with a favorable recommendation. All in favor? (Aye.) 106 11/13/02 - FINANCE - PUBLIC MEETING
The ayes have it. That bill is passed. We will now entertain a motion with regard to Bill No. 020670 and 020674. Councilman Nutter.
Thank you, Madam Chair. I move that Bill 020670 be reported out of this committee with a favorable recommendation, a further recommendation that the Rules of Council be suspended so as to permit first reading at our next session. (Duly seconded.)
It has been moved and seconded that Bill No. 020670 be reported out of Committee with a favorable recommendation and with a suspension of the rules so to be heard at our next Session of Council. All in favor? (Aye.)
And so it is 107 11/13/02 - FINANCE - PUBLIC MEETING passed. Councilman Kenney, we'll entertain a motion with regard to Bill No. 020674.
Madam Chair, I move that Bill No. 020674 be reported out of this Committee favorably, and a request made for rules suspension to allow for first reading at our next Council Session. (Duly seconded.)
It has been moved and seconded that Bill No. 020674 be reported out of Committee with a favorable recommendation and with a suspension of the rules. All in favor? (Aye.)
The ayes have it and so it is passed. Councilman Nutter, would you give me a motion with regard to Bill No. 020677.
Madam Chair, I move that Bill 020677 be reported out of Committee with a favorable recommendation, a further recommendation 108 11/13/02 - FINANCE - PUBLIC MEETING that the Rules of Council be suspended so as to permit first reading at our next session. (Duly seconded.)
It has been moved and seconded that Bill No. 020677 be reported out of committee with a favorable recommendation and also a recommendation that the Rules of Council be suspended so as to permit first reading at our next Session of Council. All in favor? (Aye.)
The ayes have it, and so the bill is passed. At the request of the majority Members of Council, Bill Nos. 020675 and 020676 will be held pending receipt of documents requested. Thank you very much. That will end our hearing. Those who are here for Committee of the Whole on tax bills, we welcome you to stay. This hearing is adjourned. Thank you very much. Thank you to everyone. 109 11/13/02 - FINANCE - PUBLIC MEETING (Council adjourned at 2:17 p.m.) - - - 110 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of November 13, 2002, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON FINANCE ___________________________ Lisa C. Bradley, RPR and Notary Public