COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON FISCAL STABILITY - - - Room 696, City Hall Philadelphia, Pennsylvania Monday, February 10, 2003 10:05 a.m. - - - RESOLUTION 030030 - Resolution providing for the approval by the Council of the City of Philadelphia of a Revised Five Year Financial Plan for the City of Philadelphia covering Fiscal Years 2004 through 2008, and incorporating proposed changes with respect to Fiscal Year 2003, which is to be submitted by the Mayor to the Pennsylvania Intergovernmental Cooperation Authority pursuant to the Intergovernmental Cooperation Agreement, authorized by an Ordinance of this Council approved by the Mayor on January 3, 1992, (Bill No. 1563-A) by and between the City and the Authority. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE BLACKWELL COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN DAVID COHEN COUNCILMAN FRANK J. DI CICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - V A R A L L O, INCORPORATED I N D E X RESOLUTION 030030 PAGE JOYCE WILKERSON, Chief of Staff .......... ROBERT DUBOW, Budget Director ............ 8 JANICE DAVIS, Finance Director ........... 9 RICK TUSTIN, Capital Program Office ...... 13 PHIL GOLDSMITH, Managing Director ........ 18 CLARENA TOLSON, Street Commission ........ 19 JOHN ZANIER, DHS ......................... 51 DUANE BUMB ............................... 62 TOM NESTEL ...............................129 3 2/10/03 - FISCAL STABILITY - RES. 030030
Good morning, everyone. This is a public hearing of the Select Committee on Fiscal Stability and Intergovernmental Cooperation regarding Resolution No. 030030. I would ask Mr. McPherson to please read the title of the Resolution.
Resolution No. 030030 providing for the approval by the Council of the City of Philadelphia of a Revised Five-Year Financial Plan for the City of Philadelphia covering Fiscal Years 2004 through 2008, and incorporating proposed changes with respects to Fiscal Year 2003, which is to be submitted by the Mayor to the Pennsylvania Intergovernmental Cooperation Authority pursuant to the Intergovernmental Cooperation Agreement, authorized by an Ordinance of this Council, approved by the Mayor on January 3, 1992, by and between the City and the Authority.
While my colleagues join me at the microphone, good morning.
Good morning. Before you start, Ms. Wilkerson, I do want to 4 2/10/03 - FISCAL STABILITY - RES. 030030 apologize to everyone for our late start. Hopefully, we'll be getting more members as the hearing goes on.
I'm joined at the microphone by Janice Davis, Director of Finance; and Rob Dubow, our Budget Director. I'm Chief of Staff to the Mayor. I'd like to thank Council for the opportunity to begin these budget hearings by testifying on behalf of the budget and Five-Year Plan submitted by the Mayor on January 28th, 2002. I've submitted the majority of my testimony in written form last week. What I'd like to do today is put the numbers that were submitted last week in a bit of context. This Plan is submitted to accomplish the goals that the Administration has set forth to make Philadelphia a premier City in which to live, work, and visit. We all want neighborhoods that are attractive and safe from crime, with well-educated and well-protected children, and a mix of commerce that capitalizes upon our traditional strengths but takes advantage of new high-tech opportunities. The Mayor has often said on the floor of Council that we can turn our attention to neighborhoods without 5 2/10/03 - FISCAL STABILITY - RES. 030030 turning our backs on the City. We can do this by maintaining our fiscal discipline while we continue to make strategic investments in Philadelphia's future growth and development. We're facing very difficult, uncertain economic times. In many ways, the fiscal situation that all cities now face was caused by the perfect economic storm, a convergence of powerful and unpredictable events, the end of an unprecedented 10-year economic expansion, new and unanticipated homeland defense expenditures, increase in criminal justice costs, and the City-State partnership that averted a shut down of the Philadelphia public schools. But we also followed a different path in Philadelphia. We committed to continue tax reductions that is beneficial to the long-term health of the City, but complicates the tax of balancing the budget in these difficult times. And my testimony that I submitted goes into the numbers of the Five-Year Plan in substantial detail. I'm not going to read from the testimony. What I'm trying to do is paraphrase the themes that support the Five-Year Plan. So you'll not find the 6 2/10/03 - FISCAL STABILITY - RES. 030030 testimony that I'm giving verbatim anyplace. In preparing the Five-Year Financial Plan, the Administration initially faced a projected deficit of $834 million by the end of FY '08. By taking the steps outlined in this Plan, we intend to address that liability. We will have to be disciplined. And some of these steps outlined will be painful and involve some service cut backs. We will have to maintain a watchful eye on the economic perils and uncertainty facing the global economy. However, the beauty of five-year planning is that you do identify challenges early enough to identify and implement solutions to longstanding structural problems in the way government operates. The choices and sacrifices that we will outline during these budget hearings will fundamentally change the way we do business and institute reform measures that will make government operate more efficiently and effectively for generations to come. The deficit reduction strategies do not come at a cost of our critical investments in fostering long-term systemic changes. Our primary strategies include revenue proposals, efficiency improvements in management and 7 2/10/03 - FISCAL STABILITY - RES. 030030 productivity, policy changes, and service reductions. They're outlined in detail in the Five-Year Plan. Our approach to reducing the deficit balances the imperative to reduce services against our ability to make critical investments that will eliminate the need for some of those services. For example, we will not stand by and watch our prison population and associated social service needs grow. Rather, the Administration is committed to investing in crime prevention programs, including after school and parenting education, neighborhood stabilization, Operation Safe Streets to reverse the trend and eliminate the associated cost.
In this sense, an ounce of prevention is worth a pound of cure. The Plan also proposed to continue the Tax Reduction Program. 21 percent. 4625 percent. 8801 percent. These reductions will provide Philadelphia taxpayers with an additional $319 million in the next five years. 8 2/10/03 - FISCAL STABILITY - RES. 030030 Since the beginning of the Street Administration, taxpayers have benefited from $475 million in lower taxes. We've asked departments to cut their personnel and overall budgets to produce $200 million in savings over the life of the plan. These mandated cuts do not apply to critical public safety operations; the Free Library, the Recreation Department, or Fairmount Park Commission. But we will see some unfortunate consequences to these cuts as quickly as this summer. For example, the grass in Fairmount Park will not be cut at the same schedule as we did last year. We have read in the press that despite our population decline, the size of City Government has not adjusted. Over the next five years, this Administration has set a goal of reducing the size of government by approximately 2,500 employees. While we look first to achieving those reductions through the DROP Program, there is no doubt that some layoffs will be involved. We have begun this process at the top in the Mayor's Office. By April of this year, 50 senior staffers from the Mayor's Office, the Finance Department, and the Managing Director's Office will leave City 9 2/10/03 - FISCAL STABILITY - RES. 030030 Government. We will also have to make sizing decisions when it comes to City facilities. One of the major ways that government operations will change to close the budget gap is to increase productivity and streamline management services by centralizing department administrative functions. Functions such as payroll, attendance tracking, IT support, hiring and training personnel, and providing public relations and information services will be combined into administrative service centers that will support a cluster of City departments. Through this initiative we can save approximately $35 million and at the same time allow City departments to focus on their core business and eliminate redundant positions. Another similar proposal will consolidate eight existing department call centers into a single call intake and service delivery contact center, saving approximately $5 million. It will simplify what people have to do to get straight answers to simple questions. In addition, the Administration proposes a fairly dramatic shift in its pension policy. The 10 2/10/03 - FISCAL STABILITY - RES. 030030 Administration will, for the first time in a long time, begin making only minimally permitted payments on the pension. With smart management and fiscal discipline to make hard choices, we anticipate saving a total of $489 million over the next five years. This plan also contains several revenue-generating measures that have been submitted to Council in past weeks concerning increase fees for the Department of License and Inspections, the Records Department, and also an increase in parking fines. This plan also continues strategic investments in priority areas that will change the lives of our residents for the better. Our goal is to foster the stabilization and revitalization of neighborhoods throughout the City. Last week, we announced -- the week before last we announced the first large-scale housing developments of our Fight Against Blight and Deterioration. This is the next step in an ongoing process to improve the appearance and safety of our neighborhoods by removing dangerous vacant buildings, debris-filled lots, decayed trees, abandoned cars, graffiti and litter. 11 2/10/03 - FISCAL STABILITY - RES. 030030 Other weapons to transform our neighborhoods include funds for code enforcement to abate public nuisances and loans for home repair.
The Five-Year Plan also maintains our commitment to the welfare and development of our most vulnerable citizens by providing quality youth development and effective social services for our children and families. This includes an expansion of Beacon after-school programs, delinquency prevention, and visits to a thousand new mothers that risk of neglect and child abuse. In addition, $5 million is provided for Child Care Health and Safety Fund. Additional funds are allocated to School-based Facilities Improvement Fund. You may ask, how can we do this given the tough economic times? The real question is, what will happen if we don't? The consequences to our children and to our City's future will prove us to be penny-wise and pound-foolish if we fail to protect our children and put them on the right track. The future of our City also depends on our ability to attract and retain businesses and the jobs that are essential to economic stability. 12 2/10/03 - FISCAL STABILITY - RES. 030030 Through the Commerce Department and Innovation Philadelphia, we're targeting existing businesses to convince them to remain in Philadelphia and addressing the needs of new high-tech entrepreneurs. Building our business base is also tied to strategic initiatives we have outlined in the Plan. In addition to tax reduction, safer streets, better schools, and revitalized neighborhoods are critical to business location decisions. As important as it is, growing our City is not our only concern. The people who have long lived in Philadelphia deserve to get what they pay for. Our citizens pay taxes and we will continue to deliver vital City services, from public safety to snow removal and garbage collection, to the upgrade of facilities in Fairmount Park. We must continue our services that improve the quality of life of our taxpayers. Once again, Operation Safe Streets has had a profound impact on our City neighborhoods. Citizens are expressing record levels of satisfaction with the Police Department. And after years of increases, the prison population is no 25 longer growing, and crime is beginning to slow 13 2/10/03 - FISCAL STABILITY - RES. 030030 down. Much will be said and debated over the next weeks about the details of this Plan, but as we engage in this debate, I hope we will be mindful of the things we don't have to talk about. We're not faced with the percent tax hikes proposed in New 8 York City. We're not looking at Draconian service 9 cuts like closing libraries or fire houses. The 10 prudent management and fiscal discipline that we 11 have exercised over the past three years has served 12 us well, despite the increasing economic uncertainty 13 that is facing every city in the nation. 14 I'd like to thank you for the 15 opportunity to present this testimony in support of 16 the Five-Year Financial Plan. We will be happy to 17 answer any questions you have. We also have 18 representatives from virtually every City agency here that can answer any questions the three of us can't.
Thank you very much. I would like to make an announcement for the first go around. Each Councilmember will be given five minutes and will be timed. I would ask 14 2/10/03 - FISCAL STABILITY - RES. 030030 that you please respect that. You can start timing me. Ms. Wilkerson, the Mayor, in his budget address, announced three new initiatives to significantly increase our capacity to serve children and families in our City. They are a $5 million Child Care Health and Safety Fund, a $30 million Free Library Expansion Fund, and a $25 million School-Based Facilities Improvement Fund. Could someone from the Administration explain what these programs entail, where they appear in the Five-Year Plan, and how the City will pay for them?
These are initiatives that will be funded by a sale lease-back, and Ms. Davis will go into that in more detail. And Mr. Dubow can explain where they appear in the Five-Year Plan.
They do appear? Mr. Dubow, where are they in the Five-Year Plan?
They're only covered in the 15 2/10/03 - FISCAL STABILITY - RES. 030030 Five-Year Plan in terms of debt service on the sale lease-back. There's $4 million a year beginning in '05. To the extent that we -- when we get to a point where we want to actually spend money, we'll have to come back for transfer ordinances to move money into appropriate places.
The City will be using a sale lease-back structure in which the central library itself serves as the property being sold. And in this case it would be the building sold with the City maintaining the ground. We will receive a rent -- ground lease rent payment on the land, while making a payment on the building equivalent to the debt service on the $60 million. It's a structure that allows us to get the benefit of depreciation and any arbitrized (sic) play in funding the particular project. So we will use the actual library itself to generate the funds.
Councilwoman Blackwell is asking a question, and I had the same question. Are we selling or leasing, did you say?
It's not a true lease. It is a sale lease-back in which the rights to the building are sold, but only from a financing 16 2/10/03 - FISCAL STABILITY - RES. 030030 standpoint. As we get the plan fully developed, we will be coming back to City Council with a fuller explanation than we can give at this point with the details. It is something that's been used in this area in the past with the sale lease-back of buses by SEPTA to generate funds. It's taking advantage of the fact that the City gets no tax benefit from depreciation, while a private investor would. So you leverage the actual occupancy. We are never forced to leave that building. We don't give up true title to the building. And, in fact, it's a tax structure that allows us to take the benefit of the fact that we don't get anything from depreciation on a significant piece of property that does have significant depreciation every year.
At the appropriate time, wouldn't this have to have Council approval?
Yes, it will. As we fully develop the proposal and fully develop the actual project, we will come back to City Council for a briefing and then for City Council approval. As it is developed, we will get in touch with City Council 17 2/10/03 - FISCAL STABILITY - RES. 030030 often before we get here for an approval vote, because it is a different structure.
