Committee Hearing, June 6, 2006

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 very much. Councilman Goode.

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?

Sure.

Thank you.

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.

He actually just sent me an e-mail.

Is he not coming?

He sent me an e-mail unrelated to this hearing.

All right.

I think we ought to have him here.

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?

I did read it.

Thank you. That's fine. Thank you very much. Please identify yourself for the record, Ms. Williams and Mr. Deegan, and begin your testimony.

Krista Williams, PIDC.

I'm Paul Deegan, D-E-E-G-A-N, and I represent PIDC and PAID.

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.

Thank you.

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?

Sure.

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.

If I could read that into the record, please, yes.

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?

Currently it's at Wachovia Bank and --

Do we have some kind of contract with them?

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.

Say that again.

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?

I do not know that, and I believe --

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?

Not at all.

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?

Excuse me. I didn't hear that.

Does a financial institution have to be authorized as a City depository to hold 35 6/6/06 - FINANCE - BILL 051142, ETC. payroll deposits?

I'm not sure I understand your question. I'm sorry.

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?

Just one.

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 --

Because of size.

So years ago, someone picked the biggest bank and 37 6/6/06 - FINANCE - BILL 051142, ETC. the biggest bank has kept the contract?

Yes.

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?

Excuse me, Councilman?

Do you know how many authorized City depositories are 38 6/6/06 - FINANCE - BILL 051142, ETC. actually qualified to hold payroll deposits?

I wouldn't know that unless we did the RF --

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?

I would see no 13 objection to that process, no. 14

In your view, according to the City Charter, does City Council have the authority to approve payroll depositories?

Excuse me?

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.

Last --

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.

Okay.

Thank you, Councilman. Councilwoman Tasco.

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?

It would have to be approved before we leave.

So it's not approved before we leave perhaps.

If it's not approved before we leave, then there's no 21 contract.

So what happens to the payroll process?

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 --

But the other thing is --

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.

I think that's it.

Thank you. Councilwoman Reynolds Brown.

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?

That's correct.

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.

And 49 6/6/06 - FINANCE - BILL 051142, ETC. United?

United Bank, yes.

Can you speculate what percentage is held by Wachovia?

It's actually within our folders.

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.

Could I add on to that question?

Please.

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.

Say that again.

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.

Go ahead. I'm sorry.

You're done?

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?

No. 17

Could you please state the answer to the question, sir. It's just important to me that the sponsor of the bill hear that.

Exactly. Sure.

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?

We just resolved that.

Oh, you did? And I didn't even know that. So thank you very much for your testimony, City Treasurer.

Okay. Sure.

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.

Who proposed it?

It is Councilwoman Krajewski's area and her 57 6/6/06 - FINANCE - BILL 051142, ETC. bill.

I thought it was the Administration.

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.

Thank you. Good afternoon, Mr. Kearney.

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.)

Anyone here? (No response.)

Thank you very much.

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.

I think they should be here to testify.

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.

Thank you, Mr. Hershey.

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.

Thank you.

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.

Yes. Good afternoon.

Good afternoon.

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.

From Mr. Clearfield, that's correct.

Yes. To your general counsel, Ms. Pozesky. And it's very informative and it's very long. It's almost a four-page letter. My guess is, it's somewhere on your bill. It's probably about a thousand dollar letter. But what really shocks me is that this issue deals with a unanimous City Council ordinance that became law on July 1, 2004 and which calls on PGW, as well as the Water Department -- and the Water Department I think is going to be a mandamus issue if it doesn't happen soon -- to spell out in bills what people are paying for that's not their gas and your overhead, but where you're paying for other people's gas. And I would 71 6/6/06 - FINANCE - BILL 051142, ETC. strongly suggest that you would split that item between, whenever you get to do this, between that which you have decided as a company to subsidize people's bills with and the unpaid bills, the purely unpaid bills, because they're really two different issues, I think, for most people. And this is what really shocks me, and explaining in four pages why this hasn't been done yet, and I understand the reasoning. There's a couple of groups out there, Action Alliance and an Office of Consumer Advocate, but I'm not sure who the Office of Consumer Advocate is, so I just want some clarity on that. I know Action Alliance. Is it the Mayor's office? Is it a State office? Is it the PUC's office?

The Office of Consumer Advocate is an office established by Pennsylvania statute I believe in the 1970s, and they represent 72 6/6/06 - FINANCE - BILL 051142, ETC. utility customers before the Public Utility Commission and in the courts. They've long been established and well respected.

