Well, when you say the investigation -- THE CITY SOLICITOR: -- we could give you that number.
When you say the investigation, what investigation are you talking about? THE CITY SOLICITOR: I'm talking about the information requests and other investigative matters, some of which we do not know any details at all about, that --
Fine. Let me rephrase -- THE CITY SOLICITOR: -- that have been initiated by the U.S. Attorney's Office or the F.B.I.
Fine. I understand. Then let me rephrase the question. Up through today, what were the costs 3031 Budget - 4/12/05 associated with the corruption probe for FY '04? THE CITY SOLICITOR: In terms of the Federal investigation, the number that we have for FY '04 is $2,036,217, which includes all City-related expenditures for FY '04.
Okay. And up through what is now, I guess, the third quarter of FY '05, what have the costs been so far, either expended or anticipated? THE CITY SOLICITOR: I can give you a number as of April 6th, which is the latest calculation that we have concluded.
Right. THE CITY SOLICITOR: And for FY '05, the number that we have calculated is $944,260. That's as of April 6, 2005.
Gotcha. And what at the moment are you estimating... I'll hold that part of the question. What did you estimate them to be for FY '05? THE CITY SOLICITOR: We estimated in 3032 Budget - 4/12/05 the budget category, that included some additional matters. Not exclusively for the Federal investigation for '05, we had estimated $972,000, is my recollection.
Okay. Do you think that -- But we still -- I mean, we still have, in essence, about a quarter to go. THE CITY SOLICITOR: I'm sorry?
We still have, in essence, about one quarter of the fiscal year left: April, May, June. THE CITY SOLICITOR: That's correct.
You estimated $972,000. You're presently at $944,000. Do you believe that you'll stay within your estimate or will it exceed the estimate, fiscal year '05? THE CITY SOLICITOR: Our current best estimate is that not only for the Federal investigation, cooperation and client representation, but also the labor negotiation reopeners and some of the things I mentioned earlier, that we are going to 3033 Budget - 4/12/05 require just under an additional $300,000 in FY '05. And I have communicated that information to the Budget Director.
So you think in FY '05 you'll need an additional $300,000 for probe-related and non-probe-related matters. THE CITY SOLICITOR: For contract requirements in '05. That's with, to be very honest, a very aggressive management of our contracts in all areas. But in terms of the Class 200 dollars that will be required, over and above what we have previously projected. We're going to need just under $300,000.
And within the $300,000 how would you break out the labor-related matters versus the probe-related matters? THE CITY SOLICITOR: I can calculate in a minute or two, if you will give me that time.
Sure. THE CITY SOLICITOR: If you want to go on to the next question, I will come back 3034 Budget - 4/12/05 to that number.
Well, the next question is, what do you anticipate the FY '06 probe-related costs to be? THE CITY SOLICITOR: Of the number, I actually have it now. I can go back to that, Councilman.
All right. THE CITY SOLICITOR: I had said that just under $300,000 in additional authority would be required for our Class 200 funding, inclusive of the Federal investigation. That number was actually $286,580.
Two eighty-six five... THE CITY SOLICITOR: $286,500, Councilman.
So, that's the real number. THE CITY SOLICITOR: That is the number that we are projecting now in additional funding that will be required. I've backed out the numbers that we have for the labor negotiation reopener work. 3035 Budget - 4/12/05 And so, the remainder, backing out that labor negotiation work, it looks like for the Federal investigation itself that we'll need $166,580 in addition to what we have projected.
So, the labor work is $120,000? THE CITY SOLICITOR: That's correct.
Gotcha. Okay. And then FY '06? THE CITY SOLICITOR: For FY '06 we believe that the number we have in the budget before you is a good number. And that number is in the General Fund, $565,000; in the Aviation Fund that's $109,000, for a total of -- I'm sorry. For a total of $674,000.
Okay. So... Let's see. We're at $2,036,217 for FY '04. We're at $1,110,840 for FY '05. That puts us at $3.1 million. And then you're at another six seventy-four... 3.8 or so? THE CITY SOLICITOR: Going through FY '06, that looks -- that certainly looks ballparkish. I haven't done the math, but 3036 Budget - 4/12/05 that loose ballparkish, Councilman.
Looks like three eight two one oh five seven. THE CITY SOLICITOR: The number that I see my colleague, Mr. Lang here has is $3,817,051. Oh fifty-seven. Sorry.
All right. So in the course of the three years, I mean, maybe we've got a 4,000 or so dollar -- maybe there's about a 4,000 or so dollar difference between us. And we'll figure that out in the course of the afternoon, but we're at three eight? THE CITY SOLICITOR: $3.8 million, I think, appeared to be a fair rounding. And yes, that appears to cover the '04, '05 and '06 projection at this time.
Okay. THE CITY SOLICITOR: And of that I would just go back and reiterate, based upon the information I provided earlier with respect to the responses to the U.S. Attorney's Office, document reviews, subpoenas, et cetera, the vast bulk of that 3037 Budget - 4/12/05 expenditure is related to the City's cooperation with document requests, discovery, et cetera. And we've estimated just the production effort alone is taking about two-thirds of all of the dollars that have been spent or likely will be spent on the Federal investigation. And these are not the representation of individual clients, if you will, related to the use of outside counsel, but just the production of documents and cooperation on behalf of the City, relative to the Federal investigation. We're spending about two-thirds of all those monies just on that effort alone.
So you're saying two-thirds of the 3.8... THE CITY SOLICITOR: At least two-thirds.
...is dealing with documents and the review or production of documents? THE CITY SOLICITOR: Review of the 3038 Budget - 4/12/05 documents, the electronic materials that have been produced, all of the efforts on behalf of the City to be responsive to the Federal investigation. Our calculation, if I recall correctly, was 67 percent. 67 percent of the numbers that we had spent in FY '04 were related to the kind of activities that I mentioned.
So, I mean... All right. Two-thirds of three eight sounds like 2.6? THE CITY SOLICITOR: In round numbers, I would accept that, yes.
Okay. So, $2.6 million in dealing with documents and reviewing documents and producing documents and $1.2 million in actual legal representation? THE CITY SOLICITOR: I think in round numbers that's correct.
Okay. And before this started... I mean, have they already been budgeted in the Law Department, 3039 Budget - 4/12/05 these kinds of numbers, over the past few years? THE CITY SOLICITOR: I'm sorry, Councilman. Before what started?
Before this whole situation started. I mean, the Law Department did not have these dollars in its budget in anticipation of massive... THE CITY SOLICITOR: Well, they certainly were not budgeted for this purpose. We were not privy to the thinking of the Grand Jury process nor the U.S. Attorney. And, so, therefore, if you're asking have dollars been reprogrammed? Were they available for this purpose? No, they were not available for this purpose in advance of the investigation commencement. We --
So they came from somewhere else in the government. THE CITY SOLICITOR: That is my assumption, although I was not involved with the Federal investigation at that time.
