COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING JOINT COMMITTEES OF THE WHOLE and HOUSING NEIGHBORHOOD DEVELOPMENT AND THE HOMELESS - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, March 29, 2004 10:35 a.m. - - - RESOLUTION 040095 - A resolution amending the Fiscal Year 2004 program Statement and Budget for the expenditure of the Neighborhood Transformation Initiative (NTI) bond proceeds. - - - PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE L. BLACKWELL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DAVID COHEN COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JUAN F. RAMOS COUNCILMAN FRANK RIZZO COUNCILMAN FRANK J. DI CICCO COUNCILMAN DARRELL L. CLARKE COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN JACK KELLY - - - V A R A L L O INCORPORATED Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, PA 19103 (215) 561-2220 350 RESOLUTION NO. 040095 - 3/29/04
Good morning, everyone. Sorry for the delay. This is the continued Public Hearing of the Committee of the Whole, of Neighborhood Development, Housing, and the Homeless Committees regarding Resolution No. 040095. Mr. McPherson, would you please read the title. MR. McPHERSON: A resolution 11 amending the Fiscal Year 2004 Program Statement and Budget for the expenditure of the Neighborhood Transformation Initiative bond proceeds.
Thank you. Anyone wishing to testify, if you would see Ms. Murray back here, give her your name so that you would be called at the appropriate time. Good morning.
Please identify yourself for the record and proceed with your testimony.
Patricia 351 RESOLUTION NO. 040095 - 3/29/04 Smith, Director of Neighborhood Transformation. Good morning, Madam President, Madam Chairperson, and members of the Committee of the Whole and Housing, Neighborhood Development and Homeless. My name is Patricia Smith, Director of Neighborhood Transformation. If I may, I would like to just take a few minutes at the outset of the hearing --
Ms. Smith, just a moment, please. The noise level is much too high. Thank you, that's much better. Please proceed.
If I may, I would like to take a few minutes at the outset of the hearing to address some of the issues and concerns that were raised last week about the progress the Administration is making under the Neighborhood Transformation Initiative. And I am also submitting a substitute Exhibit D in terms of that I would like to replace the one that was in the 352 RESOLUTION NO. 040095 - 3/29/04 resolution itself. And I will talk a little bit more about that at the closure of my testimony and explain that. Under the umbrella of NTI, the Street Administration is taking on problems that are the result of decades of divestment and neglect. NTI represents an unprecedented commitment of resources for Philadelphia neighborhood. It endeavors to help preserve and rebuild Philadelphia neighborhoods by removing blighted conditions, creating opportunities for redevelopment through land assembly, stimulating private investment in neighborhoods, and coordinating and improving the delivery of services and resources to neighborhoods. NTI recognizes that strong and healthy neighborhoods requires safe streets, job creation and workforce development, good schools, retail, cultural and recreational outlets and a range of quality housing options for all incomes. NTI emphasizes neighborhood 353 RESOLUTION NO. 040095 - 3/29/04 planning, balancing affordable housing and market-rate housing development, the involvement of nonprofit and private sector, and collaboration among city departments and agencies. The implementation of NTI has not been easy. To my knowledge, nothing equal to the breath or the scale of NTI is being undertaken elsewhere in the country. When necessary, the Administration has made adjustments in its program goals and strategy to accommodate lessons learned and changed circumstances. Yet, despite the many challenges that are embedded in the implementation of an initiative of this scale, this Administration has accomplished a great deal since the passage of the NTI authorizing legislation in March 2002. And just to list some of our accomplishments, we have contracted for the demolition of more than 1900 dangerous buildings, contracted for the stabilization of more than 400 properties, redesigned the PHIL 354 RESOLUTION NO. 3 million in development costs, initiated the acquisition of more than 5500 projects for development projects or land banking using the RDA eminent domain powers, contracted with ten CDCs for the implementation of a new homeowner repair program for their neighborhoods, and contracted with eight CBOs to help maintain vacant lots. In addition, the Administration since January 2000 has made the neighborhoods safer and cleaner by closing down open -- air drug markets, taking 202,198 abandoned cars off the street, removing graffiti from 308,757 buildings and fixtures, pruning 15,975 trees and removing 7401 dangerous street trees, removing more than 30,000 tons of debris from vacant lots, planting some 4000 new trees on streets, in parks and on vacant lots, improving more than 1400 vacant lots by installing topsoil, seeding and fencing, and selected more than ten commercial corridors or 355 RESOLUTION NO. 040095 - 3/29/04 neighborhood gateways and garden projects for improvements, and funding upgrades for 26 neighborhood parks. We secured a seed grant from Freddie Mac to set up a public information hotline to reach victims of predatory lending and help home improvement or debt consolidation loans. To date, what we call the "Don't Borrow Trouble" hotline has served more than 2300 callers. Because of a generous grant from Citizens Bank, the Administration will promote the hotline this summer in a series of ads in newspapers, on buses and on the radio. Furthermore, the face of several Philadelphia neighborhoods is being transformed by large-scale development projects throughout the city. Six large-scale developments, consisting of more than 2500 new units are well underway.