I understand. So some people don't like this, fine. What really gets me and upsets me is that this very, very expensive letter explaining why this hasn't been done talks about from the very beginning a City Council resolution. Now, you know and I know that a City Council resolution is a suggestion. A City Council ordinance is a lot different than that and a lot stronger. And if Council was paid for this letter on the assumption that it was a resolution and not a new law of the City, then I think you paid somebody in error, because everything that follows it follows this suggestion that isn't being followed. Now, I understand you're under the PUC and they control this issue, but what I don't understand, because it is an 73 6/6/06 - FINANCE - BILL 051142, ETC. ordinance that dictates this, that there's nothing in here to suggest that, This is how we could go, the State legislature could help us with this. There's not anything positive in here like that, Council wants us to do this and this is what we're going to recommend. It's just saying why we shouldn't do it or why we can't do it. And in one part it says that the PUC could take up to four months to approve this and then we could go on longer in court if the Consumer Advocate and the Action Alliance opposes it. We're two years already. We could be past all that. It would be the longest litigation in the history of the PUC on such a small issue, and we're past two years and we haven't even gotten to the -- if you don't want to do it, just say you don't want to do it, and I and others can react accordingly. But foot dragging and having a very long-winded letter, which I will share with my 74 6/6/06 - FINANCE - BILL 051142, ETC. 9 percent of whom I've talked to all think this is a consumer right to know. And as I go to senior citizen groups, they cannot believe me. They actually think I'm lying when I tell them that Action Alliance of Seniors Citizens would fight this, because that's their holy grail group. That's the group that they revere to lead them on issues involving seniors. And yet they don't like paying for other people. And there's another issue. People want the government to subsidize people that can't afford utility bills. They want the federal government; if not the federal government, the State government; if not the State and federal government, the City government. They don't want a utility to subsidize with their money. They want an elected 75 6/6/06 - FINANCE - BILL 051142, ETC. legislative -- an executive branch of whatever level of government it is to subsidize with tax money. And somewhere along the line -- I understand you're about percent this 7 line would be of somebody's bill right 8 now when you add in the social programs 9 and the bad debt. I can understand why 10 you might not want that printed, but I 11 can also understand why a customer would 12 feel entitled to it. 13 So could you start by asking 14 Mr. Clearfield if he would take another 15 look at it as an ordinance two years 16 after the ordinance became effective and 17 not a resolution? Because resolutions in 18 Harrisburg are the same as resolutions in 19 Philadelphia and in Washington. They 20 mean nothing. They're nice expressions 21 of someone's thoughts or desires or 22 opinions, but they're not binding or 23 intended to be binding. 24 The Water Department hasn't 25 done this either, but they're still 76 6/6/06 - FINANCE - BILL 051142, ETC. waiting for an opinion from the Law Department, and the Law Department is going to not get another request for an opinion. They're going to get a mandamus action, because that's totally within the City. I understand the PUC aspect of this, but I don't understand when somebody threatens to oppose something that this legislative body unanimously wanted to do, that your counsel says, Well, we shouldn't do it because we'll be tied up in litigation. You can't stop people from suing. Please respond.

I don't want to spend this whole time on this, but to me, this is serious. You do remember the reaction around the City when you were actually going to put a line in your budget that you never did, in your bill, and it was actually getting called by seniors, it got labeled the dead-beat line item, because you were asking for money in case bills went up and didn't pay them, that you could add to people's 77 6/6/06 - FINANCE - BILL 051142, ETC. bills. And they don't know it was already in their bill. They've already had it in their bill. It's just not stated. You were just being forthright and honest asking for something to be held in reserve in the event that fortunately what didn't happen might happen. I'm just kind of fed up with this thing.

Councilman, I understand your frustration. I should say first that PGW understood that it was a City Council ordinance and treated it as an ordinance, treated it as --

Who did?

-- our obligation. As we explained --

Wait a minute. I'm talking about the counsel here, Mr. Clearfield. Mr. Clearfield makes reference to a resolution about 24 times in his letter. 25