Okay. Well, I 3040 Budget - 4/12/05 mean, I know my time expired, like, so long ago I can't remember. But it's at least clear to say these dollars were not in your budget prior to this. They had to come from somewhere else in the budget, and therefore were not available for other General Fund purposes to fund other programmatic initiatives in other departments of the government. I mean, some one, some any number of agencies within this government have not had access to these funds to do what they do because they're now being utilized for this particular purpose. THE CITY SOLICITOR: Councilman, it's not that I don't want to be helpful to you, but it seems to me that goes beyond the scope of my competence or testimony. I can only speak to what we have been authorized to spend. I understand that former Solicitor Ramos requested and received a transfer ordinance to cover some of these additional expenditures. I can't speak to where they came from and what other purposes 3041 Budget - 4/12/05 as a consequence were affected.
Now, I mean, the main, I guess the -- so far, the big trial seems to be wrapping up. At what point in time or at least for fiscal years gone by, why would we not receive -- I mean, you -- And I appreciate it. I mean, on the one hand we have a listing of the firms. On the other hand, we have no dollar amounts to go with them. So, I mean... I mean, we've made at least that progress because there was, I think, a fight about a year or so ago as to we couldn't even know who the firms were. Why can't the budget at least show for fiscal years gone by what the expenditures were at those times? Of course you can't anticipate what FY '06 is going to bring. And we're in the middle... toward the tail end, at least, of FY '05. Why can't the budget at least show us what the past expenditures have been for a previous fiscal year that has now been closed 3042 Budget - 4/12/05 out? THE CITY SOLICITOR: I will go back to an earlier response before you joined us, Councilman. And frankly, the Code of Professional Conduct which is applicable to all attorneys practicing in this jurisdiction, would essentially restrict me and any City Solicitor from providing that information without an informed consent from the clients represented. We are not allowed to provide that kind of information without the clients informed consent. It has nothing to do with our desire to make your review of the budget.
You need the client's informed consent before you can tell at least the legislative body how the City's money is being spent? THE CITY SOLICITOR: Well, in terms --
I mean, it's not the clients' money; it's the City's money, right? 3043 Budget - 4/12/05 THE CITY SOLICITOR: It is the City's money. I think you did acknowledge that we're trying to be responsive by providing the dollars that are being used for this purpose. We're also providing the firms that are doing the work for this purpose. It seems to me asking us to take the next step and provide the information as to the identity of the clients represented by the firms --
I didn't ask for that. THE CITY SOLICITOR: I'd like to give it some more thought.
I haven't asked for that. THE CITY SOLICITOR: Okay. Okay.
Don't -- Don't -- I haven't asked for that. What I asked you was: You have a listing of firms. We know what the overall amount is. You know who's billing us what or 3044 Budget - 4/12/05 providing the representation. My question is: We've got a previous fiscal year. The books have been closed on that. You know what the expenditures are. And there's a listing of firms. And all I'm asking is, why is there not a listing of what the expenses were from back at that time? You can't do it for '05 because we're in that fiscal year, and you don't know what they're going to be in '06. But why would there at least not be a listing for a previous fiscal year which is over and done and you know what those costs are? How does that violate anything or say anything about what might be going on within the probe, other than what the expenses were in a previous fiscal year to any or all particular firms? THE CITY SOLICITOR: My recollection of a year ago is that, you know, in a similar set of questions and answers, then City Solicitor Ramos commented, if I recall correctly -- and I would concur -- that it 3045 Budget - 4/12/05 gives rise to perhaps erroneous conclusions about the involvement, non-involvement, intensity of involvement of individual represented clients. Whether we have released the information or not, certainly --
We don't know who the clients are. THE CITY SOLICITOR: Please; may I finish the answer?
Okay. THE CITY SOLICITOR: Whether we have provided the information to you directly or you have gotten than information and the public gotten the information from the press, certain clients and certain firms are clearly linked in the public's mind. And I think the information that we would provide to you, with regard to the expenditures as to certain firms, could give rise to erroneous conclusions about the clients represented. That would be our concern, Councilman.
I understand. Okay. 3046 Budget - 4/12/05 Well, this... You've projected 500 or 600-some odd thousand between the Law Department, the Aviation Fund for the upcoming fiscal year. This... I mean, 3.8 over three fiscal years. I mean, it seems to be moving at about, you know, a million or so a year. Do you have any estimate of the total costs of this probe, you know, toward its conclusion? THE CITY SOLICITOR: I think what you will see, because we don't believe -- I don't believe that we have reflected an average cost that is, you know, divisible by three.
No; I understand. THE CITY SOLICITOR: I think we have seen the Federal investigation costs of the City and perhaps the intensity of the investigation itself -- but I can't speak to that -- the costs to the City have -- have increased in FY '05 and... I'm sorry. Was that FY '05 or '04? Was it '04? 3047 Budget - 4/12/05
Well, you had big up-front costs. THE CITY SOLICITOR: I'm sorry. '04. '04.
Right. THE CITY SOLICITOR: You see a lessening of those costs in '05. And we are projecting currently that they will continue to go down. And we are hopeful that we are accurate in that projection in '06.
All right. But at the moment, I mean, you would not feel -- you would not be able to definitively say that given where you're projected to be, that going over $4 million is outside the realm of possibility. THE CITY SOLICITOR: I have not heard anything from the U.S. Attorney's Office which would give me a confidence as to when the investigation would end and the responsiveness the City might anticipate and its related costs, no, sir. Okay. Thank you, Madam Chair. I'll come back. 3048 Budget - 4/12/05
Thank you. The Chair recognizes Councilwoman Tasco.
Thank you very much. Good afternoon. THE CITY SOLICITOR: Good afternoon, councilwoman.
I'm just going to take you in a different direction and leave those questions to Michael. What is the policy -- I have an interest in the collection of outstanding real estate tax to the City of Philadelphia. And what is the policy around collecting those dollars? I have a situation where there is a property that is owned by an individual with over $350,000 tax and water bills owed to the City. And we proceeded to move to take the building under the N.T.I. acquisition program, but was told that the gentleman had a permit to work on the property. And as 3049 Budget - 4/12/05 long as he was working on the property, we couldn't take it. Now, does that make sense to you? THE CITY SOLICITOR: I'm not aware of that particular situation. But what I am assuming is that the question was related to the viability and the economic value of the property and whether it would continue to be usable as opposed to vacant, and not usable, and therefore acquirable for N.T.I. purposes. I'm not familiar with this particular circumstance. I'd be happy to provide a response on the record particularly, if you could be so kind as to give us an address. I will check it out and respond to you.
Well, what is the process where your collections on a property, if the City -- if it is owed City money. I see that you have on the back of your testimony a chart of the taxes you have collected, real estate taxes you have collected. 3050 Budget - 4/12/05 And how long -- And, you know, what is the process, and how long does it take to collect the taxes or move to have the property taken to Sheriff's sale? THE CITY SOLICITOR: It is from our perspective, from a collection perspective, it's a long process. It's one where we attempt at every juncture to work with the taxpayer to seek a negotiated resolution. We meet with taxpayers each and every day. We try to be helpful to them to develop payment opportunities. But in the end, if it turns out that it is not possible for us to come to a satisfactory resolution or payment plan or other negotiated result, then the process of getting it to a Sheriff's sale for tax purposes is quite lengthy, I'm told as long as 18 months to two years.
