Committee Hearing, April 18, 2011

COUNCIL OF THE CITY OF PHILADELPHIA2 COMMITTEE OF THE WHOLE - - - Room 400, City Hall4 Philadelphia, Pennsylvania Monday, April 18, 2011, 10:18 a.m.5 - - - RES. 110161 - Five-Year Plan BILL 110135 - Capital Program 2012 through 2017 BILL 110136 - FY 2012 Capital Budget BILL 110137 - FY 2012 Operating Budget BILL 110138 - Wage Tax Bill 12 13 COMMITTEE MEMBERS PRESENT:14 Anna C. Verna, Chair15 Marian B. Tasco, Co-Chair Jannie C. Blackwell16 Blondell Reynolds-Brown Darrell L. Clarke17 W. Wilson Goode, Jr. Bill Green18 William K. Greenlee Curtis Jones, Jr.19 Brian J. O'Neill Frank Rizzo20 Marian B. Tasco 21 - - - 22 23 24 25 2 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Good2 morning. Sorry for the delay.3 This is a continued public4 hearing of the Committee of the Whole. I5 would ask Mr. McPherson to please read6 the bills.7 MR. McPHERSON: Resolution No.8 110161, Five-Year Plan;9 Bill No. 110135, the Capital10 Program, Fiscal 2012 through 2017;11 Bill No. 110136, the Capital12 Budget for 2012;13 Bill 110137, the Operating14 Budget for 2012; and15 Bill No. 110138, the wage tax16 bill.17 And we're taking testimony18 today on Bill No. 110137, the Operating19 Budget for Fiscal 2012.20 (Witnesses come forward.)21

Good22 morning.23

Good morning.24 COUNCIL PRESIDENT VERNA:25 3 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Please identify yourself for the record2 and proceed with your testimony.3

19 And joining me here today are20 representatives from those divisions, and21 they'll be able to answer questions. 2 billion for2 Finance; that's an increase of about3 $41 million over our FY '11 estimated4 obligations. 9 million. 20 Our proposed budget includes21 about a billion in Class 100 Funds;22 that's an increase of almost $43 million23 over estimated FY '11 obligations. 5 million in Class 20011 funds is an increase of $730,000 over12 FY '11 estimated obligations. 17 The increase is due to a18 $450,000 increase in the Defenders'19 contact and a $280,000 increase in the20 core budget, and that's due mostly to a21 $350,000 increase in our contract with22 ACS Government Solutions to administer23 and collect code violations and alarm24 fees. 5 million in Class10 500 funds for contributions. 4 million for Community College,16 which is unchanged from FY '11; $250,00017 to Fund City Year; and $500,000 for the18 Mayor's Reward Fund. 11 COMMITTEE OF THE WHOLE - Bill 1101371 disabled-owned business participation in2 City contracting. For this year, to3 date, we have an overall 46 percent4 participation rate in contracting5 opportunities. 8

Thank9 you.10 Mr. Dubow, why are you11 proposing to increase the Defenders'12 Association contract by $450,000?13

That money is for14 benefit costs for the Defenders. As you15 know, we fund all of their costs through16 the contract.17 One of the things that's been18 increasing for them is their health19 benefit costs, and that increase covers20 that.21

What22 services does ASC provide to your office?23

ACS provides24 collections for code violation and alarm25 9 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 fees.2

And3 what is their fee arrangement?4

They get a5 percentage of the amount that's6 collected; I think it's a little under7 11 percent.8 And the increase here reflects9 anticipation that there will be increased10 revenue. And so, their percent would go11 up.12

What13 amount have you included in your revenue14 estimates due to this contract?15

$8.35 million. And16 that's up from about 7.4 in the '1117 budget.18

On19 of your detail, you're requesting20 $775,880 for AON Consulting for health21 care and pension expert services.22 Can you explain the scope of23 services they provide?24

Sure. AON provides25 10 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 expert services for us in connection with2 collective-bargaining, and they've3 provided advice on both health care and4 pensions.5

On6 of your detail, you're requesting7 an increase of $330,000 to the School8 District. This increase is due to9 wage-tax reductions of $60,000 and10 real-estate tax millage at $270,000.11 Can you explain why these12 adjustments are needed?13

Yes. Two things.14 When we decrease the wage tax, the school15 income tax decreases; and by law, we're16 required to compensate the District for17 that change. And you can tell it's a18 very minor change there.19 And the second part is, on the20 property tax, when we changed the millage21 rate, the split between the City and the22 School District change, that affects how23 the pilot from the Stadium District is24 allocated. So their allocation would go25 11 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 down, and we wanted to make them whole2 for that reduction.3

Isn't4 the Administration proposing to freeze5 the wage tax rate at the Fiscal 20116 rates? And if so, why are we required to7 give the District $60,000?8

I think there's a9 little left over from the annualization10 of State-funded wage-tax cuts, and that11 flows to the District on its income tax.12

On13 of your detail, you are14 requesting in Class 500 two new items:15 $250,000 for City Year and $500,000 for a16 Reward Fund.17 Can you explain why these funds18 are need and how the Reward Fund will be19 utilized?20

Yeah. City Year is21 actually not new; it's something we've22 been doing for a number of years to help23 that organization provide its services,24 and we just thought it -- we should25 12 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 actually show it in the budget. We wind2 up doing it during the year, so that's3 been added to the budget this year.4 The Reward Fund, I think the5 details of exactly how it would work are6 still being finalized. But essentially,7 it would provide incentives for people to8 provide information that would lead to9 the capture of alleged criminals.10

Was11 City Fund in the budget last year?12

City Year?13

City14 Year.15

It was not, but I16 think we provided funding for it17 through -- there was a Class 50018 contribution.19

On20 of your detail, you show a21 reduction of $11,867,000 in anticipated22 workforce savings. Can you explain what23 these savings are and how you arrived at24 this amount?25 13 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Yeah. When we --2 we -- a couple of years ago, as we were3 looking at collective-bargaining, we4 included about $25 million -- well, not5 about. $25 million in savings from all6 of our employees, so from the four unions7 and from exempt and non-represented8 employees.9 As we either come to10 agreements, as we did through the award11 with the FOP, we'll make reductions as we12 did with non-reps and exempts in the13 City-administered health plan. We kind14 of moved some of the $25 million into15 actual savings achieved, and then the16 remainder is still shown as savings yet17 to be achieved.18 So I'll take one step back.19 When we originally did the $25 million,20 we allocated it based on the payroll by21 union. So as we take out the potential22 of FOP savings and the exempt and23 non-reps, 'cause we've achieved those24 savings, this is the part that was25 14 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 allocated based on payroll to2 Firefighters 33 and 47.3

Why4 is it that you expect these savings from5 the General Fund only?6

As opposed to in7 Water and Aviation also?8 COUNCIL PRESIDENT VERNA:9 Mm-hmm.10

That's a good11 question. We should go back and look at12 that.13

And14 you'll get back to us?15

Yes.16

On17 of your detail, it shows that the18 Community Development Fund is being19 charged the same in Fiscal 2012 for20 pension obligation bonds as it paid in21 Fiscal 2011 while, at the same time, the22 2012 pension payment is being reduced by23 $120,000.24 Can you explain why only one25 15 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 payment is being reduced?2

I think it's3 probably because the pension payment4 itself may be based actually on5 experience of members; whereas, the6 Pension Obligation Bond may just be split7 on the number of members.8