I think it's 78 6/6/06 - FINANCE - BILL 051142, ETC. simply a misstatement on his part, that he should have said ordinance instead of resolution. What I'm addressing is the fact that we treated your action, this body's action, as an ordinance and that it was our legal obligation to carry it out, to the best of our ability. As Mr. Clearfield does indicate and as we indicated at the time of City Council's debate on the issue, our bill 12 is regulated by the PUC and we don't have the ability to change it without their authorization. On that issue, as Mr. Clearfield does accurately describe, we did go to the Commission informally, and after talking to the Commission, understanding that they would likely oppose the change in the bill that was required by the ordinance and also understanding that the State Office of Consumer Advocate and that Action Alliance would oppose it, we made a judgment that we would likely lose and we 79 6/6/06 - FINANCE - BILL 051142, ETC. made a judgment that that would likely be a poor use of customer funds. Now, the mistake that we made in that process was, as I said in my letter to you, we failed to report that decision back to City Council and to consult with you as to how to proceed from there. Had you at that point said, Well, you're right, it's not worth litigation if you're going to lose or if prudent judgment is that you would lose, that's correct, or you could have said, We want you to go ahead and push it, and if you lose, so be it. As I said in my letter, that was our mistake. We should have done that. Now, as -- and we don't take that obligation lightly. We don't like making that kind of mistake. With regard to Action Alliance of Seniors Citizens, just before the hearing that was originally scheduled on the Capital Budget bills that are now before this Committee, I had occasion to 80 6/6/06 - FINANCE - BILL 051142, ETC. speak to the Executive Director of Action Alliance, Pedro Rodriguez, to confirm that they in fact did at that time and do now oppose the line on the bill and would they have opposed the attempt to put the line on the bill, would there have been extensive litigation, and he confirmed that that was accurate. I agree with you 100 percent that you don't give up just because somebody wants to oppose you in litigation. You make some decisions before you go into a litigation whether the litigation is likely to succeed and whether it's going to be a good use of customer funds. With regard to the programs that create the cost that you're referring to in terms of the various programs on the one hand, such as the customer responsibility program, the low-income conservation program, senior citizen discount on the one hand, and on the other hand, the bad debt, those are 81 6/6/06 - FINANCE - BILL 051142, ETC. all programs that are either mandated by the PUC, the CRP, the low-income conservation program or approved by the PUC, the senior citizen discount, and a certain level of bad debt is approved by the PUC and incorporated in our rates. So those are all programs that we manage under the regulation of the Public Utility Commission.

Mr. Hershey, you sound very sincere, and I only have one piece of correspondence and that was at my request a few months ago and it's dated April 24, 2006. This bill passed on July 1, 2004. What I would like from you prior to Council passing your Capital Budget, hopefully next week, is all correspondence of any kind dealing with this issue from or to PGW with the PUC, with anyone else that you were in discussion with or received correspondence, whether it would have been Action Alliance or anyone else. 82 6/6/06 - FINANCE - BILL 051142, ETC. We're all big enough to know that some things are more difficult than others, but if the first thing in writing on this issue is April 24th in this resolution letter, I'll call it, I don't think the evidence, at least so far, supports how serious this has been taken. I think people understand CRP. They understand a whole lot of things, but what they really understand is, they'd just like more information. And if in addition to that you could get me, one, and send it to the Chair, a simple comparison just going back three years, '06, '05, '04, when you combine the assistance programs, the cost of those with the bad debt, how much they were at any point along the way. In other words, something indicating where it was, let's just say, in -- I guess for three years you'd have to go back to mid '03. Let's use July 1st, '03, July 1st, '04, '05, '06. So it will give us a three-year picture of what the total was and then 83 6/6/06 - FINANCE - BILL 051142, ETC. what the breakdown was. And I don't need it for each of the assistance programs, but I just want to make sure that as your debt collection has gotten better, it hasn't just been shifted over to the responsibility programs. I mean, that would be a very nice thing to give people more assistance, but it would also be very clever in terms of masking what is still there, you're just calling it something else. And I really want to see it. I'm the one that's been out bragging about your collection, but when I see this, I just become suspicious. I'm sorry. So if you can get me that, I'd appreciate it.

Councilman, I would be happy to provide that, and we will do so. I can tell you that, generally speaking, the bill collection has been improving in its effectiveness. Bad debt actually in the last couple of years has declined, and so there's less 84 6/6/06 - FINANCE - BILL 051142, ETC. of a burden with regard to that issue. There has been a substantial increase over the last several years in the number of participants in the CRP program, and, in fact, in the last year, there was an increase of approximately 10,000 participants, in part due to the concern about high rates. The low-income conservation program is essentially a flat expense of approximately $2 million per year. The senior citizen discount has declined as a cost to customers because, as you're aware, I believe the --

Eligibility was limited.

That's correct. Effective September 1, 2003, we were no 20 longer able to add new customers to that program by order of the Commission. Existing customers were allowed to stay on, but the number of participants declined.

On your 85 6/6/06 - FINANCE - BILL 051142, ETC. CRP program in the last three years, you mention one is flat, the energy conservation. The senior assistance has gone down due to the lack of new eligible members, and the one left is CRP, correct? Is that the one?

Yes.

And has eligibility for CRP changed in any way in the last three years?

No. The two major factors in the impact of that program, one is the increase in the number of participants, particularly in the last year. The second is the increase in the price of natural gas, which has had a dramatic effect on the shift to other customers, and the reason for that is that CRP customers are required to pay a percentage of their income. To the extent that their income remains essentially stable, the amount they pay remains essentially stable. When gas prices increase, that means 86 6/6/06 - FINANCE - BILL 051142, ETC. there's a larger part of what would normally be billed to them under a normal bill that they're not picking up. And so the spread is increasing.

Now, you said the PUC requires the CRP program. Do they require it at the level that you offer it? Are they that specific? Do they tell you, This is what we want the eligibility to be and this is how we want the income levels to be established?

