Thank you very much. The Chair recognizes Councilmember Nicolas O'Rourke.
Thank you, Mr. President. In your testimony you claim that the PILOT agreement and U&O settlement from the developers will likely exceed what the Sixers would owe in property taxes. But based on independent calculations from leading sports economists, your projections seriously undervalue the property value and resulting property taxes, which could be as much as $450 million over the next 30 years. On top of that, the Sixers estimated over 10,000 more construction jobs than the City's impact study estimated over the 30-year period. It seems to me that there is still serious debate around your projections of future tax revenues, redevelopment prospects and jobs provided for the project. We'll be submitting a request in writing to receive all assumptions, all calculations and justifications for your expected property valuation and property tax revenue. We need to very clearly see how the Administration is making the claim that the City will not be losing any money on this deal. While we wait for that math to be released, I want to be clear that the projections used to justify this project are bets essentially, not realities, and these bets are rooted in impact reports that are difficult to trust as has been articulated already. I want to ask a few questions about the City- commissioned impact reports and because the hour has drawn nigh and the hour far spent, I want to try to keep us on time. So a yes or no is fine. I don't mean that to be quip, but seriously a yes or no would be sufficient. For the record, can you confirm that the City's economic impact analysis is based on the calculations of CSL?
Yes, it's based -- it was done by an independent company called CSL, yes.
Isn't it true that CSL is owned by Legends Hospitality Management which is a co-venture of my least favorite organizations Goldman Sachs, the Dallas Cowboys and the New York Yankees?
Isn't it true that Legends Hospitality Management also markets venue concessions and bids on concessions contracts at arenas and stadiums?
They do, but they did not on this and they followed a methodology that we prescribed for them that was very limited in what it would count for the economic impact. So it would only count new events, it would only account spending in the arena. So we took a direct hand in guiding them into what would be in their impact study. So this impact study is very different from impact studies that you'll see for other arenas.
Let me drive my point. Isn't it true that on at least one occasion CSL released a study in support of a stadium for which their parent company Legends was also bidding on concessions contract?
Wouldn't you say that their history of inflated projections and conflicts of interest make it tough for the public to trust CSL studies?
No, I do not believe that's true because of the way they did the study and because of the way we worked with them to ensure that it was a conservative study that was based only on what happened in the arena, that was based on direct spending, not induced multipliers, that didn't include a new additional impact based on what would happen with a Sixers game. Just on those new events.
Council President, I did hear the bell ring. Can I go ahead and round out my questions?
Can you name a single example where CSL did not recommend building a stadium or an arena after conducting their detailed analysis?
We were not asking them to make a recommendation about whether to build or not to build. We were asking them to do an analysis of what the impact would be based on a set of conservative assumptions that we worked with them to develop.
I want to just draw this in conclusion as far as I can tell from the questions that I've asked and what I've heard. What I've heard responded to for some of our colleagues' questions, it still feels to me, as other folks have already lifted up, that you're asking us to trust billionaire bets over trusting our constituents who are telling us actively, and have been for some time, that they do not want this arena or at least they don't want it there. What I know is that there are realities not bets, but real material problems facing each corner of our city. Some have already been named. I'm thinking about Councilmember Lozada. I know you have been raising the alarm of the housing crisis in need for good jobs for the neighbors in your District. Councilman Driscoll, who was here, he's kept our eyes focused on SEPTA and how much our public transit is struggling, Councilmembers Gauthier and Jones, who's no longer here, with the UC Townhomes and Brith Sholom as it has been lifted up. You have both been on the front lines of recent affordable housing fights which are just the beginning of many more coming down the pike in light of all that's happening. Councilwoman Bass, you fought for funding for the many struggling parks and rec centers throughout the 8th District struggles which are mirrored citywide. I hear you, Chief Thurman, for speaking to that. I know, Council President Johnson, I know you've championed workers in your District who are desperate for a good deal with permanent well-paid union jobs. And almost every Councilmanic District is facing a potential school closure over the next few weeks as Councilman Thomas has kind of alluded to. In the best-case scenario, this Arena plan does not address these real problems, not bets, but problems, realities that are facing our city right now. It does not provide more housing stability. It does not help SEPTA avoid its fiscal cliff. There are too many questions about who will benefit from the jobs it provides and how good those jobs will be, and it does not keep our schools open. And if history has taught us anything, we should expect something closer to the worst-case scenario than the overly ambitious projections shared here today, as I think Councilman Young kind of alluded to. If that turns out to be the case, this Arena plan makes all these problems worse, not better, by siphoning important tax revenue away from our most pressing real problems by putting extra strain on a transit system already under immense strain and by destroying one of our strongest and most resilient communities. Jesus said, For -- who among you will go to build a tower and not sitteth down to counteth the cost, after having laid the foundation, and then not able to finish it, the people looking around, mock him and say they couldn't built it. That's not to proselytize to make the point, that we are about to or being asked to go forward with a project with all these unanswered questions, to be the crowning jewel on Market East and leaving so many people without feeling satisfied for what they're going to get in the process, and that is a recipe for mocking on the backend. It'll be pretty and it'll also be an eyesore for many who recognize how much they didn't get out of it. And so, I would encourage us to really consider what other colleagues have said about at least negotiating, being open to reconsiderations around here. This is a major issue to me. And as it stands right now, there are a lot of questions yet to be answered. Thank you, Council President, for your time. (Applause.)
