If you were to defend it in court -- and maybe this is a question for the City Solicitor, I'm not talking about the BIRT because that's your theory -- I'm talking about how much would we be spending in legal fees to defend it in court approximately if we were to defend it in court?
The idea of getting rid of the exemptions for BIRT and Use & Occupancy, that's a decision that's made by you all, correct?
And this is something that we will have to settle in -- this is a settlement that you're going through, through court?
Nope, nope. I'll save it for the City Solicitor because I'm going somewhere with this. I just want to be clear as to whether or not this is a decision that the Administration is making or is this legislation that you're asking City Council to pass. Which one is it?
It's the latter. We need to have legislation to end the exemption.
So technically, it's not a court settlement. It's technically legislation that you're asking us to pass in lieu of a court settlement?
Okay. All right. We can do that in a conversation. But if that is the direction that you're proposing to go in -- I understand that you're trying to create a grant program, let's put that to the side -- if we know businesses, if adopted, will end up paying more in taxes, small businesses, why wouldn't we see more of a reduction in BIRT? If we're going to tax the smaller businesses in ways that they've never been taxed in recent history, that means that we can anticipate more BIRT revenue coming in, correct?
So why wouldn't we lower the net income portion of the BIRT even more than what you're recommending if we anticipate new revenue coming in because we're getting rid of the exemption on Use & Occupancy -- I mean, because we're getting rid of the $100,000 exemption?
So the proposal that we're making is we'll get about 30 million more a year from the BIRT. And our proposal is to put that into the grant and tax preparation advice that we can --
Let me just say why. Let me just say why I'm thinking that. Because if you create a grant program, there's no guarantee that the people who are benefiting from the grant program are the same demographic of people who are suffering from us getting rid of the exemption. So why wouldn't we just lower the net income portion so we can assure that it's something that benefits everybody who's going to suffer from us losing the exemption?
Because with a grant program we can target it towards smaller businesses. If we just lower the rates, then it goes to everybody. And --
-- if you're going to target something, you can't guarantee it. If we reduce it, it guarantees it. Someone's going to get lost. There's no way we could create a grant program -- let me just ask this question before we go since that's your mission: Approximately, how many businesses do we anticipate being impacted by us getting rid of this exemption?
So every business will be impacted. So everyone who pays the BIRT would be impacted. What's that --
The exemption, everyone has the exemption. So the exemption goes away for everybody.
And I understand what you're saying. I'm specifically talking about the businesses who pay nothing because -- what you're trying to say is because --
Thank you. Can you help me out because then I got to --
I understand your question. I think it's tens of thousands. It's a lot.
Exactly, so that's my point. So how can you guarantee that the tens of thousands of businesses, the barbershop, the beauty salon, the nail salon, the restaurant, how can you guarantee that these tens of thousands of businesses that's going to be negatively impacted by us getting rid of the exemption will be able to benefit from the grant program? The answer is you can't.
So we also know that if we do across-the-board decrease that, that will dilute the impact, right, and that everyone who pays will get some small benefit whereas if we do a grant program, we can be more focused and give a larger benefit to a smaller number of businesses that --
You can do both. And we can make sure that we provide the most possible relief that we can for small businesses. So I just want to be clear to everybody that's listening, we don't have to choose between your option and my option. That's why I said let's put the grant program on a shelf for a second. We can actually do both. My time is up. Thank you, Council President. And I'll queue in for the second round.
Can I say one -- when you started the conversation about why don't we use the money that we'd be getting from the exemption going away to reduce rates, that's what I was answering. Why and what we're doing, what our proposal is to do with that revenue.
And I understand that. I comprehend exactly what you're saying. While your proposal might identify and earmark what happens with that new revenue, it doesn't guarantee that the people who are paying the most will be the beneficiary from that program. But if we just reduce the net income portion of BIRT, that will guarantee that those businesses benefit while in turn using your $30 million program as an insurance policy to be able to put a little more icing on the cake. Thank you, Council President.
And then that would have a cost beyond the 30 million which I think is what you're saying, but I just want to put that on the record.
My time is up. We can debate that later. Thank you, Council President.
Thank you. The Chair recognizes Dr. Nina Ahmad.