Some of these 21 developments include 788 units at Mill Creek 22 Hope VI, 400 units at Brewerytown, 230 units 23 at Capehart, 546 units as Tasker/Gray's Ferry, 400 units by Universal Communities in South Philadelphia, and 151 units at the Cecil B. 356 RESOLUTION NO. 040095 - 3/29/04 Moore Homeownership Zone. About half of these new units will be rental properties, including low-income and senior housing, and the other half will be homeownership properties. It is impossible to talk about neighborhood transformation without recognizing the work of the Philadelphia Housing Authority. There is a demonstrated need for affordable housing in this city, and public housing is a significant resource for Philadelphia's low- and moderate-income families. PHA does play a critical role in neighborhoods. Its resources can serve as a catalyst to the revitalization of communities. Of course, the transformation of neighborhoods requires a balance of public and private investments. NTI is engaging the private sector in many important ways. Citizens Bank has committed $104 million in capital to neighborhoods where NTI is active. In the first year of its commitment, Citizens has exceeded all lending goals. In 2003 alone, they have more than doubled their residential mortgage goal of $10 357 RESOLUTION NO. 040095 - 3/29/04 million by making $20 million available to buyers in low- and moderate-income census tracts. Local lenders are active in NTI-funded loan programs. Fleet, Wachovia, Citizens, PNC have made more than $4 million since Fiscal Year '03. The PHIL program leverages $2 million in NTI bonds to make $13 million in loans available over the next few years. In addition, eight lenders -- Beneficial, Citizens, Commerce, Fleet, National Penn, PNC Bank, Sovereign and United -- all came together to serve as lenders for our new anti-predatory loan products. 6 million loans to homeowners with past credit problems. Because of NTI, there is a renewed interest, I believe, in the City of Philadelphia by for-profit residential home builders, interests seeking to build large-scale developments in distressed real 358 RESOLUTION NO. 040095 - 3/29/04 estate markets, like Cecil B. Moore and Brewerytown. The RDA has begun to receive expressions of interest from developers looking to purchase land from its inventory at fair market value. And just a few years ago, we couldn't give some of this land away. NTI bonds are laying the foundation for future development. By current estimates, roughly $19 million in approved acquisitions will bring $136 million in affordable market-rate, mixed-use development to the city. This is just the beginning. Development projects can take five years plus to come to fruition. For the next decade, the majority of all development in Philadelphia will likely have been facilitated by the use of NTI bond funds for acquisitions. We are proud of the direction we are going. I also want to reiterate the Administration's commitment to using NTI as a tool to foster economic opportunity. The Administration is meeting the subcontracting goals that are set out in the economic 359 RESOLUTION NO. 040095 - 3/29/04 opportunity plan for demolition activities. Of all the contracts that have been let for target demolition programs as of March, MBEs account for 49 percent and WBs account for percent of the subcontracts. 7 Plus, minority firms are performing 34 percent 8 of the curb-side demolition work. 9 The African-American Chamber of 10 Commerce is helping to build the capacity of 11 minority- and women-owned businesses who are 12 interested in bidding as prime contractors in 13 the NTI targeted demolition program. 14 In addition, we are issuing small 15 bid packages to facilitate the participation 16 of demolition contractors. 17 For the targeted demolition program, 18 the Administration is pleased to report that 19 minorities account for 78 percent of the more 20 than 87,000 hours worked.
Philadelphia 21 residents represent 77 percent of the work 22 force employed. 23 The vacant lot maintenance program, 24 administered by PHS, created jobs for 70 neighborhood residents. Thus far NTI work 360 RESOLUTION NO. 040095 - 3/29/04 force development program administered by DAP has resulted in acceptance of 36 individuals into the building trades. I now turn to the specific issue at hand today, the proposal to add to the FY '04 NTI program budget. The Administration wishes to replace Exhibit D to Resolution 040095 with the attached spreadsheet. The additional $25 million that we are seeking will be used to fund all or part of bid packages that are highlighted in blue and yellow on the spreadsheet. And, if I may, I just want to, for example, pick out a Council district and explain. Because I know it is a lot of numbers on this spreadsheet. What we sought to do, instead of estimating, as we had done in the approved budget that was introduced last year, we listed the actual bid packages that the amendment will support. So if you were to look at, for example, Council District No. 8, you have 361 RESOLUTION NO. 040095 - 3/29/04 already under contract bid packages 24, 25, 23, and the AAC training program. That's already under contract. In this amendment we will be adding Allegheny West and funding, for example, I believe, 46 properties as part of the bid package, as part of this amendment as additional FY '05. And we used the alternating colors just to make it easier to read. In addition, we are including funding for emergency curb-side asbestos monitoring for the targeted program and wrap-up insurance. And then, as I also explained, some bid packages, because of their size, some are being partially funded with the amendment. The remainder of the funding for the Kensington, Grays Ferry, Haddington, and Allegheny West bid packages will be in the NTI FY '05 program statement. As I explained in my testimony last week, the additional funds are needed because the pace and the cost of demolitions in '04 is 362 RESOLUTION NO. 040095 - 3/29/04 greater than the Administration projected in the original budget, which was transmitted about a year ago -- which was developed about a year ago. Because the targeted program was not fully operational when we transmitted the budget, we had very little actual experience in the field with how the contracting community would respond to large bid packages, packages that were usually greater than 75. During the first half of FY '04, only three contractors were actively bidding on target demolition packages. Another cost driver has been the significant number of party wall treatments in bid packages. As I had stated, for every 100 demolitions, on average we stucco 64 party walls. And the cost of a party wall treatment is $9,000. Although the Administration could have exercised its right to reject all bids because costs were coming in higher than projected, we elected to go forward. Generally re-biding adds at least 363 RESOLUTION NO. 040095 - 3/29/04 two to three months to the city's procurement process, without any guarantee that the demolition contracting community will submit lower bids. Furthermore, there was a great deal of public pressure to increase, not slow down, demolition activity. The Administration is working hard to reduce costs, and we are committed to that. To increase competition, we are aggressively recruiting contractors for the targeted demolition program. And results are beginning to pay off. The Ludlow bid package drew eight bidders, and Belmont has come in percent 17 lower than our estimate. 18 While our demolitions costs for both 19 the targeted and emergency curb-side programs 20 are higher than initially projected, we do believe the quality of the demolition work has improved dramatically. We have revised the specifications -- and we have talked about that -- to improve the post-demolition 364 RESOLUTION NO. 040095 - 3/29/04 treatments. Where appropriate, we are fencing.
