COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, June 6, 2006 1:25 p.m. - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL, CHAIR COUNCILMAN W. WILSON GOODE, JR. COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILWOMAN MARIAN B. TASCO COUNCILMAN BRIAN J. O'NEILL BILLS 051142, 060227, 060242, 060243, 060245, 060375, 060377, 060378, 060381, 060387, 060394, 060438, 060469 and 060473 - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2
Good afternoon. We'll now call to order our City Council Committee on Finance. The Chair notes that we have a quorum. To my left, Councilwoman Tasco. We have Councilwoman Blondell Reynolds Brown, who is Vice-Chair. To my right, Councilman Goode, and myself. So there is a quorum present for our Finance Committee. Again, we thank all of you for being here for our City Council Committee on Finance hearings. I regret that we had to continue them yesterday after the Public Property Committee lasted so long. We will first consider Bill No. 18 060387 establishing a process to select banks to receive City deposits to be used to meet payroll. Will Mr. John Nacchio, the City Treasurer -- is he present? (No response.)
We'll ask the Clerk to read the title of the 3 6/6/06 - FINANCE - BILL 051142, ETC. bill and then call on Councilman Goode to make a statement.
Bill 060387, an ordinance amending Chapter 19-200 of The Philadelphia Code, entitled "City Funds - Deposits, Investments, Disbursements," by establishing a process to select a bank or banks to receive City deposits to be used to meet City payroll expenses, under certain terms and conditions.
Thank you, Madam Chair. I'd like to briefly outline the purpose for Bill 387's legislative intent. Under Philadelphia Home Rule Charter, City Council has the authority to designate City depositories and to approve contracts for more than a year. Heretofore, the Executive Branch has entered into long-term arrangements for City payroll that usurp City Council's authority under the Home Rule Charter to 4 6/6/06 - FINANCE - BILL 051142, ETC. both designate City depositories and to approve contracts for more than one year. This practice not only undermines our authority, but also undermines the provisions created by City Council related to predatory lending, as well as fair lending and community reinvestment. Council should be able to review compliance with these measures as it's considering the designation depositories for potential long-term arrangements. Under the legislation, the City Treasurer will now be required to implement a process seeking applications from banks that wish to receive City payroll deposits. The process will have to incorporate all the existing provisions related to predatory lending, as well as fair lending and community reinvestment. The City Treasurer will then tentatively select one or more institutions to receive City payroll deposits and enter into negotiations to reach agreement or proposed contract. No 5 6/6/06 - FINANCE - BILL 051142, ETC. contract can be executed until it has been approved by City Council, and as of July 1, 2007, no institution can receive City payroll deposits without a contract approved by this Council. This bill clarifies what I believe is already within City Council's authority in the Home Rule Charter and establishes an open, competitive process for City payroll deposits. I did invite the City Treasurer to offer testimony. We do have copies of his written testimony. The only concerns the Treasurer raises within that testimony is the timing of this, but essentially we wouldn't have to go to contract with any depository receiving payroll deposits until July 1, 2007. Therefore, there's more than enough time to issue an RFP and for us to review the contract.
Thank you, Councilman. Are there any questions with 6 6/6/06 - FINANCE - BILL 051142, ETC. regard to this bill? We thank the Councilman for his statement and also for his noting that we do have a statement, which will be presented to the stenographer to be considered in its entirety. And Councilman Goode gave a good summary of what this bill will do. And as he stated, we do have time for RFPs and there's time allotted for this. So if there are any questions from anyone. Otherwise, we'll ask the Clerk to read the title of Bill No. 15 060469 removing the requirement of City depositories with regard to Section 17 17-104 of the Code.
Bill No. 060469, an ordinance amending Chapter 19-200 of The Philadelphia Code, entitled "City Funds - Deposits, Investments, Disbursements," by amending certain requirements of City depositories, all under certain terms and conditions.
Thank 7 6/6/06 - FINANCE - BILL 051142, ETC. you very much. Councilman Goode, will you make an opening statement for us?
Bill 469 simply deletes the link between 19-201 of The Philadelphia Code and Section 17-104. We established that link between those two sections to create an enforcement mechanism for 17-104. The City depositories have complied with that in 17-104, so now we wish to delete the link between the two sections of the Code.
Thank you very much. Are there questions from members of the Committee with regard to this bill? (No response.)
I take it that our Treasurer still is not here, Mr. Nacchio. 8 6/6/06 - FINANCE - BILL 051142, ETC.
We do have a request that he come, and we will ask the Clerk to call him while we continue with this hearing. Perhaps he'll be able to come over before this hearing is concluded with regard to these bills, and then he can let us know where we are and where the Administration is in terms of support of these bills and answer any other concerns that members of the Committee may have. Is that acceptable?
That's fine with me. 9 6/6/06 - FINANCE - BILL 051142, ETC.
Great. We will now consider seven bills authorizing applications for Redevelopment Assistance Capital Grants. The bill numbers are 051142, 060242, 060375, 394, 381, 245 and 473. Clerk, would you please read the title of all seven bills.