Thank you, Council President. Very important conversation. Just want to go back again on what information are we using to say that we're going to be challenged around the BIRT exemption? And are we proactively trying to fend that off by costing lot of small businesses who will be impacted? What information is telling us to do this?
So I think that is probably again a conversation during the Law hearing --
Good afternoon. My name is Francis Beckley. I'm Revenue chief counsel --
One second, Francis, because I think some clarity that folks are looking for. Why wouldn't we move forward and do the law and challenge in court the policy?
It has been reported in The Inquirer, it is a matter of public record and it is part of the public docket, that there has been a declaratory judgment filed against the City in Common Pleas Court to declare the BIRT as currently written unconstitutional. It is pending litigation. Consistent with best practices, the Law Department does not comment on the details of pending litigation. My understanding is there has been some briefing for City Councilmembers on this. I and my staff would be delighted to meet with you in private if you want to know more about the details of this, but it is not appropriate for public comment. Thank you.
So if, for example, it goes our way and we win this case, right, then we have preemptively removed these exemptions. Will we be putting them back in? I'm not saying that we are going to win it. I'm sure you have information that tells us we won't, but I'm just thinking of the scenario where we make all these drastic changes and then the outcome is moot and then what do we do, go back?
I think -- again, I certainly would not be publicly discussing the probability of our success in this lawsuit. But you as City Council always have the option of passing legislation and you will have until June to change things for FY26, and you can always repeal or re-enact things as the circumstances warrant.
All right. We'll get your private information about the lawsuit. I have a question about just growth projections. From my analysis, it looks over a five-year period about 3.2-something percent. I've heard grumblings from people that this is too low a growth projection and I wanted a comment on that. And the second part to that is this 30,000 units of housing that we are looking to do, is that going to have an impact and is that already reflected in the growth rate that you have shared with us?
So our growth rates are based on advice that we get from an outside econometric firm named S&P Global. They give us advice. We actually take it then down to a meeting at the Federal Reserve Bank with economists who then tell us what they think of it. That's what we use to inform the growth rates that we use for our taxes. This year, based on all that feedback, we show relatively slow job growth. One year it's negative. The other years are very small growth. But because that is in part informed by what they see as a tight labor market, there's also a projection about increase in wages. So the combination that you're seeing is the combination of relatively low growth on the job side and then growth on the wage side could come slightly differently. If there's more job growth, wages could go down. But that's kind of how we get to that. And they do build into their projections things like when they know that there's the H.O.M.E. Initiative coming, they'll build that in or when they know that there are changes in federal policies, they'll build that in. So it's not an explicit number that I can say, okay, here's what we put in there because of the H.O.M.E. Initiative, but it is something they consider as they do their projections.
Because that rate is an important number for people to decide to invest in setting up a business here, do those kinds of things. So it's really important that we share the information with our business community to really understand how we're projecting our growth rates so they see some guarantees about some level of growth given the changes that could happen outside our control. So this is the feedback I will give to my constituents who have been grumbling about low growth rate.
And I would say also that they're looking at national and international economic factors. So the fact that they're seeing slow job growth is not specifically an indication that, oh, there's something wrong here. It's what they're seeing globally.
Right, right. Quickly the next question I had was I believe the Controller has said that -- let me just get that -- the City's decision to provide additional funding for the pensions will actually save money down the road. Once it reaches full funding, the 742.8 million allocated can drop to 200. Can you explain in layperson terms what that means and how that frees up resources for us because there's a myth going around that you only need to go up to 80% funding the pension and you really don't need to go to 100? That's another concern that has been voiced. So I just wanted some clarity around that.
Yep. So what that means is that in essence the assets that we have in the Pension Fund are not sufficient to pay all of our liabilities --
-- and we make payments into the Pension Fund every year to eliminate basically the difference between the assets and liabilities. And we have been doing that pretty aggressively along with making other changes to things like employee contributions, the sales tax contribution, how the benefit is structured for employees. All that together has a really big impact on the fund. It's meant that the funding has gone from the mid-40s to the mid-60s. Our actuary projects that by 2033 we will get to 100% funded. When we've done that, that means we're no longer trying to pay off that difference between our assets and our liabilities. The number you were talking about is an all-funds number. The General Fund number is more like in the 430-ish range. It's still a substantial number that frees up a lot for other investments. If we decide when we get to 80%-funded that we're not going to try to go higher than that, we would never get to the point where we got that big payoff or we would push it much further back. Think it would also be very different from what we've agreed to with a variety of stakeholders about what we would be doing with pensions.