In addition, to improve accountability, we changed the bidding process. Contract is now bid on the entire demolition procedure, including asbestos removal, party wall treatments, and post-demolition treatment. There has been a noticeable decrease, we believe -- these changes have been well received by neighborhoods. Furthermore, there has been a noticeable decrease in the number of complaints regarding demolition work. " The noun "initiative" comes from the verb "initiate," which Webster defines as to cause or facilitate the beginning. For example, to initiate a program of reform. "Initiative" means the first step. During the past 50 years, Philadelphia has witnessed unprecedented losses in both people and jobs that have 365 RESOLUTION NO. 040095 - 3/29/04 decimated property values, quality of life, and the sense of community in many once proud neighborhoods. NTI seeks to build a foundation for change in neighborhoods that have been neglected for decades. Although we have faced some tough challenges, NTI has accomplished a great deal in a relatively short period of time. While much remains to be done, as President John F. Kennedy so poignantly pointed out in his inaugural speech, all of this will not be finished in the first 100 days, nor will it will be finished in the first 1,000 days, nor in the life of this Administration, nor perhaps in our lifetime on this plant, but let us begin. NTI represents the beginning. Madam President, Madam Chairperson, and members of the Committee of the Whole and Housing, Neighborhood Development and Homeless, I respectfully request your favorable consideration of the proposed amendment to Resolution 040095. Thank you. 366 RESOLUTION NO. 040095 - 3/29/04
Thank you. Have all of the Council Members received a copy of this amendment? Thank you. Ms. Smith, what is the traditional cost of a party wall treatment? What did it cost us when L & I was doing the demolition?
Well, L & I continues to do emergency demolition. And their party wall treatment number is coming in around the same amount at this point in time. It may be slightly lower because some things, like prevailing wage, does not apply to emergency curb-sides because the amount may not exceed $25,000 in total. And under Council ordinance, if a construction cost is less than 25,000, that doesn't apply. But they are almost comparable at this point. The other challenge we have in doing the apples-to-apples comparison is that under the emergency curb-side program, we let one contractor to do all stucco work. And then contractors are deployed citywide; as opposed 367 RESOLUTION NO. 040095 - 3/29/04 to having, in the NTI targeted program, the prime contractor responsible for everything. And as you may recall, Council President, one of the reasons why we made that change is, a lot of times neighbors, after a house was taken down, when the curb side, and not immediately stuccoed, would complain because they didn't realize that another contractor would come.
At that time we waited an awfully long time. And we were told that we could only find one person in the entire city who did stucco work.
I mean, $9,000 seems like an exorbitant amount to me for stuccoing work, but I'm not an expert at that. But it does sound like a lot of money.
It is in line with what we are estimating in terms of the work. And, again, the other drivers are things like prevailing wage.
Ms. Smith, I received a call from Councilman Nutter this 368 RESOLUTION NO. 040095 - 3/29/04 morning. He is unable to be here; however, he indicated that last week he did ask for a breakdown of the original budget by councilmanic district.
And he also wanted to know how much has been spent to date. Have you been able to provide him, his office, or us with that information?
We have put together a response to all the questions that was presented to Council, and they are being delivered. There was, unfortunately, a typo that I caught. And they are being delivered to the Council offices today. And I think you have my one and only copy that I brought with me, the draft.
Fine. Thank you. Are there any questions from members of the committee? 369 RESOLUTION NO. 040095 - 3/29/04 The Chair recognizes Councilman Goode.
By your statement just now, that packages are being prepared for Council Members in response to questions asked last week, should I take that to suggest that the responses within your testimony do not respond to the questions asked last week?
No; I tried to respond to what I thought were some of the major themes of last week. And one of the other things I did attach to my testimony, because there was a question specifically around the direct leverage of NTI bonds, and I did attach that chart to this testimony.
I saw that chart, but I will get back to that part of it. The first question I asked last week --
The Chair 370 RESOLUTION NO. 040095 - 3/29/04 recognizes Councilman Cohen.
Did Ms. Smith say she prepared for the individual Council Members the answers to their questions?
Well, I understood that the procedure in City Council always, without exception, was to send the replies to the President, and the President would send them to the Council Members, those Council Members whom she believed it was appropriate who asked the question. Send one to the Chair, whoever the Chair was. So I am wondering whether that's been changed at the request of the Council President, or who is changing the procedure? Because many of the questions may be asked by a particular Councilman. Sometimes one or two Council Members are interested, sometimes there are more.
No. The letter responds 371 RESOLUTION NO. 040095 - 3/29/04 to all questions that we took notes on as addressed to President Verna and Chairwoman Blackwell. And then that response we cc'd all members of Council, because it is distributed to everybody.
Why is that? Is it because you don't trust whoever the Chair is to distribute them to the appropriate people?
That's not my understanding. But I would like to have clarification from the Chair. Have we changed the procedures?
No. Normally it is sent to the Chair, and the Chair then submits it to all Council Members.
We made copies. We will deliver all copies to your office, Council President.
Yes. As I said, I had 372 RESOLUTION NO. 040095 - 3/29/04 to make a change. And we will bring all copies, we will make the copies and deliver them to your office.
Just getting started, Madam President. The first question, Ms. Smith, last week was how the rate of housing production has changed under NTI in measurement on a yearly basis. Is housing production within NTI areas increasing, is it decreasing, has it stayed the same? I don't note that response within your testimony. I don't know whether it is contained within the answers that will be forwarded.