The Chair recognizes Chief of Staff to the Mayor Ms. Tiffany Thurman.
So, Council President Johnson, as someone that is -- and I agree with you, this is not the stage to proselytize. But in keeping with the parable that the Councilmember mentioned around Jesus and the parable of the tower and counting the cost, I'd like to talk about the cost that we counted through our economic impact process. And so, if I may just less than 60 seconds, our PIDC representative here Sam Rhoads will talk about that. Thank you.
Thank you very much. Sam Rhoads again from PIDC. I want to emphasize with respect to CSL that they responded to a request for proposals. We got a very strong response nationally and chose CSL as the best out of that group. So we are very pleased with CSL and worked very carefully with them in terms of these conservative assumptions. So I just want to come back for the record again in terms of this notion of inflated or other costs, we did not do the things that people do and studies do with respect to these. In every single respect, we took it back a notch and made it more conservative. We did not use multipliers. We did not use induced effect. We did not use indirect impacts. These are very directly related to just the net new events. CSL helped us think about the single arena versus a double two-arena scenario and again paired it back to just what we thought was net new dollars.
Thank you very much. The Chair recognizes Councilmember Rue Landau.
Thank you. Quick comment and then two areas of questions: One EOP and the other is about office space. So the comment is I just wanted to put on the record my thought that, yes, we need to do both shuffling money around in the $50 million City- negotiated CBA, so things like free tickets to students gets moved to things like affordable housing and SEPTA. And we also need to ask for more, much much more because the City is in much need. So I'll start with the office space because I think it's easier. But when we saw the renderings of East Market Street, there was a discussion of adding more buildings for office space. We recall having a discussion that even the Lits Center building is 50 percent vacant right now. But we have a potential of the parking lot space at 13th and Market being created into new building for office spaces. What analysis have we done? What is the office vacancy rate on that citywide and on that side of Market Street and why do we believe that people will be filling these office spaces up?
Jessie Lawrence, Director of Planning and Development. Just to be clear, the illustrative plan that did show all of the potential along the corridor, you are absolutely right that it did demarcate 1300 or, excuse me, 1301 Market Street being a potential office development. I did -- also in presenting that plan, it was a dated proposal. The purpose of the exercise was just to identify where certain plans had been prepared along the corridor. But to your point earlier, we did present where certain office development had been -- again, past, present and future. The future aspect of that illustrative plan didn't necessarily demonstrate a lot of proposed office growth. What we did show was a lot of office space being converted to residential uses. So I think that kind of answers your question as far as what the approach is. We're setting up -- again, in any master planning process, that we're going to guide where we are going. We want to be cognizant of the fact that office development and office occupancy is downward at this point. The general occupancy is about 75 percent throughout the City. The quarter that you see, along that quarter that would be vacant is also the quarter that you see in the Market East submarket. That vacancy rate is actually even higher as you get into Old City. But we want to be clear about the fact that we -- in any master planning process, we want to make sure that we're responding to trends. And the trend right now is that office absorption is negative right now. So whatever we do, again holistic and strategic, it's not going to be presenting options for things that won't necessarily be absorbed in the way that other uses might be. But we want to be clear about the fact that whatever direction we're going is going to be a diversification of uses. It'll be mixed. It will probably ebb away from office space. Those same properties that you were talking about, the Lits building, the Macy's building, we understand that half that Lits building is subleased right now. We also understand that Macy's is also considering some sort of residential conversion. But I think that whatever we do, the master planning will set the pace for whatever we want to bound ourselves to doing. And again, if we find that market trends are allowing for office development, we respond accordingly. But if that's not the case, we won't let it go.