But9 the Aviation -- both payments are10 increasing.11

Right. And there12 could be a different alignment between13 the number of members and the liability14 for those members in Aviation and15 Community Development. It's probably16 different for each fund.17

Okay.18 The Chair recognizes Councilman Rizzo.19

Thank you.20 Good morning.21

Good morning.22

On and 27, there's something that interests24 me. Due to the recent promotions and25 16 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 requirements of accounting -- and I'll2 read it -- accounting section3 supervisors, how's the work getting done4 in their absence? Who's supervising the5 employees?6

Say that again? I7 missed --8

On and 27 --10

Right.11

Due to the12 recent promotions and retirements of13 Accounting section supervisors, how has14 the work getting been done? In other15 words, Rob, who's supervising -- you16 didn't promote any supervisors.17

Right. No, it's a18 good question. The managers who are19 there are filling in and picking up that20 slack.21 And one of the issues we had22 and one of the reasons that, you know,23 when you look at the vacancies that we're24 going to fill, there are vacancies in25 17 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Accounting, it's a place where we're2 understaffed and where we, you know, face3 some challenges.4 So that's -- I mean, it's a5 good point. So other people are filling6 in.7

Do you have8 anything in the budget to -- or do you9 have plans to see fill it?10

Yeah, yeah. That's11 in -- yes.12

Let me see13 here. Also, I understand that part of14 the function of the department is the15 authorized appropriations process. In16 addition to the budget analyst, who has17 the authority to approve and deny these18 requests?19

I'm sorry. Say20 that again?21

I understand22 that part of the function of the23 department --24

Right.25 18 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

-- is the2 authorized appropriations process, if I'm3 reading that correctly. In addition to4 the budget analyst, who has the authority5 to approve and deny a request?6 Is that not clear?7

I...8 (Witness comes forward.)9

And I'll10 read on. This might --11

No, I think we12 understand.13

I'm reading14 out of the book.15

Mike Kauffman.16 I'm the Director of Accounting.17 The other people that can18 authorize adjustments are the Grant19 Accounting Unit. And what they do is,20 they'll review to make sure that there's21 the appropriate grant-related material22 attached to an authorization that comes23 through before we'll post it.24

Okay. Let25 19 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 me read on, then.2 Prior to the promotion and3 vacancies of accounting section4 supervisors, training was performed by5 supervisory level, which, normally,6 that's the case. Now rank-and-file7 employees are responsible for conducting8 training.9 Is that a change in the policy,10 or is that just because of the problem11 with the lack of supervision?12

I think what13 happened is that originally, when we went14 to this -- to a new system, the famous15 system in our accounting system, we were16 able to put this process in17 electronically. And when we first18 started it, it was done at a supervisory19 level.20 However, we -- upon further21 review of that particular job, we didn't22 feel that it had to stay at a supervisory23 level; it could be done by someone who --24 one of the accountants could do that.25 20 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Okay. Now,2 let me just go back to the timeline and3 filling those positions, those4 supervisory positions.5 Mr. Dubow or whoever. The6 vacancies.7

We're currently8 trying fill that. We recently asked to9 have the tests issued by our Human10 Resources Department so that we'd be able11 to fill that position.12

Timeline.13 They get blamed for everything, Human14 Resources.15

Oh, timeline?16 We would hope that within the next three17 months. We're coming up into our annual18 report season, if you will, and we want19 to have that position in place so that20 when we begin to do our annual report,21 that person will be able to assume22 responsibilities and do those tasks23 related to that job.24

Terrific.25 21 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Thank you. Thanks for your good work.2 Thanks, Madam Chair.3 COUNCIL PRESIDENT VERNA:4 You're welcome.5 The Chair recognizes Councilman6 Green.7

Thank you,8 Madam Chair.9 Madam Chair, I'm going come10 back. I have a call I've been waiting11 for. I apologize.12 (Pause in proceedings.)13

The14 Chair recognizes Councilman Green.15

I apologize.16 COUNCIL PRESIDENT VERNA:17 That's all right.18

Thank you.19 Good morning.20

Good morning.21

I have a few22 questions.23 First, I want to say that24 working with your staff and the25 22 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Department of Revenue, which is, I think,2 under the Department of Finance, and3 other people, we've done -- my staff and4 Councilwoman Quiñones-Sanchez's staff has5 done a lot of good work defining what is6 potential small-business tax relief,7 100,000 and under, figuring out exactly8 how much that would cost and a way to9 implement it.10 And also, I think we've figured11 out and agreed to how much it will cost12 to do single-sales factor apportionment,13 which would achieve policy goals -- both14 of which would achieve policy goals.15 And we went into those16 discussions saying that we agreed on and17 would hope to come out of -- would hope18 would come out of those discussions. And19 just getting to know the people on the20 Revenue Department team and your team21 better through my staff and the good work22 they've done, I wanted to just commend23 that process.24 Now that we're at the end of25 23 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 that process, I think there's a2 disagreement about what actions should be3 taken. And, you know, I hope that we can4 resolve that in the next couple of weeks.5 But just the work that the staffs have6 done together, I think, was great, and I7 appreciate you making those resources8 available and I wanted to start with9 thanking you for that.10

Thanks. I11 appreciate that.12

The 313 percent budget reduction scenario14 provided for Finance included five items15 $350,000 in savings. I have questions16 about several of the items.17 There's a $55,000 reduction18 described as "Decreased and insurance19 cost rule renewals" --20

Right.21

-- "will22 need to be at FY '11 levels."23 Is this Class 280 reduction24 noted on of the Finance Office25 24 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 detail, and can you please describe this2 reduction?3

It is a cut we4 took, and I'm going ask Barry Scott, our5 risk manager, to come up and talk about6 the cut and what it means.7 (Mr. Scott comes forward.)8

Barry Scott, Risk9 Manager.10

So, in other11 words, we took the cut.12

Yes, we did.13

Okay, great.14

Then you're done?15

Yeah.16

Okay.17

The next18 item listed --19

Thank you, Barry.20 (Laughter.)21

Good job,22 Barry.23 The next item listed is almost24 $93,000 in additional revenue due to25 25 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 increased reimbursement from the2 Philadelphia Parking Authority.3

We did that one4 too.5

You did that6 one also?7

Yep.8

Excellent.9 Where is that?10

This is Cathy11 Paster, First Deputy Finance Director.12 The revenue does not actually13 show in the Finance Department's budget;14 it's a General Fund revenue.15

Okay, that's16 great.17 There's a $120,000 reduction18 described as a "decrease in lump-sum19 payments, elimination of temporary20 positions in Executive Division."21 How much of this 120K is for a22 decrease in lump-sum payments?23

Actually, you know,24 the... We'll have to get back to you on25 26 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 that.2

Okay, that's3 fine. So the questions are: Does the4 Department have the ability to reduce5 these payments? And if so, you know, are6 they included?7 (Indiscernible; parties talking8 over each other.)9

Right. As we10 looked at that, we thought we really11 didn't have the ability to do that, but12 we'll get you the split.13

Okay.14

And that's the one15 thing on the list that we wound up not16 doing. All of the others, I think, we17 took.18

Oh, okay.19 Including -- there's a temporary position20 in the Executive Direction section?21

Yep.22

Okay.23

Yes.24

The final25 27 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 item is the 50K decrease in miscellaneous2 contracts?3