Again, the rate of housing production, what we will be sending over separately, if you recall, I mentioned Secretary Hannon was pulling that information 373 RESOLUTION NO. 040095 - 3/29/04 together. But in some areas it is increasing. And some of that is due to the fact of, for example, PHA has done several large-scale housing developments, like --
Ms. Smith, we went through this last week. In terms of a comprehensive overview of housing production in NTI areas, which is not a difficult question, it is not a complicated question. If you look at it on a year-by-year basis, starting before NTI, in the first year of NTI, then the next year of NTI, is housing production in NTI areas increasing, decreasing, or staying the same? Because I notice even within what you take credit for in terms of accomplishments, not one new house, and the rehab of only 50.
What we attached to the question was our break-out of what we anticipate in rental housing development using NTI bonds. 374 RESOLUTION NO. 040095 - 3/29/04
Ms. Smith, I am not asking you what's attached. I am still asking you the question. You are the director of NTI. It is a very simple question. Has housing production increased, decreased, or stayed the same? And that, also, is not a question that I am asking for anecdotal response. I actually want to know what the numbers were the year before in terms of housing production in NTI areas, what the numbers are on a year-by-year basis.
So a week later you still don't know the answer to that question?
That's correct, not in exact numbers. I don't know it in exact numbers. I did list in the response the number of properties -- and, unfortunately, my one copy that I brought with me, if I can get 375 RESOLUTION NO. 040095 - 3/29/04 it from Mr. McPherson. I did list what we have in acquisition. I believe that's around 800 units we are projecting off of what we are acquiring. I had one copy of my response.
If I may for a second. Mr. McPherson, if I could just have the letter back. Thank you. What we provided was a list of the tax credit projects for FY '02 through FY '04 that received tax credits and the chart --
That's not the question I asked. I asked whether actual housing production in terms of units. The housing production itself, new units actually being created, has increased under NTI? 376 RESOLUTION NO. 040095 - 3/29/04
So you did not answer the question of whether housing units have actually increased under NTI, though you are asking for $25 million more, which may or may not lead to any more housing units?
The million is 14 specifically to carry out the demolition of 15 dangerous buildings for public safety. But I 16 will provide you -- 17
I understand 18 that. 19 So they may or may not lead to any 20 more housing units. 21
Thank you. 23 Second question was in terms of 24 private leverage. And the first part of the 25 question was, under NTI, period, what is your 377 RESOLUTION NO. 040095 - 3/29/04 figure in terms of private dollars -- not commitments, but private dollars -- that have already been leveraged?
And what I provided, to the best of our abilities -- again, just last year is when this was the first year that we used NTI bond proceeds for acquisition.
Do you know the answer to the question of how much in private dollars have been leveraged? Not committed, but actually leveraged.
I know what we are projecting off the leverage, because it has not resulted -- not all the units have been built yet, so --
The question I am asking is very simple. Number of housing units, number of dollars. An actual dollar amount of private money that has actually been leveraged from NTI.
For the acquisition of rental development, 6.8 bond proceeds have been approved. We are estimating a leverage of 83.6 million for 697 rental units. 378 RESOLUTION NO. 040095 - 3/29/04
Again, at this point in time not all the declaration of takings have been filed, not all projects have been funded. I can speak to the Citizens Bank commitment.
Let me ask you a question about the Citizens Bank commitment. Are you familiar with a law passed in 2001, 2002, by this Council that says that our depository banks have to submit lending goals --
They have to tell us how many home mortgages, how many home improvement loans, how many small business 379 RESOLUTION NO. 040095 - 3/29/04 loans, how many community development investments they are going to make?
Well, the legislation was authorized in 2002, the NTI bond legislation. So, it was before.
So Citizens Bank had to give you commitments for how many -- have the Administration count the commitments for how many home mortgages, how many home improvement loans, how many small business loans, how many community development investments they were going to do in order to retain their depository status anyway?
Yes. But they have also been, I mean, actively working on different other programs and projects in support of NTI. They have been a great corporate partner in this initiative.
Well, they have been a great corporate partner to retain their 380 RESOLUTION NO. 040095 - 3/29/04 depository status, I am sure of that. Beyond that, I think they have also done some great things. But the issue is, specifically in terms of those commitments made by Citizens Bank to keep their depository status, how can you separate them from commitments made to NTI? This is a question I have asked both Citizens and NTI in the past, to differentiate the two. Because I think that, basically, they are double-dipping in terms of commitments. In fact, I know for a fact that they are double-dipping in terms of commitments. I know for a fact in your testimony, when you talked about their lending goals being reached, those are lending goals that actually relate to reinvestment statements offered as part of my legislation, not the NTI legislation; is that correct?
Well, again, I think these are different tools that go hand in hand in support of your legislation. 381 RESOLUTION NO. 040095 - 3/29/04
I asked you in your testimony, where you talk about lending goals being met in terms of home mortgages, is that actually commitment that NTI is tracking separately?
We receive -- I met with Citizens Bank, I guess it was, last month, and they gave us an updated report. And this was one of the things, information that they provided to us, where they were in terms of their residential goals. They also were getting for us things like small business lending. They also did a number of grants for projects that they are going to update.
So you know that is separate from their reinvestment goals they submitted to the city?
I would assume that they are similar and the same. I mean, again, I think these tools build off one another in many ways.
I am still not sure what tools the Administration is using, 382 RESOLUTION NO. 040095 - 3/29/04 that's my question. I know the commitment by Citizens. I also know the commitment made by Wachovia, formerly First Union, and by Mellon and by PNC and by Commerce Bank and by other banks. And my question would even go to the point that, if you believe that the Citizens commitment is or is not per what they have to do to retain the depository status, what are you doing with the other banks, and why are you still listing a commitment that was made years ago at a point in which they had to start making commitments anyway?