So, in the meantime the business owner gets another license to operate the business under another name. They get a license to open the gas in another name. And they get the electricity 3051 Budget - 4/12/05 opened in another name, proceed to run the business, and again get in the cycle of not paying the real estate tax. It is an issue that exists. And I think we need to figure out how we deal with that. This is not just this one property. I'm sure there are many. THE CITY SOLICITOR: I agree with you. It's a real issue. It's one that we certainly have grappled with. And I know from dealing with P.G.W., they've been dealing with it. One of the enhancements that we have been trying to put in place, not only within the Law Department, but working with Licenses & Inspections and the Revenue Department and other agencies of the City government, we want to make sure that when people come and request approvals and privileges, if you will, from the City, that we're also checking in realtime to find out what kind of obligations that they have outstanding to the city. Let me just give you an example. If 3052 Budget - 4/12/05 you're coming and requesting a business privilege license or you're requesting a contract or a lease with the City, we are now putting into our standard terms and conditions a requirement that people be up to date. I don't care what name you've used. But if we can relate it to you that you are up to date in connection with your City obligations with regard to taxes, with regard to payments of water bills, et cetera. So, therefore, we are attempting to do that. It is not something that will happen overnight, certainly not with the antiquated legacy computer systems that we have. But we recognize it's a challenge that has to be met, and we're working on it right now.
But it's been going on -- You just got here, so I just want you to know it's a problem that has been going on for so long. And the City in the end loses dollars because they never collect the real estate tax. But the business has the 3053 Budget - 4/12/05 opportunity, continues to operate, probably by the same owner, just using different names and different individuals to gain licenses and permits to run that business. I think that we need to find a way to move more quickly on taking these businesses to Sheriff's sale, particularly if you look at some of the businesses. And they've been working with the Revenue Department to try to make agreement after agreement after agreement. And I'm certainly pro-business, but you don't see the blight that ends up in the community as a result of what goes on in the community. A building will sit for two or three years. We don't move to Sheriff sale. We don't move to collect the taxes or they come back and they reopen under another name or assumed name or some other way they do it just to operate. And the City's still out the money that we should collect. And we could put it in the General Fund. THE CITY SOLICITOR: We agree with 3054 Budget - 4/12/05 you. And I think we're moving in the right direction. We certainly need to keep moving aggressively in that direction. But one of the things that we're, I think, projecting right now, and we're very pleased with -- and we need to stay committed to it -- is that last year former City Solicitor Ramos committed to City Council to increase tax collections by $10 million. Our best projection right now is that we expect to increase those collections this year by $15.6 million over the previous fiscal year. Part of that has come from the improved technology, the investments that we have made within the Law Department. Part of it has been to realign the way we collect older delinquent accounts. We previously paid commissions to collection agencies, that we paid out of our own pocket, which are now reflected, as Council President knows, in our grant revenue budget line items. But now we are moving with regard to 3055 Budget - 4/12/05 tax collections, and in particular with the Linebarger firm which is doing the City's older tax collections right. We're using our statutory fee provisions, so that rather than having it come out of the City's pocket, the statutory attorneys' fees of percent are being used 9 to compensate the Linebarger collection firm. 10 That means that the City does 11 better, in terms of its bottom line. We 12 increase the opportunities for collection. 13 And we're continuing to be as aggressive as 14 we possibly can. 15 But we also are looking at, internal 16 to the Law Department, with the realignment 17 of our resources, to not only just have liens 18 that sit unpaid and without, you know, any collection on, as far as legal title is concerned. We have instituted a process within the Law Department where we have organized a judgment execution unit. We taken the judgments that we have already -- if There are liens, we have tried to get them to a 3056 Budget - 4/12/05 judgment. If we have a judgment, we want to actually execute on those judgments. We want to make sure we're taking every step that we can, within our statutory authority, to collect all of the money that we're owed sooner than before. And yet we have to certainly balance that concern against those of the taxpayers who think in some instances that we need to be mindful of their particular circumstances. It's a balance, but on balance we think that we're got to make sure that the City's revenues are protected and collections continue to increase.
Thank you. Let me just go a little bit to the City Council Ordinance and the Executive Order 205. How is it that you determine -- How do you determine whether an executive order is better than an ordinance, as in the case of our City Council's ordinance around the MBEC program and the Law Department's 3057 Budget - 4/12/05 issuance of a statement that it was -- the ordinance was not legal, and then the subsequent 205 Executive Order. THE CITY SOLICITOR: I don't know that I would feel qualified to testify as to which is better, but I can testify as to which we believe is legally sustainable, and with respect to the contracting activities and the expectations of the ordinance. Certainly because these are -- have been long the subject of City Solicitor opinions, which have found that in the area of contracting, that the areas that were addressed in the former ordinance were areas that were within the Mayor's prerogative. Certainly the legal authority is there to address the MBEC related matters through an executive order. In addition, if I may continue... In addition to that the passage of time certainly made it necessary that the former disparity study be updated which was done and was the basis for the Mayor's executive order. 3058 Budget - 4/12/05 I understand that there has been an interest expressed by City Council to make sure that the expiration date, which previously was months, be synchronized, if 6 you will, and recognize the need to update 7 the disparity study in the future. 8 And we have provided the Council 9 staff a proposed revision that we would will 10 be acceptable, which will provide that the 11 expiration date will be the later of the six 12 months after the presentation of the report 13 that is expected of MBEC by the executive 14 order or the update of the disparity study. 15 So, we are trying to work with City 16 Council to make sure that the executive order 17 addresses substantively the concerns of 18 Council, in a way that are consistent with the authority of the Mayor under the Charter. And we will continue to work with you in every way possible to try to meet your needs, consistent with the Charter responsibility of the Mayor.
When you were... Do you see it's your responsibility 3059 Budget - 4/12/05 to look at other cities, in terms of what they're doing around ordinances in this area and their legality, in determining how you came to your decision? Or you just looked at it from your point of view, without looking at other cities, to see where they have adopted ordinances around minority participation and the legality of such? THE CITY SOLICITOR: Well, in terms of the authority of the Mayor and Council, it's clear to me that it's not going to be especially helpful for me to know what the law is in Dallas, Texas. But in connection with the best practices, and what can be learned from looking at what others have done around the country, you know, obviously we are trying to address a system of need here in Philadelphia, that reflects the successes in other places, the best practices, if you will. From everything that I have seen in the executive order, it has been developed in a way that we think takes into account what 3060 Budget - 4/12/05 others have experienced, tried to avoid the Constitutional and other legal challenges that other municipalities and the Federal government have encountered, with regard to this kind of effort. And we've also recognized the local experience, in terms of the need to not look only at City contracting. We've got a very significant budget impact in the City of Philadelphia. But when you look at it relative to the private market, clearly, if there are opportunities to look beyond the City and to help, in terms of minority, women owned and disabled business owners to look for opportunity, we have an obligation to do that. So, the executive order in many respects goes well beyond the authority -- The executive order goes beyond the authority that is applicable to City agencies, and tries to create an opportunity for replicating our success in connection with non-profits, in connection with the private sector, by creating task forces that are 3061 Budget - 4/12/05 broader than just City agencies and the City government.