Yeah. So this would be another piece to share publicly about clarifying that not only do we want to get to 80 and that myth that surrounds that we don't need to go more and the reason for going more and how it frees up and how it impacts our bond rating as well, which allows us to borrow cheaply. So thank you for that clarification.
Thank you, Council President. I'll hold all my other questions for the second round.
Thank you very much. The Chair recognizes Rue Landau.
Thank you, Council President. Thank you all for being here. I'll jump right into the questions about the lawsuit. Got to go back to it again. I'm sorry.
Okay. I'm going to just ask Francis to come back up. So instead of my stumbling around not answering, she's going to help.
I really want to just get to the bottom of a couple of things with it because I share the Administration's goal in maximizing revenues for the City, but we all know changes towards tax system shouldn't come at the expense of small businesses. And so, I'm concerned with this notion that we are absolutely, definitely going to lose this lawsuit.
I'm one that wants to take the chance and go fight it and continue on. And one of the questions I had, because I think this is a progressive tax, it reduces the tax burdens on small businesses, let me just be clear first that the $100,000 exemption, is that on both gross receipts and net income?
It is on the gross receipts portion and then it is on the corresponding amount of net income that is attributable to that amount of receipts.
So that would vary with the profitability of the business. You could bring in 200,000 of gross receipts and the amount of net profits you have from that could be very different depending on the business.
Okay. But the net -- I understand because the gross receipts is so much smaller. Let's give an example --
But I would urge you, you're an attorney, we should have this conversation in private.
And I'm delighted to have an educated conversation with somebody who's as knowledgeable as you are.
Okay. Let me ask a more global question then. My belief is that if we remove this exemption, it will bring in significant amount of revenue for the City even from the big businesses that are excluding their first $100,000 in income. Why is the proposal to only have $30 million into a pot of money to help these small businesses?
That's our projection of what the additional revenue would be until we're basically taking the additional revenue and putting it into that pot.
Okay. I would appreciate a longer conversation then because I -- thank you.
Can we talk about the construction tax then. Why is that so complicated to implement? You've said that there's so many barriers for implementation. It brings in $3.5 million. I think there's a lot we can do with $3.5 million. Why is it so complicated? COMMISSIONER McCOLGAN: So the construction impact tax is 1% on the cost of construction. And 50% is collected upfront and then 50% is collected once the work has been complete and it's approved for occupancy. That's all administered by Licenses and Inspections.
Can your office, the Revenue Department, administer this? COMMISSIONER McCOLGAN: We don't receive the cost of construction information which is why L&I administers it for us.
But if we did have your office oversee it, likely since you administer all of the taxes for the City it could be less cumbersome and easier to collect, right? COMMISSIONER McCOLGAN: Well, we worked in close partnership with Licenses and Inspections when this tax became law and it really requires someone in L&I to understand the cost of construction for a project and to collect those funds upfront, which is why we decided to implement the tax as we have with them administering it. It's not something that Revenue was really in position to administer.
Let me also just switch while we're here to the real estate transfer tax. There's many, many exemptions to this tax. I wholeheartedly support so many of them. Who in general is paying the real estate transfer tax, what entities?
Who pays the transfer tax? It's really anybody who has a real estate transaction. So it can be for a residential transaction. It could be for large commercial transaction. It could be for an apartment building. So it's really any time there's a property sale.
But there's so many exemptions that if it's parent to child, they're exempted. If it's spouses, they're exempted. It's religious institution to institution, it's exempted. Nonprofits are exempted. Life partners and spouses are exempted --
So it's really -- and correct me if I'm wrong -- it's for arm's length transactions, for-profit institutions. COMMISSIONER McCOLGAN: Yes.
If you could get us a breakdown of who's paying that, we would appreciate that. And (inaudible) -- I got cut off. I'm coming back. Thank you.