Well, while they were doing, I think, lending previously, when they came to us and we sat down and talked about a role that they can play in NTI, that conversation was about increasing and setting new goals. I mean, granted, they were required to and mandated to do so under your laws. But they were greater goals than what I think had initially been there.
So are you aware 383 RESOLUTION NO. 040095 - 3/29/04 that Wachovia, as the city's largest depository, is actually decreasing what they plan on doing in terms of home mortgages?
I wasn't aware of the specific issue around decreasing home mortgages. My meeting with Wachovia have been around their support --
If you are aware of Citizens increasing their goals, why are you not aware of Wachovia decreasing their goals, if you are actually doing what you should be doing in terms of trying to leverage private investment from city depositories?
Mostly because of the limited capacity in terms of my office to track everything with respect to the leverage of banks. What I have been doing is meeting with -- for example, met with the head of the Wachovia Regional Foundation about coordinating their grant-making program around planning grants, so that that can augment some of the community planning activity that's been 384 RESOLUTION NO. 040095 - 3/29/04 going on. So I have been approaching and talking with various individuals on specific topics. We approached and got additional four banks that had not historically been part of the PHIL program to participate in the anti-predatory loan program. That was something new that occurred. I know under CRA, both at the federal level and under the ordinances at the state level, that that requires banks to make commitments. And we are trying to work with them, encourage them to push the envelope to the best of my ability and the capacity of my office.
I decided to let you finish that statement, although I don't understand it. So you do not know, for the record, the number of housing units that have been produced in NTI, you do not know the dollar amount, how much -- 385 RESOLUTION NO. 040095 - 3/29/04
-- private dollars have been leveraged, and you are not sure whether even the Citizens commitment, which you take credit for, which you probably should not, whether that actually is any different from what's mandated under the legislation that was initiated by this Council?
I have not tracked it in that way. And I don't have those numbers and figures in my head, no. 15
Good morning. Ms. Smith, can you talk to me a little bit of how you are going to handle and decrease your cost of demolition? You made references in your statement that were kind of contradictory, at least from me reading on it. 386 RESOLUTION NO. 040095 - 3/29/04 On you said, although the Administration could have exercised its right to reject all bids because costs were increasing, we elected to go forward. And in the same breath a little later you say, the Administration is working hard to reduce costs.
That's correct. One of the things that we have been trying to do is get more contractors to actively bid. We are resizing bid packages in terms of the size of the bid packages so they are not as large. We are doing small bid packages, very tiny ones, to help facilitate the participation of additional contractors. And, going forward, we are going to seriously look at, you know, whether it makes sense to reject. Our concern is, if we reject all bids, we have to start the process over, and that does delay things.
Is that approach -- 387 RESOLUTION NO. 040095 - 3/29/04
We are committed to reducing the costs. And we do understand that it is of concern and issue to this Council. And we are committed to, within our control, do what we can do.
And what you just outlined, this has been thought out, and you believe that this will reduce the costs by making smaller --
Well, the experience has shown on some of the small bid packages that we have let this month, I believe the numbers have come in a little bit lower. And then on two of the larger bid packages that we have let, the numbers have come in lower than what the historic experience had been. So we are starting to see a change, yes.
I believe you will agree with me that the members of this Council -- and I am a new member of this Council -- that I found it quite a bit disconcerting that your cost of demolition had 388 RESOLUTION NO. 040095 - 3/29/04 almost doubled. And that's very troubling for me. Do you know of any instances where you awarded a prime or a subcontractor's work, demolition work, and they stopped for whatever reason, quit the job, we can no longer do this for whatever reason? Did you suffer any of that?
I don't believe in the targeted demolition program that has happened. I know there has been sometimes we had to replace contractors who may have been subcontractors who were unable to carry out the work.
They actually had to walk away, if you had to replace them.
A couple of times, I believe. 389 RESOLUTION NO. 040095 - 3/29/04
They did walk away, and you have replaced them. Have you taken a look and see if that has impacted your costs of demolition work?
I can check on that. I don't think that it is, to my knowledge, from what I remember in operation meetings, that hasn't been a problem. It has been more around the quality of work issues. Sometimes there is a need to -- for some of the smaller contractors that were initially listed as part of the commission, weren't able to actually perform, and there were substitutions. And if it was a minority contractor, we worked to replace that with a minority contractor. In terms of the numbers itself, I just want to re-emphasize that we were projecting -- I mean, we have never done targeted bid packages of this size like we had done prior to the NTI targeted program. 390 RESOLUTION NO. 040095 - 3/29/04 We would let bid packages, you know, much smaller scale, they were citywide, they were only for the demolition of the house. And then under separate contracts we would let the asbestos removal, we would let the stucco work, we would let -- under separate, what we call, requirements contracts. And that had kind of led to a difficulty in accountability. Because one person would take the house down, they would be finished their job, but then somebody else would have to come along at some point to do the other work. So one of the changes we made was to put all this under the responsibility of a prime contractor. It also enabled us to create more opportunities for subcontracting; which, when we initiated the program, was a concern about the amount of subcontracting opportunities there have been previously. So in terms of that, if we looked at the cost of just taking down the house, they 391 RESOLUTION NO. 040095 - 3/29/04 are very parallel with one another under the emergency previously, as well as under the target program.