Bill No. 051142, an ordinance authorizing the Philadelphia Authority for Industrial Development to file an application with the Office of the Budget, Commonwealth of Pennsylvania, under the Redevelopment Assistance Capital Program, in an aggregate amount not to exceed $3,600,000 to assist in the development of Billy Penn Warehouse, 413 Hope Mission Ministries, and El Centro de Oro "Golden Block"; and authorizing the City to enter into an agreement with PAID in furtherance of grant requirements; all under certain terms and conditions; and Bill No. 060242, an ordinance 25 authorizing the Philadelphia Authority 10 6/6/06 - FINANCE - BILL 051142, ETC. for Industrial Development to file an application with the Office of the Budget, Commonwealth of Pennsylvania, under the Redevelopment Assistance Capital Program, in an amount not to exceed $500,000 to assist in the development of Impact Services; and authorizing the City to enter into an agreement with PAID in furtherance of grant requirements; all under certain terms and conditions; and Bill No. 060245, an ordinance 14 authorizing the Philadelphia Authority for Industrial Development to file an application with the Office of the Budget, Commonwealth of Pennsylvania, under the Redevelopment Assistance Capital Program, in an aggregate amount not to exceed $2,575,000 to assist in the development of Cancer Treatment Centers of America at Parkview Hospital, Mural Arts Center and Project HOME; and authorizing the City to enter into an agreement with PAID in furtherance of 11 6/6/06 - FINANCE - BILL 051142, ETC. grant requirements; all under certain terms and conditions; and Bill No. 060375 an ordinance 5 authorizing the Philadelphia Authority for Industrial Development to file an application with the Office of the Budget, Commonwealth of Pennsylvania, under the Redevelopment Assistance Capital Program, in an aggregate amount not to exceed $3 million to assist in the development of St. Agnes Medical Center; and authorizing the City to enter into an agreement with PAID in furtherance of grant requirements; all under certain terms and conditions; and Bill No. 060381, an ordinance 18 authorizing the Philadelphia Authority for Industrial Development to file an application with the Office of the Budget, Commonwealth of Pennsylvania, under the Redevelopment Assistance Capital Program, in an aggregate amount not to exceed $2,500,000 to assist in the development of LaSalle University Science 12 6/6/06 - FINANCE - BILL 051142, ETC. and Technology Center, Lutheran Theological Seminary and Pleasant Playground; and authorizing the City to enter into an agreement with PAID in furtherance of grant requirements; all under certain terms and conditions; and Bill No. 060394, an ordinance 9 authorizing the Philadelphia Authority for Industrial Development to file an application with the Office of the Budget, Commonwealth of Pennsylvania, under the Redevelopment Assistance Capital Program, in an aggregate amount not to exceed $2 million to assist in the development to WHYY Learning Lab; and authorizing the City to enter into an agreement with PAID in furtherance of grant requirements; all under certain terms and conditions; and Finally, Bill 060473, an ordinance authorizing the Philadelphia Authority for Industrial Development to file an application with the Office of the Budget, Commonwealth of Pennsylvania, 13 6/6/06 - FINANCE - BILL 051142, ETC. under the Redevelopment Assistance Capital Program, in an aggregate amount not to exceed $1 million to assist in the development of Citywide Youth Mini Mall; and authorizing the City to enter into an agreement with PAID in furtherance of grant requirements; all under certain terms and conditions.
Thank you. Did you read No. 245 for Parkview Hospital?
Thank you. That's fine. Thank you very much. Please identify yourself for the record, Ms. Williams and Mr. Deegan, and begin your testimony.
Thank you. 14 6/6/06 - FINANCE - BILL 051142, ETC.
Good afternoon, Chairwoman Blackwell and members of the Finance Committee. My name is Krista Williams and I am here today to testify on behalf of the Philadelphia Industrial Development Corporation, PIDC, and the Philadelphia Authority for Industrial Development, PAID, in support of Bill No. 10 051142, Bill No. 060242, Bill No. 060245, Bill No. 060375, Bill No. 060381, Bill 12 No. 060394 and Bill No. 060473. Bill No. 6 million to assist in the development of Billy Penn Warehouse, 413 Hope Mission Ministries, and El Centro de Oro "Golden Block," both of which are located on North 5th Street. The Billy Penn Warehouse project consists of rehabilitating the building located at 1516 through 1554 North 5th Street so that it may house an 15 6/6/06 - FINANCE - BILL 051142, ETC. industrial/commercial business incubator operated by 413 Hope Mission Ministries, a local social service provider. 2 million. 1 million. The Centro de Oro streetscape project consists of improvements to North 5th Street between Lehigh and Indiana Avenues to enhance this location as a commercial/cultural locale for the City's Latino community. The project will reinforce other ongoing public and private development. The total project cost is approximately $4 million. 5 million. Bill No. 060242 authorizes PAID to apply for a RACP Grant from the Commonwealth of Pennsylvania for Impact Services' facility located at 1952 East Allegheny Avenue in the Kensington section of the City. Impact Services Corporation provides important educational, social, 16 6/6/06 - FINANCE - BILL 051142, ETC. and vocational services to the predominantly low- to moderate-income citizens of Kensington. The renovation of its existing building will enable Impact Services to continue to provide these services. The total project cost is approximately $1 million. The RACP Grant amount is $500,000. Bill No. 5 million to assist in the development of the Cancer Treatment Centers of America at Parkview Hospital, the Mural Arts Center and Project HOME. The Cancer Treatment Centers of America at Parkview Hospital project consists of new construction and renovations to the existing building at Parkview Hospital located at 1331 Wyoming Avenue. The total project cost is approximately $3 million. 5 million. The Mural Arts Center project 17 6/6/06 - FINANCE - BILL 051142, ETC. consists of the renovation of a 3,000 square foot adjoining building located at 1729 Mount Vernon Street for the purpose of expanding the Lincoln Financial Mural Arts Center, which will serve the community as an all-inclusive educational arts facility. 3 million and the RACP Grant amount is $500,000. Project HOME is developing a 38,000 square foot comprehensive learning center on the 1900 block of Judson Street in North Central Philadelphia. The Learning Center will serve children from kindergarten through 12th grade and will include an adult learning and workforce development component. The programs will be tailored to help the residents of the community move toward greater prosperity by increasing their educational and employment opportunities through comprehensive technology and literacy instruction. 8 million. The RACP 18 6/6/06 - FINANCE - BILL 051142, ETC. Grant amount is $575,000. Bill No. 060375 authorizes PAID to apply for a RACP Grant from the Commonwealth of Pennsylvania in an amount not to exceed $3 million to assist in the development of St. Agnes Medical Center located at 1900 South Broad Street in the Second Council District. As part of its transition from an acute care medical center to a continuing care facility, St. Agnes Medical Center will renovate its existing facilities located at 1900 South Broad Street. The continuing care facility will house various programs such as acute care center, skilled nursing and independent living for elders. The total project cost will be at least $6 million. Bill No.