Thank you, Member Landau. Chair recognizes Councilmember Bass and then Councilmember O'Rourke, Councilmember Lozada. Then we go into our second round. You spoke already, Phillips, correct?
So just a couple of questions actually. And I want to go back to the question around PILOTs. Because as we are having these very difficult conversations, it's not lost on any of us, and I think from all of the questions that you hear today, the question of fairness and who's paying and who's not paying, it's a continuing theme, not just this year, last year, the year before, the year before, and we keep having the conversations over and over again in an attempt to get it right. And so, I wanted to ask less of a question and more of a request. I would like to request, Mr. Dubow, that you would provide to Council an analysis doing some sort of a comparison in terms of the value of real estate that is untaxed because it's owned by nonprofits and what it would typically incur in taxes versus what's being paid in PILOT payments. And I'm going to use the University of Pennsylvania as an example. We all know they own huge parcels of the most expensive real estate here in the city of Philadelphia. And we'd like to get some sort of a sense -- and I know in the past, I think under the Rendell administration, that far back, they were providing PILOT payments to the city. And then maybe in later administrations, but I don't know, if there's been any payment as of late.
They are actually making million a year 10 payment for the School District for 10 years.
So they do -- so they're making 10 to 13 million in payments to the School District?
10 million. So can we get an analysis -- and again, not to pick one anyone in particular but I just used them as an example. But can we get an analysis of sort of some of these large parcels, some of the largest most valuable real estate here in the city of Philadelphia that is untaxed because it is owned by nonprofit entities? And as I remember, can you verify that about a third of all property in the city of Philadelphia is off the tax rolls because it's owned by nonprofit institutions?
We can get you both of those. We can get you an analysis of all the nonprofit exemption, what the total assessed value is of those properties, how that would translate into an amount for tax and what that looks like as a percent of our overall assessed value.
That would be great. And also, do you know offhand what percentages of real estate that's all off the rolls?
I don't. Your percent sounded right but I don't know for sure.
Okay. Because that other two-thirds that's paying, a lot of that percentage is in low-income neighborhoods where people are really struggling to hold on to their properties. And as we increase assessments, which is basically increasing taxes -- (Witness approached Witness table.)
For all exemptions, but we probably need to dig down a little further.
Okay. All right. Well, very good to know. So even if it's a quarter, that other three-quarters that is paying is struggling. Most of those folks are struggling to pay rising real estate prices, rising real estate taxes in this market. So if we can get that information, I would really appreciate it.
You're welcome. The Chair recognizes Councilmember O'Rourke. Then Councilmember Lozada.
Thank you, Mr. President. I'd like some clarity -- and good morning -- good afternoon, sir and family. I'd like some clarity on job growth projections for the next five years. Finance noted that its projection of nearly flat growth was splitting the difference between a baseline economic scenario and a more pessimistic scenario given federal uncertainty, and we've heard that word a lot lately. (Bell went off.)
You know, I'm going to go ahead and push it to the limit. But we have heard a lot about that particular word uncertainty here. Things are unclear. I can respect that. But fiscal policy is still informed by expectations. So I want you to talk about what that pessimistic scenario actually looks like in hard numbers. Hard numbers actually help us make this make sense for folks who ask us about these things. We all understand a number like $2 billion. Trump tried to freeze about $2 billion in federal funds for the Commonwealth, but a lawsuit from the Governor unfroze it, though the Administration disagrees with that. And we've seen less than 10 million in federal funds withheld beyond that blip. But federal workers are getting fired left and right. Just yesterday Penn faculty were ordered to halt 175 million in federally-funded research and the Penn Health System cost 300 jobs. It's hard not to notice. So here's what I want to know: What does the pessimistic scenario look like? In particular, I'm asking about projections on job growth and revenue in both the general and grant funds? Also, would you say that so far we're closer to the baseline scenario than the pessimistic scenario? And -- well, let me let you answer those first.
What we went within the Five Year Plan was not the pessimistic scenario. We went with basically a combination --
Yeah, let me find it. It's about -- sorry. If you have other questions, I'll look for that while we're talking.