Thank you. I'm going to jump in real quick with my EOP questions. I'll rattle them off. The first one is that you listed the entities that you went to inform your thoughts on diversity for your diversity numbers, including office, economic opportunity, whatnot. What data did they have that you relied on? And I hearken back to when I started at the City with the Mayor's diversities in the construction trades group knowing that thankfully the unions are working very hard now to diversify, but we've had an uphill battle with this. The second question is we were promised in the meeting that there wouldn't be double-dipping, double-counting, that an African American female would be counted as both Black and female, and I don't know where that is in the document. I would love to see that. And then the third question is that I know that the Sixers have negotiated with one large service union and is not fully committed to another, which is concerning to me. And so, one, absolutely want all union workers there at the Sixers Arena. But in the meantime, I did see a notification -- I saw in the documents what we call for the City, I believe we have a minimum wage, a living wage and a prevailing wage. And a minimum wage I saw in the document, in the lease, $15 an hour plus a certain amount for inflation after July of 2023. I think that's a bit low. I'd like that to be higher. But when the TIF, what is going to be removed from -- so there's a TIF that covers about three blocks and three sections and it'll be removed from the one section the Arena will be on. Will that section still abide by the obligation of a living wage when it is removed from the TIF?
Thank you. Nicole Stokes, an attorney from the Law Department. And so, I believe your first question was regarding data relied upon. As you may know, the City does an annual disparity study every year. That is a report and a study that OEO is very familiar with. It looks at availability and utilization within the field by NAICS Code, and that's broken down by different industry. And so, that is a report that OEO relies upon a lot in order when we set goals and ranges on City contracting in the industry as well. I know your second question regarded to making sure that there is no double counting, that would be Section 3 of the diversity goals. It says, to maximize opportunities for as many businesses as possible, a firm that is certified in two or more categories will only be credited toward one participation range as either an MBE, WBE or DSBE for any specific contract. And so, that is incorporated into the EOP. And I believe I'll turn to Renee.
Thank you. CITY SOLICITOR GARCIA: And I don't know if you said the page number, Nicole, but that's the bottom of what that language is. If I understand your question on the TIF correctly, you are concerned about the two-thirds that remain?
-- one-third that will no longer make it -- ensuring that the one-third that's no longer in the TIF will pay at the minimum living wage? CITY SOLICITOR GARCIA: Yes.
Even though it's not obligated to do so any longer? Isn't there a living wage associated with the TIF and one-third is being removed from the TIF, and my concern is that -- CITY SOLICITOR GARCIA: So the third that's removed to the TIF will be governed by the terms of this deal. 21st century minimum wage covers everybody and prevailing wage will cover the Arena business services personnel.
The 21st century minimum wage applies to 76 DevCo and their subcontractors, including the master concessionaire and their professional services providers. Prevailing wage applies to building services employees. The reduced TIF district remains subject to all initial obligations, including living wage requirements. So the 21st century wage applies to the Arena.
Okay. Thank you. CITY SOLICITOR GARCIA: And the prevailing wage has all the different -- there's a whole paragraph with all the different jobs that are subsumed within that category.
Thank you. The Chair recognizes Councilmember Brooks.
Council President, it's one of the questions that I asked I think that I didn't get answered. And it's about --
I'm sorry. All right. One of my questions I don't think was answered. And it's why didn't the Administration include a labor neutrality agreement in the CBA?
So we will provide a response to the Council President's Office in writing this week.
Okay. Thank you. Thank you very much. That's a good question though. Councilmember Young.
Thank you, Mr. President. My questions are along the same lines regarding the EOP. Is the EOP incorporated in the development agreement? I think that's important because we want to ensure that the City, the developer and the contractors, right, are all aligned with the same goals that we have in mind. So again, is the EOP incorporated with any development agreement or to frame it a little differently, is the EOP incorporated into the other agreements, the lease, the sublease, by reference or exhibit or anything like that to make it a part of the actual contracts between the City, the developers and their contractors?
So we got lawyers on Council so you get those deep-dive type questions. Go ahead. CITY SOLICITOR GARCIA: Yes, it will be an exhibit to the sublease. It's also in the term sheet. The EOP and the CBA are all referenced in the foundational documents.
Thank you. Chair recognizes Councilmember Jamie Gauthier.