5 million to assist in the development of LaSalle University Science and Technology Center, Lutheran 19 6/6/06 - FINANCE - BILL 051142, ETC. Theological Seminary and Pleasant Playground, all of which are located in the 8th Council District. The LaSalle University project will consist of demolition of existing tennis courts and construction of a new 85,000 square foot Science and Technology Center located at 20th and Olney Streets behind the existing LaSalle University Library. The new Science and Technology Center will include new classrooms, labs and support facilities. The approximate total project cost is $27 million. The amount of the RACP Grant is $1 million. The Lutheran Theological Seminary located at 7301 Germantown Avenue will construct a new building to house the Seminary's public archive collection. The total project cost is approximately $19 million. The amount of the RACP Grant is $500,000. The Pleasant Playground project will consist of renovations to the existing playground located at Boyer and 20 6/6/06 - FINANCE - BILL 051142, ETC. Pleasant Streets. The approximate total project cost is $2 million. The amount of the RACP Grant is $1 million. Bill No. 060394 authorizes PAID to apply for a RACP Grant from the Commonwealth of Pennsylvania in an amount not to exceed $2 million to assist in the development of the WHYY Learning Lab, which is adjacent to their existing building at 150 North 6th Street. The Learning Lab at WHYY will be built on the 7th Street lot behind the station's existing headquarters. It will cover roughly 10,000 square feet of space. The mission of the Learning Lab is to share the power of digital technology to foster a more connected and informed community in the broadcast area. The Learning Lab programs will train community groups, students, teachers and corporate employees to produce their own video, using both distance learning and face-to-face instruction in the lab. 21 6/6/06 - FINANCE - BILL 051142, ETC. This RACP Grant is in addition to $1 million previously awarded in 2003. The total project cost is approximately $6 million. Bill No. 060473 authorizes PAID to apply for a RACP Grant from the Commonwealth of Pennsylvania in an amount not to exceed $1 million to assist in the development of the Citywide Youth Mini Mall. The Citywide Youth Leadership Agency will acquire and renovate a building located at 1100 through 1138 West Girard Avenue to house retail space and a facility in which the Citywide Youth Leadership Agency's alternative school, professional careers school and twilight school will operate. The total project cost is approximately $4 million. The RACP Grant amount is $1 million. Redevelopment Assistance Capital Program Grants are funded by the State's Capital Budget and sponsored by the local State legislator. The 22 6/6/06 - FINANCE - BILL 051142, ETC. recipient of these grants are typically non-profit organizations such as colleges, museums, hospitals and social service providers. The State provides the funding through each county's industrial development authority, in this case it's PAID. The recipient of the grant must at least match the grant amount with funding from non-State sources. After the legislature approves the Capital Budget, the Governor, through the Office of the Budget, authorizes PAID to submit applications on behalf of the recipients. I request the Finance Committee's favorable consideration of this bill and that the rules of Council be suspended to permit first reading at the next regularly scheduled session of City Council. Thank you for the opportunity to testify today. I will be happy to answer any questions you may have about 23 6/6/06 - FINANCE - BILL 051142, ETC. these bills.
Thank you very much. Are there any questions from any members of the Committee with regard to the RCAP assistance bills? (No response.)
Thank you very much. We will now ask the City Treasurer, Mr. John Nacchio, if he would come to the witness table.
There were some questions from members of the Committee with regard to Bill No. 060387 and 060469. Thank you very much. Would you like to make your statement now, sir?
We note that you do have testimony on the first bill, 060387. Would you like to make a brief statement? 24 6/6/06 - FINANCE - BILL 051142, ETC.
Yes. Please identify yourself and then make your statement public. Thank you.