Okay. The other piece I wanted was you've mentioned that experts in attendance at a February meeting, I think that Member Landau may have brought up, suggested splitting the difference between a baseline and pessimistic situation. So for the public to understand your work a bit more, to make it in layman's terms, could you explain what meeting that was, what experts gave that advice and the reasons why they gave it?
Yes. So it's a meeting that we have every year down at the Federal Reserve Bank that's hosted by our financial oversight authority, PICA. They invite economists from around the area to come together to look at our projections and to say, yeah, your projections make sense or, no, they don't. And in this case, they're too optimistic, you should modify them. And it's important to us too because as we go through our budget process, we have to get our Five Year Plan approved by PICA, the oversight authority, and their standard is whether we're using reasonable assumptions. And so, one of the things to look at is the projections that we're making for tax revenues, do they take into account everything that's going on in the economy. And if they don't, if they say, no, you are too optimistic, they can say your plan is in balance using reasonable assumptions, you have to go back and change it. So getting to a place where we have reasonable assumptions is really important to us. And your question was what are the growth rates. So they're between -- with one exception, there's one year, '27, where they project a decline. But in the other years they're projecting between .2 and 05 percent growth each year. And then on the wage side they're projecting growth. The highest year is about 6% and the lowest year is about 3.5.
And I heard my time and I want to cede it to Member Lozada who's next, but I did want to lift this up on a point information. There was a point that was made about retroactively paying if we lost that lawsuit that we weren't supposed to talk about on the record. I just want to make this point from December, about four months ago, on November of 2024 the Pennsylvania Supreme Court concluded that its decision to invalidate a limitation or cap on net operating loss carry-forwards should be applied prospectively only. They actually said that it was three things: Under the Chevron Test when considering whether to apply decision retroactively, courts must consider, one, whether the decision in question established a new principle of law; two, whether retroactive application decisions would forward the operation decision; and three, whether the relevant equities favor prospective application. Because the court found that each of the three factors supported the prospective- only application of Nextel the court determined that the General Motors court erred in applying Nextel retrospectively. So we wouldn't have to pay back on that -
So the number I gave, the $725 million, was just a one-year number. That had no retro.
I just want to make sure for those who are concerned about if we would have to pay back if we lost, that that's not the case according to the Supreme Court. But I cede my time. I have my other questions for the next round.
Thank you very much. Councilmember Quetcy Lozada.
I have a very basic quick question, right. We have businesses from very small to larger businesses across the city of Philadelphia. Some of them have language barriers. What are we doing to ensure that these businesses understand how there will be a shift in BIRT tax and how they can get connected to services? We learned through the pandemic that some of these businesses were not prepared to be able to file or take advantage of different programs that were put in place. We're still experiencing challenges with some of these folks in my community, especially where some only speak Spanish. Others come from different places and they don't speak English. What are we doing very specifically to ensure that these communities are educated on the change in process and how they can take advantage of the grant opportunities that we are saying we're going to make available? COMMISSIONER McCOLGAN: Thank you for the question. Revenue has our -- Philadelphia Tax Center is translated into multiple languages, as is the vast majority of the notices that we send out. So most of the notices that we send are in both English and Spanish, but we also have information for multiple languages on there so that they can contact us and get translation services. And we're going to work in very close partnership with the Commerce Department to make sure that we have language services available for businesses. We have an excellent communication team in the Revenue Department. Our Director of Communication speaks multiple languages, so it is something that we're very focused on and we understand the need. So we will make sure that that is part of our plan and making that information available to people in all languages.
(Inaudible) meeting people where they are as opposed to requiring them to come to us. Most of the work that we did on the ground during the pandemic connecting people to the resources that were going to determine whether they were going to continue to upgrade their business or lose their business as a result of the pandemic, we were able to do successfully at your door, right, during those non-operating hours because we recognized that very small businesses can't afford to shut down to be able to come downtown to take advantage of a program. So I'm asking that we be very intentional about communicating with people where they are in their own neighborhoods and at their doorsteps. Thank you. COMMISSIONER McCOLGAN: Sure.
Thank you very much. The Chair recognizes Councilwoman Katherine Gilmore Richardson.