Ms. Davis, you just described what sounds to me like taking advantage of a loophole.
It is, in essence, the sale of our depreciation, for lack of a better way to describe it.
After we go through this exercise, is there -- I guess it's tough to determine whether that loophole would immediately be reacted to and closed and all this would be a waste of effort?
No. This is a structure that has been used probably for the last 30 years. It's just that Philadelphia has not used it to its advantage. SEPTA uses it on an ongoing basis to extract value from their buses and rail cars. I've seen airport runways sold and then leased back. It is a very common play on the fact that governments can't use depreciation. Private people can. And they're willing to pay us for the ability to use it. 18 2/10/03 - FISCAL STABILITY - RES. 030030 So it drives down some of your financing cost.
That's okay. Just good luck. Because once you do it, they'll probably close the loophole. Thanks.
Councilwoman Blackwell, did you want to ask a question?
You may not remember, but my staff just reminded me that this might have been done during the Wilson Goode Administration with the Municipal Service Building. Does anybody remember that?
It's a common structure. We just have not -- okay. We did it for MSB. It's a fairly common, really everyday structure that takes advantage of the fact that we can't do a thing with depreciation, but it exists. And there are people who are willing to pay so that they drive down our financing costs. And we can do it in a way that it does not impact our capacity to borrow and still derives benefit. 19 2/10/03 - FISCAL STABILITY - RES. 030030
There are companies that are structured to act as go-betweens, between us and, say, Fortune 500 companies.
Maybe General Mills or -- there is a market where this is traded. So that it is literally a company will be approached by the person who is structuring it to sell them our depreciation. It may be a consortium of multiple companies. It could be Time Warner. It could be General Foods. It could be Proctor and Gamble. We won't know until the transaction is complete. And even at that point, we may not know who the counterparties to that transaction are.
We will be using -- and I don't have the name of the company with me -- a firm that has done it multiple times. And I'll be glad to get the information to City Council. 20 2/10/03 - FISCAL STABILITY - RES. 030030
Could you give us something in writing as to this whole process?
I'll get you the detailed sort of primer on what this is, what we propose this transaction to look like, and all of the pertinent information.
No. We don't actually sell the asset. We maintain the ground under the asset and enter into a long-term agreement that is equivalent in theory to the life of that asset, so that you're not really selling the asset. It's just a vehicle for extracting the benefit from the asset. It's not unlike refinancing your house to get that benefit out. You're not giving your house away. You still have the right to live in that house. And at the end of the term, if you've lived by all of your requirements, you get the house back. That is, in essence, what we're doing. We will never get out. We won't be forced to use a part and 21 2/10/03 - FISCAL STABILITY - RES. 030030 give another part to someone. As long as we make the payments, we retain title.
It's not forever. It can be structured in multiple ways. We will look at how we derive the most benefit to determine whether we do it years, 30 years, 50 years, or 20 years with a 11 renewal. It's going to follow sort of a standard 12 debt service-type time period. 13
Since we've done it 14 with the MSB Building, is there any way you could 15 give us a report on that transaction? 16
Yes. We can get somebody 17 to go back and see what that transaction looks like. 18
Thank you. 19 Would the Administration provide us with a listing 20 of all of the debt service payments included in the Five-Year Plan?
I have a question. 22 2/10/03 - FISCAL STABILITY - RES. 030030
Is it on this same matter? Because I had five minutes and everybody else used them.
Is it on the same issue? Thank you. Ms. Wilkerson, you state that one of the negative financial events causing the City's fund balance to decline was unanticipated homeland defense expenditures. What has the Administration done in this regard and how much has been spent?
I can get you a detailed breakdown on how much has been spent. The Administration has started by installing the bollards. We are also securing off the City Hall from some of the tunnels leading up to City Hall. Currently or historically, it's been possible to access the basement of City Hall. We are taking steps to secure the ground level entryways to prevent access. We're working with engineers and other planners on the details of the more comprehensive 23 2/10/03 - FISCAL STABILITY - RES. 030030 security system that includes controlling access. We have about 28 points of access into City Hall. The plan that's is proposed would create limited access along the northern side of City Hall, and the installation of security booths. The Plan also calls for cameras monitoring the hallways. The details of those additional plans are being worked out now.
When do you anticipate we will see something, particularly in City Hall?
I believe the -- I've asked Rick Tustin to come up, who is head of Capital Program Office.
To answer your question, right now we are finishing up the risk assessment report that we've hired a consultant to help us with. They've met with all of the occupants of the building, or representatives of all of the occupants of the building, and have put together a comprehensive plan. 24 2/10/03 - FISCAL STABILITY - RES. 030030 As the Chief of Staff has just stated, we've already done some work on the outside. Probably the next thing you'll see is some better control of the access points to the apron where, right now, we have chains that go across. That was a temporary measure. There will be retractable gates in those areas, either pneumatic gates that will come up either through the ground, or some other type of gate that will secure that area. And we've also asked them to expedite the design documents that will be required for the security at the entrance points on the first floor. So most of your entries to the first floor will have some sort of a card access with a redundant camera system so that, not only will we know who comes in, when they come in by the use of their access card, but we'll also be able to have them on camera, as well, if it's after hours. We're trying to do the work in stages. You should start to see some of this work this spring, actually physically see the work being done this spring, and it will continue over the next 12 to 16 months until it's 100 percent complete.
Can you tell 25 2/10/03 - FISCAL STABILITY - RES. 030030 us what that will cost?
Thank you. I think I've used my five minutes. The Chair recognizes Councilwoman Blackwell.
I'm sorry. You're going to have to repeat. Would you mind closing the door? It's rather noisy.
I just wanted to add something to the answer on our costs on homeland security. We also assembled what we call rapid assessment teams during the anthrax scare. We had over a thousand runs. They were joint teams of police, fire, and health. So that was a big part of 2/10/03 - FISCAL STABILITY - RES. 030030 our cost, too.
We thought that was probably included. I think we were just waiting to hear you say that. How about the airport?
We added police officers out there. And they also had additional overtime. They've had a few million dollars worth of costs added per year out there.
Thank you. I apologize for not listening. I've got a million things going on over here. I have some concerns about entrance into City Hall. Obviously, we're all concerned about security during these times, but I'm also concerned about the constituents that we deal with every day, who come for ID, welfare, a place to stay, a job, and food. And so I would hope that, as this plan evolves, please include me in any discussion because we are really concerned. If everybody has to have an ID getting in, I have people who don't have ID. Unless I have a staff member or two stationed in the 27 2/10/03 - FISCAL STABILITY - RES. 030030 hallway downstairs, you know -- we have some issues. I would hope that as this plan evolves, that you would take into consideration that there are members of the public who still need access to the building who can't gain access in the traditional way.
We certainly will do that. One of the things that the consultants are doing is engaging a number of different people, but we'll make sure that we have contact. This is a public building and you're always trading off security versus wanting to keep the building as public as possible.
You're welcome. The Chair recognizes Councilman Rizzo.
Thank you, Madam President. I'd like to get some information so when Public Property -- I assume it will be Public Property -- is before us, in reference to establishing the constituent call centers and the possibility of moving to a 311 number. My recollection is that there were substantial costs 28 2/10/03 - FISCAL STABILITY - RES. 030030 when we established 911, in having the local telephone company establish that. So I would hope that we have a budget established for what those charges would be just to the provider of that 311 service.
We do. We have a plan that not only shows savings, but also shows what kind of cost we'd have to incur to set up the system and to keep it going. And we can get you those details.
I don't know the exact numbers off the top of my head, but we can get you the report.
Well, when you include -- including the number, there is substantial savings for us.
I don't honestly understand. I understand 311 is a good number. But it's a big expense that we're incurring when most of those calls from residents of Philadelphia to a five-digit number aren't really a significant impact 29 2/10/03 - FISCAL STABILITY - RES. 030030 to them financially, because many people have dialing within the City of Philadelphia that does not incur a charge to them. I understand it's a convenience, but if this is a very, very big expense, I think it really needs to be considered, especially in the initial setup.
I'd like to have Ms. Davis comment, because it also coincides with some other initiatives and expenditures that the Administration has to undertake.
As we were looking at what to do with billing and collections for the Water Revenue Department, as a component of that, we were looking at CRM, our Customer Relationship Management and 311. A lot of the cost for the software will be involved as part of that. So there are some synergies that we will be able to take because we need CRM and 311 as a part of billing and collection. Additionally, we have people now answering phone calls that will now be directed, instead of to 1776, to 311. 311 happens to be the number that's identified to that service, but we could, in fact, use 1776 and take those multiple 30 2/10/03 - FISCAL STABILITY - RES. 030030 people, train them on the basic FAQs, those most often asked questions, and have them centralized in a call center. That's simply what 311 is. It's not as dynamic, perhaps, as a 911 where you have the interaction. It is just, for us, the consolidation of people calling individual departments, calling 1776, calling somebody that they know works for City Government and getting transferred around. For us, it's the consolidation of that. We'll be able to take advantage of the software that we'll be purchasing for another reason and piggyback that along with that consolidation. So by consolidating those employees, we will get the benefit of the savings.
I think if you checked the notes of testimony at the last budget process, I was the one that gave the Administration the suggestion to move to a call center. I understand all of that. But my concern is that we might spend many millions of dollars, many millions, just in -- did you ever try to add call waiting to your phone at home? They want to charge you $17.50 just to do that. My concern is that the City could be obligated to pay many, many millions of dollars 31 2/10/03 - FISCAL STABILITY - RES. 030030 to Verizon or any other local provider of telephone services to establish a 311 line, when it really doesn't -- we're not saving the taxpayers of this City any money, because calling within the County of Philadelphia in many cases is a free call to that person from their residence. Maybe not their business. I would hope that before we pull the trigger on establishing this, that you really understand the ramifications, the cost, et cetera, associated with that.
Public Property has, in fact, had an extensive study done on this process, so we've gone in depth to make certain that what we're taking on is not something that will in the long run prove unbeneficial to the City. And we'll provide that information to your office or to any other City Councilmembers who might -- or to the Council President for her distribution.
But when the Public Property people come here, you can bet that's number eight question.
The Chair 32 2/10/03 - FISCAL STABILITY - RES. 030030 recognizes Councilman Ortiz.
Thank you, Madam Chair. Ms. Wilkerson, can you just give us an explanation and background in terms of these across-the-board cuts and their impact and their savings? You said the across-the-board cuts led to just over $200 million in budget reduction over the life of the Plan. And then you say, unfortunately, the consequences will show. Could you give us a detailed explanation of what consequences, by department, and where these cuts have taken place and their impact on services, if any?
We can give you an overview now, if you want, and then submit in writing something more detailed.
Well, give us the overview now and we'll get the detailed explanation.
When we put the '04 to '08 Plan together, we asked each department to take a 2 1/2 percent across-the-board cut. We excluded from that the Fire Department, Police Department, 33 2/10/03 - FISCAL STABILITY - RES. 030030 Free Library, Recreation, and Fairmount Park. We also excluded independently elected officials. When departments came back and gave us their plans based on those cuts, they gave us savings of about $84 million in personnel, about $82 million in contracts, $28 million in materials, supplies, and equipment, and about $9 million in Class 500. The impact on service that people report back to us were in just a couple of areas. Fairmount Park said that the length of time between mowing grass would go from about two and three quarters weeks to just under three weeks, which is actually where it was a couple years ago. They also said they'd have to cut back on the amount of times they maintain or renovate ball fields. And the Streets Department said that the length of time it takes to get to ditch repairs would increase. Those were the effects people told us about.
When they say it will increase, what does it mean? It will increase by two days, three days, four weeks, seven months?
What the Department said is that instead of getting to -- I think their ditch backlog would grow from 252 to 752. 34 2/10/03 - FISCAL STABILITY - RES. 030030
Their ditch backlog would go from 252, which is where it is now, to about 752.
And the time to get to these areas would be what? You're telling me the increase, but you're not telling me a time line. I report something today. How long will it take a crew to get there? Will it take four weeks, three months, eight months?
I'm going to ask Clarena Tolson from the Streets Department to answer that. Clarena, can you come on up for a second?
While she's coming up, Phil Goldsmith was going to respond on the Fairmount Park issue.
I'm going to put on my Fairmount Park hat, if I can, because I do want to --
You really get into crisis situations, don't you? You must like this.
This is not a crisis. 35 2/10/03 - FISCAL STABILITY - RES. 030030
You go from City schools to budget deficits in the City.
Maybe we'll put you on the shuttle investigation or something like that.
I want to say on Fairmount Park, because I don't want to leave the impression that -- what we did with Fairmount Park is what, hopefully, we will do with all City departments and have been doing, is looking at our core services and coming up with what I would call predictable, relevant, and reliable service levels.