Good day, Madam Chairwoman and members of the Committee on Finance. I am John Nacchio, the City Treasurer for Philadelphia. My name is the sole authorized signature for all checks issued from the City Treasury for payroll. Therefore, I appreciate this opportunity to testify before you on matters related to City depository financial institutions authorized to accept City deposits. Bill No. 060387 is proposed legislation by City Council to establish a process in selecting a bank or banks to receive City deposits to be used for City payroll expenses, under certain terms and conditions. The nature of payroll accounts referred to in this legislation act as an 25 6/6/06 - FINANCE - BILL 051142, ETC. intermediate escrowed cash reserve to cover payments authorized by the Director of Finance and approved by the City Controller. The expenses cover net pay to employees, deductions and taxes due to the federal government, the State and City. The payroll accounts involve a number of complex processing relationships internal to the City and between and among banks upon which 30,000 employees are paid biweekly. These employees are both banked and unbanked. These deposits are intended to be in and out on the same day. The two former City Treasurers in this Administration are on public record with testimony before the City Council in reference to moving funds. Quote, The process to change depositories could prove to be difficult and take considerable time. A new depository to handle the corresponding City funds would have to be selected and the proper procedures put in place to make a smooth 6/6/06 - FINANCE - BILL 051142, ETC. transition. This change could also require the task of setting up accounts, making sure that our computer systems are compatible and the involvement of other departments within the City's government. In the proposed legislation Bill No. 060387, Section 1, Paragraph (b), it is stated, After July 1, 2007, the City shall immediately withdraw any City payroll deposits held by any institution that has not executed such a contract, end of quote. If the contract process was not finalized, it could result in a position of default on making payments for payroll to employees, required deductions and taxes. All of these payments are related to various legal and contractual arrangements or requirements. Also in the proposed legislation Section 1(c), it is stated, quote, No contract with a proposed recipient of the City payroll deposits may be executed until it has been 27 6/6/06 - FINANCE - BILL 051142, ETC. approved by Council by ordinance, end of quote. In the event that a contract is in executable form and not approved by City Council could leave the City administrative process without an option to continue to meet its payroll obligations. These concerns are reflective of the public testimony provided by the two former City Treasurers. And that concludes my written testimony.
Thank you very much. Mr. Nacchio, at what bank does the City keep its payroll deposits currently?
The way bank accounts have been established in the 28 6/6/06 - FINANCE - BILL 051142, ETC. accounts, they've just been bank accounts and not contracts for services.
So each of the individual bank accounts that we have are just like you and I going to a bank and opening up a bank account. There's never been that kind of relationship where there's been a contract or agreement specifically laid out for bank accounts like this. So it's considered a demand account, which is a checking account. So the City Treasurer would set up a demand account at a bank and use it for the disbursements of payroll. In this case, we have like four separate accounts.
Are we regulated to give the bank any notice, say, if we were to end payroll deposits?
It would be -- I'm going to say it sounds simple, but it would be simply opening a new bank account at another bank, but the 29 6/6/06 - FINANCE - BILL 051142, ETC. relationships or the layer of complexity in terms of our relationship with the bank fall in two areas. One is the way the payroll is processed electronically. So the City's computer center, MOIS, has a transmission process that they send to the bank, both for direct deposit and for the processing of the check. Also, it involves Finance in terms of the payment process that is electronically created as a file called an issue file. And I have to say that over the last two years as City Treasurer, one of the things I've held in complete focus is the prevention of fraud for our accounts like this, because like any checking account, the City is subject to theft and identity theft, et cetera. So over the last two years, we've changed the process by which we work with the bank and our transmission and we send to the bank an issue file. And in that issue file, it has information pertaining to the check number, the dollar amount 30 6/6/06 - FINANCE - BILL 051142, ETC. and the person's name. So with the bank, we've set up what is called positive pay/payee match, and that means that every check that the City issues for payroll that goes to the teller's window and is processed by the bank is checked against that file. If there's any exceptions, the Treasurer's Office immediately on that day gets an electronic message saying that there's some discrepancy between the two. In that regard, we have prevented fraudulent activity where folks duplicate checks, change the name on a check, change the dollar amount on the check, and these kinds of items have surfaced over the last two years, but we have a preventive measure in place. And when I talk about the complexity, it's that electronic file 22 transmission and the setting up of that is not a simple matter. So if you would transfer from one bank to another, some banks don't have that positive pay/payee 31 6/6/06 - FINANCE - BILL 051142, ETC. match at the teller window and we'd have to look for that, because it really is something that in this age you need to have.
We neglected to say that Councilman O'Neill is present at our Finance Committee as well. Thank you. Are there any fees paid by the bank or the City with respect to these accounts?
Because Wachovia Bank is one of our larger banks holding many accounts with the City of Philadelphia, not only with the City Treasurer but outside of the City Treasurer, the arrangement has been with banks is what they call balance-earned credits. So the deposits which are kept at the bank earn credits for the City of Philadelphia and the expenses are offset against those credits. So the payroll account is part of a larger relationship with the bank, and the cost to the City 32 6/6/06 - FINANCE - BILL 051142, ETC. in that respect looks like it is zero. So there is no cost to the City.
Would you know whether City Council could by ordinance require the Administration to obtain Council approval of a contract with a bank holding our deposits if our Charter does not otherwise require it? Would you, by chance, know?
One last question from me. Does the Administration support this bill?
I've heard that there would be no objection, but I did not hear whether it was supported or not.
Thank you. Further questions from members of the Committee? Councilman Goode and then Councilwoman Tasco.
Thank you, 33 6/6/06 - FINANCE - BILL 051142, ETC. Madam Chair. I thank you for your testimony, Mr. Nacchio. Let me note for the record that we do have a letter in support of the bill from the National Community Reinvestment Coalition. Also, this bill 9 was drafted by City Council technical staff. I just have a series of questions I want to run through, Mr. Nacchio, fairly straightforward. You are not at all suggesting through your testimony that we can never change payroll depositories, are you?
I'm not suggesting that. I'm only saying that the caution about the relationship with the complexities of the processing, which involves the Finance Department and the Mayor's Office of Information Systems, and the processing is something that needs to be considered in this process. Yes. Because just from experience, I 34 6/6/06 - FINANCE - BILL 051142, ETC. know it takes some time for the technical people to get everything in place.