I guess my question, though, is, have you seen successful ordinances in other cities that could have been and that were comparable to ours that have not been challenged and have been successful? THE CITY SOLICITOR: I personally have not seen such an ordinance. Not that they don't exist, but I just did not do that particular research, Councilperson.
Well, would it have been helpful to do an analysis of research around other cities, to see if our ordinance would have withstood legal challenge? Or was the issue solely to determine whether it was Council's right or prerogative to issue an ordinance versus the Mayor's right to do so? THE CITY SOLICITOR: Let me just go back because I don't want to leave the misimpression, Councilperson, when I said I personally had not seen ordinances in other 3062 Budget - 4/12/05 cities as part of this effort. I don't mean to suggest that we have not within the Law Department done that kind of effort. Certainly there was a review. And I'm happy to provide for the record the results of that review. But you raised an issue that I think is important to come back to. And that is were there legal issues of potential deficiencies of the ordinance. And it seems to me that the most important one that I have to raise in that regard is our concern related to the staleness, if you will, of the record on the disparity study. So, one of the most important improvements, if you will, in connection with the substance of the executive order, apart from who should have addressed it, whether Council or the Mayor, substantively speaking, the updated disparity study, which was the baseline for constructing the current executive order, was critical, we think, to making sure, as much as we possibly can, that 3063 Budget - 4/12/05 our program withstands legal challenge. And the ordinance in and of itself, without that updated disparity study, we think would have been subject to challenge. And frankly, it was potentially vulnerable to such a challenge. We think we have addressed that in the current executive order.
So, you think that because we didn't have the disparity study when we passed the ordinance made the ordinance somehow flawed and subject to legal challenge because the information that we drafted the ordinance on was stale. Is that what you're saying? Or could we have used the disparity study that you... that was used to draw the executive order to enforce the ordinance? THE CITY SOLICITOR: My recollection is that there was a disparity study previously done. But I think one of the improvements of the current executive order that we discussed a moment ago is that there is a need to have a review of the situation, in 3064 Budget - 4/12/05 terms of disparity, in the market for minority, women and disabled contracting. That has to be reflected in all of the benchmarks that are set, with regard to City contracting. It is a continuing area of concern, I think, in all litigation to ensure that we have a very narrowly tailored remedy to meet the Constitutional requirements that the Supreme Court has established for this kind of a program. It's an important program. I think we would all agree that we want to do everything possible to create the strongest foundation against a court challenge. We hope it won't happen. But if it does happen, we want to make sure that we have protected the program. We think this executive order does that. And with the new addition that we discussed to update that disparity study into the future, we think that we have a more robust legal basis for protecting the program.
Thank you. 3065 Budget - 4/12/05 Thank you. CHAIRWOMAN BLACKWELL: Thank you very much. Councilwoman Blondell Reynolds Brown.
Thank you, Madam Chair. Good afternoon. THE CITY SOLICITOR: Good afternoon.
Let me start out by first commending you on your diversity statistics. The Law Department in the few years I've been here consistently does what I call get it right with regards to the hiring of women and people of color. And we would hope and expect that that trend would continue under your leadership. THE CITY SOLICITOR: Thank you, Councilwoman. And I, you know, like in so many things, we all stand on those -- the shoulders of those who have come before us. And as you know, I was hired by former solicitor Nelson Diaz. And his efforts in this regard were certainly continued by 3066 Budget - 4/12/05 former City Solicitor Pedro Ramos. I'm building on their record and those that have preceded them. And I know that it's of great concern to Council and to the Mayor. But independent of that, I will have to tell you, if no one had told me a thing about this issue, it's something that personally matters to me. And you have my commitment to build on that record.
We thank you for that. THE CITY SOLICITOR: Thank you.
On your testimony, you talk about -- in your opening paragraph there you talk about a number of the efforts that you intend to align. One of which, and I quote is, provide high quality public education and comprehensive coordinated social services for children, adults and families. Elaborate, if you will, on what you mean by high quality public education for that constituency. THE CITY SOLICITOR: One of the 3067 Budget - 4/12/05 things that, you know, I was reflecting on as I developed the testimony for today's hearing was that the Law Department doesn't exist in a vacuum. And I could have, you know, the Romey Diaz, you know, top hits list. But to be very honest, the most important thing, given the fiscal resources that we have, the challenges that the City faces...
Mm-hmm. THE CITY SOLICITOR: ...is that the Law Department has got to be there in support of the overall priorities of this administration and to meet the concerns of Council. For this year, reflective of our budget priorities, I have listed the ones that include high quality public education and social services. But an example of that is what we have done in connection with the realignment of our resources and the work that we have done with D.H.S. and Family Court, to make sure that we are providing quality team 3068 Budget - 4/12/05 approach representation services to the children in our social services system. We need to make sure that we don't have multiple hands touching our children unfamiliar with their cases. We need to make sure that we're giving consistent, integrated analysis and recommendations about those children in our system, whether it comes from the D.H.S. social worker or the Law Department, legal advisor representing that child in court, working with Family Court, to make sure that we are working toward a goal of getting these children into permanent placement so they're out of the system and while they are in the system, they're being given the best possible care and representation by the City.
Well, that certainly answers the follow-up question that I have which was about the partnership with D.H.S. and Family Court and the new development where you put here the list system has been reformed. So, that's a good thing when it comes to, I guess, the 3069 Budget - 4/12/05 efficiency in how we manage the case load for those families. THE CITY SOLICITOR: No; absolutely. And among the people with me today is our Chair for Social Services, Barbara Ash. She and her team are under tremendous pressure dealing with real world, real people issues day in and day out. They do a tremendous job. And we're so thankful to their efforts in protecting our children.
Well, I have to say I couldn't agree with you more. We've together had worked on a couple of adoption public service initiatives. And her work and commitment of that team was revealed. So, I could not agree with you more on that. On the bottom of , you talk about staffing levels being reduced. Are they due to layoffs or the D.R.O.P. Program or what? THE CITY SOLICITOR: They're principally related to managing our budget resources, making sure that our reductions in the staffing levels are sustainable without 3070 Budget - 4/12/05 damaging our capability to meet our commitments. I think every manager in America, whether public or private, has got to manage resources.
Sure. THE CITY SOLICITOR: We understand we're a part of that budget process. We're managing our resources. But at the same time, through hard work, and I never ever, you know, forget the fact that we've got a lot of people in the Law Department doing hard work. We think that we can maintain these reductions and meet our commitments to the City of Philadelphia and its residents. As part of that, we do have a few limited number of individuals in the D.R.O.P. Program. My recollection is that we had about a dozen in the program through 2009. And I'd be happy to provide you the specific numbers, but at least directionally about a dozen people over a several-year horizon. So, we're not talking about D.R.O.P. 3071 Budget - 4/12/05 as being our principle effort to reduce our numbers. It's through attrition and making sure that we're redeploying our resources to the highest value work in the Law Department wherever possible.