Thank you, Council President. We've all been here all day, but we've talked about several aspects of community benefit for which there's no answer for or for which there's not enough, right. We talk about the SEPTA piece. I heard conflicting statements on the Sixers covering the construction but they're not on the hook for the operating, and then I heard members of the Admin say they're on the hook for everything, but none of that is specified in writing or in this legislative package. Additionally, we've talked about things like having 1.6 million, I believe, kind of allocated for business disruption, and many members commented that that wouldn't be enough given what they've seen from big projects like these in the past. We also talked a good amount about housing, $3 million over three years for affordable housing in areas that not only are gentrifying now but for which our own impact study says gentrification and displacement could increase given this project. Given that the current CBA, which we're calling a Community Benefits Agreement, doesn't speak to a lot of this stuff, I have questions still about the timing and the sequencing of the master planning process. I would think that in a normal situation with a project of the scale where we've looked at some of the unintended negative impacts that the Administration would be presenting us with a master plan for revitalizing Market East, a master plan for not just protecting Chinatown but growing Chinatown. However, the Administration has been clear that you want to present a plan after the Arena has been moved forward. If we are really prioritizing Chinatown as a cultural asset and a valued neighborhood in this city, why are we doing this backwards? Can you just expound on that more?
Well, one, we're not doing it backwards. And then of course, we'll answer the question again. I'll ask --
Why are we -- sorry, let me be clearer. Why would we worry about master planning after we move forward an enormous project which our own impact study shows could have negative consequences? Can you speak to the sequencing and why that is wise and prudent?
John Mondlak from the Department of Planning and Development. Again, the impacts if the Arena were to go forward won't begin until 2026 at the earliest. That's when they're proposing is the earliest demolition date construction in 2028. We have plenty of time to engage with the community, gather as much information as we can, formulate a plan, figure out how is the best way that we can serve the community, the affordable housing needs, affordable commercial needs and engage with something that predates the initial demolition and activity that happens on the site.
So is the Administration's position that you worry about that type of stuff after you say yes to the project?
We're worried about it right now. I mean, we're already starting --
So what are we doing about it or where is that enumerated or detailed?
Right now we are starting the planning process within the Department of Planning and Development, so we're putting together what is our gameplan, what is the cost that's going to be associated, how do we pull in the other work that's already been done, how do we piggyback on what's already happening under the Stitch and the outreach that's happening in the planning efforts that are going there, to try to just formulate a plan, how are we going to pull this off, how do we get started, what are timelines, what are deliverables, that's all starting right now.
Well, do you think this is an ongoing sort of way of operating? We'll kind of just approve huge things and worry about a plan or having the resources to stop displacement afterwards? Is that just like an Arena philosophy or is that a philosophy to planning in the city of Philadelphia in general?
So we do master planning processes all across the city. We know that, right, from Chinatown to neighborhood -- your neighborhood, right, the District that you represent. So whether we're talking about this deal or other deals, as John Mondlak said, this is a part of our overall process regardless of what type of development is happening on Market East. And with regards to the impact analysis, the Master Plan is actually in response to the ongoing engagement that we've done. John, do you have anything else to add there?
I think that's part of it. So it's baked into this -- we have a bunch of benefits that are in the CBA that are intended to drop into place. Now, that money doesn't necessarily hit until the Sixers sign the document, agree to do this project. And if they don't, then we're dealing with a whole different set of circumstances. We're dealing with the natural trend of what's happening right now with gentrification that Chinatown is experiencing, but it's going to be very different than an arena. And so, until we know that the Sixers are actually going to go forward, that they commit to this and drop the money, then we know what we're planning for. We don't know right now because if they don't, then we're not planning for an arena. We're planning for something else, and it may be some other proposal that comes down the pike. We don't have any right now, but hopefully there is another option at some point. Somebody wants to invest their money into Market East and we need to take that into consideration when we do our planning.
To be clear, just to respond to the comment about neighborhood planning, which I think is very important, as an urban planner with two urban planners in my office, I've not seen kind of so much expected to come after the fact. The plan doesn't come after the project. The project comes after the plan, right. And we should not be -- the only legislation I've seen come out to protect the cultural integrity of Chinatown came from Councilmember Squilla. I would have expected that to come from the Administration and the Sixers or at least some of it. The Sixers should not be planning our city. We should be planning our city.
And I want to be very clear. We were very happy to sit with any member of Council, including Councilmember Squilla. But what we came out with shows not just our commitment to Chinatown but also our citywide commitment even beyond the CBA. And if I may, I'll ask Sophie Bryant to come up and talk about that Chinatown commitment beyond the CBA.