Simple question. You're not suggesting that we can never change payroll depositories?
Just that it's complex and there are timing factors involved?
Actually, in some respects, it's probably a healthy process to go through for the City.
I agree. Let me run through a few questions that will help us bring a little bit of clarity, I think. Does a financial institution have to be authorized as a City depository to hold payroll deposits?
Does a financial institution have to be authorized as a City depository to hold 35 6/6/06 - FINANCE - BILL 051142, ETC. payroll deposits?
Does a financial institution have to be an authorized City depository to hold payroll deposits?
Okay. In taking a look at the type of funds that are used to fund payroll, I would say it's almost like 99 percent pure City Treasury funds, which are under the Charter, the funds that came into the City Treasury into consolidated cash and are paying for payroll. There are some payrolls which come out of bond funds and other smaller funds, but I would say on the whole that they are City Treasury funds and, yes, they should be an authorized depository.
How many financial institutions currently hold payroll deposits?
How long has 36 6/6/06 - FINANCE - BILL 051142, ETC. the institution been holding payroll deposits?
I can't say that I know the total history, but because of the institutions which preceded it, I would say that it probably has a 10, 8 or more year kind of history. 9
And how is 10 an institution selected to hold payroll 11 deposits? 12
Based on my 13 understanding of the history banking in 14 the City Treasurer's Office, that the 15 City of Philadelphia, because we are such 16 a large institution with 30,000 17 employees, that they tended to bank at 18 the largest bank in town, and over time 19 the succession banks have all kind of 20 collapsed into one, so that banking is at Wachovia now.
So years ago, someone picked the biggest bank and 37 6/6/06 - FINANCE - BILL 051142, ETC. the biggest bank has kept the contract?
Which follows my line of questioning. How many authorized City depositories are qualified to hold payroll deposits now?
I haven't gone through that process, but, again, I wouldn't veer too far from some of the larger banks because of the presence both in the branch community and the communities, and their presence in Philadelphia is an important part of the employee relationship that we have with the bank at the window. And currently Wachovia doesn't charge our employees for --
Do you know how many authorized City depositories are qualified to hold payroll deposits?
Do you know how many authorized City depositories are 38 6/6/06 - FINANCE - BILL 051142, ETC. actually qualified to hold payroll deposits?
That's my next question. Has an RFP or RFQ ever been issued to hold payroll deposits?
In answering that question, I'm going to say it's difficult, because in the City Treasurer's Office in the last two years that I've been there, I haven't had access to two deputies and three administrative staff people.
My question is simply, to your knowledge, has one ever been issued.
No, no. I want to answer the question. Because of that institutional knowledge is not in the department, because of the administrative staff that's not available to me as City Treasurer, there is no link to the past, so I couldn't find the paper trail that 39 6/6/06 - FINANCE - BILL 051142, ETC. indicated when and if that was ever done in the past. So that's what I'm saying, there is no institutional trail that I can relate to you because there's no one to ask and the files are dead files.
Is there any reason that an RFQ or RFP should not be issued to hold payroll deposits?
Again, it has to do with my caution about the processing internal to the City and also with the banks. There's also -- I got some feedback from some of the banks too in their concern about if this was a year-to-year contract, as most City contracts are, that would be a destabilizing factor in their consideration of taking on payroll, because from a year-to-year basis, it's very difficult to change gears all the time.
This is actually your decision as City Treasurer to decide how long the contract should be 40 6/6/06 - FINANCE - BILL 051142, ETC. and to issue the RFP or RFQ for however long a period of time you think that it should exist. So is there any reason absent timing, which is pretty much under your control, and even aside from the bill, is there any reason that there shouldn't be a request for qualifications to all the City depositories to find out who is actually qualified to hold City payroll deposits?
In your view, according to the City Charter, does City Council have the authority to approve payroll depositories?
According to the Home Rule Charter, in your view, does City Council have the authority to designate payroll depositories?
According to the City Charter, yes. City Council designates the City -- authorizes the 41 6/6/06 - FINANCE - BILL 051142, ETC. City depositories.
One of the things in the RFP process that I think the bill 6 kind of addresses is what happens in the instance if the RFP goes out and an institution that responded is not an authorized depository.
If enacted, will you implement the ordinance by issuing an RFP or RFQ for payroll deposits, and when will you do it?
If that process were to begin and approved by Council by ordinance, with the timetable explained in the ordinance for July 1st of 2007, I would have to say we'd have to start immediately, because I know the planning time involved in creating an RFP and getting a contract through the process. So I would hope to have an RFP designed in the first quarter of the year, hopefully a response by the second quarter in the year and the contract 42 6/6/06 - FINANCE - BILL 051142, ETC. pretty much in motion by January, if everything were to work out if there was a change.
And does the Administration have a recommendation for any flexibility it might need in terms of timing?
That's the one thing that concerned me in my testimony, is that having hard-line cut-off dates doesn't provide the administrative possibility that the contract may not be in place. The RFP might have some problems with it in terms of execution and immediately withdrawing all funds, which would put the payroll payments at risk.
Just for the record, this bill was drafted by City Council technical staff. The original date in it was January 1st. I actually changed it to July 1st. I'm willing to be a bit more flexible than that as well. But thank you for your testimony. 43 6/6/06 - FINANCE - BILL 051142, ETC.