Yes.4

Okay.5

And we took 15 of6 that.7

Like last8 year, I've been asking departments about9 new or unfilled positions to be filled in10 FY '12. The Finance Office budget detail11 shows variance vacant and new positions12 that are proposed to be filled in FY '12.13

Right.14

Unlike many15 other departments, Finance's FY '1216 Budget does not have a vacancy allowance,17 which is used both to account for18 unfilled positions not being filled at19 the start of the fiscal year and also for20 turnover in the course of the fiscal21 year.22 Starting with the currently23 unfilled positions, will Finance be able24 to fill out of its eight positions by25 28 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 July 1st?2

That's our goal.3 We want to get them all filled so we have4 everyone onboard.5

You don't6 expect any attrition during the course of7 the year?8

We don't expect a9 lot of -- we don't expect attrition to be10 big enough to provide, you know, much --11

Is there12 anybody currently in DROP scheduled to13 leave from the Finance Department during14 the course of the next fiscal year?15

We'll get back to16 you on that.17

Okay. So18 would it be fair to say if you know19 people are going to retire, if you know20 people are going to be in DROP, that we21 should create a vacancy allowance in the22 Finance Department?23

Well, no, because24 if we know that they're going to retire,25 29 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 we can start the hiring process to get2 someone onboard so that there's not that3 gap.4

And is it --5 are you saying it is realistic that all6 eight currently-vacant positions will be7 filled by July 1st, that there are tests8 for them, that there's a list that you've9 interviewed already?10

I'm saying that's11 our goal. I mean, obviously, you know,12 things slip, but that's our goal.13

Does every14 position have a -- has the test been15 taken or created for every position?16

Some of them are17 exempts. And I think for maybe all but18 one, the test has been -- there's a test19 that's been taken, maybe two.20

Two, okay.21 So there is potentially some vacancy22 allowance.23

Right. And I don't24 think it's much, but there's some25 30 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 potential.2

Right.3 Well, I think $50,000 may keep the pools4 open for another week. So, you know --5

Right. I don't6 think that there's --7

-- we look8 our dollars where we can fiend them.9

Yeah. I don't10 think that's much, but (inaudible).11

Like last12 year, I'm asking all departments about13 contracted services and I have questions14 about several of Finance's contracts.15 As noted in the testimony, the16 Administration plans to increase by17 $350,000 the City's contract with ACS18 State and Local Solutions for19 administration and collection of code20 violation and alarm fees. You note that21 the additional fund will only be paid to22 ACS if it collects additional revenue for23 the City.24 How is that contingency25 31 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 structured in the contract?2

Under the contract,3 ACS gets a percent of the collections. I4 think it's a little under 11 percent.5

And is that6 cheaper than how we've been collecting7 them to date?8

It's consistent.9 We're just projecting an increase in10 rev -- and, actually -- well, actually,11 it's cheaper because their rates come12 down, the percents come -- we negotiated13 a new contract with a lower rate.14

So this15 is -- ACS currently does the16 collection --17

Yes.18

-- for you?19

Yeah.20

Okay. And21 the rate has come down slightly?22

Yes.23

Okay. And24 so, would this be all of the code25 32 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 violations and other issues issued by2 BAA? Is that the --3

It's not BAA; it's4 the Office of Administrative Review.5

Okay. So6 the budget brief indicates no increase7 from FY '11 to FY '12 in burglar alarm8 license fees and for false burglar alarm9 fees -- or fines.10 Does the Administration expect11 an increase in alarm-related revenues12 based on ACS's additional work?13

So if you look at14 the original budget from last year,15 they've gone up -- that's where it's a16 budget-to-budget increase. So that's17 what's being captured in the additional18 amount.19

We're not20 exactly clear on what revenue is21 anticipated to increase as a result of22 this additional collections --23

Okay. If you --24

-- from25 33 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 which buckets and category?2

Yeah. Look at page3 15 in the budget in brief. And the4 increase is in lines 78, 79 and -- well,5 78 and 80, mostly in 78 from sweep6 collections.7

It's an8 increase not over what we anticipate9 collections --10 (Indiscernible; parties talking11 over each other.)12

Right, from budget-13 to-budget, yes.14

Okay, okay.15 So would this...16

And again --17

Would this18 include --19

-- if collections20 don't come in, we don't spend the money.21

Right. So22 would this include fees or fines for23 Dumpster violations?24

Yes, yes, it would.25 34 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

I don't see2 that -- is that -- was that the sweep3 fees?4

Yes. It's in the5 sweep fees.6

So how much7 of that is -- could I get a breakdown of8 how much that is related to the fees and9 then how much of that is related to fine10 collection?11

Yes.12

Okay. On13 of the Finance Budget details,14 there's a $2500 professional services15 contract listed for FY '11 and FY '12,16 with the provider noted as "to be17 selected" and the scope of work "capital18 consultant."19 What is this work?20

I'll ask Rebecca21 Rhynhart.22 (Ms. Rhynhart comes forward.)23

Rebecca24 Rhynhart, Budget Director.25 35 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Actually, on the 2500, I2 actually need to look into what they're3 doing or what they would do. So I could4 get back to you on that.5

So this has6 not been let?7

Yeah, I don't8 believe so. Actually, I need to check on9 it; I'm not familiar enough with it.10

Do you know,11 has a provider been identified?12

Again, I don't13 -- I don't believe we have them under14 contract; that's why I think I would be15 familiar with them. So if I could get16 back to you.17

Okay.18 Without, you know, publicly mentioning19 the name of the provider, has someone20 been identified for this contract?21

Again, I'm22 really not familiar with it.23

Okay, fine.24 If you would just get back to us.25 36 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Sure. I'm happy2 to.3

The4 Five-Year Plan resumes BPT and wage-tax5 reductions in FY '14, including gross-6 receipts reductions, which I believe were7 demonstrated to be far less damaging to8 the local economy and job creation than9 the net income proportion of the10 business-privilege tax but again11 delays -- and I think that was12 demonstrated during the hearing as well.13 But again delays implementation of the14 Cohen tax credit.15 Following the hearings on16 Councilwoman Sanchez and my BPT reform17 last year, we understood there to be18 agreement that any further BPT reductions19 should be in the net income tax and not20 the gross-receipts tax.21 I'd like to go through, for the22 record, the cost of the BPT reductions in23 the last three years of the plan and the24 amounts related to gross-receipts tax25 37 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 reductions.2 Based on the backup detail3 provided by the Administration, the BPT4 rate changes will result in: revenue5 reductions of $3.882 million in FY '14,6 of which $2.8 million, or 72 percent, is7 from gross receipts; $15.447 million in8 FY '15, of which $12.123 million, or 789 percent, is from gross receipts; and10 $21.478 million in FY '16, of which11 $16.481 million, or 77 percent, is for12 gross receipts.13 These figures are based on the14 Administration's charts, and I'd like for15 the Finance Office to confirm the numbers16 in writing to the Chair.17

Okay.18

I'm not19 asking you to do that off the top of your20 head.21

Okay.22

With respect23 to that, continuing gross-receipts24 reductions, as you know, based on the25 38 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 work done by our respective staffs,2 numbers we agree on take $15 million in3 tax away from the City of Philadelphia4 from people who have no nexus here to5 otherwise pay any taxes. And the rate is6 so low that it is comparable to gross7 receipts rates in the suburbs currently.8 I'm wondering what analysis the9 Administration did to reach the10 conclusion that pursuing the course of11 reducing gross receipts instead of net12 income makes sense and why we would want13 to give up $15 million in revenue from14 people who take advantage of our market15 but otherwise pay no taxes here.16