Phil Goldsmith, Managing Director. So I think what we want to do is look at predictable, relevant, and reliable service levels, and when we present the budget for Fairmount Park, what you will see is three new programs. One is a regular cleaning of our hard surface trails so that our users know that our trails are going to be cleaned, the hard surface trails, on a regular, predictable basis. 36 2/10/03 - FISCAL STABILITY - RES. 030030 Secondly, the addition of more rest rooms with a predictable cleaning of those rest rooms. And then, third, is a safety program where we are inspecting our playground equipment on a regular, predictable basis so we know the users of those playgrounds are using safe equipment. To do that, we had to also look at things where perhaps we didn't have to do as frequently and so make some trade offs. And on that is some of the mowing and some of the athletic fields, and those will be prioritized. And some of the lawns we're looking at turning into metals and so forth. So I think the important thing is that we are adding additional services while looking at things where we may be able to reduce back without hurting our users or hurting the core services of the park. Thank you.
Good morning, Councilman. Clarena Tolson, Streets Commissioner.
I asked a question in 37 2/10/03 - FISCAL STABILITY - RES. 030030 terms of -- because they used the Streets Department as an example, and they said it would be an increase in terms of ditch maintenance or ditch --
-- repairs, restoration. It would grow by a couple of hundred, but they didn't give the time line. What does it mean actually when it's reported to when it's getting fixed? Because people like to know that, or at least have an idea. MS TOLSON: Sure. The time line for repair presently is in the six week range for restoration, to bring a ditch from a plumber's repair or Water Department repair to the complete restoration of that spot. We expect that with the challenges that we're going to face, that the timeline for restoration will go from 6 weeks to approximately 10 to 12 weeks.
I should also say that we are working on some legislation that could help us with this issue. We're presently working on a 38 2/10/03 - FISCAL STABILITY - RES. 030030 right-of-way legislation that will place more accountability on those that provide openings in the street, such that they will help pay for the restoration in a much more quicker manner than we presently have.
You might have a private vendor. You might have Bell Telephone -- I'm sorry -- Verizon come through and open the street to put in cabling. And right now there's not much accountability on their part in terms of the maintenance of those streets. They do a simple opening and then it's up to us to do the closure. But it could be a big help to the City to have those that are opening the street actually be responsible for restoring the street.
Councilman Ortiz, your time is up. You'll have to wait for the second go-around. 39 2/10/03 - FISCAL STABILITY - RES. 030030 Councilman Clarke.
I just want to touch on a couple of issues in this particular round. One is something we spoke about earlier. This whole employee reclassification. As we have a substantial amount of individuals going out in the DROP Program and in some instances we will be bringing them back, particularly in the Police Department, there is this issue about reclassification. For a number of years, it was my belief, and some other individuals' belief, that in a lot of instances we have police officers doing work in the neighborhoods, in the government, that we could probably have other types of Civil Service employees do. One of the issues in particular that comes to mind is this whole issue of public nuisance officers, for lack of a better term. I know in various other cities, Baltimore in particular, and actually I think in some instances in New York, 40 2/10/03 - FISCAL STABILITY - RES. 030030 where we actually have a different category of employee who provides traffic service. I don't know if we still do, but I know at some points in time we actually here in the City of Philadelphia had police officers writing sanitation tickets, which I think is, frankly speaking, a waste of their training. As we move ahead, assuming that we will have a substantial amount of police officers come back after the DROP Program or rehiring of those police officers, what's the possibility of us looking at reclassification in hiring an employee who would make a lesser amount of a salary, but be able to provide a service that, frankly speaking, we think is inappropriate for police officer to do?
Councilman, as you know, it's something that the Mayor has supported previously. We're going to take out those old files, dust them off. I think you're right, the DROP Program does present us a real opportunity now. And hopefully, we'll have the analysis completed before the Police Department comes and testifies as a department. We also have currently available to the City the right to move some non-uniform officers into some of the desk duties, for example, that 41 2/10/03 - FISCAL STABILITY - RES. 030030 police officers currently perform. We're going to take another look at that to make sure that we're using that program or that opportunity to the best advantage. But hopefully, we'll try to have an answer for you in more detail when we come for the department testimony.
I recall earlier, a couple years ago in the discussion, there was some question about whether or not there would have to be a Charter initiative. Is that your understanding, or could you do it internally simply through the personnel departments?
We'll have to take a look at that, rather than speak extemporaneously on it. My guess is there are collective bargaining issues, there are probably some Charter issues, but we'll take a look at that and try to have an analysis when the Police Department comes to testify.
Okay. One of the other things that's important to me, this whole issue of revenue growth, in particular, under the NTI program. In earlier explanations, particularly in the communities, we talked about reclaiming 42 2/10/03 - FISCAL STABILITY - RES. 030030 vacant land, non-revenue-producing vacant land, vacant buildings, and reclaiming that to create an environment that would ultimately produce revenue both through, hopefully, wage tax and property tax. Can you talk to me about where we are, particularly given the most recent announcement of those seven developments that the Mayor announced recently? Has there been an analysis of the best case scenario, if we were able to reclaim that land?
No. We've not tracked that to date. We've not estimated what the additional tax revenue would be. There have been studies, some of them by the Horticultural Society, that actually studied what it would mean in terms of revenue if the vacant land was put into productive use. We can make those available to you. I think we can, at this point, since we've identified a significant number of units, plotting some of the numbers of residents at this income that would generate wage taxes and other kinds of revenue for the City. And we can do that. We have not done it thus far.
Doesn't it seem prudent if you're going to make an investment, prior 43 2/10/03 - FISCAL STABILITY - RES. 030030 to making that investment, you would determine or at least guesstimate what the return on that investment would be?
This was something that did come up at the time that the bonds were proposed. The Administration did not propose the NTI Bond Program based on a return of investment. What we said was that we're currently spending this amount of money; we're not doing it in a structured way, that we can make better use of the money we're spending for demolition and the money we're spending to eliminate blight if we focus on trying to harvest the opportunities that are represented by the abandoned buildings and the vacant land. It was re-targeting the amount of money that we were spending anyway. That was our rationale for undertaking the program, as opposed to return on investment kind of analysis. But we can certainly pull that information together and get that for you.
Well -- and I don't want to belabor the point, but not simply just pulling together the analysis on what was proposed. I think as we move ahead when we make those decisions, that should be a category in that 44 2/10/03 - FISCAL STABILITY - RES. 030030 decision-making process. I would think that if we're going to spend whatever the amount, I'd really like to know what the benefits are. And I think in that decision-making process, making a determination as to whether or not we spend NTI dollars in particular portions of the City, I'm sure some of the Councilmembers will agree that they would like to see that money spent prudently and be able to tell the story that this, in fact, will enhance the City's revenue growth. One other issue. You had naming rights, and I'm not clear exactly what that would be in your testimony. I know maybe a year or so ago there was this issue in one of my colleague's districts about naming rights and there was this discussion about certain advertisers being able to advertise on City-owned facilities. Is that what we're talking about, or we're talking about some other initiatives?
In this instance, we're sort of looking at everything that might be available in that arena, whether it is pouring 45 2/10/03 - FISCAL STABILITY - RES. 030030 rights where Philadelphia becomes the City of Pepsi or Coke or whatever, are using City facilities as a vehicle for advertising. We have put together and will be finalizing in the next week or so an RFP to see what is available. Some school districts and other cities have done quite well in using the purchasing power of that City to attract corporate sponsors, if you will, who are interesting in saying that Philadelphia drives Fords, or whatever. It becomes a very popular vehicle for them and, in many instances, is a lot cheaper than what they spent for air time on TV. So we are doing an RFP to get someone in to put together a strategy for going after those multiple opportunities. But it wouldn't simply be putting some logo of some company on a police car or whatever. Not that we do that, but it might entail becoming the Pepsi generation.
Or we may see a John Deere commercial with the Mayor on a little tractor removing snow.
The Mayor likes trucks. We might be Ram capital of the world. Just by way of comparison, in Texas where I most recently worked before Philadelphia, 46 2/10/03 - FISCAL STABILITY - RES. 030030 this was a very popular vehicle for school districts to generate additional revenue. And there have been payments of up to $20,000 per child, some as much $50 million over a 10-year period just for being the Pepsi generation or the home of Dr. Pepper. There was one school district whose buildings were in the flight path of DFW Airport, and they painted literally the logo of one of the beverage companies on their roofs so that people coming in and taking off DFW would see that. And there was a payment of $17 million for that benefit. School districts have used it. Other cities have used it. And Philadelphia just getting into the business of some commercial endeavor for the fact that we do have purchasing power.
I think, as Janice said, what we're going to do first is conduct a survey to find out what kind of opportunities are out there. I think we're mindful of the issues that have been raised in the past about pushing soft drinks in schools and what kind of message that sends. So we're mindful that there are a lot of issues. We don't want to create a lot of visual litter around our City, but at the same time, we think that there 47 2/10/03 - FISCAL STABILITY - RES. 030030 are creative opportunities. And we'll be spending some period of time trying to figure out what they are, how to solicit them before making any kinds of decisions.
Okay. Could you make sure that you include the Councilmembers in that process? I know of at least one Councilmember, Councilman Cohen, who will be very interested in any advertising on any public facilities. I really would like to have you participate in full early on in the decision-making. Is my time up?
Thank you. On Page one of your summary, you talk about the Administration looking at ways to change the way government operates. When Ed Rendell became the Mayor and we were experiencing serious financial challenges, he instituted a number of efficiencies, government efficiencies. I mean, do you have additional ones, or are you keeping the ones he instituted? I mean, we thought he had sort of 48 2/10/03 - FISCAL STABILITY - RES. 030030 gotten the butter from the duck. What else do you plan to do in terms of the efficiencies?
We've mentioned briefly the 311 call centers, the administrative clusters so that every department will no longer have its own personnel function, it's own record keeping function. We intend to consolidate some of those. Janice can talk about what is intended for the Finance Cluster in more detail. I think that gives you some sense of the kind of opportunities that we think are out there.
As you consolidate these functions, the consolidation of those functions, have you calculated the loss to personnel in consolidating those functions?
Yes, we have. Going back to your initial question about Mayor Rendell, he drove down the cost of doing business in the same way. He took advantage of some ways to cut cost without fundamentally changing the structure of government. What we're proposing is to fundamentally change the structure of what we're doing, so that instead of telling a department to just do more with less, we're looking at the fact that there are 49 2/10/03 - FISCAL STABILITY - RES. 030030 redundancies in certain departments around those non-core functions, the things that everybody sort of looks at and says, "Well, we've got to do that because Finance wants it or we've got to do it because Personnel wants this piece of paper." It doesn't add anything to the way they do it, but somebody in that department has to do it. As we looked across government, we noticed that whether a department had people or 11 250 people, some of these same positions were there. 12 By taking the fact and looking at the Finance 13 Cluster, where there are roughly 76 people 14 identified -- and when I say the Finance Cluster, 15 we're talking about the Mayor's Office, because we 16 created sort of new clusters. We're talking about 17 the Mayor's Office, MOIS personnel, Treasurer's, 18 Revenue, Water Revenue, Procurement and Finance. 19 When we looked across that grouping, there were some 20 76 positions that are identified in the budget as administrative. When we looked at creating a cluster to handle the work that is traditionally the work of taking care of budget items, taking care of procurement items, MOIS doing that interaction with personnel, when we looked at doing that by 50 2/10/03 - FISCAL STABILITY - RES. 030030 leveraging the fact that one person can probably handle two or three of these departments, we came up with a number half that amount. And that's what we're going to roll out across government. We will look at it in a studied way. We're going to spend about a year making certain that what we do in Finance can be duplicated and supported by policies and procedures across the entire government. And then we will implement probably six of these clusters with departments that are like departments with the same types of needs. If there is a department like DHS that has very specialized needs, we're going to pay a lot of attention that they are different. We would not mix them with the Finance Cluster. They have very different needs. We're going to put departments that are very alike together. When we look at the personnel and we estimate that, by the end of the Plan, there will be 400 people who will not be needed providing those functions. We will take advantage of the fact that there will be hirings in Drop to outplace some of these people, and we will be looking strategically to minimize the number of people who don't have jobs. Moving them from this, 51 2/10/03 - FISCAL STABILITY - RES. 030030 we recognize that we will be hiring people because people will be leaving in Drop. And so we're going to look and strategically attempt to outplace these people. There will be some impact on the work force, but we're attempting to minimize it.
Yes, we still have the Productivity Bank. And in this instance, Rob is directly taking the benefit, so it won't go to the Productivity Bank. Instead, any savings go directly to balancing this Five-Year Plan.
Councilwoman, I'm sorry. Your five minutes is up. The Chair recognizes Councilwoman Blackwell.
Thank you, Madam President. Will the individual district allotments in terms of recreational facilities and libraries in this year's budget be protected, those that we have already talked about? 52 2/10/03 - FISCAL STABILITY - RES. 030030
One more question. In terms of NTI and community participation, since that's listed as a goal, as we proceed on with this, will that whole issue be protected? My understanding is that even though we have the goals and the minority participation, female and disabled, community participation could still be an issue. Are we able to make sure that is protected as we look forward?
We're looking at trying to put mechanisms in place to better deliver on that. That's one of those very challenging issues. And so Pat, Managing Director's Office, me, are sitting down and trying to put in a mechanism that better delivers on that. It is a commitment that we've made. It's a commitment that we intend to deliver on.