Thank you. Councilman Goode asked a majority of the questions that I was going to ask. I want to ask Councilman Goode the question about the bill since it's his bill. Would the contract be subjected to the approval of Council prior to the Administration entering into a contract with the institution?
The way the bill is drafted, the City Treasurer's Office would issue an RFP or RFQ, would select a bank or banks from that process, enter into a contract that would be negotiated on behalf of the Treasurer's Office and the Law Department, then that contract would come to Council at that point. So the process is totally 44 6/6/06 - FINANCE - BILL 051142, ETC. controlled by the Executive Branch of government leading up to the selection of a bank or banks, and even the contracting is left up to the Executive Branch. So it's totally within their control, but it would come to City Council for approval since it is a long-term arrangement.
Okay. My concern is the administrative process for all of this in terms of suppose July 1st of 2007 you're not prepared. What happens at that interim to all of the payroll deposits?
Exactly. And that's the concern that I'm expressing, is there has to be some alternative, either to continue the existing relationship in some form or fashion so that payroll can continue to be met until the other requirements are fulfilled.
So July 1, 2007, you don't have -- let me just make sure I'm reading this correctly. After July 1, 2007, if no contract has been 45 6/6/06 - FINANCE - BILL 051142, ETC. executed with any bank -- first let me ask you a question. I'm trying to get the process here. Do we approve the contract before they issue the RFP or after the RFQ is executed?
They issue an RFP or RFQ. They select the bank. They go to a contract, and the contract has to be approved by us.
So the contract is approved after we're out of session?
If it's not approved before we leave, then there's no 21 contract.
We approve it before we leave. 46 6/6/06 - FINANCE - BILL 051142, ETC.
I'm telling you, what if we don't have it before we leave?
This is a process that's completely within the control of the Administration. They can issue their own RFP, whatever RFP they want. They can select whoever they want. They can go to contract and formulate whatever contract they want. It just has to come here before it's formalized, and it should come here. I mean, under the Home Rule Charter, we have the right to not only designate depositories but to authorize long-term arrangements. There should not be a relationship with any institution that is long term, particularly of this nature, that is not approved by City Council, particularly since we have thousands of City employees 47 6/6/06 - FINANCE - BILL 051142, ETC. that essentially are affected by not only when they receive a check or not but by where our depository relationship is. There are thousands of City employees who literally have accounts at the bank that we choose. And City Council has not been involved in that process for decades, even though it has been its right to be involved by the Home Rule Charter. So I'm willing to be more than flexible in any timing concerns that exist and make sure there's an out, but to suggest that there should not be an RFP or RFQ and that City Council should not approve a contract to me is allowing our Charter-mandated authority to be usurped as it has been historically. We have a right to this.
Thank you, 48 6/6/06 - FINANCE - BILL 051142, ETC. Madam Chair. Good afternoon. I want to review some testimony to make sure I heard what I thought I heard. In your testimony you mention that some banks don't have those processes. So is it not possible that the RFQ process would indeed wean out banks who simply don't meet the muster to be able to execute what's required for 30,000 employees? The RFQ would narrow the field; would it not?
And then you said that -- and this could very well be a misquote. I just need to know for clarity. Wachovia is one of the City's holders. Who are the others?
Well, primarily of the nine banks, most of our funds are kept at Wachovia, PNC, Mellon Bank and United.
Can you speculate what percentage is held by Wachovia?
I'm told that that is within the material we have here. Fifty-four percent of the -- 54 million is held by Wachovia Bank. That addresses that question.
Do the other banks hold payroll deposits? Only Wachovia does payroll?
Well, insofar as institutional knowledge, it appears as though the last four to six City Treasurers have made a very strong effort to consolidate the banking at one bank 50 6/6/06 - FINANCE - BILL 051142, ETC. institution as much as possible for operational reasons, because dealing with one entity is less complex than dealing with a number of banks, and the relationship does benefit in this case payroll by the earned credits which are earned by other accounts for payroll, because payroll in and of itself, as I expressed in my testimony, is really kind of like in and out. And I think Philadelphia should be very proud of the fact that we have presently 74 percent of the employees on direct deposit. So that means the money goes in and the money goes out. So it's the other percent 17 of paper checks, which is approximately 18 8,000 employees, where some of the funds 19 linger. Because payroll deductions and 20 taxes, et cetera, again, they go in and 21 out. So it's just the paper checks, that 22 we wait for them to be cashed, and if 23 they don't get cashed, they go to the 24 State of Pennsylvania for unclaimed 25 monies. 51 6/6/06 - FINANCE - BILL 051142, ETC. But, again, I looked at the analysis, and our payroll account is usually in a negative position. So it's the other accounts that are carrying the cost for processing payroll.
Because the nature of the deposit is in and out, if we were to have payroll at a separate institution with no deposits, the likelihood is that we would be charged for the service, because the deposit is made to the account and goes in and pretty much goes out, so the deposit doesn't linger there long enough to earn any credits or any interest that would be applicable to fees.
I'll come back. 52 6/6/06 - FINANCE - BILL 051142, ETC.
The other banks, Commerce, PNC, United Bank and Mellon, how did they become the lucky four? What process was used for these other banks to participate in the City's business transactions?
Again, I don't have enough institutional knowledge available on my staff to tell whether they had an RFP process in the past or whatever, but, again, most of it has been there for a long time and in place.
I see. Does your department have any RFP process for any of the business it conducts?