Okay. And then my final question speaks to the... I'm curious about the P.G.W. collection statistics in FY '02, FY '03 and FY '04. It says that an estimated -- and I guess the operative word is estimated -- $12 million was collected. But for '05 and '06 there appears to be a shift. Why was a decision made to shift collections to P.G.W. and how are they doing, based on what you know? THE CITY SOLICITOR: The best information I have, in terms of how they're doing, is that they're doing very well indeed. They've had a lot of support from the Council, in terms of making sure that they are moving forward and making those collections and not shifting the collection 3072 Budget - 4/12/05 burden onto others. But the latest information that I have is that the collection rate at P.G.W. has had approximately 93, 94 percent. That is significantly higher than they have been over the last few years, where they were in the mid 80s to upper 80s percentile range. And one of the things that the P.G.W. executives and general counsel and I, along with the former City Solicitors, talked about over the last couple of years, was giving them more tools to essentially focus their collection efforts in a holistic way and not just pieces of it. They felt that they had more of an incentive to do the collection work right, because it mattered to them as to their bottom line. We agreed with them. That shift has been made as of this last fiscal year. And so what we have attempted to do, so that you can compare apples to apples, is to reflect what we thought was in the base relative to P.G.W. 3073 Budget - 4/12/05 collections done by the Law Department in years past, and you could then measure how we were doing going forward. So the $90 million that we show for the Law Department non-P.G.W. work last year now can be compared to what we believe we're going to achieve this year. And by the end of FY '05, our projection is that we will collect $105.6 million, significantly over the commitment made by former Solicitor Ramos last year at this hearing when he said we would improve it by $10 million. We think this year with luck and a one-time major settlement, that we're going to get it up to $15.6 million over last year.
Okay, then. And then finally, on of the testimony, you talk about community development. Just briefly, what does that mean in the Law Department? What is that? THE CITY SOLICITOR: That is primarily the funding source for the attorneys representing our housing work. 3074 Budget - 4/12/05
Oh, okay. THE CITY SOLICITOR: The Community Development Block Grant which is... you know, continues to be under pressure, in terms of Federal funding is one that we have a concern with. But this represents the allocation from the O.H.C.D. folks.
Okay. THE CITY SOLICITOR: Based upon their Community Development Block Grant dollars that are used for housing attorneys in the Law Department.
Very well. Thank you for your testimony. THE CITY SOLICITOR: Thank you very much, Councilwoman.
You're welcome. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. 3075 Budget - 4/12/05 Mr. Diaz, I need to... This was not on my list, but you responded to some questions by Councilwoman Tasco, talking about the executive order related to minority business. And I took down a statement that the executive order was an attempt to address many of the issues that have been raised by Council in the past and that you were trying to work with Council on the MBEC related issues. Is that a somewhat fair characterization of what you said earlier? THE CITY SOLICITOR: I don't recall having said exactly that, but I certainly recall having said that the Law Department was attempting to work with Council to address what I understand are some outstanding issues. I think we've resolved them, in connection with the future disparity studies and the termination date of the executive board, yes, sir.
On the point of working with Council, could you explain to me what the nature of the work with Council was 3076 Budget - 4/12/05 in the development of the executive order? THE CITY SOLICITOR: Well, with regard to the development of the executive order, I understand that there was a concern expressed by Council -- and I am sure that is where you're coming from -- a concern expressed by Council that there had not been sufficient coordination between the Law Department on this issue and City Council.
When you say "a concern expressed by the Council," I know... And Council is a quite wonderful collection of unique members. Was this a collective 15 expression? Were these individual 16 expressions? How are you aware of the 17 Council's concerns? THE CITY SOLICITOR: I recall a hearing on the executive order, and the prior ordinance that Solicitor Ramos testified at...
Mm-hmm. THE CITY SOLICITOR: ...perhaps two months ago. I was in attendance and heard concerns expressed at that time. 3077 Budget - 4/12/05
I understand. So, what is your knowledge or information with regard to any involvement by the Council or any of its uniquely qualified members having been involved in the 10 creation of the executive order? What 11 exactly was the working-with-Council 12 relationship that you reference by way of the 13 Law Department? 14 THE CITY SOLICITOR: In that 15 context, I would stipulate to the fact that 16 what I heard was that Council did not believe 17 that it had been consulted --
Okay. THE CITY SOLICITOR: -- fully and coordinated with, as to the development of the executive order.
Do you have any information... THE CITY SOLICITOR: If I may, my testimony was with reference to now that the 3078 Budget - 4/12/05 executive order is out and there are some continuing concerns that have come to my attention from Council members, those have been addressed. I understand that we have an agreement as to those issues. Our draft revisions are now with Council staff. And I would hope that the Council, through its staff, would clear those revisions so that we could seek a revised executive order. So, I was speaking in terms of the recent past, not the --
You said that you're aware of what the concerns of the Council were, and that you've sought to address them, and that there are people now working on these issues? THE CITY SOLICITOR: We have a draft. And, in fact, I had a conversation with Mr. McPherson last Friday about it. And I understand that we are essentially in agreement as to the revisions, and we are awaiting confirmation of that from Council staff. 3079 Budget - 4/12/05
Okay. I'm just trying to understand the process. Did someone from the Law Department talk to each of the members individually or is this you just reviewed the notes of testimony from a particular hearing? How would you know what all the concerns were? THE CITY SOLICITOR: Again, I'm not talking about the origin of the executive order.
I'm not either. THE CITY SOLICITOR: I'm talking about once the executive order was issued --
It's now been issued. How do you know what the concerns are? THE CITY SOLICITOR: It was brought to my attention by members of the Law Department, who had been in contact with Council staff. And I understood that to be Mr. McPherson, among others. And those issues that had been raised we believe we have addressed in a proposed revision of the executive order. 3080 Budget - 4/12/05 Whether your office or you in particular have been consulted, we haven't gone behind the curtain to, you know, to ascertain that. We've been working with Council staff.
Okay. So there's been no discussion with each of the individual members about this. You're working with Mr. McPherson, who's on the Council President's staff, and through that process you're addressing all of the concerns by the Council. Is that... THE CITY SOLICITOR: I have not had any individual conversations with Council members. We're happy, certainly, to have those conversations. And I think as I began my testimony, I'm now in my eighth day as City Solicitor. I would certainly put this as a priority, if you tell me that is your desire, sir.
Okay. Thank you. I do appreciate that. In a slightly different area, I noticed on our financial disclosure form 3081 Budget - 4/12/05 there is an item that makes reference to honoraria and that we are supposed to list sources over $100. You're, I'm assuming, familiar with that. THE CITY SOLICITOR: I'm familiar with the concept. I don't have the form before me, nor am I familiar with the instructions immediately, with respect to that provision. But if you'll ask your question, I'll tell you if I can respond today or in writing.
Sure. Whether under City law or the Home Rule Charter or any state statute, are we allowed to accept honoraria at all? THE CITY SOLICITOR: Councilman, because it is an important issue, and I don't want to give you an off-the-top-of-my-head answer, and because we're dealing with both state and local ethics rules, I would propose to provide that response to you in writing, if I may.