Thank you. Thank you, Council President. I apologize. Moms do get the job done. And I got a call from my kids' school and that comes first. So thank you all very, very much for this opportunity. And I want to thank Rob and Sabrina in particular for all the meetings that we continue to have ad nauseum over a number of items. But I want to start, I wanted to go back to a couple things that I wanted to get on the record. Now, Rob, you talked about the issuance of the bonds for the Housing initiative. Did you say they were taxable bonds?
Okay. But typically, aren't the interest rates -- are interest rates higher on the taxable bonds than they are --
-- on the tax-exempt bonds? Then why are we doing that?
Yeah. It gives us more flexibility in how to spend the money. There are things that -- programs that are part of the H.O.M.E. Initiative that would not qualify as tax-exempt.
Okay. Could you just detail them for the record because I know there's an issue, a challenge nationally regarding this proposed tax cut that's happening in D.C. that would impact cities like Philadelphia's ability around our bond issuance?
Yeah. That threat is to the tax-exempt status for all of our bonds which would be things like our geo borrowing. Every year we borrow for things like paving our streets or putting new roofs on police stations or renovating rec centers. So, yeah, that would have a high cost for us and cities around the country and probably cut into the amount of infrastructure investment that jurisdictions can make. For this borrowing we looked at -- and there were restrictions on tax-exempt. There are things that you can and can't do. So, for example, we have to invest -- we have to use the money for things that we own and that don't have any kind of private purpose attached to them. So we thought that for this bond issue there were too many things that wouldn't qualify as tax-exempt, that it would overcomplicate our ability to do the issue to make it --
So you know what I'm going to ask for, you already know where I'm going. And then this wasn't even in my line of questioning. I just heard you say the taxable bonds as a response to another colleague. And with the fact that the interest rates are typically higher, if there's a way to aggregate it out, what could be a tax-exempt -- I mean, what could be a taxable bond versus a tax-exempt bond and what the proposal indicates, that would be helpful. And specifically, those interest rates are at least two percentage points higher, right, spread out?
On average. Okay. I heard the bell. I'll just get a few more in really quick if that's okay, Madam Chair.
Thank you very much for the accommodation. I also wanted to go back to -- and I had this question for the Treasurer's Office regarding the issuance of the bonds and if we could get a breakdown. I do have the information that you all shared, but I wanted to be able to look at it from a historical perspective relative to the companies that are actually doing the bond issuance on behalf of the City. If you could give us information on the minority spend and which firms. And if you could break it down not just minority, but if you break it down, Black, Hispanic, Asian. Just give us a whole breakdown so that we understand what the difference has been over the past couple of fiscal years. I know I did go over this information with Jackie Dunn previously. I think it was maybe a year and a half ago at this point, and we did see some trends that were happening relative to the minority spend, particularly around the bond issuance. And I want to make sure that in this sort of environment that we're currently in that we're doing all that we can do to ensure that as a city that the folks that we contract with to do that work for us reflect the city of Philadelphia and the demographics of our city.
Okay. Just have it spread out over the last couple of fiscal years. And then really quickly I just wanted to notate something that Council President brought up around us maintaining our credit rating with the significant spend that is planned over the life of this Five Year Plan, particularly with the spend down and the low balance in the General Fund over the last years of this Five Year Plan. And then I just need to put this on the record really, really quickly. Pension Board, I wanted to say thank you to all the Pension folks. They have been wonderful. They worked with us with the ESG policy change at the Pension Board. And I just wanted to give them a special shout-out for all the great work that they have done and will continue to do up until 2033. And then finally --
We know, we know. But we know our big target year, and of course I need it for after 2033. And then for Revenue, very quickly I wanted to go back to the question from Councilmember Young because I remember working with our former Revenue Commissioner Frank Breslin regarding the change in the policy around homeowners or individuals that can prove equitable ownership in a property, that if they can show revenue that they are in the process of resolving a tangled title or deed, they will be eligible for a tax relief program with the City of Philadelphia. I heard my colleague's question regarding a property that may or may not be in a trust and that the homeowner still resides at the residence. I just want you all to put that on the record regarding that policy change that we worked on last term. And I need to know how many individuals have taken advantage of a tax relief program as a result of that policy change. COMMISSIONER McCOLGAN: Sure. I can confirm for you that that is in place and we'll be happy to get that information.