Well, in the City Treasurer's Office, there's three major functions. One is the disbursement of checks. Two is our cash management to make sure that the funds are available in all of our bank accounts daily, and then the third is investments. So keeping bank deposits is really the least important aspect of our relationship with 53 6/6/06 - FINANCE - BILL 051142, ETC. money. This keeping deposit to bank does not benefit the rate of return. So in the investment area, in the '90s, the City Treasurer went out and had an RFP process for money managers. So we do have a group of money managers who have contracts with the City Treasurer's Office through an RFP process, so that on a daily basis, we inform them of what excess cash we have above expenses. They take that cash and invest it for us at the maximum returns.
I see. And did I hear you say also that the position of the Administration at this juncture is? I need you to complete the sentence.
Well, I heard no 20 objection to the RFP process, but, again, I have voiced a concern about the timing of the administrative process, that we wouldn't want be left without an option.
So given that realistic possibility, is it 54 6/6/06 - FINANCE - BILL 051142, ETC. possible then that the department could -- and I'm jumping ahead -- but in an effort to be proactive, craft language that allows for a bridging of the finalization of one contract to the start of another? Is that not one way to approach the type of possibility that Councilwoman Tasco raised?
Exactly. That would make the legislation more administratively manageable.
Sponsor of the bill, did you hear the answer to that question?
Could you please state the answer to the question, sir. It's just important to me that the sponsor of the bill hear that.
Given the potential reality raised by Councilwoman Marian Tasco, could the department be helpful in crafting bridge language, for 55 6/6/06 - FINANCE - BILL 051142, ETC. lack of a better description, that accommodates potential breaks between the finalization of one contract and the start of another?
Oh, you did? And I didn't even know that. So thank you very much for your testimony, City Treasurer.
Thank you very much. Are there further questions for the Treasurer or comments? (No response.)
Thank you very much. We will now consider Bill No. 21 060438 removing the Philadelphia Keystone Opportunity Zone, a portion of a property in the 65th Ward so that it may be developed for residential use. Will the Clerk please read the 56 6/6/06 - FINANCE - BILL 051142, ETC. title of the bill. And we will ask anyone who is here to testify on this to come forward.
Bill 060438, an ordinance removing a portion of a property in the 65th Ward of the City, in the vicinity of Delaware River, from the Philadelphia Keystone Opportunity Zone, subject to the request and consent of the owners of said property, under certain terms and conditions.
Is there anyone here to testify on Bill No. 15 060438? (No response.)
Seeing none, this is in Councilwoman Krajewski's area. Seeing none, we will call her office. We assume that she is supportive of this legislation. We'll verify that.
It is Councilwoman Krajewski's area and her 57 6/6/06 - FINANCE - BILL 051142, ETC. bill.
Yes. Where is the Administration on this? Is there anyone who has information with regard to this bill? (No response.)
All right. We'll go to the next bill and we'll try to find out if there is more information in that regard with this Keystone Opportunity Zone. We'll ask the Clerk to read the title of Bill No. 060227 authorizing the Philadelphia Firefighters who are members of the German-American Firefighters Association to designate payees for voluntary payroll deductions. Is Mr. Kearney present of German-American Firefighters Association here? Thank you. We have his testimony, and after the Clerk reads the 58 6/6/06 - FINANCE - BILL 051142, ETC. title of the bill, we'll welcome you to testify. Clerk.
Bill 060227, an ordinance amending Section 19-203 of The Philadelphia Code, entitled "Payroll Deductions," to add the German-American Firefighters Association to the list of designated payees to whom an employee may direct payroll deductions, all under certain terms and conditions.
Good afternoon, Madam Chairman, Committee members. My name is Dave Kearney. I'm the President of the German-American Firefighters Association and I'm here to testify and ask for your passage of Bill No. 060227. This bill would allow our members and, more importantly, our potential and future members the modern convenience of payroll deduction for 59 6/6/06 - FINANCE - BILL 051142, ETC. association dues. The German-American Firefighters Association is a fraternal organization. It consists of men and women who seek greater enjoyment in life through camaraderie. As our name implies, we are comprised of members with German ethnic origins and/or those individuals who are now or once were associated with the fire service. As our inclusive title implies, the German-American Firefighters membership is quite varied. Our ranks, while obviously Germanic in essence, do not exclude other ethnic backgrounds, and the fire service status of our members is diversified. We include a variety of firefighters who are either active duty or retired. We also have on our roll members who participate in other organizations that support the fire service. German-American Firefighters Association was founded in June 1982 with 60 6/6/06 - FINANCE - BILL 051142, ETC. a charter membership totalling 92, most of whom were members of the Philadelphia Fire Department. Although fraternal, our organization is also charitable in nature. Proceeds from our functions have been donated to various fire-related charitable organizations. Our principal event held in the spring of each year is our Muster. Public and private fire apparatus are displayed and compete for various plaques and trophies. In addition to sponsoring our own affairs, we also participate in those of other organizations. Our most visible presence is when we march in the von Steuben Day Parade, the Tacony Day Parade and Thanksgiving Day Parade alongside our antique fire apparatus. We also attend social functions at other German clubs in the area. These include banquets and outdoor fests where entire families are welcomed. 61 6/6/06 - FINANCE - BILL 051142, ETC. We traditionally host German firefighters who visit us for the annual von Steuben Day Parade in September and at other times throughout the year when they visit us. While most of our members are City employees, our membership is not restricted to Philadelphia or the Delaware Valley. Many of our members live throughout the United States and as far away as Germany, Austria and Switzerland. We found that after speaking with the leadership of several other public safety-related associations, including the Second Alarmers and the German-American Police Association, that having payroll deduction is not only convenient but results in an increased membership participation. I, therefore, respectfully request that the Committee move this bill forward to the full Council. Thank you. I'll be happy to 62 6/6/06 - FINANCE - BILL 051142, ETC. answer any questions you may have.