The PUC requires that every utility in the state have a program like this. They then ask each utility to submit a specific program design, and after some formal or informal discussion at the Commission, they approve a particular design. They approved the design that is in place for PGW now in 2003, I believe it was. We have just completed an independent formal evaluation of our program and submitted it to the PUC. That is subject of an ongoing review, 87 6/6/06 - FINANCE - BILL 051142, ETC. which is likely to be part of a formal review at the Commission over the course of the next six or eight months. And at the end of that program -- or as part of that process, we will make proposals to change the design of the program to make it more fair to all customers, trying to balance affordability on the one hand and fairness to other customers. If I may, when I served as the public advocate representing PGW's customers, we created in 1989 the predecessor of this same program, and when we did so, we had two major goals. One was to ensure that low-income customers had a bill that was affordable to them and, second, that affordable payment was sufficient to cover at least the cost of natural gas that was supplied to that customer, plus at least one dollar toward PGW's fixed costs or overhead. And if we met those two goals, then it was likely that the customer would stay on the system, continue to 88 6/6/06 - FINANCE - BILL 051142, ETC. receive service and that all other customers would be better off, because PGW would be avoiding the credit and collection costs, and that would be one dollar that no other customer would have to pay. Now, we met those goals pretty much through the 1990s with the help certainly of LIHEAP, because the cost of gas was essentially flat, or at least we were very close to meeting those goals. With the increase in natural gas costs, we were not able -- the program did not meet those two goals. And certainly now we don't come close -- the program payments do not come close to covering the cost of natural gas, and it's for that reason that we will recommend changes to the program, again, trying to meet the goals of affordability to the individual participant and fairness to all the other customers. And it's not going to be an easy task, but we're working on that. 89 6/6/06 - FINANCE - BILL 051142, ETC.

So the PUC requires utilities to have some customers pay for part of other customers' bills? It's a requirement?

Yes.

It wasn't just a requirement when you became subject to PUC; they already had that?

No. In 1989, when we first proposed this program --

No, but how long have you been under the PUC?

Well, completely since 2003.

And prior to the PUC having control over you, authority over you, did they already have a CRP requirement among utilities in the Commonwealth?

Other utilities, yes, did have similar programs.

So this appointed body was telling another appointed body that you had to subsidize 90 6/6/06 - FINANCE - BILL 051142, ETC. certain customers through certain other customers' payments, and no elected body at all three levels of government involved in using what we normally use for subsidies, and that's tax money. And at the time, the State was one of only two states in the universe of the United States not to have contribution even towards LIHEAP. Now, we do have some LIHEAP money now from Pennsylvania; is that correct?

In this past year, Pennsylvania did make a contribution to that program, yes.

How much?

Just under $20 million.

And how much of that goes to PGW's customers?

Normally we would get -- there's no separate accounting for that specific money, but if the ratios hold, we would normally get, I believe 91 6/6/06 - FINANCE - BILL 051142, ETC. it's, about one out of every six dollars in the program.

I'll accept the normal ratio. So about three and a half million dollars or so of the 20?

Approximately.

How much is our CRP total that some customers pay for other customers because the PUC requires it?

It's about $90 million now.

So even with the State now participating in LIHEAP, our customers are subsidizing other customers three times higher than the State, who orders it, is subsidizing other customers?

And, in fact --

They're real brave people up there in Harrisburg, I'll tell you. That's the kind of information I'm trying to get. I don't 92 6/6/06 - FINANCE - BILL 051142, ETC. know how they sleep at night.

I agree with you on many of the points you've made. I point out that there was a recent op-ed piece in the Philadelphia Inquirer by PUC Chairman, Wendell Holland, basically saying that every utility in the state has exactly the same kind of problem or roughly the same kind of problem that you've just described that we have. The difference is that our problem is larger, substantially because of our service territory and our demographics. I also agree with you that normally good public policy would mandate that this sort of thing would come out of taxpayer dollars and not out of utility rates, and if you adjusted PGW rates to make our programs equal to those of others, our rates would be very competitive with other utilities in the state. It's the size of the cost. It's the cost of the social programs that 93 6/6/06 - FINANCE - BILL 051142, ETC. makes our rates much higher.

Okay. Well, I would appreciate you putting that in writing, because I'd like to have a better understanding of it, along with the other things I requested. And that will be it for today. Thank you.

Thank you, sir.

Thank you very much. I guess that the line of questions of Councilman O'Neill I suppose respond to the $18 million payment, the $45 million loan and where we are in that regard in terms of receiving those dollars. Are there other questions from members of this Committee in this regard? (No response.)