Okay. Thank you very much, Madam Chair, and thank you all so much. I'll submit the balance of my questions for the record. But I just wanted to put on, Rob, you know that I've done the wage investment amendment over the last several years, which is an opportunity to give people money back in their paychecks. And we want to ensure that we understand and we see the difference between the proposal from the Administration and the recommendations from the Tax Reform Commission. And I just want you to know that we will work with our team to get a few different spreads on that because I think you realize and you know that it's only .01 reduction each year over the five years of this plan. Okay. All right. Thank you very much. Just wanted to put that on the record.
Thank you, Council Lady Gilmore Richardson. Chair recognizes Councilman Phillips.
Thank you, Chairwoman. You mentioned the allocation of $30 million to support small businesses during this transition. Could you elaborate on how the City plans to ensure that businesses, particularly those that have never filed BIRT returns before, have access to these resources and be able to comply with the new requirements?
Yeah. So one of the things that we're doing to try to make sure that we have that kind of outreach and make sure that we get the program to the people who need it most is we're adding administrative capability in Commerce where employees in the 4 budget, proposing a budget, so that 5 they can administer the programs 6 and make sure they get to people 7 who need it. And the Revenue 8 Commissioner can talk a little more 9 about the outreach that we're 10 doing. 11 COMMISSIONER McCOLGAN: 12 Yes. So as I talked about a little 13 bit earlier, we are working in very 14 close partnership with Commerce to 15 identify those businesses and make sure that we are communicating to them their obligations and, very importantly, the support that's available to them in tax preparation and --
Thanks. Let me just elaborate on that question a little bit more so it's different from the one I asked earlier. Right now $30 million, correct, is going to go to several different -- the $30 million is going to be split to fund into several different entities within Commerce, correct, as opposed to one $30 million fund that these small businesses can go to and just apply for? They will have to apply to several different programs within Commerce to get to the $30 million for them, correct, for the business?
I think the idea is one central application and then Commerce and Revenue would help businesses figure out which program is best for them.
Okay. So it's one central application and then Commerce will disburse the money. Okay. That's better. Okay. Thank you. Now, just one more question. Given the education, medical institutions and government employment contributed nearly 45% of all wage tax revenue in FY24, what proactive measure is the City taken to mitigate potential revenue losses from federal employment reductions or research funding cuts?
So really what we've done is tried to put some reserves in our budget to help us withstand whatever impact we might have. And also, again when you look at our projections, part of what we're looking at in the projections is the impact of changes at the federal level. So those are the kind of things we're doing. I don't know whether that answers your question. I'm not sure --
It does. And I did forget I did have one more question regarding the OPA Office, Office of Property Assessment. How does the OPA ensure that neighborhoods with historically fluctuating property values receive fair and accurate assessments that reflect real market trends without causing undue tax burdens?
I'm going to ask AJ -- don't even have to say his name. He's here. (Witness approached Witness table.)
Good afternoon. James Aros, Chief Assessment Officer. I believe I caught most of that question, but if you could just repeat it so that I can answer it correctly.
Yeah. Just real quickly, so how does OPA ensure that neighborhoods who have historically fluctuating property values receive fair and accurate assessments that reflect real market trends without causing undue tax burdens?
So the tax burden piece would have to be separated out because the assessment may or may not accurately reflect somebody's tax burden due to abatements or Senior Tax Freeze or LOOP or any of that. But from an assessment perspective where we're just trying to estimate the value of the property, for all parts of the city we have a multi- year analysis as far as sales go and we break the city into 14 different residential zones. So there are multiple years of transactions that are considered for all properties in the city. If a particular neighborhood or area is seeing fluctuation in the market, that will all be taken into consideration and is in that analysis. So one or two of the most recent sales, if it were the peak of the market, won't unduly drag all of the values up because there's multiple years of transactions that are being considered. Likewise if there is a dip in a particular market at a certain time, if the market has been going in a different direction, it's all considered so that way we want to have enough representations, which is why we use five years' approximately worth of sales so that way no one particular burst of activity unduly affect the values in a neighborhood. We want to make sure we have enough transactions, because one sale doesn't create a market in any one particular part of the city.
Thank you, Councilmember. Chair recognizes Councilmember Thomas.