A couple of things.17 First, I think, you know, we still18 disagree on the impact of gross receipts19 because --20

We don't21 disagree on that answer, right?22

Well, can I --23

We --24

Can I answer?25 39 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Yeah, sure.2

I let you ask your3 whole question.4 You know, we -- study after5 study have shown that gross-receipts tax6 has a very negative impact on business in7 Philadelphia and that reducing that rate8 has a positive impact.9 That said, I think one of the10 things that we also agreed on is that11 through these discussions that, you know,12 we haven't concluded we would determine13 kind of what that best approach to14 business tax reduction is, and I thought15 that we were going to do that as part of16 this budget process, and we haven't17 concluded that process yet.18

Okay. I19 guess based on the last meeting that the20 group had, I thought that it had been21 concluded. If you're saying it hasn't22 been concluded, I'll ask questions about23 that offline.24

Okay, 'cause I25 40 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 think we left that with our saying that2 we would go off and do some analysis that3 looked at taking the money that we had4 for gross-receipts reduction in the plan5 and seeing what would happen if we6 applied that to the ideas we could come7 up with, and that that was going to be8 our next discussion.9

Okay, great.10 Turning to the plan reductions11 in wage tax, I'd like to confirm the cost12 of the reductions in the nonresident13 rate.14 By our math, the reduction in15 the nonresident rate costs $6.7 million16 in FY '14, $13.7 million in FY '15, and17 $21 million in FY '16.18 What is the -- do you happen to19 know the analysis of the cost of the20 nonresident reductions?21 Oh, that's the nonresident22 reductions? Can you just please confirm23 that those are the numbers?24

Yes, we can confirm25 41 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 that.2

Okay. With3 respect to the Cohen low-income taxpayer4 credit, which the Administration proposes5 to delay until FY '17, how much would6 that credit cost per year?7

I can get you the8 breakout by year. Over the course of the9 plan, the amount's about $50 million.10

It's11 $50 million if we were to begin in this12 year. Is that what $10 million a year or13 --14

It was -- I think15 it was starting in either '13 or '14, so16 it wouldn't have started in '12. It was17 in '14. So it was up from '14, '15, and18 '16, and it would be a $50 million cost.19

So it's20 roughly $16 million a year? Is that --21

Well, I think it22 grows each year, so -- but we can get you23 the breakout by year.24

Okay, that's25 42 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 great.2 The proposed budget includes a3 $330,000 increase in the City's4 contribution to the School District,5 bringing the total contribution to6 $38.93 million. This is section 11, page7 52.8 Can you... is the City legally9 required to increase its contribution?10

For a portion of11 the contribution, yes; and for a portion,12 no.13 The portion which is the14 smaller portion that compensates for wage15 tax reduction we're legally required to16 increase.17

Can you18 explain that?19

Yeah. When the20 wage-tax rate goes down, the school21 income tax rate goes down too. And under22 State law, we're required to compensate23 the School District for the loss in the24 school income tax.25 43 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 There's a second portion this2 year --3

And that's4 Act 46?5

I think it's in Act6 46, yeah.7 There's a second portion that8 we're proposing this year, which is when9 the millage rate changed, the split on10 millage between the School District and11 the City changed so that the City's12 portion was higher. That changed the13 stadium pilot so that the School District14 would have gotten a smaller portion of15 the pilot, 'cause they were getting a16 smaller portion of the property tax.17 We're proposing to hold them18 harmless from that change.19

What does20 "revenue-neutral" mean to the21 Administration in the context of property22 tax changes?23

Well, what we24 would -- our proposal for the property25 44 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 tax is that the amount of revenue we2 collect this year remain -- will -- I3 guess it's more of a projection -- will4 be maintained as we go forward because5 we'll be capturing value that we have not6 captured over the last almost ten years.7

I think the8 definition set forth in policy papers by9 then-candidate Nutter was that it was10 collecting the same amount of money11 after -- in dollars after the shift as12 before the shift. And that's sort of, I13 think, a common-sense understanding of14 what "revenue-neutral" means in that.15 Would you agree that if you are16 taking additional dollars from the17 private sector, that that is a tax18 increase?19

No. If that's your20 definition, then anytime we collected21 more business-privilege taxes, that would22 be a tax increase even that was a result23 of increased business activity.24

So --25 45 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

And we've had, you2 know, years where there were dramatic3 increases even when we were reducing4 rates.5

So -- okay.6 So under the scenario that you previously7 testified about, what is the property tax8 revenue the School District would receive9 in FY '13?10

As I said last11 time, they wouldn't have an increase.12 And I think if our increase was about,13 you know --14

20 percent.15

Theirs would be the16 same. And I think that would be about17 120 million.18

Okay. Do19 you know how much the -- for the record,20 how much the property tax revenue the21 School District is projected to receive22 this fiscal year?23

I can get you that.24

It's25 46 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 120 million less than it would be after2 the move to --3 (Indiscernible; parties talking4 over each other.)5

I think it's around6 600 but I'm not sure, so I --7

Right. And8 so, the increased property tax to the9 School District would be 120 million,10 which is 20 percent.11

Yeah. And that's12 just an estimate, and I'd have to go back13 and actually look at the numbers, but --14

Okay.15 That's all my questions, Madam Chair.16 Thank you.17

Thank18 you.19 The Chair recognizes Councilman20 Jones.21

Good morning22 Madam President.23 Good morning.24

Good morning.25 47 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Generally,2 we are -- is it safe to say that we are3 ahead of schedule by way of revenue4 enhancements that we put in from the5 sales tax and other taxes that were6 raised last year?7

The sales tax has8 been pretty healthy the last few months,9 so I think we are a little bit ahead.10 And in property tax, it's11 probably too early to tell; we haven't12 seen all the collections yet.13

In your14 plan, however, I do not see -- I see a15 provision for $25 million in reduction in16 benefit costs, which are give-backs from17 the unions, but I don't see a resolution18 on a contract.19

Right.20

What are the21 potential impacts of those contract22 signings on the health of this budget, in23 your estimation?24

Just one -- it's25 48 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 not -- we don't use 25 anymore. Because2 some of the savings have been realized,3 we're showing about 12 million.4 And what we have said to the5 unions is that we expect that, you know,6 any contract will be consistent with what7 we have in the Five-Year Plan.8 So to the extent, for example,9 that there are pay increases in a10 contract, we want other items in the11 contract that would pay for those12 increases and net us the savings that we13 show in our plan.14

Where are we15 by way of anticipated revenue cuts,16 freezes, and the like with the17 Commonwealth of Pennsylvania?18

So the Governor's19 proposed budget had a number of cuts that20 would affect the City primarily in our21 social service agencies.22

Which is23 DHS?24

DHS, Homeless,25 49 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Health.2 We are kind of working through3 how to react to those cuts and how to4 build them into our budget. I think5 those departments will all be here next6 week, and they'll have a lot more detail7 on what they're doing and how the cuts8 are affecting them.9