If I may, Madam Chairwoman, I would simply offer to Councilman O'Neill, when you receive some of this information from PGW, the Gas Commission would be happy to assist, to 94 6/6/06 - FINANCE - BILL 051142, ETC. the extent you require it, in some of that interpretation of the data; for example, with regard to bad debt expense. It's worth bearing in mind, although Mr. Hershey indicated, that generally that's on a downward trend and it is true that the collections situation has improved over the past couple years. This year it looks like things are declining again somewhat because of the continuing high gas costs. But it's important to note that with bad debt expense, that really that is subject to agreement with PGW's auditors at the end of the fiscal year, and what you actually will see when you see the data, a little bit different from what Mr. Hershey just stated, you will see that bad debt expense actually increases some years. There's a little bit of an up and down, because occasionally they will make a decision that they've got adequate funds available for debt service coverage and, 95 6/6/06 - FINANCE - BILL 051142, ETC. accordingly, they will basically, as a prudent matter, sock away some additional funds to write off accounts that they know are going to be written off eventually to get them out of the system. So I just would caution you that as with everything with --

Well, a footnote would be helpful on something like that.

With PGW's financials --

Something that's not quite clear, even though it looks clear on the surface.

Correct.

Then if I can't understand the footnote, I'll call. I could tell in going to meetings and hearings, there were a lot of hearings around the City when you would propose what is commonly referred to as the dead-beat tax that didn't make it, that the people who objected the most 96 6/6/06 - FINANCE - BILL 051142, ETC. were the people who could least afford to subsidize anyone else. People that had a little extra money, they weren't going to a hearing to -- it was the people who are struggling to pay their bill and always know somebody else on their block, in their family, in their neighborhood who is trying to take advantage of something, and they just can't understand if they're having trouble enough paying their bill, why some of their bill is going toward somebody else. And it's the bill. I mean, I just strongly believe in broader subsidy from people that pay taxes than from utility payers. And I got to get a better idea of this whole CRP thing, because CRP goes up by 10,000 people in one year and your debt goes down, it seems to me it could have just been a shift over. And I've been out applauding PGW's collection efforts the last couple of years, and I hope I haven't been getting gamed myself. So I'll wait to see it. 97 6/6/06 - FINANCE - BILL 051142, ETC.

The Chair notes that we did not support totally getting rid of the senior citizen discount, and we also note that in today's environment where we have fires every day, we're always concerned about people who can't pay bills and people who end up victims of a system where everything goes up. They just can't pay them. And that in a humane society, it is our responsibility to still try to protect and provide for people who are unable to take care of themselves. That's my statement on this. And before I call on Councilwoman Tasco, let me note that there was a hearing scheduled today at 3:00 p.m. before the Committee of the Whole regarding Bill No. 20 060474 and Resolution 060485. This hearing will be recessed until Wednesday, June 14th at 10 o'clock a.m. So anyone here for Committee of the Whole regarding Bill No. 060474 and Resolution No. 25 060485, please note that that hearing 98 6/6/06 - FINANCE - BILL 051142, ETC. scheduled today will be recessed until Wednesday, June 14th at 10:00 a.m. The Chair now recognizes Councilwoman Tasco.

Yes. Just for the record, Councilwoman, I want to note that the Gas Commission along with PGW about a year or two ago spent some time talking about the increase in cost of gas, and know that we constantly charge other customers for that. We do see the need for more State subsidy. We've even talked about the City subsidy. There has to be a subsidy. Unless there is some federal subsidy, the cost is going to remain the way it is. And we talked to the State legislators. We set up meetings with the caucuses to let them know, give them all the data and information about what was really needed from them to help us with the rising costs and then the -- we have to just pass these costs on, but there needs to be more pressure put on the legislature 99 6/6/06 - FINANCE - BILL 051142, ETC. and on the federal government in terms of providing a subsidy. Like Councilwoman Blackwell says, there will be a percentage of people who cannot afford the high cost of the utility, the gas. How do we handle that? And that has been the question that we raised with our Board and the PFMC Board to bring this discussion to the table. And I will tell you, it may have resulted in maybe the increase of the LIHEAP program, but certainly we made a plea to the State legislature that there has to be another way to fund those people who cannot pay. But there will be. We have to accept that fact. And I agree with Councilwoman Blackwell, you can't let people freeze. And how we handle it is not just the gas company's issue. It's our issue and it's the State's issue and the federal government's issue, and that pressure has to come to bear on the elected officials to understand that.

If I may, 100 6/6/06 - FINANCE - BILL 051142, ETC. Councilwoman, the irony of all this is that, as you pointed out, Councilman O'Neill, this is the first time that the State did appropriate some supplemental funds, and I think the Governor has indicated it's a one-shot deal. That's my understanding from the news reports I've read. However, it's also my understanding that the State did not expend all of the federal LIHEAP dollars available to them. This year, once again, again, I think some of the members have a history in knowing that that's been the case, and it's just an untenable situation where funds are available and because the State attempts to avoid running out of funds to avoid having pressure brought to bear, that we need a State contribution or a larger State contribution. The income eligibility limits are kept artificially low. The Crisis Grants are kept artificially low, and the result was, the program closed at the end 101 6/6/06 - FINANCE - BILL 051142, ETC. of April with -- the report again I heard was over $75 million unspent. And there is an ability to roll some of those funds over to the next fiscal year, which the State likes to do to avoid a possible lapse in funding when they don't know what the feds might appropriate, but in my --

Who sets the eligibility requirements?