So, Councilmember, consider me -- sorry, Sophie Bryant, the voice of the expertise of a lot of colleagues here. So in thinking about this Chinatown commitment, I think what we're trying to sort of frame out for Council's consideration is both those CBA funds as sort of an initial leverage and a boost but also all the other things the City can do and should do to respond to conditions in Chinatown. So I know I'm going to get accused of like filibustering here, but let me just run through a couple of different categories just to talk about it. So sort of starting with the community vitality and cultural preservation, here the master planning is critical to that, right, as you know from your city planning expertise. But I think the zoning, sort of even in advance of Councilmember Squilla introducing the zoning overlay, the Administration was already in conversation about what are the zoning interventions that might help preserve the community, and that relates to sort of uses, permitted uses, not permitted uses, density. Also, there's a commitment to support a City-run recreation space for Chinatown and cultural center. So again, just two specific examples of things that we've heard directly from the community that are important to the community. We understand that there's -- aren't existing those facilities there. That might tie to how the Chinatown Stitch overlay gets programmed. Just to talk a little bit about traffic and parking, we know in multiple meetings with Chinatown stakeholders, particularly for small business owners, concerns about parking are existential and they're already existential, right, because we know, and it's reinforced by the community impact study, it's a super car-dependent community and small business community. Lots of folks who shop and engage in Chinatown are driving in, and Mike can speak with more specificity about this -- sorry. Mike Carroll can speak with more specificity, but we obviously have to sort of do an audit and some planning of what are the existing parking spaces, is there a parking validation opportunity to help people who are coming in not for arena events, but to patronize Chinatown's small businesses have access to the parking. We've also heard Mike talk I think in some of the Council briefings about working with PPA to really control and rein in the onstreet parking hours. So we don't have folks going to Disney on Ice, for instance, using that precious onstreet parking. Instead we're hopefully driving them to using transit to get to those events. Sort of one more area on sort of clean and green. Another area that we know is really important for the Chinatown community whether or not, right, whether or not an arena gets constructed. So they are thinking about how do we leverage existing programs like PHL Taking Care of Business and sort of further build out -- and this again comes up in Councilmember Squilla's Arena Services District -- ways to make sure that the neighborhood is clean, is beautiful, so on and so forth. So sorry, too many words too quickly. But the broad concept is take some of those targeted investments that are in the CBA and use those to help spur a broader conversation about how can the City be supportive of this community based on conditions that are already existing.
Okay. So we should give the Sixers a commitment, but we'll have a conversation about displacement in Chinatown? I just want to be clear.
I heard we were spurring a conversation about the potential displacement and how we could manage it. But thank you, Council President. I'm done.
You're welcome. And the Chair recognizes Councilmember Rue Landau for the last question and then we'll be preparing for recessing until tomorrow morning.
My final question is because there's so many question marks and unanswered financial questions, is there ever a point where the City would back out of this saying, clearly this cannot go through fiscally in a responsible, reliable way?
We came to this agreement not lightly. We came to this agreement based on a robust analysis, economic impact study, doing learning journeys, looking at other cities, what we could learn from those cities. We looked at the CBA and beyond the CBA. We looked at our Economic Opportunity Plan. We did not come to this decision lightly but now we stand on it. This is a decision, this is a plan, this is a package that we stand behind and that we believe in. And so, on behalf of Mayor Parker and the Parker Administration, the promise is the promise.
Just to be clear, that's not what I was asking. I was asking not this moment. I wasn't asking until now. I'm talking about we're being asked to say yes now and plan later. So what happens if something goes terribly wrong six months from now, eight months from now? Is there ever a moment where the City says, wait a second, we're out of this, we'll step back?
We'll go over to our City Solicitor. CITY SOLICITOR GARCIA: There are certainly contingencies built in, say -- there's certainly, you know, say we can't get through zoning, things like that. If the 76ers file for bankruptcy or there's, you know, investments that we can't make and fulfill on the City side, there are escape clauses in the sublease. Of course we hope that it doesn't come to that and there's not a catastrophe and we're going to be optimistic that there isn't one. But there are certainly clauses for both parties if completion of the deal is not realistic.
All right. Thank you very much. Thank you for your time today. We'll see you tomorrow at 11:00 a.m. This concludes the business before the Committee of the Whole for today. I recognize Councilmember Squilla for a motion to recess the public hearing on Wednesday, November 13, 2024 at 11:00 a.m.
It has been moved and properly seconded that the Committee of the Whole will be recessed to Wednesday, November 13, 2024 at 11:00 a.m. All those in favor will signify by saying aye. (Aye.)
The ayes have it. This hearing is recessed. (Committee of the Whole concluded at 4:30 p.m.) C E R T I F I C A T I O N I, hereby certify that the proceedings and evidence noted are contained fully and accurately in the stenographic notes taken by me in the foregoing matter, and that this is a correct transcript of the same. __________________________________ TANEHA CARROLL