I believe you have gone through a review. But this review is going to have to be thorough and done very expeditiously, because it is going to cost the taxpayers of this city a tremendous amount of money. And we are as a body, as you saw last week, very, you know, very disturbed by the increase of the cost of demolition. I spent a lot of years in demolition, so I know a little bit about the field. And one thing that happens a lot in the demolition business is that contractors at times, for whatever reasons, cannot continue a demolition job. And what happens at that point is that you have to bring in another contractor to finish that job. And my experience of many years, it usually meant we had to pay more for it. And if you had more than a few of 392 RESOLUTION NO. 040095 - 3/29/04 those instances, I would like for you to find out. Or for you to take a look at that and see how that has driven. I suspect that your cost has been driven because you probably have had instances where contractors, whether prime or subs, have walked away from the job for whatever reason; they haven't got in paid in time, they just didn't want to do the work anymore, they couldn't get the right people to do the work, those types of things on jobs. So I would like you to take a look at that, as well.
I will double-check. But that has not been, what I recall, the walk-away part and that we had to make some substitutions.
I am still open to this request of yours, and I have not decided where I am going to go with this. But I will say that this City Council needs to have something in place where you can come back to us and talk to us about your progress in reducing the costs of 393 RESOLUTION NO. 040095 - 3/29/04 demolition, and in a timely manner, so we won't come here next year when you are looking for the rest of your money. And I am not saying that you are or there are any projections of what happened, but we sure would be, and the public would sure be, very dissatisfied to hear that your cost continues to increase, versus the cost of demolition decreasing. That's it, Madam Chair. Thank you.
Good morning. I apologize for being late, and I am probably going to ask some of the same questions that have already been asked. Could we have Mr. Solvibile up here, please. Could he come up.
Good morning. My name is Robert Solvibile, Acting Commissioner of Licensing & Inspections.
Good morning. Prior to NTI, what was the process for the demolition program for the city? 394 RESOLUTION NO. 040095 - 3/29/04
As Ms. Smith has stated, everything was separated. We had separate bids for the demolition, the stucco work, and the asbestos monitoring, and the asbestos identification that there was or was not asbestos in the building. We sought different contractors and different bids and primes for each individual aspect of the process.
So every building didn't require every aspect of the demolition?
So you could base the cost on what was actually the work to be done?
At the time several years ago -- and it has changed, it changes. Right now it is, roughly, 64 percent of demolitions require a wall to be stuccoed. Almost 100 percent require identification -- they all require that we identify if there is asbestos. In the past, it was roughly 50 395 RESOLUTION NO. 040095 - 3/29/04 percent walls had to be stuccoed and maybe only 30 percent did we have to identify if there was asbestos in the property. The demolition is, with all the rules and regulations, mostly driven by the feds, the federal level, trickling down into the city level, state/city. It has completely changed, the environmental aspects of it. The fill that's in the holes is much more stringent than it was in the past. So all this has led to an increase in demolition. Basically, right now our average cost for curb-sides as of a week ago was $22,007, I believe. So ours is right in line with NTI. There is no great difference. As an example, the cost of stucco prior to, in the past, was a bid -- we bid it by square footage -- was roughly almost $3 a square foot. Right now it is, I believe, $5.45 a square foot. So there has been dramatic increases in the price of doing business. 396 RESOLUTION NO. 040095 - 3/29/04
Who were some of the contractors who were doing the demolition for the city prior to all this new regulation and process?
Gamma Wrecking, Gephart Brothers, Atlantic Wrecking, Liberty Demolition, and several others. I believe Robert Hawthorne was one, they are no longer in business. For the bigger demolitions, we would have Thorn Demolition.
Several. Robert Reiner -- I cannot remember his name -- gene Pullins, and one other that the name escapes me right now. But I can get that list for you, what we have now and what we had in the past.
Right now it is running about 45 to 50 percent range for demolitions, for primes. 397 RESOLUTION NO. 040095 - 3/29/04
Councilman Cohen, were you finished with your questioning?
Madam President, thank you. How much is L & I involved in any of the decision-making of demolition, if any at all?
Licensing & Inspections, as my prior boss used to like to say. Councilman, NTI and L & I have formed a partnership, and we make decisions jointly on what will be demolished. The improvement in the process, I 398 RESOLUTION NO. 040095 - 3/29/04 think the great improvement that NTI has brought to the table, has been they are planned demolitions versus necessitated on need of a building collapsing. And --
Buildings collapsing, like an emergency demolition, curb-side demolition. So we very, very rarely had the chance to have planned demolitions in the community. So with the NTI process, L & I, NTI, and the Councilperson for that district, we go out and we survey an area to see all the buildings that may or may not be dangerous and/or vacant. And then we have that information mapped out. And we go back again with the Councilperson, NTI, Hill International, and L & I inspector, and pick what's to be demolished, working with the Councilperson that has that area. 399 RESOLUTION NO. 040095 - 3/29/04 And I think that that's a great system, and one that was much needed. And I think that's the most successful part about NTI, is how they picked --
You would have never known a ward about it, as a Council body. Maybe individual District Council Members might or might have not known, but I certainly never knew that at all. In fact, we were kind of laughed at by the Administration, who suggested that L & I had an important role to play. In fact, we would have felt much more comfortable in Council had we known L & I was involved. Again, it was poo-pooed by the Administration, they don't need L & I, L & I has never had much experience in demolition, despite all the statistics showing the great volume of experience that L & I had. So when this did relationship develop?
L & I, I believe that when Ms. Smith first came with the city and first got the job, that her and I visited 400 RESOLUTION NO. 040095 - 3/29/04 more neighborhoods than I care to remember. So we have been involved from the beginning. Have been and will be. I have been involved with NTI since day one, have input. We have had input, I have had responsibility. And I think from NTI, along with Hill International --
Hill International, the consultant hired by NTI to help us with this massive undertaking. That they have taken up L & I's weakness. And our strengths, Licensing & Inspections' strengths, and NTI's strengths combined, make a really strong partnership.
All I know is the Administration flatly rejected. Council believed that there was no need for any new administration. Or if there was, there was very little need. But we were told that L & I was totally unprepared, they knew nothing about it. And that's the story that I last heard.