Thank you. 53 2/10/03 - FISCAL STABILITY - RES. 030030 Ms. Wilkerson, do we have or are we likely to receive the $30 million in TANF funds for investment and after school and youth development programs? Are you using the money for these programs? Are we decreasing funding to other programs? If so, can you tell us which other programs will be affected?
No. You are likely to receive the TANF money. We use programs that are eligible for TANF to take that funding, and it's federal money. And we're looking to expand the amount of money that we get through TANF. And it's not a reduction for anything else.
Thank you. Can you tell us if the $25 million School-Based Facilities Improvement Fund will be financed by the School District or the City?
That would be funded by the City under the lease purchase -- sale lease-back agreement structure that Ms. Davis discussed earlier.
Do we know which schools will benefit from this fund?
No. That decision 54 2/10/03 - FISCAL STABILITY - RES. 030030 hasn't been made. What the Administration has proposed is that as we go through the process of trying to right-size City facilities, that we acknowledge that in order to locate facilities, in order to take advantage of some of the benefits of downsizing, we're going to have to spend some money. A lot of these initiatives have inherent in them having to spend money. What the Administration wanted to do as we launch this process of trying to right-size is also identify a pool of money that can be spent in connection with the right-sizing initiative and making better use of the school facilities that are out there. There is no plan on where that money will be spent. Our commitment is to work with City Council and the other stakeholders as we go through this whole right-sizing process.
Now, Ms. Wilkerson, did I understand you to say that the $25 million will come from the sale lease? Now, are we talking about the sale lease from the library?
It's all part of that same project. We anticipate borrowing roughly $60 million through that process. And the $60 million will be spent in the way identified in the 55 2/10/03 - FISCAL STABILITY - RES. 030030 Mayor's budget speech as being the three initiatives that he identified, the Library Expansion Fund being the major part of it. But those funds will also be directed to the other components of his plan.
Also, you state that Innovation Philadelphia will work to increase the annual science and engineering research investment in Philadelphia to $1 billion. What have they attained thus far?
Innovation Philadelphia has done a number of things. One is worked to better leverage the federal dollars that are coming into Philadelphia. Mr. Bendis will be here with the Commerce Department. Philadelphia, this entire region, receives substantially less federal dollars than other jurisdictions. We also support these kinds of initiatives with less local money and state money. Mr. Bendis has worked to develop material and to reach out to additional sectors of the community to let them know that this funding is available. Now, small businesses can go on-line and make applications. The Innovation Philadelphia provides consultant review of the applications, 56 2/10/03 - FISCAL STABILITY - RES. 030030 small grants to assist in helping with the development of applications. Innovation Philadelphia is also involved in the student retention initiative. The university presidents and a lot of the other -- or some of the other players, I believe, the university science center and some of the others, are engaged in the initiative to try to retain students in Philadelphia. Innovation Philadelphia is a key player in that. Innovation Philadelphia has also been working to attract new types of businesses to Philadelphia. And so in the Five-Year Plan or in the Mayor's budget message, and also in his message to the Chamber, he identifies some of the businesses that will be moving to Philadelphia. Some of them we expect to have coming to the naval yard. A lot of that has been as a result of some of the outreach of Innovation Philadelphia. But Mr. Bendis will be here with the Commerce Department and provide more detail.
Thank you. I would like to get back to the DROP Program, if I may, for just a minute. In last 57 2/10/03 - FISCAL STABILITY - RES. 030030 year's Plan, the Administration proposed to only replace two-thirds of the civilian employees who would be leaving as a result of the DROP Program. And you have commissioned a study, I'm told, which we have not seen. And I would really appreciate it, if that could be made available. In this year's Plan, you now have increased the number of jobs to be left vacant from one-third to one-half. How do you propose to achieve these savings, and what is the status of the report?
We have a draft of the report. As soon as that draft is finalized, we will get it to you.
Is there any indication as to how much savings will be realized?
The report dealt in specific with six departments, and then it also included some kind of City-wide proposals. And a number of those proposals are actually things that you see in this Plan. Like, for example, they were proponents of centralizing the administrative services. We plan to work with each department as people leave through the DROP to identify ways they can re-do their 58 2/10/03 - FISCAL STABILITY - RES. 030030 business to do it with fewer people. That's part of what the study did. The study found those opportunities in working with the six departments that they worked with, and will continue over the next four years to work with each department.
What is the Administration's position with regards to the DROP Program going forward? Does the Administration support the program or wish to see it terminated?
From the standpoint of its impact on the Pension Fund, our interim report shows that it has had a negative impact on the Pension Fund. The Pension Board --
I will get you a copy. The Pension Fund will commission the full study to be prepared and ready some time in the fall. The review is supposed to take place in July. And at that point the Pension Fund will come with a recommendation. Given the negative impact on the Pension Fund, at this point I would recommend to the Mayor that DROP be discontinued. DROP has traditionally been used in 59 2/10/03 - FISCAL STABILITY - RES. 030030 areas that had difficulty keeping people in government. Philadelphia's experience with a number of long-term employees would indicate that that is not a problem we've had. And, additionally, the fact that our salaries are very competitive and our benefits, in fact, richer than those of the private sector in this area, that maintaining employees is not something that the City will have difficulty doing, except in very specialized areas. And so for that purpose, I think the City does need to review its widespread use of DROP. Because while DROP has afforded the City an opportunity at this point to restructure government, going forward, it is a very high price that's extracted on the Pension Fund for keeping DROP in the way that it was initially implemented.
Could you detail the negative impact on the Pension Fund?
The impact has been that employees are retiring actually two years earlier.
I'm talking financial. 60 2/10/03 - FISCAL STABILITY - RES. 030030
Yes. And I'm getting to it. That change in behavior has been identified as about $100 million impact. Additionally, there is a differential between the earnings of the Fund and what we're guaranteeing to those DROP participants, to the extent that we're not earning 4 1/2 percent, but we are paying 4 1/2 percent. That is another dollar value. At the point that the actuary did the calculation, he did not include the dollar value of that differential with any specificity, but mentioned something in the neighborhood of $13 million. At this point it looks like --
He didn't go into great detail on the precise amount of the impact and differential. But as I recall, it was roughly $13 million just from that differential at that point in time. When we get the full report, he will go into greater detail, of course. But at this point, it looks like $113 million or so negative impact.
Last night -- I 61 2/10/03 - FISCAL STABILITY - RES. 030030 wasn't going to go into this until the third go-around. Last night I saw a report in the news in terms of the City's contribution to the Pension Fund, and that you were diminishing the City's contribution to the Pension Fund and the impact that would have on the pension and the current pensioners. Could you detail that? Because one of the things that they listed in this report last night was that there would be a reduction in terms of pensions that people now receive, or that could be an effect.
That was an outright lie. There is no gentle way to put that piece.
Yes. That was a lie. The people who are currently covered by the Pension Fund, because it is a defined benefit plan, will suffer no change in that benefit. No discussion has been held on what would happen to future employees. We do not have the ability to change what those vested people will receive. That is a part of what they've earned for being employed. So there is no 25 truth to that. The impact will be on what the City 62 2/10/03 - FISCAL STABILITY - RES. 030030 has to contribute to cover those benefits. And whether or not the City at some future date may decide, instead of offering a defined benefit, they will switch to something like a defined contribution going forward. But it has nothing to do with those employees who are currently -- the retirees who are currently receiving pensions or to those people who are currently vested in the existing pension funds. It would be something that would have to be decided and implemented by this City Council in some future period to make a switch from defined benefit to defined contribution. That was erroneous reporting and very misleading.
I'm sure that you got a lot of phone calls today on that.
Could you tell me then, when you say you're going to pay the minimum municipal obligation, what was -- what does that mean in terms of dollars and what does it do to the Pension Fund?
I will let Rob answer the exact dollars. But what it does to the Pension Fund is that in the future we will face a larger unfunded 63 2/10/03 - FISCAL STABILITY - RES. 030030 liability. It just means that in future years, if the market does not rebound, we will be forced to make larger contributions. The minimum municipal obligation is the minimum amount that we can legally make under the laws of the Commonwealth of Pennsylvania. The City had been funding at a higher level. We will be funding at the level that is required by law. And I'll let Rob give the impact of the payments going forward.
If we had been paying under our old funding policy, we would be paying $245 million more than we're paying over the life of this Plan. Even with the payment schedule that we have in this Plan, we're paying about $130 million more over the life of this Plan than we did over the life of last year's plan. So our payments are actually higher than they were in last year's plan.
Detail the projected payments, please. You say it's $130 million more detailed in projected payments over the life of this Plan.
Under our current funding, policy, in '04, we would pay $202 million; in '05, $240 million; in '06, $283 million -- wouldn't it be 64 2/10/03 - FISCAL STABILITY - RES. 030030 easier for you if we just sent this to you?
And you're bringing it to the minimum amount which is --
In '04, $157 million; '05, $198; '06, $233; '07, $271; and '08, $293.
Ms. Davis mentioned that we have an unfunded obligation that we may have to meet in the near future. Could that future be a year from now, two years from now?
We have a schedule from our actuary that shows payments we'd be required to make 65 2/10/03 - FISCAL STABILITY - RES. 030030 going out for 30 years. And throughout the course of those payments, we're --
That unfunded obligation, when will we have to meet the unfunded obligation? Over a 30-year period or a 5-year period?
The beauty of a government that doesn't get the luxury of going out of business is that your unfunded liability never goes away. You continue to fund into eternity. While we say we will amortize over a 30-year, some states allow amortization over 40 years. What you are, in fact, doing is continually amortizing. Because as you amortize one group out, another group comes in. So it's just sort of a shorthand to say that the current existing liability over the next 30 years will be gone. You're never at a point where there is not -- the liability is never gone.
And at one point the City's contribution will have to meet it.
We won't meet the entire -- 66 2/10/03 - FISCAL STABILITY - RES. 030030 we would never meet the entire. Our payments to amortize it go up, but we will never come to a day when everybody comes due at the same time. If, for example, the City could go away and we could stop doing business, then we'd be forced at some point to provide the entire amount. If we were to do that, you're talking billions -- if we looked at what it's going to be in '04, you'd be talking about a $1.7 billion unfunded liability. But that liability never goes away. Our payments to amortize it will continually go up, and will go up slightly more quickly because we're not over-funding at this point. But we'll never reach -- or should not reach the level that they would if we were doing a less aggressive payment schedule. As I said, some states permit 40-year amortization. If we did something like that, then you'd see a more rapid run-up in your liability. But at this point, even with our funding schedule, by '08 we would have dropped to 63.8 percent funding. With this new one we dropped to 59.7 percent.
What is generally acceptable in the industry? 67 2/10/03 - FISCAL STABILITY - RES. 030030
There is a thought that 70 percent represents being covered for everybody who is currently receiving a pension and currently in the vested and going forward status; 70 is sort of a comfort range. Given what's happened in the market, there probably aren't many of us who started right above 70 who are still hanging in at 70. The City had gotten to 76 percent or 78 percent.
Our last funding status was -- and I'll have to check with the pension people. But where we say we'll be in '04 is 73.2 percent. I believe we were in the 75, 76 percent range as of the actuary report.
Councilman Ortiz, I'm sorry. Just make this your last.
Thank you. I would just like to ask a couple questions at this time. Outsource Custodial Services -- although most of the larger City-owned facilities currently used contracted custodial 68 2/10/03 - FISCAL STABILITY - RES. 030030 services, there are still over 500 City employees performing custodial services for the remaining facilities. We are led to believe that the City plans to release an RFP during FY '03 to determine if Outsource Services across the City would be more cost effective than performing the work internally. What is the departmental breakdown of the 500-plus jobs?
Okay. Can you also tell us what the projected saving per year from this initiative would be, and what is the basis of these projected savings.
The savings are approximately $500,000 a year. And we got that really by looking at the costs in our -- in the buildings where we use private custodial services in comparing that to the cost where we don't use them.
Is the elimination of these positions reflected in the position schedule?
It is? Thank 69 2/10/03 - FISCAL STABILITY - RES. 030030 you. Under NTI, regarding the removal and pruning of dangerous street trees, does this include overgrown trees that pose potential danger to property owners? Oftentimes we receive calls that branches are so large they're on someone's roof. And I guess we automatically send a letter of request asking they be pruned. If, in fact, the tree is dangerous, we ask that it be removed. We sometimes wait a year and a half. Do you see any improvement in that program occurring under NTI?
I can get you a written report on exactly how many trees and when we expect to have gone through the backlog of trees. There was a backlog of, I think, about 8,000 dead trees.
But my question to you is, will we see some improvement? And is each council district being earmarked for X amount of dollars for the pruning and removal of trees?
I'll get you a response 70 2/10/03 - FISCAL STABILITY - RES. 030030 in writing.
Please. I see other Councilmembers want to be recognized. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. Good morning, Chief of Staff Wilkerson and Secretary Davis and Director Dubow. I wanted to come back to the area where Councilman Ortiz was regarding the Pension Fund. And I apologize for missing some of his questions. And if he went over it already, you can just let me know that and I'll read the notes of testimony. I'd like to better understand our earnings assumption rate. And I recall at the time of the Pension Adjustment Fund Bill a few years ago, our earnings assumption is 9 percent; is that correct?