Thank you, Madam Chair. We have contract negotiations coming up, right? What unions again?
For FOP, Firefighters, D.C. 33, D.C. 47, Correctional, all of them.
Okay. And thinking about the Housing initiative from the Admin, the Admin is operating from the perspective that housing is the biggest crisis that we have in the city of Philadelphia, correct, more of a problem than poverty, correct?
Okay. Fair. So if the housing crisis is as bad as it is and a part of it is the poverty crisis that we're dealing with, we have contract negotiations coming up, how many City employees live in poverty?
Can we get that number? If we're talking about providing housing for City residents and City employees, how do we know that they can afford it? We have a contract coming up with contract negotiations. How do we plan on pulling D.C. 33 workers out of poverty so they can afford these houses we want to build?
So one of the things you heard in the Mayor's budget address is that we are committed to providing our employees with fair wages, and then that would be part of this collective bargaining process.
We need to know how many employees live in poverty so we can figure out how many of them we're going to pull out of poverty. So if we want to ask people to be able to move into these houses that we're going to be able to build -- a big problem that we've seen in the financial crisis that we've seen in the past was that people were moving into houses that they couldn't afford. And I don't want to set Philadelphians up for failure, so I think it's very important that we find out how many City employees are living in poverty and figure out what can we do with this labor reserve in this budget this year to pull those people out of poverty, because I think the poverty problem matches the housing problem. And I don't know what we're doing right now to pull people out of poverty based on the dialogue that we're having. Because if the people who work for us live in poverty, then we're the CEOs, right. We're the problem that we're talking about that other people are if we're the CEOs of the company who employ people that's living in poverty. I hear my bell going off. The borrowing --
You said that we don't have revenue. I don't agree with that because I think that if we looked at the anticipated revenue that we have, projected revenue over the last couple years, every year that I've been in City Council, those numbers have been far below what we've actually collected. There's been years where we've seen $100 million surplus, which means the revenue we thought we were going to have in the spring we ended up having significantly more. But with that being said, the Admin is looking to borrow $800 million to be able to look at housing-based initiatives over two different time periods with two different sets of borrowing. When -- years you've 22 been here I believe, right. When 23 have we ever -- 24
There you go. The kids will say 26 and 66 are the same thing, so we're all in the same category. When in the history of the City of Philadelphia do we traditionally see borrowing in that amount when it's not some type of emergency? I'm not talking about COVID. I'm not talking about the fiscal crisis of the early 2000s. When do you see this type of borrowing that the Admin is asking for when there's no emergency taking place?
I want to take one step back because you talked about our revenues and I have to say something.
I do think that we are facing really an unprecedented level of uncertainty both just the economy in general and with decisions being made at the federal level that may have a very negative impact on our economy and on our revenues. So I think we have to be mindful of that as we look at things. And, you know, I had to say that.
So we have done major borrowings for initiatives in the past, like the Neighborhood Transformation Initiative, which was a --
I was here for the Neighborhood Transformation Initiative and I don't want to take up too much time, Madam Chair, but that was an initiative that was specifically done to rectify the damage of COVID.
No. Neighborhood Transformation Initiative was in the Street Administration. You're talking about the Neighborhood --
10 You're absolutely right. I'm 11 sorry. Go ahead. Elaborate. 12
Yeah. So 16 that was $300 million borrowing 17 back in 2001 so that was a very 18 large borrowing. I know, and you 19 talked about it, NPI also large 20 borrowings partly because what was 21 going on with COVID and partly 22 because there were needs around 23 housing -- 24
Just so I can move on, how did that work out for us? That first borrowing example that you gave up during the Street Administration from a fiscal lens only, not a social lens, how do we end up paying for that? What did the timeline end up being on how we were forced to be able to repay that $300 million?
For NTI, for Neighborhood Transformation Initiative, it was borrowed with a set debt service schedule and it was repaid over that time.
Can you give us the time and how much we ended up paying, more than what we actually borrowed? I think that's what I'm trying to get to.
I forget whether those were 20- or 30-year bonds, but it's either or 30 years. And, right, for every borrowing we do there's an interest component.
7 Which means we were still paying 8 for that some 20 years later, 9 correct? 10