So the two10 major areas are DHS but also the11 Philadelphia schools, correct?12

Right. Outside of13 our budget, there were obviously14 tremendous cuts to the School District,15 to institutions of higher education, and16 to hospitals.17 So there's -- the impact of the18 cuts is much bigger beyond our budget and19 for the City in general.20

To what21 degree does the School Board's cut impact22 us beyond the obvious of revenues to keep23 the schools open? They're dealing with a24 facilities management resizing,25 50 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 downsizing, whatever you want to call it.2 How are we working with them to look at3 efficiencies, economy of scales, multiple4 land swaps that possibly could happen?5 Is there a group working with them to6 look at those possibilities?7

Right. We've been8 working with them really since the9 beginning of the Administration to look10 for ways that we can kind of work11 together to generate efficiencies;12 looking, for example, of ways we might be13 helpful on their fleet.14 We also have been working with15 them as they go through their facilities16 management to see, you know, if there are17 facilities that they're no longer using,18 what the best use for them going forward19 would be. So we have been in20 communication with them on those items.21

It would be22 my hope that you involve the District23 Councilpeople and whatever other24 Councilpeople might be interested, but25 51 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 definitely the District Councilpeople as2 to determine some of the highest and best3 use for those facilities.4 And I think the Mayor was5 forward-thinking in look at the inventory6 of City-owned properties, whether it was7 by Health Department, by Recreation8 Department, by other municipal property9 owners. But in addition, looking at what10 the School Board may have so that a good11 school site may make a better recreation12 site, considering population shifts.13 So if we are having that14 dialogue, that discussion about those15 efficiencies, it should involve the16 District Councilpeople as well as the17 community to give some insight on that.18

Right.19

And even20 though it looks like a problem, it could21 be a opportunity for us to gain land,22 gain advantage, and reduce some23 expenditures by consolidating certain24 services out of one building as opposed25 52 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 to possibly even as many as three.2

I agree.3

So you will4 let the Chair know about that and invite5 us to said meetings? Is that a yes?6

That makes sense,7 yes.8

Okay. Thank9 you, Madam Chair.10 COUNCIL PRESIDENT VERNA:11 You're welcome.12 The Chair recognizes Councilman13 Goode.14

Thank you,15 Madam President.16 Good morning, Mr. Dubow.17

Good morning.18

I'll be very19 quick this morning because you provided20 all of the information that I needed21 within the handout.22 My only question actually is:23 Is this going to be the format for the24 departments going forward?25 53 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Are you suggesting2 that it should be?3

Yes, I am.4

Okay. We'll work5 on that.6

Okay, thank7 you.8 Thank you, Madam President.9

The10 Chair recognizes Councilman Green.11

Thank you,12 Madam Chair.13 I guess on the first day of14 testimony during the Capital Budget15 hearings, we discussed the need for City16 Council to get budget detail for the17 departments that are going to experience18 significant cuts.19

Yes.20

And we were21 assured that we would have that, you22 know, weeks in advance, and that's why23 the hearings were, in fact, delayed.24 Those hearings begin Wednesday;25 54 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 today is Monday, and we still don't have2 the budget detail.3

Right. And what I4 said at the time was that that was5 contingent on our getting clear6 information from the Commonwealth, which7 is still kind of rolling in.8 So that's the reason for the9 delay.10

When do you11 -- I mean, I think I'd like to talk to12 those departments, when there's full13 information available, about where we're14 actually going to cut, because otherwise,15 we're not having a really meaningful16 conversation.17

Right. I mean,18 unfortunately now, the way that the19 Commonwealth's budget process is going,20 it doesn't look like there will be full21 information until sometime in June,22 because, you know, they still seem to23 have some disagreement up there about the24 way to resolve their budget issue.25 55 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

You know,2 we've had -- over the -- my last three3 years and over the last 25 years, a4 rather negative experience in Council5 with appropriating a certain dollar6 amount to departments and then having the7 Administration make its choices once8 there's an appropriation above what can9 be spent as to where the cuts should come10 rather than having that public debate11 about which priorities should be financed12 and which are less important, given the13 resources available.14 And I just think that we're not15 doing our job as a body if we don't have16 the information about where you intend to17 cut versus not intend to cut.18 You know, I can give you --19 there are examples of where you would20 cut, like if CBH is going to cut what21 it's doing with the diversionary court22 system when the V.A. don't pay for things23 or when we need money for Mental Health24 Court or, you know, people who are being25 56 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 diverted because of substance-abuse2 problems from the system, that's where a3 lot of that money's coming from. If that4 money's going to be available, you know,5 we may not have money -- enough money in6 our prison budget.7 And so, like, I would argue8 that we should be making that a priority9 within the funding of CBH and other10 things and in order to avoid having to11 increase our prison budget.12 And I really think that we13 should not -- until we see the whole14 picture, we shouldn't just sort of let15 things go.16

Yeah, I think what17 we can do, and what we should and will18 do, is give you what -- the best19 information we have based on where the20 Commonwealth is now.21

And when22 will we get that? We need that in23 advance of the hearings.24

Yeah. We'll get25 57 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 you that, you know, based on where they2 are right now.3 The thing that we can't do is,4 you know, anticipate where they may go in5 June because we don't know what they6 might put back and, you know, where they7 might cut their budget.8 But you're right, we should get9 you as quickly as we can the information10 on what we're doing based on what we have11 now.12

I think13 there was a contingency budget done last14 year, wasn't there? Or haven't we done a15 contingency budget in the past?16

Well, this is a17 little different because the contingency18 budget we did in the past was based on19 kind of -- on something that we had asked20 for; and if we didn't get it, we were21 going to -- we had an alternative22 scenario.23 In this case, we don't know24 what they might do.25 58 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

But we know2 what they've projected.3

And that's what I'm4 saying we should get you and we will get5 you. We'll get you information on what's6 in the Governor's budget --7

Right. And8 --9

-- to the extent10 that we have good information.11

And so you12 can tell us what cuts will happen --13

Right.14

-- if that15 passes as is.16

Yes, yes.17

And then you18 can say, If we get an extra 10 million,19 this is what we'll do with it; if we get20 an extra 20 million, this is what we'll21 do with it.22

Yeah. It doesn't23 really work that way because, for24 example -- well, I don't want to -- they25 59 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 can -- they provide cuts in specific2 places for specific things. They don't3 just say $10 million.4

I5 acknowledge that; that is true.6 Okay. So, I mean, should we be7 talking about passing a budget before8 June, then?9

Well, yes,10 because -- I mean, we don't -- they might11 not do anything. They might do12 something; we don't know. But we should,13 you know, pass the budget -- pass our14 budget when we are required under the15 Charter to pass it.16

Why don't --17 well, I mean, budgets have been passed in18 June before, with no repercussions.19 My question is essentially:20 Why wouldn't we just pass the budget on21 the Governor's budget and your chosen22 cuts? And then, if we get more money,23 you can come back to City Council and ask24 for increased appropriation authority.25 60 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Yes. I think2 that's what we're proposing to do.3

So then I'm4 confused about why we've been delayed in5 getting the information because --6

Oh, because --7

Because --8

So, for example, we9 knew overall levels of cuts, but what we10 needed to know was, for example, if11 there's a cut in DPW, if that cut will be12 made in a specific way, it requires us to13 react in a specific way.14 That's the kind of detail that15 we need from them and that we're getting.16