And how long has our earning assumption been 9 percent?
I will have to check with the pension people and I'll get back to you. I'm not certain. 71 2/10/03 - FISCAL STABILITY - RES. 030030
But at least as long as your time, and you think a few years before that?
Yes, I believe it has been. At least since when the pension obligation bonds were done.
As least through the period when the pension obligation bonds were done.
And over the past, let's take at least a five-year time period, what has been our actual annual earnings rate?
I don't have the years before I got here; but since I've been, the last two and a half years it's been well below 9 percent. And, in fact, we've lost value.
Do you have a ballpark figure on what it actually has been?
Let me get the information from the pension. Our five-year overall fund has earned 2.04 percent over five years -- the last five years. That's their composite earning.
That's the 72 2/10/03 - FISCAL STABILITY - RES. 030030 five-year?
I don't have the annual rate, but I can tell you at three years, it was a negative 5.2 percent. The one-year rate would be 9.79 percent. And year to date rate is a -- those are minuses, by the way. Minus 5.2, minus 9.7 at one year, and minus 6.22 for the year to date of this year.
Given what's going on in the market, either presently or in the most recent past, do you think it's still appropriate to continue to use a 9 percent earnings assumption?
We looked at using less than 9 percent. But what that has the impact of doing is increasing at this point the City's contribution. You usually see changes in your assumption at a time when fronts are, in effect, doing well.
I didn't hear the 73 2/10/03 - FISCAL STABILITY - RES. 030030 first part of that. I'm sorry.
You get a change in your earnings assumption -- if the City were going to do a change in the earnings assumptions, they would have been better doing that in better times when their contribution to the fund was less. To change it now to a lower number, which is something I think we do seriously need to consider, would be to compound the fact that we are not earning now. Because the fact that we're not earning 9 percent and we are, in fact, losing value also says that we would not be earning 8 percent or 7 percent in this instance. And so we, in fact, would be compounding our problem. We had the actuary actually look at what a change in our funding policy would be to an assumption of 8.75 percent. And that increased the amount over the Five-Year Plan that we would have to contribute. So we were just -- we would just compound our problem. Instead of over five years being faced with a $1.4 billion contribution, we would have been forced to make a $1.5 billion contribution. So this is not the time, although I think it is something that the City does need to 74 2/10/03 - FISCAL STABILITY - RES. 030030 consider as it goes forward, whether or not there is a more appropriate rate of return.
I'll have to get that information and present it when I give you the detail for all the other years.
Are you aware of a time period when the markets were doing better?
Oh, yes. In '97 -- '96-'97 time frame they were doing a lot better.
I understand. I know they were. Let me finish the question. Are you aware of any conversations that took place over at the Board during periods of greater prosperity where there was any discussion about changing the rate?
I would have to ask somebody who was there during that time. I wasn't.
I think I heard the new buzzer. I'll try to sneak in one last question, Madam Chair. Can you give us a sense of what the assumed rate of return is in other either 75 2/10/03 - FISCAL STABILITY - RES. 030030 comparable funds or other governmental funds generally ?
They're mostly in the same -- 8 percent is assumed a fairly standard rate.
And most of the funds around us are having similar regression or retreat?
Yeah. I mean, it's not just the funds around us, but the funds across the country. When you look particularly at state funds, they're taking a lot of negative hits. I think, if I'm not mistaken, New Jersey has lost something like $25 billion over the last two years.
Thank you. Are we going to look at another tax lien sale in the future? I understand that we made 76 2/10/03 - FISCAL STABILITY - RES. 030030 some --
If I could find someone willing to buy additional tax lien bonds, I would aggressively pursue it. But given the fact that those have not proven to be our best performers, I don't think we'd be able to find many takers on that.
You talked about, back on of your summary, the need to -- that you're making a significant investment in supporting Social Services so that we can eliminate the need for those services. Have we seen any impact, any changes in the need for the services? What have you done in the area -- we know about Safe Streets and what's happening on the street, and we'll be talking about that, I'm sure, in detail when that comes before us. But what about the prevention programs? Have the prevention programs contributed to the need to cut -- I mean, to cutting down some of the Social Service?
I'll have to ask some of the Social Service people to talk about whether there's a causal relationship, but we're seeing youth service center numbers at an all-time low. We 77 2/10/03 - FISCAL STABILITY - RES. 030030 have had population figures that were around the 150 population. They're now down to around 90. We are seeing a decline in our prison population. It is too early, we think, to correlate it directly to Safe Streets, but the prison population is now down below -- it's around 7,400. That's lower than we've seen it in a long time. But it's still too early to start drawing causal relationships, but, you know, when --
That's right. Because we're trying to track things so that we could have a sense of what's working and why it's working.
The other thing, the increase in -- I know you're doing a lot of stuff with Safe Streets and dealing with the drugs. Have we seen an increase in the number of clients seeking treatment and has that driven up treatment costs?
We've seen a fairly dramatic increase in the number of individuals seeking drug and alcohol support.
You don't have to 78 2/10/03 - FISCAL STABILITY - RES. 030030 call them. I'd just sort of like to get an idea because we will ask those questions of the departments when they come forward. No point in being redundant.
We're seeing a dramatic increase in the number of individuals seeking drug and alcohol support. It was slow in the very beginning phases of Safe Streets, but it's picked up, and the Department will talk about that.
You're welcome. The Chair recognizes Councilman O'Neill.
Thank you, Madam President. To the Panel, the 50 employees that the Mayor had mentioned in his budget message that would be in this year, rather than a lot of things that have to happen next year, could you give us an idea -- I know it's not just the Mayor's Office; it's the Finance Department and -- was that it? Those two?
And the Managing Director's Office. And there are a smaller number 79 2/10/03 - FISCAL STABILITY - RES. 030030 in one of the other city departments.
Could you tell us of the 50, how many are DROPs that will be leaving, if any, and how many of the positions are currently funded but unfilled or not staffed, if any?
We can get back to you. I think there are only two in the DROP and they were all positions that were filled.
Okay. I say it because we may be looking to do some belt tightening here and I'm just trying to get some comparative numbers.
And if that DROP number is wrong, we'll get you the right number, but I think it's only two.
On the attachment, the Revenue and Expenditure Assumptions in the Five-Year Plan, the wage tax revenues at the end of that second bullet says, "Instead of growing in '04 by 2.59, they would have grown by 3.5, but for the proposed tax decreases." Does anybody factor in that, if it weren't for the tax decreases we may not have the increase to begin with? There's a very strong 80 2/10/03 - FISCAL STABILITY - RES. 030030 argument in lot of quarters that just as when you raise taxes you don't get -- the graph doesn't go straight up. It often disappoints you because your revenues actually go down when tax increases happen. And there's also a strong argument that tax decreases tend to generate revenue, particularly when you're talking about eight-year period. Is there anything built in on that? And I give the same question on the fourth bullet with the business taxes.
I understand what you're saying. And if we didn't think there was some impact on the economy and on our taxes, we wouldn't be doing it. What that really is, it's just a straight calculation. It's just saying you lose about .8 percent.
And it could even be wiped out, for all we know. It's a number that 81 2/10/03 - FISCAL STABILITY - RES. 030030 we'll never be able to get our hands on.
Right. And economists have a whole different range of conclusions about the size and timing of that impact.
Councilmember, you usually see the benefit in some other tax. It usually shows up in another part of your revenue base.
Okay. But, for instance -- and I don't want to beat the horse too long, but a little bit, anyway. Because of the tax decreases, I am moving from the suburbs or I'm staying in the City because I like the trend and I'm hiring more people. That's real. And that is wage tax. That's not another tax. And so you might get more real tax, too, because I've expanded my building or I buy a building if I come in from the suburbs. But I do think there's a factor in there. I don't know what it is, obviously, any more than you. You've made it zero or a neutral factor. I think there's some part of our increase in wage tax that is due to the fact that we have decreased it over the years.
I should also add, though, that there really -- there aren't economists who say 82 2/10/03 - FISCAL STABILITY - RES. 030030 that you get a large impact immediately. So from this year's reduction, we won't see much of an impact in this year. We may see it two years down the road. So in really looking at the net impact on that year's revenues on that year's cut, I think it's fair to present it this way.
One last question on that, so I'm clear. When you factor in what it would have been, when you use that number -- this would be 3.5 percent -- are you factoring in just this year's single, solitary cut or the cumulative cut?
Just this year's cut. I think it was between the 3.5 and the 2.6 -- or 3.25 and 2.6. It's just this year's cut.
The impact of the cuts over the Plan are 150 -- in this year, $319 million. I don't have it broken out in front of me by year, but I'll get you that.
Okay. Just a 83 2/10/03 - FISCAL STABILITY - RES. 030030 couple more. The PGW is, in the Mayor's words, back on its feet. It's the Phoenix risen from the ashes. I was never a big fan of lending the money because I thought it was throwing it away. It's comforting to know that they're back on their feet. But are they back on their feet -- to me, back on their feet means that they can pay their bills, including to the City. Are they back on their feet all the way or are they still kind of --
The Phoenix might be a tad strong. I think that the company is off of life support. I think it is no longer a proposition that threatens even the City's fiscal stability and I think --
In a cold winter, they're the only people in the City happy.
No. We're normalizing, so we're giving credits at this point. But the good news is, they are paying their bills, including to the City. In the past two years, they've had to defer their $18 million to the City until the end of the year. I am happy to report that they have now 84 2/10/03 - FISCAL STABILITY - RES. 030030 started making their payments in accordance with the agreement, so that we have already received the first of the four payments that they make to the City that will at the end of April or so be equivalent to $18 million. We've received their first payment.
And we expect that the $45 million will be repaid according to --
The bullet says FY '03 for the $45 million repayment. The Plan assumes that the City receives the repayment of the $45 million loan in FY '03.
'07. So while they're doing well, they're not doing that well.
They're not going to pre-pay that, you know, sort of inexpensive money.
Last question: 85 2/10/03 - FISCAL STABILITY - RES. 030030 $37 million for DROP separation payments; could you explain those in some detail? I don't know what they are.
When people leave the City, they get payments for their accumulated vacation time and for a third of their sick leave time. And with a huge number of people leaving, those payments are bigger than normal. That's all that is.
And mainly because it's the first DROP class, if you will?
Rather than spread out over future years, which we may or may not have in the near future. On the DROP, I was fairly involved with those hearings and remember a lot of it. There were about or cities that had the DROP when we got 19 involved and none of them, to my knowledge, had ever 20 ended it after they had started it. I know some of 21 this was fairly new when we were doing it, but some 22 had gone back to, I think, 1980, I'm not sure if it 23 was Baltimore. And I remember Commissioner 24 Hairston, who actually brought the DROP to the City, 25 and I think it's been the greatest morale booster, 86 2/10/03 - FISCAL STABILITY - RES. 030030 at least in the uniform departments that I've seen in the years. What is the experience elsewhere? 4 I mean, I see initial impact problems and I see 5 problems when the pension fund is doing lousy. It's 6 doing lousy for everyone. But I still think it's -- 7 I remember the actuary testifying on why it's good 8 or we wouldn't have done it. It wasn't part of any 9 union negotiations. It was done because it was a 10 win/win. Part of it was being able to better 11 actuarially predict our costs. And, yes, you have 12 good years and bad years. When we were 9 percent 13 and we were getting 13 percent, there was the 14 argument, why aren't you increasing your actuarial 15 assumption so the bonus pool gets more money. Now, 16 why aren't we reducing it when we know, if somebody 17 is getting 9 percent, they're going to get all the 18 money be invested in the United States right now. 19 So do you have any record on what other cities have 20 gone through like we are now and whether any of them 21 have dropped the DROP? 22
We don't have the 23 information on what they have done since they've 24 come into this bad market. We have to try to do 25 some research. 87 2/10/03 - FISCAL STABILITY - RES. 030030
Well, there's two things, Ms. Davis. You've got the bad market, and many of them might not have that until now either. And to the extent that they are seeing maybe a renewal period come up for their own DROP, we may want to look at it, but I'm also thinking of this huge bump where the first group is in and all leaving at the same time and, because of our fiscal constraints, we can't give them any leniency. We may give one or two, if there's a special circumstance. I'm sure the greater majority, if not every DROP person, is going to be disappointed that they can't stay an extra year or two, even if it would help in transitioning so you don't have so many people at once, so many new classes at the academies, those kind of things, because the finances just don't permit it. But I hope we can get some experience from others and not act rashly, because I think a whole lot of City employees are looking forward to the day they can DROP and give the City three or four years notice of their retirement. It does move some people out. I know a lot of people who would like to stay that are leaving. They've had second thoughts. But they 88 2/10/03 - FISCAL STABILITY - RES. 030030 probably in many cases should be leaving and let other people move up, lower salary people move in and it kind of keeps the system going. I hope we look at everything, including other cities' experiences when we're making recommendations, either to the Mayor or to the Pension Board or both.
We'll do that. We'll do a survey and also expand a little bit on the experience that this City has had as a result of DROP.
Thank you. In the Fiscal Health Section of the Plan, you mention the risk of receiving the funds due from the Parking Authority. What steps are being taken to ensure the receipt of these funds? The City has guaranteed the Parking Authority's bonds?