Thank you very much. Are there any questions for this witness? (No response.)
Thank you very much. We will now ask the Clerk to read the title of Bill No. 060243 increasing from $200 to $300 the fee assessed for special ordinances and requiring that fee to be paid prior to introduction of said ordinances. Clerk.
Bill 060243, an ordinance amending Section 21-501 of The Philadelphia Code, entitled "Special Rights, Privileges and Franchises," by increasing the fee related to special ordinances and requiring that such fee be paid prior to introduction of such ordinance, all under certain terms and conditions. 63 6/6/06 - FINANCE - BILL 051142, ETC.
Thank you very much. Is there anyone here to testify on this bill? (No response.)
Councilwoman, what does this mean? What is this bill about?
Our understanding is that this increases -- both these bills are Administration bills.
If they're not testifying, we shouldn't be passing them. I want to know what they're for.
Our understanding -- well, this is an Administration bill. I think we ought to hold it. 64 6/6/06 - FINANCE - BILL 051142, ETC.
Thank you, Councilwoman Tasco. We'll ask the Administration if they may send someone here to testify with regard to Bill 243. We have asked about Bill No. 060438, and we've been told that that prevents a double credit with regard to Keystone Opportunity Zone for a property or area that's already been given a break in another area. However --
I want to say this, if they're their bills, then they should come and respect this Council to come and present testimony on this legislation and not leave it up to us to interpret it.
I think I agree with the Councilwoman, that the Administration should testify on their bills, and we're again asking them to come forward. Otherwise, we will move 65 6/6/06 - FINANCE - BILL 051142, ETC. forward and hold these bills or recommend that this Committee does the same. We're now up to PGW, and while they're coming forward, we will ask the Clerk to read the titles of Bill Nos. 060377 and 378 dealing with Capital Budget items. I'll have the Clerk to read the title of both bills.
Bill 060377, an ordinance further amending Bill No. 12 050792, entitled "An ordinance approving the Fiscal Year 2006 Capital Budget providing for expenditures for the capital purposes of the Philadelphia Gas Works, including the supplying of funds in connection therewith, subject to certain constraints and conditions, and acknowledging receipt of the Forecast of Capital Budgets for Fiscal Years 2007 through 2011," as previously amended by Bill No. 060011, by approving a further revised Capital Budget for Fiscal Year 2006; and Bill No. 060378, an ordinance 66 6/6/06 - FINANCE - BILL 051142, ETC. approving the Fiscal Year 2007 Capital Budget providing for expenditures for the capital purposes of the Philadelphia Gas Works, including the supplying of funds in connection therewith, subject to certain constraints and conditions, and acknowledging receipt of the Forecast of Capital Budgets for Fiscal Years 2008 through 2012.
Thank you very much. Please identify yourself for the record and begin your testimony.
I guess I'll begin. I'm Janet Parrish, the Executive Director of the Philadelphia Gas Commission. Good afternoon, Chairwoman Blackwell and members of the Committee.
Good afternoon. Thank you. Thank you for your patience.
Chairwoman Blackwell and members of the Committee, I'm Steven P. Hershey, Vice-President, 67 6/6/06 - FINANCE - BILL 051142, ETC. Regulatory and External Affairs of PGW.
I should add that acting Chief Operating Officer, Craig White, who was here for the hearing yesterday was unable to attend because of a meeting that had previously been scheduled and unavoidable in Newark, New Jersey today.
Good afternoon, Chairwoman. I'm William Gallagher. I'm Director of Budgeting and Reporting for Philadelphia Gas Works.
Thank you very much. You may begin your testimony.
Thank you. Councilwoman Blackwell, I'll start with 060377, the amendments or further amendments to the Fiscal Year 2006 Capital Budget. 68 6/6/06 - FINANCE - BILL 051142, ETC. This bill embodies the recommendations which were adopted by the Gas Commission at its meeting on May 2nd, 2006. There is an amendment to the budget that would support some new load growth projects, which are important to bringing new revenues into Philadelphia Gas Works, and a major proportion of that pertains to the Civic Center Boulevard project, which I know you are familiar with in your district. With regard to 060378, the Fiscal Year 2007 Capital Budget, this bill too represents the recommendations of the Gas Commission adopted at its May 2nd, 2006 meeting with respect to the budget and forecast for the future years. We have provided written testimony that addresses both bills, and without belaboring that, I will be happy to answer any questions that you may have.
Thank you very much. 69 6/6/06 - FINANCE - BILL 051142, ETC. Is there further testimony?
Madam Chairwoman, Craig White previously submitted written testimony for the record here. We will not read that testimony, but we are available to answer any questions with regard to that testimony. And that testimony is consistent with the record established at the Gas Commission and consistent with the testimony of Ms. Parrish that has just been given.
Thank you very much. We are happy to make all testimony in its entirety part of our record. We have questions, but I'll defer to Councilman O'Neill, who has some serious concern.
On a somewhat related matter that goes back to 2004, and I have some correspondence, 70 6/6/06 - FINANCE - BILL 051142, ETC. Mr. Hershey, that you've gotten me on this issue and I have some questions about it. One, I have a copy of a four-page letter from private counsel in Harrisburg that I assume represents PGW.