That would be great. Okay. 3082 Budget - 4/12/05 There was testimony earlier by the District Attorney who made a statement with regard to the demographic composition of her office, and seemed to indicate that the racial and gender breakdown of the office was at a superior level. And I asked if she could -- and she agreed, and so now I'll ask if you can -- provide an overview and an analysis of the past five years for attorneys and non-attorneys a breakdown by race and gender in the Law Department, so that I can have a better understanding and make comparison between the two. You've mentioned some of the information in your testimony but we may want to go into a little more detail. Can you do that? THE CITY SOLICITOR: I'd be more than happy to provide that to you for the record. I don't have the information, in terms of the five past five years.
No; I understand that. THE CITY SOLICITOR: But in 3083 Budget - 4/12/05 connection with our employee demographics, you know, we're proud of the fact that we have 50 percent minority staff, 69 percent women. We have just under 1 percent disabled. We are always committed to trying to improve on that record. And I'll provide the five-year statistics that you're looking for as quickly as possible.
Last question. There have been many, many twists and turns, going back to the MBEC, over the years. Now, my recollection is, is that it was originally created by an ordinance of City Council. Is that correct? THE CITY SOLICITOR: I can't confirm that. I understand there was an ordinance. I don't recall if the so-called Ortiz ordinance created MBEC. I just don't recall that.
No. It was back from an earlier -- an earlier point in time. I think it may have been 1983. Has there been a subsequent 3084 Budget - 4/12/05 executive order creating the Office of Minority Business Enterprise? THE CITY SOLICITOR: I am not personally familiar with such an executive order.
Okay. So, my recollection is -- and I'm sure you'll check back at the shop -- that there was a bill 10 that was passed. I believe the Mayor vetoed it, the Mayor at the time. Council overrode the veto. The Law Department, of course, opined that Council did not have the authority to create such an entity. And one of the many opinions that is on the shelf somewhere in the Law Department, you know. When Council acted, and then you go into the room where you keep all of these opinions, like Formal Opinion Number 7 and a few others, and you just, you know, pull them down and hit us with what we can and cannot do. THE CITY SOLICITOR: Well, we consider them important precedent, Councilman. 3085 Budget - 4/12/05
Yes. No; I understand. THE CITY SOLICITOR: And we rely on that. We believe it creates the continued consistency --
I understand. I'm just giving you a hard time. THE CITY SOLICITOR: -- of legal analysis and opinion.
Absolutely. Yeah. Sometimes the footnote is longer than the rest of the commentary on the page. THE CITY SOLICITOR: Well, we lawyers tend to like footnotes.
I understand that. So, I'm just trying to get a little better understanding of the footing that we're on here, in terms of its standing at the moment, creation of a process and procedure by executive order. Councilwoman Tasco again raised the issue of why in this kind of matter. I mean, this is not your garden variety executive 3086 Budget - 4/12/05 order, based on the weight of the issue. And I think the executive order itself is upwards of maybe pages. Is that possibly one of 5 the longer executive orders in the City's 6 history? 7 THE CITY SOLICITOR: Again, I have 8 to confess I can't give you personal 9 testimony on that issue, but I will take the 10 point that it is a substantive and lengthy 11 executive order. 12
Right. It just, 13 of course, begs to the next question which is 14 why we wouldn't create such policy by 15 ordinance which is law and has a slightly 16 higher standing in the whole scheme of things 17 than an executive order. But I think it would be helpful if you could in a separate document lay out the history of the creation of the first attempt by the City to set policy by way of minority business enterprise, the ordinance, in any subsequent either bills or executive orders that have been formalized since that time, and then provide a sense of what's the legal 3087 Budget - 4/12/05 status of the entity at the moment. THE CITY SOLICITOR: I'm happy to provide that for the record. And I'm sure we'll have the requisite footnotes. But I will tell you this, Councilman: Whether there is an executive order that existed or exists currently creating MBEC, it clearly does exist. It clearly is within the authority of the Mayor to allocate resources to the function. The mission, I think, of MBEC is clearly laid out in the executive order. It has a -- It has a clear going forward expectation. But I'll be happy to provide the review of the historical record on this point.
It would be helpful. THE CITY SOLICITOR: And address the establishment of MBEC.
Great. Thank you. Thank you very much. Look forward to working for you. I think we'll have a good time. Thank you. 3088 Budget - 4/12/05 Thank you, Madam Chair.
You're welcome. The Chair recognizes Councilwoman Blackwell.
Thank you. The Chair recognizes Councilwoman Miller.
Good afternoon, Mr. Diaz. THE CITY SOLICITOR: Good afternoon, Councilwoman.
Can you tell us what's happening with the lien sales? Has that program ended, lien sales? THE CITY SOLICITOR: The tax lien sale program -- The tax lien sale program has not ended. The tax liens have been sold. They are currently continuing to be executed upon, if you will, through the tax sale process.
But we're not 3089 Budget - 4/12/05 able to make substitutions, correct? THE CITY SOLICITOR: The issue with regard to the tax lien sales, Councilwoman, is that the pool of available properties to substitute for those coming up for sale is dwindling. As a consequence, it becomes increasingly more difficult to substitute properties in kind for those that would otherwise be subject to a tax lien sale. So, except for those properties that are legally deficient and the City has a responsibility to substitute, we have recently communicated that we do not have at this -- at this point the ability to substitute, at the request of Council members' offices, for those properties scheduled to be sold because the only way that we could generally make the tax lien servicer putting these properties up for sale would be through cash. And we don't have the budget for that, Councilwoman.
So, then, there absolutely won't be any substitutions. 3090 Budget - 4/12/05 That's what you're saying, correct? THE CITY SOLICITOR: Generally speaking --
If we don't have the cash. THE CITY SOLICITOR: Generally speaking that would be the policy. We, you know, continue to work with the tax lien servicer wherever there is an opportunity to address a concern. We try to do that. But bottom line is as you suggested.
Okay. Are there any programs that help delinquent real estate tax homeowners? Do you know? THE CITY SOLICITOR: I'm sorry?
Are there any programs that's available to help people that have delinquent real estate taxes if they are having a hardship, they're facing a hardship? THE CITY SOLICITOR: In fact, one of the things that we have instituted -- and I know that some Council members have participated in the conversations with the Sheriff and the Linebarger Firm about the tax 3091 Budget - 4/12/05 lien sales, is that, first of all, we want to make sure that we are making people aware of their options early on. For example, the Office of Housing and Community Development has grant programs that can be made available to those that otherwise might be subject to a tax lien sale. It's important that people know what their rights are early enough so that they can access them. And obviously funds are limited. But the unfortunate situation, as I understand it, is that some of these funds remain unclaimed, which means to me that we need to do a better job of letting people know what their options are before they get to the critical end of a long process that I described earlier, as taking as much as 18 months to two years to complete. And one of the things that I talked about earlier, Councilwoman, is the desire to use communication tools to let people know that. Last year we were focused on making 3092 Budget - 4/12/05 sure that we were developing technology and redeployment options that made sense, so that we could maximize our tax collections within the Law Department. As we have matured this program, if you will, it seems to me that we need to go out and communicate what we are doing and tell people that the City is serious, the City Law Department is serious about these collection efforts. But it's got to be a two -- It's got to be a two-pronged message. We're serious and we're going to collect, but we have options. Here they are. You need to know what they are. And you need to take advantage of them. That is the reason why I communicated earlier that we need to be looking at communication mechanisms. And that's one of the things that I have identified I'd like to focus on as part of our collection effort going forward.