We have been sending them a barrage of letters requiring that they perform under the contract. Unfortunately, Senate Bill 1100 removed any requirement that they respond to us about their budgets or their spending or anything. We are to date still awaiting their audited 89 2/10/03 - FISCAL STABILITY - RES. 030030 statements for FY '02 and have to request of GFOE an extension on our filing of our financial statement for the year because of it. We have also to date received roughly $4.8 million from the Parking Authority of a -- roughly $14.9 million budgeted 7 amount of revenue. We have requested of them that 8 they provide us an explanation for why we have not 9 received those funds, and to date have received no 10 such explanation. I believe the airport is in 11 somewhat the same situation, that they've not been 12 getting the reports nor the funds transfers on the 13 level that are anticipated. The City is seeking 14 relief from Senate Bill 1100 and we are looking at 15 other alternatives to deal with the Parking Authority, because it is a very real problem for us. And in this Fiscal Year could be as much as a $10 million problem, if we don't receive any other funds.
Does the proposed Plan include any General Fund payments on behalf of the Parking Authority?
May I ask how much? 90 2/10/03 - FISCAL STABILITY - RES. 030030
I believe there is $4 million in debt service for the Parking Authority bonds. And I think that's the amount I remember for those bonds for 8th and Chestnut and the Walnut Street property.
What is the status of the two projects and when will they move forward?
Eighth and Chestnut is now a surface parking lot. And Walnut Street, I'm not certain. We had had some discussions with the Parking Authority about the Walnut Street property and there are developers who still remain interested and engaged in that. But I could not give you the details of what it is now because we've not gotten any further updates on it.
We'll provide you with a report updating you on 19th and Walnut. That had been in litigation, but we'll get a status report for you.
Thank you. On of the Plan you state, "By the end of FY '03, the City will launch NTI quality of life improvement programs tailored to address public 91 2/10/03 - FISCAL STABILITY - RES. 030030 nuisances specific to the City's different communities. These programs will represent a coordination effort among the Mayor's Office, the MDO, Law Department, several of the operating departments, members of City Council and community residents." Please explain these programs and their locations.
We're still fashioning the ones beyond the 6th and the 10th Districts and the 3rd District. The CLIP program has probably been one of the most popular initiatives. As you know, it was the brainchild of Councilwoman Krajewski. And what we want to do is have that same coordinated approach to nuisance problems in neighborhoods throughout the City. Different neighborhoods have different kinds of problems. We'll need slightly different approaches and we want to spend the time between now and the end of the Fiscal Year working with the different Councilmembers to talk about how -- what form the program might take in the various districts.
And when did you say each Councilperson will be -- 92 2/10/03 - FISCAL STABILITY - RES. 030030
Under the ordinance that authorized the issuance of the NTI bonds, we're committed to having a proposed program and budget for the coming Fiscal Year. There are a series of meetings that happen. I believe those are being scheduled now so that there is Council input. That final program won't be transmitted until probably until May -- I forget what the exact time line is, but that process is beginning now.
Is there an order in which the projected 2,000 property demolitions will take place?
We are meeting with the Councilmembers. We're moving around from district to district, and I don't have the exact schedule of what's happening, when I can get back to you on that.
Okay. Under NTI, you state that Conrail has committed $200,000 from an anticipated tax refund to fund a railway clean-up project in Port Richmond and Kensington. Is this amount sufficient for the clean-up? And what will we do if the tax refund does not materialize? 93 2/10/03 - FISCAL STABILITY - RES. 030030
It's probably not a sufficient amount. The City has an extensive strip of rail lines that cut across the City and a lot of these aren't maintained. We have been in constant contact with the rail lines encouraging them to do a better job. And when Pat Smith comes to testify, I will have her talk in more detail about what the plan is for trying to secure compliance. The Law Department has been involved in the negotiations with the various transit lines, but we will respond in detail then.
At this time the Chair recognizes Councilwoman Tasco.
You ought to cite them. Send L&I out and cite them. Make them go to court. Councilwoman Blackwell asked a question earlier and I just want to follow-up on that question. We talk about the Capital Program and you said there would be no change in that. A number of us -- at least I do, have a project on the table that's up for bid right now. If the project is completed, what impact will Operating Budget have on the functioning of that facility, since you're 94 2/10/03 - FISCAL STABILITY - RES. 030030 talking about closing some facilities? I'm really concerned about having worked on this project for about five years that we don't see it come to closure.
I think we're all going to have to spend the next year working carefully on the right-sizing initiative. Not all the properties that would be right-sized are in the Recreation Department. The City has over a thousand properties that it maintains and -- you know, the Police Department, the Fire Department. The right-sizing discussion is going to be a fairly expansive discussion. And I think what you're talking about is one of the challenges. We've all been putting money into these recreation centers, have a lot invested in them. What happens with that investment if it turns out that it appears to be a redundant facility? But those are the kinds of conversations we'll have in the coming months. We think that this is going to be one of the very challenging initiatives, doing an assessment, the quality of the facilities; are there opportunities that will be presented with the construction of new school buildings? Can the 95 2/10/03 - FISCAL STABILITY - RES. 030030 service be co-located with something else that the City has to do in a neighborhood? Maybe you collapse a fire station or a police station into the same facility. Those are all the kinds of things we're going to be looking at as we move forward. In the meantime, we are not pulling the plug on maintaining the facilities we have or not pulling the plug on providing adequate operating support for those facilities. I think that that will all been part of the discussion as we move forward.
Certainly. In fact, should we break for lunch? It's up to you.
No. I'd rather we mush through this. I just need a quick break.
All right. Why don't we take a 15-minute break. (Brief recess.)
We're now back in session. 96 2/10/03 - FISCAL STABILITY - RES. 030030 Councilman Ortiz.
Thank you, Madam Chair. Before we get into the book, in your statement, you say that the Plan also eliminated the projected deficit through increased fees and fines. Which are the fees and fines that have been projected to be increased?
There are three different types of fees that were increased or projected to be increased in the Plan. One is Licenses and Inspections fees.
It's those fee increases. That's what's assumed in the Plan. Records Department fees, that's also been approved by Council, so that was included in the Plan. And then the parking fees.
The ones that are in the ordinances before Council now. 97 2/10/03 - FISCAL STABILITY - RES. 030030
And those parking monies are going directly to the General Fund?
So how much of that is going to be transferred over to the City?
The Five-Year Plan projects that over the life of the Plan we get $95 million from the Parking Authority. Now, we get roughly about $14 million a year, so there's about a $5-and-a-half million increase assumed in the amount of Parking Authority revenue.
And what are the projected -- what's the amount of money in projected real estate transfer taxes?
Hold on one second. I'll have that. The Plan projects $ 99 million in '03, $93 million in '04, $90 million in '05, $92.2 in '06, $94.5 in '07, and $96.9 in '08.
You're assuming a 98 2/10/03 - FISCAL STABILITY - RES. 030030 very active and healthy real estate market to be in place during all of those years.
We're actually assuming that it slows down a little from where it is now. Over the last couple years, we've had record high levels of transfer tax revenues. So we bring that down a little.
How much have we been getting in the last three years, for example?
Before the last couple of years we had what were historically high years and we were in mid to high 70s. In '02 we went up to $97 million.
Well, for the first half of this year, I think we're over 50. The first half of this year has kept pace with where it was over the last year.
Under state reimbursement for DHS, is that the TANF $30 million or is that other monies?
It's TANF. It also assumes that reimbursements for salaries and benefits go 99 2/10/03 - FISCAL STABILITY - RES. 030030 from 80 percent, where they are now, to a hundred percent. That's something that actually other counties are pushing. If it was something that was just our initiative --
That's right. It's not in place yet. We're assuming that that happens.
You're assuming. And how much money is that? I just want to see what the assumptions are.
The other thing that assumes, there's about $15 million a year in increased revenue because the State changed the way it does its institutional placements for delinquents. Before, the State ran that directly. Now they're having counties run it and reimbursing them. So most of that, the increase we're showing is for that.
I'd like to put a number to the assumption in the next few years.
We can lay that out for you. There's about -- it's worth about $8 million, moving from 80 percent to a hundred percent. 100 2/10/03 - FISCAL STABILITY - RES. 030030
A year. And if that doesn't happen, that requires -- who is going to act, the State House, the Senate, or is that up to the Governor?
Because we're making assumptions about a budget that we're supposed to be approving by May 30th.
Good morning. John Zanier, DHS Budget Director. Delaware County is taking the lead --
Excuse me. You have 101 2/10/03 - FISCAL STABILITY - RES. 030030 to speak into the microphone.
Delaware County is taking the lead in introducing that legislation.
I didn't say who was taking the lead. I said, where is it at? What are --
It has not been introduced yet. All right. The other part in your statement, "The consolidation of decentralized departments' administrative functions," could you please go into detail, what are the departments that are going to be centralized and consolidated? How are they going to be consolidated? What, if any, people are going to be laid off? And what is going to be either the savings or the cost, the initial cost and then the projected savings?
I'll ask Ms. Davis to recap that. 102 2/10/03 - FISCAL STABILITY - RES. 030030
We will not be consolidating departments, but consolidating those non-core functions within departments such as the budget, personnel actions, payroll, time keeping, some --
-- has those functions. And they will be taken out of the Commissioner's -- each commissioner will give those functions up?
Yes. And we will create -- I believe we've looked at six service centers performing the functions for all the departments across the government. We anticipate that it will eliminate 400 positions. We don't know how many of those will result in layoffs because there will be hirings in conjunction with DROP. We anticipate that in '05 we will save roughly 50 percent of the money generated by this consolidation. And never do we take more than two-thirds of it in any Fiscal Year, recognizing that there will be costs associated with the implementation of the Administrative Service Centers. 103 2/10/03 - FISCAL STABILITY - RES. 030030
Do you have a chart of those departments and the positions that will be impacted in this consolidation? And could you give us each one of those departments with the positions that are going to be affected?
We've done a prototype for Finance and we can list the departments that will be involved in that consolidation. We have the anticipated clusters, but we've not identified each and every position within the rest of the departments. Once that is done, we will provide it to City Council.
Well, you said 400 positions are going to be eliminated.
If our experience with what we've seen in the prototype department holds true, it is roughly 50 percent of the positions involved in Administrative Services.
So right now we have 800 people working in the 10 departments?
876, assuming a little less of a reduction Citywide than we've seen in the 104 2/10/03 - FISCAL STABILITY - RES. 030030 Finance Cluster.
We have 4 departments, 10 administrative departments; is that 5 correct? 6
No, no. I'm saying 9 we have 10 commissioners -- 10 departments. In 10 those 10 departments, we have over 876 people --
I mean, we have 10 Charter departments, right? I mean, 10 commissioners?
But we're not just talking -- we're talking about every department, not just the operating agencies, so it's more like --
-- if you look at the back of the Five-Year Plan, there's an appendix that lists 105 2/10/03 - FISCAL STABILITY - RES. 030030 all the departments.
What happens to the 400 people that hold those positions?
We anticipate that a lot of those people will be able to be reassigned because of the DROP Program, and DROP happening at about the same time we're implementing.
How many of those individuals do you know are in the DROP program?
I don't know exactly how many of the people who will be affected are in DROP.
I'd like to see a detailed chart of all the departments, the positions that are going to be impacted and what the consolidation is going to look like. You're going to eliminate -- from 50, you're going down to 6; is that correct? 106 2/10/03 - FISCAL STABILITY - RES. 030030
No, we're not going down to six. We are not taking 50 departments and compressing them into 6. What we are doing is taking the functions that support --
That's what I'm saying. You've got 50 departments in which these individuals --
Groups of people. And you're going to put them into six clusters?
And those six clusters will have very defined functions?
Could you give us those functions and the definitions of what they are?
We will provide you with a written document that summarizes -- it will have more detail for the Finance Cluster and less detail 107 2/10/03 - FISCAL STABILITY - RES. 030030 for some of the other departments. But I think we will be able to identify for those other departments the kinds of positions where we think the opportunities are.
Councilman Ortiz. I'm sorry, your time has been up. I just wanted you to complete your question.
We have other Councilmembers that would like to be recognized. We'll be very happy to come back to you. I just have one question, if I may, Councilman Rizzo. On of the Plan you mention the new stadiums. The press has been running stories that suggest the stadium transaction is not producing the revenues the Administration projected at the time of the hearings and are, therefore, requiring the City to make cuts in order to pay for the stadium. For the record, will you please explain this transaction and what budgetary impact it has had on the FY '04 budget and Five-Year Plan?
Yes. First, just to get to the statement about the $5 to $6 million. That's 108 2/10/03 - FISCAL STABILITY - RES. 030030 not accurate. There are two sides, obviously. There are the costs, which is the debt service, and then there are revenues and avoided cost. Revenues will come in from wage taxes on construction, which has happened just as we anticipated; from the Phillies' salaries, which are going to be much higher than we anticipated; from the Eagles salaries -- and there's some dispute about whether that will meet what we said; from the car rental tax, which has been a little lower than we thought because of what happened after September 11th. And there are the avoided costs from not having to put what engineers told us was at least $160 million into Veteran's Stadium, so that it will be usable going forward. Our look at the numbers show that it's too early to draw a conclusion about a 30-year project, but that, so far, not only have the stadiums not taken money from the Plan, but that we've gotten revenues without corresponding expenditures so that they've actually helped us in terms of last year's Plan and this year's Plan. And the debt service numbers are actually lower than what we anticipated when we made our presentation to 109 2/10/03 - FISCAL STABILITY - RES. 030030 Council.