Councilman, I am not 401 RESOLUTION NO. 040095 - 3/29/04 privy to that.
This is the first time I have heard of involvement here.
Councilman, I can only say that actions contradict that. Because we had been involved, myself and Ed McLaughlin, my predecessor, had been involved from day one. I have testified here with Ms. Smith.
It is not unusual for us to be told one story and have the Administration do something totally different. So what you say is quite believable; it is just amazing that we never heard it before. Because then we would have had some complaints or questions, if we had them. I think all of us would have felt more comfortable dealing with an agency that had a vast amount of experience. I remember being told at various times in demolition questions that there was only one contractor who was willing to do that. And the city had problems for that reason, because he could pretty much set the 402 RESOLUTION NO. 040095 - 3/29/04 price because there is nobody else to do anything.
Actually, Councilman, that may have been true at the first bid, and it may have been true for the first three or four, I'm not really sure of the number. But right now we are receiving bids from several companies. One company -- minority companies, small businesspeople, small business companies. A real nice diversification of companies are bidding on these projects. So it was a lot of work that NTI did, a lot of outreach to contractors. But I think that part has been successful, also. The African-American Chamber contract is a tremendous asset to L & I. We were able to -- through that training program, we now have two contractors on our list that are capable and certified to do emergency demolitions with us, and that we would not have had. And that helps us in our program to 403 RESOLUTION NO. 040095 - 3/29/04 lower the cost of demolition in the curb-side bids, and it is a tremendous asset. It gets us more participation, more diversification. And I think it has been successful. It started out slow, but it is very successful right now.
Is the success based on the realization by contractors, or by people who are in that field generally and can become contractors, that there is lots of money available now, and the sky is the ceiling, we can even double the price? And unlike L & I, which can be hard-balled, and referred to a tight budget, we have a great setup here where the budget is unlimited. And if it doesn't meet it, we will just get an extra batch of money from City Council.
Right now, Councilman, our average cost is very, very similar to what the NTI programs are. And I would suggest that the cost has been driven up by increases in labor and the environmental actions that were necessary 404 RESOLUTION NO. 040095 - 3/29/04 that several years ago were not necessary. Environmentally it is a totally different world.
Well, take the stucco question. How long has it been when L & I first stuccoed a wall? Because for years you didn't, and you got many complaints from Council offices, including many from my office, and then we all welcomed them when stucco came. My impression has been, it has been some years now.
Actually, stucco was required with the new -- with the more modern code. 1952 it became a requirement.
With the performance contract we now have, about 20 years ago Councilman.
That long. So it should not have been too much of a surprise by the stucco prices. Because 405 RESOLUTION NO. 040095 - 3/29/04 certainly you must have realized, NTI must have realized, particularly if they were working with you, that stuccoing was going to be necessary, so that that should have been included in their estimates.
I don't know -- I know it wasn't a surprise. I think that what was a surprise to me -- I don't want to talk for NTI, but to me, L & I -- that there were more walls to be stuccoed now than there were prior. A lot of the straight demolitions have been done, and we are not dealing with a lot. There is more demolition adjacent to occupied properties than we were doing for the last several years. And that came as a surprise to me, personally. And I don't want to speak for NTI, because I don't know it did for them. But for L & I, it was a total surprise. It was around 50 percent, was the number of walls we would stucco a few years ago, and now it is, I believe, 64 percent. So that's a 14 percent increase, which is a tremendous increase. 406 RESOLUTION NO. 040095 - 3/29/04 And for L & I purposes, our average price went from roughly almost $3 to $5.50 a square foot. So there has been a big labor increase that is costing the bids.
I believe it is the labor cost. It is the cost of doing a quality job doesn't come cheap. And if you want to put, you know, a sloppy job up there, I guess we could get it for $2.50 a square. But these are much -- the spec has been changed and the quality is tremendous. The quality is just absolutely tremendous.
But there could be a number of reasons. I mean, I come from a paperhanging family. All my older brothers are paperhangers. And I sit here because I could never learn to keep the paper on the ceiling. It got wrapped around me while I was trying to get it on the ceiling. It had nothing to do with sending me to school. Maybe that's a 407 RESOLUTION NO. 040095 - 3/29/04 loss to Philadelphia, rather than its gain. But, in any event, that's how it happened. I know prices are driven by many factors. One is the estimator has a pretty good idea of how much money might be available. And if there was more money available, a good estimator figured out how to acquire it, how to convince people that the quality had to be better, and, therefore, it justified a higher price. Or in this case, in view of the facts that have appeared in the press so often, we all wonder about the campaign financing. For example, I am convinced that campaign financing raises the cost of doing business by the government. Because I have yet to find the first businessman that was the lease bit really interested in who the Mayor was except from the point of view, well, that Administration helped me get work. If it is good for my job, you know, then I will be interested in supporting it. 408 RESOLUTION NO. 040095 - 3/29/04 So I am convinced that campaign financing is paid for really by the public, not by the contributors in the form of, it is going to find its way into the bid estimates. And now I don't know how much that has to do. But at the rate that campaign financing has increased, I think it is a much higher rate than just the cost of demolitions. So I can see that it costs much more for the city to meet its contracts. But I am wondering, could we get information on the number of contracts for demolition that exist, how many properties they have covered, what the price range is, the names of the companies that were invited to bid, or that did bid, that kind of thing? And, then, can we utilize the city? I guess NTI does more demolition work than L & I now. But between the two of you, you can help us identify who the companies are. For example, I would love to be proved wrong. I would love to be proved that nobody who ever got involved in a demolition contract ever made a contribution to anybody's 409 RESOLUTION NO. 040095 - 3/29/04 campaign, not even Councilman DiCicco's campaign. COUNCILMAN DiCICCO: Point of order.