Okay. All right. Very good. Thank you. 3093 Budget - 4/12/05 Thank you, Madam President.
You're welcome. Are there any other questions or comments from members of the Committee? (No response.)
Seeing none, thank you very much. Thank you. THE CITY SOLICITOR: Thank you, Council President and Council members.
We will now hear from the Commerce Department. Good afternoon. Thank you for your patience. Kindly identify yourself for the record and proceed with your testimony. We do have a copy of your testimony. We will give it to the stenographer. It will be transcribed in full. So, I would just ask that you summarize your testimony if you will.
Be happy to do that. I'm Stephanie Naidoff. I'm the City Representative and the Director of the 3094 Budget - 4/12/05 Department of Commerce.
Good afternoon, Madam President and members of City Council. I'm seated here with Charles Isdell, the Director of Aviation; Duane Bumb and Mjenzi Traylor. I'm sorry. He was here just a few minutes ago. I'm sorry. Mjenzi Traylor, the First Deputy of the department. We're here today to present testimony on behalf of the department's FY 2006 operating budget request of $239,661,470, an increase of $13,039,032 over FY 2005 estimated obligations. Do you want me to skip through all those details, since they are on the record?
I think everyone has... All of the members have a copy of your testimony. So, as I said, if you would simply summarize.
The Office of the City Representative is the part of the office that supervises the part of the budget that 3095 Budget - 4/12/05 involves the Class 500 dollars for the Philadelphia Cultural Fund, which recently awarded 224 local arts and cultural grants. In addition, they supervise the other parts of the City -- They supervise the provision of services to City ceremonies and other initiatives such as festivals and events, such as the Fashion Festival at Becook, and the Sunoco Welcome America Celebration. On the commerce side of the house, on the Department of Commerce side, we function as the coordinating entity for the City's economic development programs and initiatives. We directly manage the K.O.Z. programs, the neighborhood economic development programs, including those funded through the C.D.B.G. contracts, economic development related capital improvements, international business development including the Sister Cities Program, and business services through the Mayor's Business Action Team. 3096 Budget - 4/12/05 We also contract and work closely with P.I.D.C. and P.C.D.C. on loan programs and other business services, and the Urban Industry Initiative, an independent non-profit, that works with issues concerning manufacturing businesses in the City and the economic development arm of the Empowerment Zone and Renewal Community Programs are all housed within our office, so that we can better coordinate economic development activities. The next part of my testimony relates to the C.D.B.G. budget. And since that will be discussed at a subsequent hearing, I'll just go through that and turn to the new initiatives which discusses the blueprint and particularly the ten objectives which I reviewed recently with Council in two hearings. I list the two objectives -- the ten objectives there, and talk about the fact that these objectives will provide the framework for the initiatives and priorities that our department will pursue. 3097 Budget - 4/12/05 I then go on to talk about the large-scale development projects including the Cira Center and Comcast Center, both of which are under way and will provide more than 2 million square feet of new office space in Philadelphia. We also note the residential renaissance taking place, particularly in Center City but also throughout the neighborhoods, as a result of the successes of the Neighborhood Transformation Initiative. That Center City has actually seen a total of over 6,000 new housing units and throughout the City there's a total of 10,000 new housing units that have gone up. And despite that tremendous boom, the vacancy rate actually remains quite low. We note particularly --
Yes, in our housing market. We note here specifically the expansion of the knowledge industry institutions, and we note the University of Pennsylvania and Children's Hospital, redevelopment of the former Civic Center site, and the Fox Chase Cancer Center plans for expansion at their northeast headquarters. I note also the tremendous boom in retail development, and as a result of the blueprint... Have talked about the fact that we will be creating a retail advisory board to help us coordinate and encourage the expansion of retail development throughout the City. In neighborhood economic development, we talk about the fact that we are going to focus on commercial corridors as a primary neighborhood economic development initiative because we believe that commercial corridors provide the backbone for our residential neighborhoods. 3099 Budget - 4/12/05 We believe -- We recognize that strengthening commercial corridors builds stronger, more vibrant and stable neighborhoods. Business attraction and expansion efforts will include small and neighborhood businesses with a particular focus on the commercial corridors. Talk then about the business attraction and retention efforts, and the fact that we've had a very successful partnership with P.I.D.C., Center City District, the Greater Philadelphia Chamber of Commerce and the Governor's Action Team to pro-actively meet with and address the issues of the City's largest businesses whose leases are about to expire. And this has been carried over now into our business attraction efforts. And we talk about hospitality and tourism on . And that is increasing at this point in -- especially in -- as a result of the Philly's More Fun When You Sleep Over Campaign. 3100 Budget - 4/12/05 Talk about the five tourist attractions that are the top draws, and especially about the expansion of the Convention Center which we believe is a very important and necessary step in our ability to continue to grow our tourism market. On the Aviation Fund, we have seen some tremendous successes at the airport in recent times, particularly as a result of the arrival of low-cost carriers. We had 28.5 million passengers who utilize P.H.L. this past year which is an increase of 15.5 percent over 2003. And our international passengers rose to 4.1 million which is a percent increase. 17 The low-cost carriers... I'm trying to skip over some of this. Our average air fares now rank slightly lower than the national average, compared to 20 percent higher in 2003. In addition, in February of this year Standard and Poors reaffirmed our A credit rating with a stable outlook. To meet the growing demand, we're 3101 Budget - 4/12/05 moving forward with a number of plans, including the terminal expansion program. We recently requested the City Council authorization to issue airport revenue bonds to cover the expansion and renovation of Terminals D and E and to have some improvements to Terminals B and C as well and A east; also, to do the resurfacing of one of our major runways. And we're in the major -- in the last stages of a master planning process which will allow us to relieve some of the congestion and delays that occur at the airport. Lastly, we talk about the fact that the airline use and lease agreement which became effective in 1974 is coming up in June of 2006 for renewal, and we have entered into negotiations with the airlines about that. Sorry. Quick and dirty summary. Readers Digest summary.
Very good. Thank you. On of your testimony, you 3102 Budget - 4/12/05 state, now that the City has committed to creating a fund of $125 million from unlocked water and sewer bond reserve funds...
...and will leverage state and Federal funds to address the standard public responsibilities of planning, land assemblage, environmental remediation, demolition, and infrastructure. What do you mean by unlocked bond reserve funds?
This has to do with our request, which we will be coming back in a more formal sense to request from City Council the, use of the reserve funds under the water and sewer bonds to create this $125 million economic development fund that we've been talking about for some time now.
Can you tell us how these bond funds will be used?