Thank you. The Chair recognizes Councilman Rizzo.
Thank you, Madam Chair. For a few years now we've been having conversations at these budget hearings about making the government more efficient. And after the budget hearing, lots of the ideas were just kind of dismissed and never occurred. One that we've been talking about for lots of years -- and maybe someone read the transcript from maybe three years ago from the budget hearing -- we talked about consolidating or at least trying to manage better the Fairmount Park Commission and the Recreation Department. You know, we talk about the line in the sand, but we have the line in the grass, where crews from the Recreation Department cut the grass to a line and won't dare step over it because that's the piece of grass that the Fairmount Park Commission cuts. So I would hope that after -- this is about my fourth year talking about this efficiency improvement. But somebody really takes it seriously. That's part of the problem that 110 2/10/03 - FISCAL STABILITY - RES. 030030 Administrations, that they say they're going to do things and they don't do them. So if you're really serious, let's get with it.
I'd like to ask Phil Goldsmith to come up. The Administration has been serious about looking at those relationships. We've gotten a grant from the William Penn Foundation to help us develop a strategic plan that actually gets rid of some of what you're talking about.
Thank you. Councilman, I agree with you. We do have a strategic plan going on. This is a national firm. They are in town. They've been in town for about three weeks now interviewing people. Part of what they will be doing is an operational review of Fairmount Park so we can really assess objectively how the park is being run and so forth. But having said that -- and before I took this position as Managing Director in the budget that I submitted for Fairmount Park, I have recommended and I believe that there are things that we should be doing right now and we need not wait for. In fact, a 1983 master plan for Fairmount Park had talked about the consolidation of recreation 111 2/10/03 - FISCAL STABILITY - RES. 030030 centers. Swimming pools, we have three swimming pools. The Recreation Department -- I shouldn't say we. Fairmount Park has three swimming pools. The Recreation Department has 80. I think the Recreation Department should run the additional swimming pools. I think they have an expertise. They will find economies. And the same thing with our Fairmount Park's Recreation Centers. There are eight. We're recommending in this year's budget that six of those eight recreation centers be put under the management of the Recreation Department so they can start to perhaps provide better programmatic skills than Fairmount Park has been able to, as well as look for redundancy in operations and move people around where people are needed, as opposed to where they're reporting on an organizational chart. I think the grass cutting is something we're going to look at and we're going to keep on working through these projects. But I think, frankly, the time has come to do it and I hope to use my perch as Managing Director to get that stuff done.
Managing Director, I'm going to taking advantage of you sitting in that 112 2/10/03 - FISCAL STABILITY - RES. 030030 seat. For years and years and years and years we've been talking about -- and I think I'll describe the situation. You drive through the City. You see a traffic signal that's not operational. You see a stop sign that is knocked down or a speed limit sign that is becoming detached from the location it's intended to be. You see intersections that require lane markings that have faded to the point where you don't know if you're supposed to be in this lane to turn left or that lane to turn right. And if you do it -- it's kind of like three years old that we've been talking about some responsibility of employees of the City, specifically the Streets Department, where we should have people that either it's part of their job or create a position as an inspector because I'm sometimes amazed, because I'm pretty focused on things like I just described, and I'll see that something is knocked down on Monday and I'll figure, oh, somebody other than a Councilman had to see this. Somebody in the Streets Department had to see it. The Police Department had to see it. The Fire Department had to see it. And I'll call on Friday from seeing it on Monday and be told that this is the first report they have of it. We don't 113 2/10/03 - FISCAL STABILITY - RES. 030030 need people, constituents, people that live in the various neighborhoods to really have to call a Council office to get a red light bulb re-lamped or a street light that's out. We should really have a group of people in each of those districts in the Streets Department out there looking and seeing the same things that I see, the constituents that I represent, you represent. We've been talking about this and everybody at the budget hearings says, "Great idea. That's something we should do to be more efficient." And guess what? It never happens. I'm still reporting the same stop sign knocked down a week after I see it the first time. And it's the first time that that particular issue has been addressed. So I would hope that the eyes and ears of the Streets Department district engineers, or whatever, highway people are out there looking at these things because that faded intersection that I described, they must see it.
Well, Councilman, I think I would ask all employees to be the eyes and ears for us and to be early warning signals. My own point of view is when we hear from a Member of 114 2/10/03 - FISCAL STABILITY - RES. 030030 City Council, it's because we haven't done our job. So I think we've got to be more alert on the field for those of us that are doing the job. So we're trying to be attentive to these. By the same token, we're going to have to prioritize a lot of this stuff because the needs far outstrip the resources. But we have to be attentive and let people know what we're doing and when we plan to do it.
I agree with you, but safety issues where you have a pole that's supposed to be in the sidewalk area indicating no parking and it's bent over where a person at night coming home doesn't see it and they get their head almost bashed because there's a pole that has been out of alignment for months and months and months. And I understand that we have to prioritize. I'm not suggesting that we hire additional people, but there ought to be a person in each district, if it's not everybody that works in that district, highway district, be a facilities inspector, if they see something that's not right. As a matter of fact, I see poles all over, metal poles with nothing on it. We talked at the last budget process about doing some audits of 115 2/10/03 - FISCAL STABILITY - RES. 030030 what's supposed to be there. Signs get taken away. As a matter of fact, in one particular area there were signs removed by some people that lived in the area because they didn't particularly agree with the message. They've been missing for five years and nobody ever noticed.
Thank you. The Chair at this time recognizes Councilman Nutter.
Thank you, Madam President. I did actually want to follow-up on one of the issues that Councilman Rizzo raised. You responded to Councilman Rizzo, I believe with regard to the strategic plan for Fairmount Park and said that -- did you say that people conducting it have been here in the City for about three weeks?
My only real 116 2/10/03 - FISCAL STABILITY - RES. 030030 question about that is, I seem to recall that it was during these budget hearings last year, I think in March, when the Fairmount Park was in for departmental hearings as a part of the Committee of the Whole. Do you have any sense of why months 7 later we're just now at a point where the people who 8 are actually supposed to do the work are doing the 9 work? 10
I can't give you the 11 complete history of it. When I joined the park in September, I think the process was that we were interviewing consulting firms based on an RFP that had been put out. Shortly after that, we interviewed seven firms, made the decision to select the firm that was selected. That was happening at about the Thanksgiving holidays and so forth. By the time the contract got signed and schedules opened up it was really January. So I think the good part is that we have an outstanding firm that's done work in major cities. They're in the process of interviewing. They will be working through Councilwoman Brown in terms of dealing with City Council and getting the input of City Council and so forth. So it's going to be a public engagement. 117 2/10/03 - FISCAL STABILITY - RES. 030030 We're still shy. We're going to do the public engagement and operational review, and then we have to find some more funds to complete the study to really get the full impact. We're out there now applying for some grants and hoping that the private sector and the business community puts up some money because I think Fairmount Park is a great asset.
I think it's about $600,000 total, so it would be about an additional $300,000.
Okay. Thank you. Madam Chief of Staff, I wanted to ask a couple questions directly related to the testimony, and then I have just a couple other questions. On , about the middle of the page, this was one of, I believe, three new spending proposals as outlined by the Mayor in his Budget 118 2/10/03 - FISCAL STABILITY - RES. 030030 Address back on January 28th. Can you tell us a little bit more about the $5 million Child Care Health and Safety Fund, and are those dollars identified in the Five-Year Plan?
Don't answer it. And as well as the $25 million and the $30 million?
On the same , under the heading of, "The City recognizes that future economic growth depends on the ability to attract and retain businesses in the City," can you tell us -- obviously, given our fiscal situation, it is more than appropriate to look at the number of facilities we have, and I know we've had this terminology that's being used currently about right-sizing the government. Can you tell me on the other side of that, I guess, what steps or what actions, or is there an operation, if you will, for 119 2/10/03 - FISCAL STABILITY - RES. 030030 population growth of the City to reverse the decline or exodus in population? Or is there a strategy here today somewhat similar to what, unfortunately, happens sometimes with patients in a hospital, where we just decide to try to make the person as comfortable as possible and send them back home and the rest will take its course? I mean, what steps are we taking to reverse the middle class exodus?
I think the Administration is doing a number of things. I think that until we get our neighborhoods to the point that they provide a reasonable quality of life, we'll continue to see the exodus of people. And one of the tenants underlying Operation Safe Streets, underlying NTI and dealing with a lot of these quality of life issues that have been lingering around for decades in some cases, is that you cannot expect people to remain in the City unless we get a handle on this. I think the schools are perhaps the largest example of that. We know from studies that have been happening over the years that people decide to locate where there are quality schools. And so I think we can never reasonably expect to see 120 2/10/03 - FISCAL STABILITY - RES. 030030 the population grow in a significant way until we get a handle on education, crime, and the quality of life in neighborhoods. I think that one of the other things that we've learned is that people want a type of housing that we don't necessarily offer in this City. And so with NTI, what we've attempted to do is harness the resources we have in our neighborhoods in order to put them back into productive use in a way that people tell us they want to live now-a-days. We think that there is interest in moving back in the City, but people don't want to live in little row houses in every instance. They want a selection of different types of housing. And so I think that attracting population back to Philadelphia in part turns on having a different type of housing supply. As the Mayor indicated in his speech to the Chamber, we are already reaping the benefit of being able --
Among other points that he made, he indicated that growing the Convention Center -- 121 2/10/03 - FISCAL STABILITY - RES. 030030
We should talk about that. That was actually one of my questions here. I'd love to engage in a discussion about the Convention Center.
That all the buildings that have been redeveloped in Center City, I think converted from industrial commercial to residential use is further evidence that if we can come up with a housing stock, we can grow our population. We also know that retaining students is an important part of trying to grow Philadelphia. And so the Administration, in collaboration with the universities, is working on specific strategies to try to keep those students in town. I think we complement our approach on bringing residents in addressing the housing stock with a strategy that looks at retaining and growing businesses. Under Jimmy Cuorato's leadership, the Commerce Department, together with Center City District and PIDC, has visited every business that is looking at an expiration of its lease, finding out what it is that the City can do to better address their issues, what would it take to keep them in the City. And I think Radian is one of our 122 2/10/03 - FISCAL STABILITY - RES. 030030 success stories. Radian had talked about moving into Conshohocken and has since changed its mind and is remaining in Philadelphia. We intend to pursue aggressively every business in Philadelphia. We're not conceding any yardage in this. And we think all of those things are important components to growing Philadelphia.
I appreciate your use of the sports analogy. I like a good sports analogy as much as the next person. Tell me a little bit, if you can, about -- and that was a starred item on my list. You made mention of the 60 largest local businesses whose leases expire. Can you give us any update on either how that's going or -- I certainly recognize the Radian situation as a success. Are there other successes or challenges out there that we should be aware of?
Good afternoon. I'm Duane Bumb with the Commerce Department. In response to your question, we are outreached to large businesses whose leases are 123 2/10/03 - FISCAL STABILITY - RES. 030030 coming due within the next five years. It's sort of an ongoing process. I would say that we are about halfway through that process. In many cases, when we meet with businesses, this group, as Joyce has said, The Commerce Department, PIDC and Center City District primarily meeting with business leaders, more often than not, sort of the good news is that many of those businesses are or have already renewed their leases. In other cases, we identified specific issues or concerns that we need to resolve for that business's satisfaction.
Without breaking any confidentiality, but kind of in general, what are the kinds of things that the business people are concerned about?
It's a broad sort of range of issues. At least when talking with us and maybe just as the negotiating point of reference, taxes often will come up, especially with businesses who cite dissatisfaction with their current location.
Incredibly, yes. They talk sort of almost evenly between the business privilege 124 2/10/03 - FISCAL STABILITY - RES. 030030 tax and the wage tax are the two large taxes which they focus on. Other than that, sometimes it's a matter of making sure from the lease perspective, making sure that there are sufficient resources available, whether that be for tenant fit-out if the business chooses to stay or move to another location within the City, making sure that we have sufficient resources to assist that business in that growth or that relocation within the City. Sometimes it is also other sorts of infrastructure improvements that that business is looking for whether -- in the case of one very large business in Center City, the major issue they brought to our attention was that they wanted a stop sign where one did not exist. And we put a stop sign in. They were very happy and stayed. So it can be a broad range of things.
I think that there are other challenges. For example, Budd Company is talking about withdrawing from -- will be withdrawing from the City, and this is part of their corporate strategy.
It's a national 125 2/10/03 - FISCAL STABILITY - RES. 030030 consolidation issue.