Okay. So17 when can we get -- when will we get18 material to review for Wednesday's19 hearing?20

I thought they21 started Monday.22

Wednesday.23

Who's Wednesday?24

Public25 61 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Health, DPH.2

We'll get back to3 you today with when we can get you the4 information. We just need to do that.5

Okay. I6 mean, if you can't get it to us --7

We'll get you8 something before --9

-- today,10 it's hard to do it --11

I understand.12

All right.13 Thank you.14

Thank15 you.16 Are there any other questions17 from members of the committee?18 (No further questions.)19 COUNCIL PRESIDENT VERNA:20 Seeing no one, thank you.21 Our next department...?22 MR. McPHERSON: Is the Property23 Assessment Office.24

I'm following up to25 62 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 our discussion.2 We will get you information3 today on State budget cuts and how we4 intend to handle them.5

When6 will we get the testimony for Wednesday?7 We do have a 48-hour rule.8

It should be9 coming over very shortly.10

I beg11 your pardon?12

We'll send it13 over shortly. We'll send it now.14

Thank15 you.16 (Witnesses come forward.)17

Good18 morning. Welcome. 23 MR. 24 My name is Richard McKeithon. 9 They are Veronica Daniel, Administrative10 Services Director; Mike Piper, Real11 Property Assistant Administrator; Jean12 Machiz, Real Property Assistant13 Administrator; Tom Dougherty, Acting14 Information Systems Group Manager. 18 We are here to testify on19 proposed 2012 Fiscal Year Operating20 Budget. OPA is primarily charged with21 discovering, listing, and valuing all of22 the real property in the City of23 Philadelphia in a fair and equitable24 manner. 6 There are 577,798 parcels of7 real property in the City of8 Philadelphia. 20 As you know, OPA was in21 existence for less than a full year in22 Fiscal '11, since it was officially23 created on October 1, 2010. 7 The additional resources will8 be used for 89 new employees and for9 information technology equipment and10 software that is capable of handling the11 technology used in sketching, modeling,12 imaging, et cetera. 3 For 2010, the City's taxable4 market value was $38,584,769,215. 7 The OPA's disadvantaged8 business participation rate for Fiscal9 Year 2010 was 36 percent for Class 20010 expenditures. 17 In summary, the Office of18 Property Assessment continues to strive19 to reach its ultimate goal of valuing all20 real-property parcels throughout City of21 Philadelphia in a fair and equitable22 manner and at a hundred percent of market23 value. 11 COMMITTEE OF THE WHOLE - Bill 1101371 1. 6 2. 9 3. 12 4. 16

Thank17 you very much, sir.18 You mention in your testimony19 that you are requesting 89 new positions20 for Fiscal Year 2012. What are the21 position titles, and are there current22 civil service lists for them?23 MR. McKEITHON: Well, the bulk24 of the positions are evaluators; those25 69 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 are actually individuals that go out and2 value the properties.3 In addition to that, we have a4 position for a database administrator, an5 abatement coordinator, I believe a couple6 of supervisory positions, but the bulk of7 them are actually evaluator positions.8

Are9 they civil service positions?10 MR. McKEITHON: Well, the11 evaluator positions will be civil service12 positions. The database administrator,13 the abatement coordinator, the actual14 modeler will be exempt positions.15

Is16 there an existing civil service list for17 the evaluators?18 MR. McKEITHON: At this time,19 we're in the process of working with20 Human Resources to establish that. We're21 in the early phases of that process now.22

On23 of your detail, you're requesting24 $400,000 for camera system imaging. Can25 70 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 you explain why you need these funds and2 the services you will receive?3 MR. McKEITHON: Certainly. My4 vision about the camera system or the5 database system that we're currently6 using, it's customary to have an image of7 every parcel throughout the City. When8 you pull up a particular record, you9 should be able to have an image of that10 particular parcel, and that's what I want11 to establish here, in the City of12 Philadelphia.13 Currently, we don't have that14 in our system. And so, I think it's very15 necessary because, one, one of the first16 things you do when you actually look into17 the value of property or get some18 information on the property, you want to19 see it.20 And so, we currently don't have21 a mechanism for that; we don't have any22 images, only the ones that we may have23 recorded over the recent years. But as a24 whole, our system doesn't have images,25 71 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 and I wanted to establish that file for2 our system.3

You4 also mention in your testimony that the5 City has 577,798 parcels of property.6 Can you tell us how many of these are7 tax-exempt and their market value?8 MR. McKEITHON: We'll probably9 have to -- we'll have to get that for10 you. We can --11

I12 think somebody in the back of the room13 may have the list for you.14 MR. McKEITHON: Okay.15 (Witness comes forward.)16

Good17 morning. Please identify yourself for18 the record.19

Good morning, Madam20 President and members of Council. I'm21 Michael Piper, Deputy Administrator of22 the Office of Property Assessment.23 To answer your question,24 currently, there are 24,724 properties25 72 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 that are fully exempt --2

I'm3 sorry, 24,000...4

24,724, and there5 are 16,003 properties that are partially6 exempt, and a market value of7 $38,558,902,478.8

All9 these billions are too fast for me. Do10 you mind again?11

$38,558,902,478.12

Does13 your office review these properties to14 ensure that they're not being used for a15 taxable purpose?16

We do. We do17 routinely audit properties in which18 there's any doubt in which, you know,19 we -- you know, if we're not sure, for20 instance, a church is having services or21 a property that's receiving an exemption22 because they've been granted one based on23 the idea that they're having classes24 because it's a school, if it's not25 73 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 obvious, we do.2 MR. McKEITHON: And let me add3 to that, if I may.4 In the future, my plan is to5 actually conduct an audit of all exempt6 properties every three years. So every7 exempt property would, on a rotational8 basis, get a request to send in9 information verifying the fact that they10 should still be exempt.11 And so, one of the conditions12 of getting additional employees will go13 to that effect.14

I15 guess I sound very naive, but I'm going16 to ask the question anyway.17 With the hospitals that we have18 in the City -- and I won't mention any19 one of them -- they seem to expand for20 blocks and blocks and blocks.21 Tell me, if you will, which one22 of those buildings would be exempt.23 Would the hospital itself be exempt?24 MR. McKEITHON: Well, it's all25 74 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 in the use. Typically hospitals are2 exempt.3

All4 right.5 MR. McKEITHON: But it depends6 on how they're structured. I have seen7 some that are non-exempt. It depends on8 how they are structured.9 We have the Law Department look10 into exemption applications, and they11 have different guidelines on what12 qualifies you for exemption, but it all13 depends on how they run, how they're14 operated for profit, and things like15 that. There are many different variables16 that go into play.17 So the hospital property -- the18 actual hospital can be exempt, but some19 the other parcels that they own may not20 qualify. It depends on how they're being21 used.22

How23 about for physician services? Supposing24 with the expansion that they make, if one25 75 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 of the buildings is being used for2 physician services, is that also exempt?3

Typically, the way4 that would work is, once the evaluator5 inspects the property, if the report6 indicates that the physician, for7 instance, conducts or administers8 services in a portion of the property9 that the nonprofit organization owns, and10 that doctor, that physician, is an11 employee of the hospital, typically, that12 part of the property would be exempted.13 If the physician, however, was14 a for-profit entity working for him or15 herself, typically, it would not be16 exempted.17 MR. McKEITHON: And see, we18 have to get into those details once we're19 reviewing the applications and exactly20 what they have filled out and how the --21 in accordance to the law, so...22