That is the State Department of Public Welfare, and they are the administrators of the LIHEAP program in the State. And there are definitely some serious policy issues there in terms of who is eligible, both income-wise, folks on payment agreements not being eligible and so forth, and that sort of working at cross purposes with PGW's needs. And that was really the focus of the efforts that Councilwoman Tasco just alluded to, was to try to make the State legislature aware of that gap or that conflict between what we need 102 6/6/06 - FINANCE - BILL 051142, ETC. here in Philadelphia and what all rate payers of PGW need and what the State is doing as a matter of policy.

So is 6 million of the 75 that's not spent the 7 money that -- 8

Again, my 9 understanding is that they've managed the 10 book so that $20 million, which cannot be 11 carried over or would lapse, that that is 12 spent and what remains unspent is the 13 federal portion, because the funds were 14 basically commingled, and the federal 15 funds do have an ability to be carried 16 over. A portion of the federal funds 17 have an ability to be carried over. 18

Now, are 19 income limits different in different 20 states?

Yes.

Are they higher in different states?

In a few.

103 6/6/06 - FINANCE - BILL 051142, ETC. Specifically, I'm thinking of states that are near us, like New York, Maryland, Delaware, New Jersey, Connecticut.

That, I couldn't tell you off the top of my head, but states do have some latitude. There are federal maximums or criteria, and then the states establish their plans within that. Many of the states use 150 percent of the poverty level. Pennsylvania has backed away from that in recent years in an effort to be able to spread around the available funds.

Ms. Parrish is correct that the federal government in its regulations sets general parameters. They then require each state to submit a plan which must comply with those regulations, and the states can differ dramatically one from the other. There are a number of differences between Pennsylvania and some of our neighboring states that Ms. Parrish alluded to one of them, and, that is, that in other states, 104 6/6/06 - FINANCE - BILL 051142, ETC. customers who have a payment arrangement can still get a Crisis Grant. That was also the case at one time in Pennsylvania. It's no longer the case.

Does the Crisis Grant come from LIHEAP funds?

Yes.

Yes. It's a special part of the LIHEAP program. There are other states that mandate that the LIHEAP Cash Grant go to the primary heating source. Pennsylvania has decided not to do that. The primary heating source, of course, is the biggest portion of the bill. I know breaking that out using my own heating bill, as an example, at home we have a gas-fired boiler, but it requires electric ignition and electricity for the circulators and things. But the gas is far and away the largest portion of my heating bill. Some very small portion of it would be attributable to electricity. And those other states say, Well, appropriate 105 6/6/06 - FINANCE - BILL 051142, ETC. public policy is to say that the cash portion of -- the Cash Grant would go to the primary heating source. Crisis could be left to the option of the customer. Pennsylvania doesn't mandate that, and so customers have a choice, they can give it to electricity or wood or water or anything, as long as it's related to providing heat for the house. So there are a number of differences between Pennsylvania and the other states, and as Councilwoman Tasco said, we made our pitch to the legislators, the Philadelphia delegation. We went to Harrisburg on a number of occasions. We spoke to various legislators, to the Governor's office, and repeated that just recently in a meeting with members of the Governor's staff looking toward next year with regard to money that was rolled over or not with regard to next year's State plan and these various options that might be available, hoping that we would have a 106 6/6/06 - FINANCE - BILL 051142, ETC. better opportunity to bring more money to Philadelphia customers. And we don't yet know how successful that was, but obviously the more people who send that message to Harrisburg, the better we are.

What's the total amount of LIHEAP dollars that go from the federal government to Pennsylvania; for instance, in this year?

Originally there was about 135 million, I believe, and then there was a supplement, and I think it was close to $175 or $180 million, is my recollection, for the fiscal year, correct.

So they're holding back almost half of it for rollover?

That would be the concern.

Thank you.

Thank you very much. Any other questions? 107 6/6/06 - FINANCE - BILL 051142, ETC. (No response.)

Thank you very much.

Madam Chairwoman, just to reiterate our request for a suspension of the rules. I neglected to reiterate that earlier. And I know that Councilman O'Neill has asked for some information to be provided by Philadelphia Gas Works. I trust or hope that you will still report the bill out today with a favorable recommendation and a suspension of the rules so PGW can have the spending authority that is so important. Thank you.