That's right. And so what we're looking at are ways of trying to make sure that that parcel doesn't lay dormant for a protracted period of time. We're also looking at the various resources that are made available, like the Keystone Opportunity Zone and its newest iteration. Or Innovation Philadelphia has worked with other players in the City. Also the Rendell Administration on the Keystone Incentive Program, which would co-locate businesses with universities. So we're trying to use a whole array of strategies to attract and grow businesses. We're also taking a real hard look at entrepreneurs in the City that -- particularly among segments of our population, not everybody's going to find a traditional job. And whether it's vending or day care centers or some other kind of opportunity that we can facilitate, we're looking at those as a way of trying to extend employment and give more families an opportunity to generate jobs.
Thank you. With regard to the Budd situation, I 126 2/10/03 - FISCAL STABILITY - RES. 030030 would certainly be pleased to work with you and anyone else in the Administration to make sure that that significant facility doesn't sit around for an extended period of time. And so anything that I can do to be of help, please let me know. Let me just ask a few last questions and then I'll be finished. On of the testimony -- and it may have been mentioned in other places in response, I believe, to a question asked by the Chair, Madam Chief of Staff. You talked about the CLIP program, and there have been continued expressions of interest, at a minimum, for expansion, when you talked in response to my question about quality of life issues. Can you give us a sense of a timetable of when we would see the expansion of the CLIP program in the course of the current Fiscal Year and going into the next Fiscal Year?
I think we plan on doing the actual expansion in '04. It's part of the '04 budget. We'll be talking with people over the course of the next few months trying to figure out exactly what is wanted in various districts or parts of districts so we can put together the program, 127 2/10/03 - FISCAL STABILITY - RES. 030030 have it ready to be up and running with the start of the new Fiscal Year.
And would that be a City Operating Budget funded or would that be NTI Budget funded?
The CLIP by and large draws on operating General Fund resources. It is a redeployment of people in the Streets Department, L&I, better coordination on the City side. For the most part, it involves very little NTI money. Although depending on the neighborhood, if you come across an abandoned building and it looks like the building needs to be renovated, we would be able to draw on NTI resources, but the actual quality-of-life-type issues are General Fund.
Well, let me ask about the NTI resources in the context of -- in the current NTI program. A statement. I think we've allocated $500,000 to each of the 6th and 10th Districts, and so it was from that perspective that I was asking about the NTI dollars. What's your sense of the timing of getting an NTI budget over here? Is that during this process or subsequent.
It will be during the 128 2/10/03 - FISCAL STABILITY - RES. 030030 process. Under the legislation, we commit to transmitting the actual resolution with the program and budget 60 days before the end of the Fiscal Year. I think it's 30 days prior to that that we commit to having a draft available. We've got people circulating now trying to schedule visits with Council offices and putting that together.
The last thing in testimony, you talk about the prisons system's population has stopped growing. I'll make a big leap and assume that somewhere else in the course of the Plan or possibly in the testimony, the assumption is, is that the prison population decline is directly related to the activities coming out of Operation Safe Streets?
We're not making quite that bold a causal relationship. We're looking at a number of things, trying to figure out exactly what's going on. In addition to the Operation Safe Streets, we've had a number of meetings between the Police Department, the District Attorney's Office, the Courts, the Public Defenders, trying to better manage the whole system. While we would like to say it's all Operation Safe Streets, we're trying to 129 2/10/03 - FISCAL STABILITY - RES. 030030 refine our analysis. We think that it probably does play some role. Because if you look at the timing of it, it appears to play some role, but we're not quite there yet.
But on the other hand, I think I at least want to believe that it's not necessarily a goal of Operation Safe Streets to arrest fewer people.
I can have the Police Commissioner speak more directly about how --
I mean, there are clearly some who need to be arrested. I'm just stating that for the record.
One of the main functions of Safe Streets is to make the quality of life much better in the community.
How does that play into the issue of whether more, fewer, the same 130 2/10/03 - FISCAL STABILITY - RES. 030030 number of people get arrested? I certainly understand that it's not good for us to have the prison system overburdened with people. It's not good for the system and at least a whole host of other issues. I'm just trying to -- are there fewer people being arrested because we believe that fewer people are committing crime or that crime is going down in general? Or because of Safe Streets, there are fewer transactions and activities that these knuckleheads are conducting out there and, therefore, we have fewer people to arrest?
We believe because of the added presence of the police officers there is less activity out there and that is part of the result for the reduction in arrest.
Okay. Thanks, Commissioner. Mr. Dubow, let me ask you this question with regard to wage tax revenues. This is on the attachment to the testimony. The second bullet says, "Wage tax revenues, including the PICA tax are projected to grow by 2.59 percent in FY '04. Without the wage tax reductions, those taxes would have grown by 3.5 percent." 131 2/10/03 - FISCAL STABILITY - RES. 030030 Do you recall in the current plan what the estimated growth would be in FY '04?
What do you anticipate them to be for '03 as compared to the estimate? I understand we're still in the Fiscal Year.
For '03 -- let me answer your '04 question first, and then I'll go to the '03 question.
You're a man on a mission. 132 2/10/03 - FISCAL STABILITY - RES. 030030
2.37 percent, sir, for '04. That's what we had in last year's Plan.
Yes. So it's just a kind of slight change. And for '03, I think we're still at roughly the 1.9 percent. I don't think we changed that too much.
Do any of you know how many people have signed up for the tax deferral program under Bill 020579?
No, we don't have those numbers yet. We just sent out the notification about the deferral, so we haven't gotten numbers yet.
Can you send me a copy? I'd just like to see what's --
Well, I'd generally ask if you could send all of us a copy so that we'd at least have it, so when our constituents call and say, you know, "What in the world is this," we might actually be able to answer the question. 133 2/10/03 - FISCAL STABILITY - RES. 030030
With regard to taxes -- last question. The Plan makes reference to last year's wonderfully engaging activity with regard to property taxes and the tax assessment situation, that the Mayor vetoed the percent cap bill and 9 allowed the 4 percent Bill to become law without 10 his signature, which also in that Bill is a provision requiring state enabling legislation. There is a Bill floating around in Harrisburg that would do that. And so I need to understand at the moment, is the Administration's position that, since the one Bill was allowed to become law without the Mayor's signature, that the City Administration is supporting the state legislation in Harrisburg?
I think that our position is linked to our capacity to absorb those cuts. I believe that was part of what the Mayor said at the time, that we would have to take a look at what it is that we could afford. As we move forward with a very challenging fiscal situation as we look at -- you know, we're always trying to look and scan the horizon to see what kind of risks 134 2/10/03 - FISCAL STABILITY - RES. 030030 there are for the City. We have to engage in that before making a final decision.
Not from a public policy standpoint, but at least from a financial standpoint, as I best understand the numbers, from the City's perspective, is a 4 percent cap better than a percent cap or vice versa? 9
A 10 percent cap would 10 cost less than a 4 percent cap, and either one of them -- our ultimate support for either one of them turns on our ability to afford them. To some extent it's almost like the wage tax. We prefer to really drive the wage tax down to the point that it could really be significant, but you can't afford to always do it.
Okay. Thank you very much. I appreciate all the answers. Thanks. Thank you, Madam Chair.
You're welcome. The Chair recognizes Councilman Ortiz.
Thank you, Madam President. Of those 60 leases, how many are we 135 2/10/03 - FISCAL STABILITY - RES. 030030 thinking about? How many have signed up and how many are still not there?
Duane Bumb with the Commerce Department. I'm going to have to get back to you with specific answers to that.
We talk about the problems that they projected and what they wanted to remain. I just want to know, of the 60, are there any ones that are actually moving?
Again, we're talking about -- we're being proactive here. We're talking to businesses whose leases may be up in three or four years in the future, which is to say they've not made a decision. We've begun a dialog with most of those.
Usually these cooperations make their decision three and four years before the lease is up.
That's right. And our purpose for getting to them early is to make sure that we are in a dialog with them before they make a decision that's negative for the City. Of those that we're talking to, it's my understanding that we have not lost anyone yet. And I think that that's 136 2/10/03 - FISCAL STABILITY - RES. 030030 sort of our approach to that. But I can certainly get -- I'll review that and get more information back to you.
I just want to know where we're at. Thank you. In terms of tax projections, there have been reports that, in terms of stadium and the stadium financing, that there has been a short-fall in terms of the rental tax that has increased the need for City contribution of to more or less $8 million. That's what we have seen in the papers and reports. Where do we stand on that?
Those reports weren't accurate. What the reports did is looked at several factors that have been coming below projection. One of those being the car rental tax, which has come in below projection because of what happened after September 11th. There are also things that have come in above projection. Phillies, for example, their salaries are much higher than anticipated.
The Phillies' salaries are much higher than we anticipated when we did the analysis so -- I think they made some investments. 137 2/10/03 - FISCAL STABILITY - RES. 030030
The Chairman wants to know, does that translate into winnings?
A couple other places where things have been better than projected, the debt service is actually lower than the debt service projections that we had when we came to City Council. The construction activity has been just what we expected it to be. And the other large component in the analysis was that, if we hadn't built new stadiums, we would have had to invest substantially in the Vet just to keep it operational. I think the architect's estimate was it would be at least $120 million, maybe more just to keep it up for 10 years.
Could you give us something in writing in terms of that, so that when we read something like that in the paper, we can have some figures and some documents that we can judge them against?
Yes. What we can do is, there's a letter in the Inquirer from Charlie McPherson and Janice Davis that laid out these issues and we will forward that to you.
I'm always intrigued 138 2/10/03 - FISCAL STABILITY - RES. 030030 about how language changes across the years. And Ms. Wilkerson has been speaking about right-sizing certain things. It implies that they were wrong-sized before. Is this a change in terms of that, we mean that we're downsizing certain government agencies and we use the word right-sizing? What does the word "right-sizing" really mean?
I think when a lot of the City's infrastructure was constructed, it was constructed when the planners were thinking that the population was going to grow 2.5 to 3 million. And so we built pools, we built recreation centers, we built fire stations, you know, at a time when we had a larger population. The population hasn't grown. We've never really stepped back and said, do we need all these facilities. What is the right number of facilities for a City this size? Would a different configuration better serve the City? We also want to -- I think what we intend by that term is also taking a look at, perhaps, providing those services in a different configuration. Perhaps it makes sense to provide after school and recreational facilities using 139 2/10/03 - FISCAL STABILITY - RES. 030030 school buildings.
In some situations that may make sense. I think what we intend to do over the course of the next year is engage Council and stakeholders across the City in a discussion and a review where we look at the various facilities we have. It's not just recreation centers. It's not just swimming pools. It's -- all together the City has over a thousand facilities out in neighborhoods. But really take a look at what we have, what condition they're in, whether there are opportunities to provide the services we provide better by collapsing the number of facilities. One of the big challenges we have in the out years is the decrease in the amount of capital funds we're going to have to address the challenges out in our neighborhoods. By the end of the Five-Year Plan, I believe we'll be down to $50 million -- $46 million by the end of the Five-Year Plan. And so we're going to have far fewer dollars, you know, and questioned whether we can afford to maintain all the facilities. 140 2/10/03 - FISCAL STABILITY - RES. 030030 We want to use this year as an opportunity to try to develop strategies to continue a high level of service, but do it in a more efficient way, both from the capital side and also from the operating side.
Do we have anything, any analysis of all of our facilities that we have and an analysis of what and where this can be replaced or an alternative situation in which the replacement can be if we are going to close a recreation center? How is the school going to be -- I assume that a school building is going to take over the recreation activities for that neighborhood. Do we have any analysis as to that?
We don't have the kind of analysis that would support a decision to close or keep open a specific facility. What we know is that when you compare Philadelphia to other jurisdictions, that we have far more in terms of recreational kind of facilities, for example, which leads us to believe that there are opportunities out there. Over the course of the coming year, what we propose is to do the kind of analysis that you're 141 2/10/03 - FISCAL STABILITY - RES. 030030 talking about so that we know exactly what the facilities are, exactly what the condition of the facilities are. Right now the School District has a very aggressive development program it's proposing. We want to make sure that we work with them so that we capture opportunities that they're creating as we go about trying to decide how to provide facilities.
Among those facilities that we have, besides recreation centers, are fire houses. And I remember a time in this government, not this Administration, within the City government, in which it was thought that we had too many fire houses and that some of them were extraneous. Are you looking at that?
We're going to take a look at it all. We have a lot of facilities out there. We propose that everything be put on the table, that we go through a process that involves engagement by Councilmembers, by other stakeholders to try to come up with decisions that work for the entire City.
Do you have a time line to present to City Council a plan in terms of 142 2/10/03 - FISCAL STABILITY - RES. 030030 the utilization of a thousand or so facilities that you have, that you mentioned?
I think we would like to have it reflected in the '05 budget, in the '05 to '09 Five-Year Plan and Capital Program and Plan. But I think it is going to take a year of hard work looking at these facilities, going around working with the School District in order to put together something that has credibility to it.
Are there any other questions from Members of the Committee? Are you finished, Councilman Ortiz?
Since there are no other questions from Members of the Committee, the Committee will stand in recess until Tuesday, February 24th at 9:30. Thank you very much. (Council adjourned at 1:15 p.m.) - - - 143 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of February 10, 2003, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: FISCAL STABILITY COMMITTEE FIVE YEAR PLAN ___________________________ Lisa C. Bradley, RPR and Notary Public