But23 if they have a retail store in any one of24 the buildings, the retail store should be25 76 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 paying taxes for that portion of the2 building, would they not?3

That portion of the4 building would be taxable, yes, correct.5

And6 with the churches, is it only the house7 of worship that's exempt from paying any8 taxes?9 MR. McKEITHON: Well,10 typically, once again, churches are11 exempt, but that doesn't necessarily mean12 that all church property is exempt.13 We have a process, and Mike can14 explain it, but it's all in the use of15 the particular property.16 Exemption depends on use.17 There are categories for exemptions such18 as religious, charitable, et cetera, but19 it depends on how that entity is actually20 using that property.21

I22 would love to see that one. We do have23 an awful lot of properties that are24 exempt. I think it's something that we25 77 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 should definitely be looking into.2 Does your office review these3 properties? You did say that you review4 them to ensure that they are not being5 used for a taxable purpose?6 MR. McKEITHON: Our goal is to7 audit all of them at least once every8 three years.9 We have a process that they10 apply for exemptions now, but I think we11 need -- my goal is to have an annual12 process, a rotating process, where they13 would have to at least attempt to give us14 information that they should still remain15 exempt at least once every three years.16

When17 do you expect to complete the18 reassessment project, and when will we19 have use for the data?20 MR. McKEITHON: Our goal is to21 complete the reassessment in the fall of22 2012. We're working hard towards that23 goal each and every day. So that's --24 that's our response. That's our goal, is25 78 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 to have it completed by the fall of 2012.2

Once3 the citywide reassessment project is4 completed, what will be your reassessment5 policy going forward?6 MR. McKEITHON: Every year, I7 believe that it -- once a reassessment is8 completed, you have to maintain it. And9 so, every year, we will expect portions10 of the City will continue to collect data11 on a rotational basis.12 There are standards in our13 profession that dictate that you should14 do field inspections for every parcel at15 least once every four years or so, and I16 fully intend on doing that.17 I'm not looking to just18 complete the reassessment and then let19 things go back to where they are now. I20 intended to maintain the reassessment and21 look at these values each and every year.22

Thank23 you very much, sir.24 Councilman Greenlee.25 79 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Thank2 you, Madam President.3 Good afternoon, it is now, to4 everyone.5 Mr. McKeithon, first of all,6 just to follow up on what the Council7 President just asked, so just so I'm8 clear, the idea -- your goal is to have9 all of this completed by fall of 2012, so10 the bills that go out, first the11 assessment notices go out the late summer12 of 2012 would be included in that. So it13 would be for the bills --14 MR. McKEITHON: Well, the15 notice --16

-- that17 would go out in late 2012 for FY '13. Is18 that right?19 MR. McKEITHON: The assessment20 notices I'm looking to get out -- my goal21 is to have them out by fall, meaning22 possibly November of 2012. And then from23 that point, bills would be generated by24 Revenue and sent out.25 80 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

So it2 would be a little bit later than we're3 doing it now then.4 MR. McKEITHON: I -- I -- is5 that --6

'Cause7 usually they go out in, like, late8 August, right? 'Cause it's --9 MR. McKEITHON: Mr. Dubow will10 respond to that.11

Okay.12 (Rob Dubow comes forward.)13

Yeah, Councilman,14 the idea is that the bills -- Revenue15 would be sending the bills out in16 December of 2012. So people, if they17 wanted to, could pay them before the end18 of the year, but they would be for FY19 '13.20

Okay.21 But just so I'm -- I'm not trying to22 nit-pick the timeframe here, but --23 'cause usually, as Mr. Piper, I think,24 started saying, the notices go out -- the25 81 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 assessment notices go out, what, late2 August, so it gives the people the chance3 to appeal them.4 Is that --5 MR. McKEITHON: Well, that's6 how --7

I mean, I8 know we're talking about the future here.9 MR. McKEITHON: Right.10

But I'm11 just trying to get the procedure down,12 sort of.13 MR. McKEITHON: They'll still14 have an opportunity to appeal.15

Uh-huh.16 MR. McKEITHON: Once we get17 notices out, typically, most18 jurisdictions will give you 30 days or so19 to appeal, so they'll still have an20 opportunity to appeal.21

Mm-hmm.22 MR. McKEITHON: And then, based23 on those decisions, I guess their bills24 would be -- I don't want to speak for25 82 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Revenue, but I guess their bills would be2 adjusted.3

Okay.4 I'm just saying it sounds like a tight5 time frame. If it's fall by the time you6 have the numbers ready, you know, people7 have to have the chance to appeal. And8 if there's appeals upheld, for example --9 you know where I'm going with this?10 MR. McKEITHON: Right.11

It12 doesn't sound like you'll have the chance13 to get the bills out in December, right?14 MR. McKEITHON: Well, once15 again, we're working as diligently --16

No, I17 understand, I understand.18 MR. McKEITHON: -- as we can to19 get to the fall of 2012.20

Yeah, an21 I understand. I'm just saying that22 that's a little bit different time frame23 than we've been working on; am I right?24

Just a little. A25 83 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 couple of months. I would agree that it2 is tight.3

Mm-hmm,4 okay, all right.5 The civil service positions you6 talk about, particularly evaluator, now7 that test hasn't been actually set up yet8 so that -- am I right?9

Good morning.10

Good11 morning.12

I'm Veronica13 Daniels, the Administrative Services14 Director.15 That exam has not yet been16 scheduled. We are actually working with17 Personnel to change the specs of that18 exam --19

The20 specs?21

-- or of that22 position.23

Okay.24 That's where I was going, 'cause I know25 84 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 for, say, Evaluator I, I think the2 requirement's always been a bachelor's3 degree; is that right?4

It has been in5 the past.6

Is that7 being looked at as possibly being8 changed?9

It is.10

Okay. I11 know one of the big criticisms, if you12 will, whether it was fair or not, was13 that we needed more professionals.14 If you're lowering that, what15 would be -- is that going against that16 argument?17 MR. McKEITHON: Well, we are,18 as opposed to just making it a mandatory19 bachelor's, we're looking at the CPE20 certification, which is what our industry21 professionals would normally have.22

And what23 is that? Could you -- CPE is...?24 MR. McKEITHON: Certified25 85 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Public Evaluator.2

Okay.3 MR. McKEITHON: So that's a4 professional credential that's5 specifically for property assessment6 versus just someone having the bachelor's7 degree in any particular field. We think8 that this would just be equally, if not9 more, credible to have something in that10 particular field.11

So you're12 looking for something specific toward13 evaluating.14 MR. McKEITHON: Exactly.15

And how16 do those CPEs -- you don't necessarily17 have to have a bachelor's degree; is that18 --19 MR. McKEITHON: No. But we do20 require, in addition to a CPE, some level21 of experience, years of experience,22 knowledge of the real-property field and23 things like that.24

Okay.25 86 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Last question. On Evaluator IIs, I don't2 know if you've looked at that, but that's3 always been an advancement position,4 right?5 Are you still looking at that6 the same way or hiring somebody -- would7 that be new hires necessarily or both or8 --9

In the past, the10 Evaluator II was in a career advancement11 position.12

Right.13

The way that the14 positions will be structured in future is15 that the department could hire an16 individual based on their experience at17 either level.18