Thank you very much. We understand that Mr. Robert Byron, Divisional Deputy City solicitor, is here who can testify with regard to Bill No. 060438, which removes from the Keystone Opportunity Zone a portion of a property in the 65th Ward. 108 6/6/06 - FINANCE - BILL 051142, ETC. Would you come forward and testify with regard to that legislation. And also after this testimony, we will ask Brian Abernathy, Legislative Assistant for Councilman DiCicco, to testify with regard to Bill 060243 increasing fees from $200 to $300 in certain cases.

It's an Administration bill, isn't it?

Councilman DiCicco's staff member asked to testify.

But not on behalf of the Administration.

We'll see. I have no idea what the testimony will be. Mr. Byron, will you please identify yourself to the record and begin your testimony.

Good afternoon. My name is Robert Byron. I'm a Divisional Deputy City Solicitor with the City of 109 6/6/06 - FINANCE - BILL 051142, ETC. Philadelphia Law Department.

Thank you. Please testify with regard to this bill.

Thank you. Thank you, Councilwoman. This bill concerns the Northern Shipping site, 7777 State Road. It's a development by Transactional Properties, and the purpose of this is to decertify a portion of that site from KOZ certification.

And what is the purpose? Why would you want to decertify it from the Keystone Opportunity Zone?

The purpose is to decertify a section of the development that will be developed into residential, residential properties, so that the KOZ status would normally preclude payment of certain taxes, and it's been City policy that when residential development occurs, to then decertify from KOZ status, so 110 6/6/06 - FINANCE - BILL 051142, ETC. that the residential properties will be then subject to the taxes.

Are there any questions with regard to this bill and this testimony? (No response.)

Thank you very much.

Thank you, Councilwoman. And the Administration supports this legislation and respectfully requests that it be reported favorably out of Committee.

Thank you.

Thank you.

Are you requesting a suspension as well?

Yes.

Thank you. Mr. Abernathy, would you then come forward and testify with regard to Bill No. 060243. 111 6/6/06 - FINANCE - BILL 051142, ETC.

Good afternoon. Brian Abernathy with Councilman Frank DiCicco's office. Bill No. 060243 is a bill the Councilman sponsored and it was prepared in conjunction with the Law Department but on the request of the Councilman specifically to address some issues that we've had come out of the Streets and Services Committee. Several bills that we hear each hearing extend the deadline for specific legislation. It was the Councilman's belief that these bills -- it would be appropriate to charge a special fee ordinance or a special authorization from a private developer and the like prior to the introduction of that legislation. The increase in fees from $200 to $300 is as a result of the effort that the City undertakes to prepare these special bills is not covered under the current $200 fee.

Are 112 6/6/06 - FINANCE - BILL 051142, ETC. there questions from members of this Committee? So you're saying if you're adding or deleting streets, I assume, in special areas where developers are creating communities, then they would be charged an extra fee?

Correct. A developer, if they need a street stricken, will approach the Streets Department and the Councilperson and ask for a specific bill to be prepared. That bill is prepared, goes through the Streets and Services Committee. It is passed out. They then have 60 days to pay a $200 fee for the privilege of having that bill introduced. About 30 to 40 percent of all the bills that come through Streets and Services is actually an extension of that 60-day deadline. It takes our resources and requires us to vote on bills -- or requires the Council to vote on bills several times. Councilwoman Krajewski had a situation 113 6/6/06 - FINANCE - BILL 051142, ETC. where she's actually extended the deadline three or four times for essentially the same bill and it goes back to the $200 fee. What this bill 6 does is, prior to introduction, requires the individual requesting this bill to pay the fee to the City prior to introduction or prior to preparation.

Thank you. Councilwoman Tasco.

So you're paying the Law Department to draft the legislation for the developer?

The bill 17 actually comes from the Revenue Department. The Law Department and the Streets Department will often work in conjunction to craft the bill.

And the fee covers what?

The fee covers attorney time, engineering time from the Streets Department. 114 6/6/06 - FINANCE - BILL 051142, ETC.

I want to make sure --

Councilman O'Neill.

-- I understand it. Someone that legitimately has to pay $200 for an initial bill gets it passed. It's introduced and passed. They pay the $200 within the 60 days. But then what is it they're asking for to be extended?

They do not. If they don't pay the $200 within the 60 days. There are several instances where, for one reason or another, the person requesting the ordinance does not know that they have to pay the $200, that they do not receive a bill from Revenue or that there's a significant time delay between the passage of the bill and the receipt of an invoice from Revenue.