We are assembling the list at this point, as I had mentioned the last time I was questioned about it. We will be putting -- We are putting together a list 3103 Budget - 4/12/05 of the allocations of -- the proposed allocations of that money.
Do you have any indication as to what the cost of unlocking these funds will be and who will pay for it?
I believe that the... Turn to the Budget Director. I don't know if she has more information than I do. I believe that there is -- the cost -- the major cost is the securing of a surety bond which I think was in the neighborhood of about $4 million. I'll have to get you some more specific information, Madam President, on that. But I think it was $4 million dollars. And I believe that the $125 million is net of the costs. I think the total amount in the reserve funds is --
-- the $4 million be paid? And who would be paying for it? 3104 Budget - 4/12/05
The proceeds of the reserve funds would cover the expenses of securing that. And what nets out would be the $125 million, which would then be available for the use of those infrastructure projects.
Would the water rate payers be paying for this investment?
No, I don't believe so. I think that this is money that is under current bond issues is required to be kept in reserve funds. And we believe that by buying the surety bond, we can unlock those reserve funds and use that money for other projects, such as these infrastructure projects, as long as we are able to secure that surety bond.
But aren't the water rate payers paying for that reserve fund?
So they, in essence, would be paying for this $125 million dollar issue.
I don't think this is a new issue. What we're talking about is reserve funds that are already there that are under the current bonds. And we are under the --
-- I don't think... You know, this was brought up last year. And I don't think we got a very good explanation about the $125 million, and how it would be used, who would be paying for it, and who would oversee the expenditures. I think this is much, much too vague. And I think that Council certainly should be more informed as to how this is going to be spent.
I certainly understand what you're saying. And we intended at the point that we come forward with the actual 3106 Budget - 4/12/05 proposal for this, to provide you with complete testimony.
It is in the budget. So, I just don't know when you would be coming forward, I mean. The budget hearings are practically over. You are requesting $4 million in economic stimulus funding.
How will these funds be used? And can you tell us, what is the total amount the City has spent in economic stimulus funds over the last five years?
I would need to provide you with that report. I don't have that with me.
All right. When you provide the report, can you let us know what projects have they gone to, and how have the benefits of this program been factored into the Mayor's revenue estimates?
I see a number of Council members want to be recognized. On -63 of your detail, you are requesting $10 million in the Grants Revenue Fund for your Economic Development Division. You do not list the grants title, award period, nor the objective. Can you tell us what these funds are for and what is the likelihood that you will receive these funds?
I'm told that that is a number that we include in the budget as a standby appropriation for grants that we may receive.
But isn't the normal process that it comes out of Finance, so that you know when you get the 3108 Budget - 4/12/05 grant and we know when you get the grant? Isn't that the way it's been done in the past.
No. I think we've always done it this way. Maybe Mr. Gordon can -- John Gordon can explain it.
Welcome, Mr. Gordon. Please identify yourself for the record.
John Gordon, Assistant Commerce Director. This standby appropriation in the amount of $10 million has been in the budget for at least years. It hasn't always been 16 necessarily $10 million, but there's always 17 been a standby appropriation. 18
Okay. 19 Thank you, Mr. Gordon. 20 The Chair recognizes Councilwoman Tasco.
Yes. Thank you, Madam President. I want to follow up on your questions about the stimulus funds. I know 3109 Budget - 4/12/05 that the President has asked what were some of the projects that were funded last year. I'd like to know if you've targeted those areas where that money would be spent in year 2006.
Also, I'd like to know the criteria for determining which projects or entities receive economic stimulus.
I'm sorry. I didn't hear the beginning of your question. THE CITY SOLICITOR: I'd like to know what is the criteria for which projects -- for determining which projects or entities receive economic stimulus funds.
Do you -- Are the dollars spent directly through you or through P.I.D.C.?
We authorize them, and it is -- the accounting is done through P.I.D.C. They issue the checks. 3110 Budget - 4/12/05
It's a process that involves four departments signing off on it: Our department, the Finance Department, the Mayor's Office and P.I.D.C.
So, if someone is interested in getting some of the stimulus dollars, they apply to your department or to P.I.D.C.?
It's generally not done through an application process. It's done when we have negotiated agreements for development projects that we believe will create jobs and benefits for the City of Philadelphia, and the projects need some additional support, some City support in order to move forward.
Well, what kind of funds were given to the American Business 3111 Budget - 4/12/05 Financial Services Group? Were they stimulus dollars? THE CITY SOLICITOR: It was $1 million of that was stimulus.
So what happens now that they have gone out of business and did not bring those jobs into the City? How does the City recapture the dollars that they gave to this company?
I believe the City got more than the million dollars. I believe it was $2.2 million in wage tax revenues from that company on behalf -- from the employees of that company, so that we more than made up the amount of money that we invested.
Well, what did the City lose when they proceeded to foreclose and use predatory lending practices on some of the people who live in the City of Philadelphia? How much did we lose?
The other question I have about that is, who vetted this company before they came into the City?
I don't know the answer to that, since I was not around at that point.
I'd like to know how they determined this company was worthy of a grant. Did they vet them in any way to see what their business practices were?
Peter Longstreth, President of P.I.D.C. Happy to be here. This goes back three or four years. At the time American Business Financial Services was located in Bala Cynwyd and was 3113 Budget - 4/12/05 considered a very vibrant and successful company and a target for attraction to the City. We went through about a two-year process of reviewing with them a variety of different options in the City and underwriting the credit risk. And at the time it was considered, once again, a very positive opportunity for the City to attract 1,000 new jobs which represented the largest attraction in over 13 years. 14 So, I would say we went through the 15 normal underwriting process that we go 16 through with most companies, and ended up 17 with a financial structure that was largely 18 collateralized by a very valuable building 19 here in the City. 20
Yeah. I 3114 Budget - 4/12/05 think they were Lord & Taylor building; were they not?
Weren't they located at the Lord and Taylor building?
Yeah, the Wanamaker Building which has $110 million worth of value. We have a second position on that building for the $15 million worth of debt involved. And then, as it relates to the grant money that went to them, once again, the Commerce Director has indicated the wage taxes that were paid during the two years that they occupied it more than offsets that. Now, obviously, nobody is happy with the outcome. We feel particularly badly for the employees, the shareholders, the creditors. And obviously we're one of those creditors. But we are somewhat reassured by, one, having the collateral on the vast majority of the funding that was provided; 3115 Budget - 4/12/05 and then secondly, having the taxes collected during the two years that they did occupy the space.
I also know that through their business practices a number of people in the City lost their homes. I'd like to have someone calculate what that impact was to the citizens of the City of Philadelphia.
The other thing is, when you are attracting these businesses to the City, do you look at the kind of business they are and what their practices are, and as opposed to their financial conditions? Sort of like a character review.
Yeah. We certainly -- We certainly try to. Based on what you're saying, I'm not sure we're always successful as we'd like to be, but we certainly try to.
If you had been forewarned, say in 2003, that there was some problems with this company, what would you 3116 Budget - 4/12/05 have done? Could you have done anything to recapture your dollars or protect the investment of the City?