Either19 level. It would still be the opportunity20 for advancement possibly? I mean, would21 they just --22 MR. McKEITHON: Definitely,23 yeah.24

Mm-hmm.25 87 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 MR. McKEITHON: I want to2 create an environment where if I get a3 good candidate and they have experience,4 knowledge, et cetera, good credentials, I5 can hire them at an EV II.6

Mm-hmm.7 MR. McKEITHON: And also have8 the flexibility to hire someone at an9 EV I and they work their way up to an10 EV II.11

Mm-hmm.12 MR. McKEITHON: So this would13 give us more flexibility and, in my14 opinion, be more realistic with the15 real-world environment.16

Okay.17 Thank you. Thank you all.18 Thank you, Madam Chair.19 COUNCIL PRESIDENT VERNA:20 You're welcome.21 The Chair recognizes Councilman22 Jones.23

Thank you,24 Madam President.25 88 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 Just so I can put my arms2 around this, did you say the number and3 value of -- well, first of all, good4 afternoon.5 MR. McKEITHON: How you doing.6

The number7 and value of tax-exempt properties was8 38 billion?9

Yes, the market10 value of the exempt properties is 3811 billion, correct.12

And what is13 the -- and I guess a simple way to put14 this is: What is Philadelphia's real15 estate that is taxable worth?16

Excuse me. Just a17 second, Councilman, because I'm looking18 at something here, and I want to make19 sure I gave you the right number.20 Councilman, I beg your pardon.21 The exempt market value total is22 17 billion -- not 38 billion, but23 $17,521,033,504.24

So do I25 89 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 understand the figure to be 38 billion of2 taxable property?3

No. The 17 billion4 is the exempt portion, and the 38 billion5 is the taxable, that's correct.6

Yeah.7

Yes.8

All right.9 So --10

(Inau11 dible, off-mic.)12

Yes.13

I14 have made notes of what you testified to15 earlier.16

Yes.17

And18 you did say "38 billion, 588 thousand."19 What figure is it really?20

I'm going to give21 it to you -- and I apologize, Madam22 President. I'm looking at ten different23 columns here.24 The exempt market value is25 90 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 $17,521,033,504.2

And3 you did say --4 I'm sorry, Councilman.5

You're right6 on point. We're in the same direction.7

And8 you did say that there were 24,7249 properties that were exempt?10

That were fully11 exempt, and that number is correct.12

And13 16,003 were partially exempt.14

Yes, that's15 correct.16

Okay.17 I'm sorry, Councilman.18

No, no,19 you're -- no, for clarification purposes,20 I thank you.21

Thank22 you.23

How much is24 Philly worth -- real estate, taxable?25 91 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

The 38 billion is2 the taxable.3

And exempt4 is...?5

17.6

What7 percentage of Philadelphia is exempt?8

Hold on a second.9 Let me get my calculator.10 MR. McKEITHON: We'd have to do11 the math on that. We can get that for12 you.13

Let me say14 this. I'm getting scared here. It looks15 like more than half of our exempt16 property -- half of our value is exempt.17

I agree. We do18 have a lot of exempt properties in the19 City of Philadelphia.20

All right.21 I need you to -- you're in an exact22 science. I'm in the "about" business; I23 can estimate, guesstimate. I need you to24 calculate that for us --25 92 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371

Okay.2

-- so that3 we know what we're working with.4

Okay.5

And let me6 further ask, you said periodically, you7 send out inspectors to check to see if8 indeed a tax-exempt property is being9 used for said purposes, correct?10

Yes.11

What is the12 frequency of those inspections and the13 percentage of properties annually that14 you do inspect?15

That's also a16 number I'd have to get and calculate17 based on what it is we've done in the18 past.19 But, of course, as20 Mr. McKeithon said, you know, what we're21 doing is developing a plan to inspect all22 of them within three years.23

What I do24 need to know is, what did we do last25 93 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 year? If it ain't measured, it ain't2 managed.3 And I'm asking you: Last year,4 how many properties did we inspect? What5 was the results of those inspections?6 How many were found to be operating under7 the said purposes? And how many were8 not?9 MR. McKEITHON: We can get that10 for you.11

I'm waiting.12 MR. McKEITHON: We can --13

No, you14 don't have somebody who can --15 MR. McKEITHON: No, we'd have16 to go back --17

This is at18 the -- I can -- without being a19 soothsayer, you're going to be the most20 popular department this time next year.21 When I tell you that all of us are going22 to be at your -- we're going to want to23 know this data so we can communicate that24 back to our constituents, both25 94 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 businesses, nonprofits, and regular2 taxpayers alike. Sharpen your pencils,3 'cause those are the questions we need to4 know.5 People are already questioning6 whether or not this temporary real-estate7 tax will be revenue-neutral, and we need8 to have faith in the numbers, the9 calculation, the inspection process, the10 exemption process, that indeed we are11 getting the money due us and that the12 people that are doing nonprofit,13 philanthropic kind of activities are14 indeed doing that.15 And so, I need to know how many16 inspections you make.17

How18 long would it take you gentlemen to get19 that information, come back to us, and20 let us know?21 MR. McKEITHON: I would22 estimate a few days.23

A few24 days?25 95 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 MR. McKEITHON: Yes. We would2 have to go back to our office and3 research some record.4

You5 don't have a good computer system, I6 guess, huh?7 MR. McKEITHON: We are asking8 for budget funds for our computer9 hardware and software.10

Oh.11 MR. McKEITHON: We're pretty12 bad off IT-wise right now, and that's why13 we're asking for a lot of this funding.14 But, once again, I think that,15 you know, I want to emphasize --16

If we17 were to continue this hearing until later18 this afternoon, would you be able to come19 in and provide the information that20 Councilman Jones is asking for?21 MR. McKEITHON: We could do our22 best, but I wouldn't say without any23 degree of certainty that we could gather24 that by this afternoon. I mean, we would25 96 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 really have to go back to our office and2 research some records. It may take some3 physical detail. It's not as simple, I4 believe, as pressing a button.5 So if you will allow us, we6 could definitely attempt to get you that7 within a few days.8

Madam9 President, if I may?10 COUNCIL PRESIDENT VERNA:11 Councilman Jones.12

This is such13 an important issue.14

I15 concur.16

They need to17 take the time that they need, but they18 need to take the time and get this19 information to us.20 The confidence in this21 information is at the heart of what a22 taxpayer needs to know, that there is a23 system that is not a wild-ass guess.24 Thank you, Madam President.25 97 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 COUNCIL PRESIDENT VERNA:2 You're welcome.3 Councilman Green.4

Thank you,5 Madam Chair.6 Mr. McKeithon, under State law,7 by what date must someone appeal a8 property assessment for the next calendar9 year?10 MR. McKEITHON: Well, under11 State law, here, in the City of12 Philadelphia, once the assessment notices13 are mailed, we give opportunity to appeal14 within 30 days, correct?15

That's16 right, but there's a State law17 requirement, a date certain by which all18 appeals must be put in place; it's in the19 First-Class City Act. By what date is20 that?21 MR. McKEITHON: They have an22 opportunity to nunc pro tunc, I believe,23 indefinitely.24

I'm just25 98 4.18.11 COMMITTEE OF THE WHOLE - Bill 1101371 asking you for the date.2

Councilman Green,3 the date is the first Monday of October4 or --5