Or my campaign. It would be great. That would be great. So could we get that kind of information.
We will provide Ms. Smith our records, and she will provide it to Council President Verna. COUNCILMAN DiCICCO: Point of order, Madam President.
Councilman DiCicco. COUNCILMAN DiCICCO: In response to Councilman Cohen's suggestion about me getting some campaign contributions. Just for the record, Councilman, it is the first time in nine years I am actually in the red, so I haven't received any contributions. But I would gladly accept one from you, if you have any extra money in your account. 410 RESOLUTION NO. 040095 - 3/29/04
You might not yet be known by NTI. But I am interested, in general, why has there been such a huge cost increase? I think we ought to be able to figure that out and then take some substantive changes. If I am wrong on campaign contributions having any role in this, I would like to be able to admit it, because I think it would be great for Philadelphia. But the general theory is that costs of campaigns are paid for by taxpayers because businessmen think in terms of investment. And they are investing into the future. They are hoping somehow or other -- they may not know any of the details -- but they are hoping to be standing in good stead with whoever makes the decisions. Now, may I ask you, who makes the decision on a contract?
The contracts that we issue are issued through the -- one of the things I want to make absolutely clear, when we use the word "NTI," there are two ways, two 411 RESOLUTION NO. 040095 - 3/29/04 methodologies, that we are using for demolition work. One, as Mr. Solvibile said, is planned demolitions, where we work with the Council district in a target area in selecting the properties. But those properties are still bidded through the procurement department. Bid specs are advertised, posted on the internet, sealed bids are solicited, and we use the city's traditional procurement process. In addition, there is the emergency curb-side procedure. That operates citywide and addresses emergency situations. That, I believe, there is a prequalified list of contractors that we draw from.
And who is Hill International? I have heard that name before. Are they the ones that make the final decision on whether --
No, they do not. Again, I want to really state for the record two 412 RESOLUTION NO. 040095 - 3/29/04 things. From the very beginning we always said that this is the City of Philadelphia, under its public powers, contracting for the demolition of dangerous buildings. That has not changed. Because we never embarked upon the planned demolition program of the scale that we were talking about, we brought on Hill International Company, after an RFP process, to actually assist with the administration of the project, including recordkeeping, interfacing with contractors, tracking the bond proceeds, and things of that nature. It does not replace in any way the Department of Licenses & Inspections' role with respect to demolition. The department issues the Notice of Violations, it still deploys inspectors to inspect work for compliance with the Philadelphia building codes. Its traditional role is applicable whether it is an emergency, curb-side demolition, or what we call a targeted or planned demolition. 413 RESOLUTION NO. 040095 - 3/29/04
And who makes the decision as to -- I mean, what's the basis for choosing the contractor? Say you have three contractors who all bid about the same, one is a little lower than the second, and the second is a little lower than the third? Who makes that decision?
The decision is made by the procurement Commissioner, procurement department, and the buyer. In the City of Philadelphia, the lowest responsible bidder is the one chosen, with curb-sides and with NTI planned demolitions. There is no difference. The contracts are all bid and approved by procurement. L & I --
William Gamble is the Commissioner of Procurement. And that 414 RESOLUTION NO. 040095 - 3/29/04 department oversees all the city's contractual bid solicitations under the Charter.
He has more authority to determine who gets the contract than anybody in NTI?
He makes the decision that they are the lowest responsible bidder. And L & I and NTI weigh in if they are in agreement or disagreement with that, then they award the contract. But in all cases it is determined by the lowest responsible bidder. That's the city Charter. There is no, that I am aware of, any other way of bidding a process.
Hill International works with Licenses & Inspections, with the District Councilperson in looking at doing field surveys, identifying vacant properties, assisting with making judgments as to which properties ought to be included in the bid package. They develop cost estimates for the 415 RESOLUTION NO. 040095 - 3/29/04 Council, that's then submitted to the District Councilperson. They sign off on the bid approval signing. They write up the bid specific issues for the ones that are going to be selected. It is a variety of administrative actions that they do. They do not make the final decision or select the contractor. Again, it is the City of Philadelphia. They are a consultant to the city. It is the City of Philadelphia, through the procurement department, that actually puts the bid out and opens the bids and reviews them and selects them.
Yes. In fact, they 24 played the role as program manager and 25 construction manager on a number of projects, 416 RESOLUTION NO. 040095 - 3/29/04 both in the City of Philadelphia and throughout the world, from my understanding.
Absolutely. Councilman, in the beginning of the NTI process, there was an RFP, as Ms. Smith said, put out for soliciting people that wanted to be project managers. And Licenses & Inspections, represented by myself, sat on a committee that interviewed all of the companies that applied. And Hill was the top one or two picked by that committee to recommend to the Mayor.
The city had no 16 people who knew each other well enough to communicate? They needed somebody from the outside to bring the different parts of city government together?
Again, that was my recommendation, that we bring that resource to the table. Because, again, we had not had, in other own experiences as a city, managed a planned demolition in this fashion. I viewed it the same as, for 417 RESOLUTION NO. 040095 - 3/29/04 example, when Capital Program Office puts out for the construction of a library, they retain project managers and program managers to assist the city with that work. It does not mean -- they advise the city, they assist us with program administration, things of that nature.
Well, NTI originally had an estimate, didn't it, of what it was going to cost to demolish a building, the average building, or however you figure out estimates?
Again, I mean, an estimate is that. It was our -- at that time, given our very limited experience on a program, in fact almost no experience, we made an estimate. And we revised that to reflect what's actually happened, the actual experience. And we routinely review that and revise our estimates based on that.
The original estimates did not include the cost of stucco. 418 RESOLUTION NO. 040095 - 3/29/04