I've always thought it was rather on the bluebacker. At one time a bill will 115 6/6/06 - FINANCE - BILL 051142, ETC. always have something typed on it, "requested by," and it could be requested by developer so-and-so, civic association so-and-so, individual just asking for a bill to be passed, area neighbors, District Councilman or Councilwoman, and I guess what I'm trying to make sure is, if we make it $300, does that change at all -- I mean, I know who your target I think is, and that's when there's a developer on there. Civic associations don't have to pay it. Neighbors don't have to pay it. The Councilmember doesn't have to pay it. But in the case where, through misinformation or lack of communication or whatever the reason being, the person hasn't paid it in time and there's a new bill needed, that new bill still is going to be needed. It's just going to have to cost $300 up front rather than $200. I guess what I'm getting at, it would seem to me I would want the person that is screwing this thing up, causing 116 6/6/06 - FINANCE - BILL 051142, ETC. all this extra work to be paying for it, not all the other people that are now having to pay who are in the 60 percent group. Let's just say that the numbers are 60/40, 60 do it right and the other 40 come back and ask for more than one -- often more than one occasion to have the bill passed again or extending the time. Isn't there some way of earmarking the person making that second request that it be -- do they have to pay $200 for the second request right now?

Yes, but they did not pay $200 for the initial request.

Well, why don't we just -- I'm just trying to target better on this thing from a strategic standpoint. If they have to pay the $200 and then pay another $200 because there is another special interest ordinance for them, then you got $400, and you'll have to do it probably more than once. I'm not trying to fight it. 117 6/6/06 - FINANCE - BILL 051142, ETC. I'm just trying to -- because I've been involved with -- I don't get as many bills as the Councilmember's district that you represent, but in terms of developers, I might, until recently, have been ahead of him. All those things with like one-way streets, usually they're area neighbors. It doesn't come under the same charge thing where all work was involved that the City did. I would just hope we could find a better way to target the person on round two and make them pay for round one as well.

I understand, Councilman. This actually will eliminate round two. This requires payment up front rather than payment on the back end.

But it increases it. And how about the person who asks you to introduce the bill and the bill never gets passed? In other 118 6/6/06 - FINANCE - BILL 051142, ETC. words, they pay just for the privilege of having it introduced?

The City department still goes through the effort of having the bill prepared.

Right now I can live with that. I understand.

Madam Chair.

Councilwoman Tasco.

One of your comments you said that the person might not know they have to pay the fee. At what point will we tell them they have to pay the fee so they'll know? Because if they don't know, you can't charge them. You can't blame them for not paying it. They don't know that they should pay the fee.

I agree, Councilwoman, which is why Councilman DiCicco believes it's better practice to charge prior to the introduction. There 119 6/6/06 - FINANCE - BILL 051142, ETC. is no confusion. While certainly it is the practice within Councilman DiCicco's office to make it very clear that there is a $200 fee required, it certainly has fallen through the cracks, not just in our office but in other Council offices, that developers or others do not recognize that they have to pay that fee, whether it happens to be a small business looking for an outdoor cafe.

I've never had a developer not pay the $200 and go back. I want to make that clear, because my colleague was asking about it. And I get a lot of developers with bills. What I'm concerned about is that there may be a new class of people that, for instance, people aren't developers that -- I don't know if we're going to broaden this, because I've heard over the years that some people in the Law Department or Revenue Department think that people that used to have to pay don't have to pay anymore because 120 6/6/06 - FINANCE - BILL 051142, ETC. Councilmembers don't put their names on the back of the backer and that kind of thing. And there's a distinction, is this really for the area residents or is this for the company may be benefitting, appearing to benefit, because it's the area residents who are asking for it and whose bill is it.

And, Councilman, I would think that that --

I don't think it should be limited just to developers who do a lot of work --

And I don't think it should be limited directly to developers, but at least in our circumstance and within the Councilman's district, if area residents or a civic association wishes to see legislation passed, they'll request it from Councilman DiCicco directly and not request it from the Law Department directly. And certainly Councilman DiCicco will then approach the Law 121 6/6/06 - FINANCE - BILL 051142, ETC. Department and make sure it gets done. But it's clear that it's not on the behalf of a private interest to where there's a profit being made. The purpose of this bill is purely, at least in part, is to purely streamline the Streets and Services Committee hearing where you have 60 bills, 30 of those happen to be the extension of a deadline because someone did not pay a fee.

Does anybody know how many -- this is a percentage of bills introduced, whether they go to the Streets Committee or other committees, that are subject to the $200 charge. It may be that the $200 charge is charged to so few as a percentage of all the bills that come into Council that we would just eliminate it, because it's not worth the trouble of going through the hassle and not charge people who may have a lot of much simpler legislation, because this complicated legislation also leads to a whole lot of people paying 122 6/6/06 - FINANCE - BILL 051142, ETC. taxes in high rises and other developments. Something doesn't feel right about this. Maybe because I haven't had a problem with it, and usually if there's a problem, I find it somewhere along the way affecting me. Councilwoman Tasco to my left hasn't had the problem. I don't know if Councilwoman Blackwell has had the problem. And I certainly don't mind supporting it for the First District, believe me.

And, Councilman, with all due respect, Councilman DiCicco was interested in this legislation specifically because of the Committee on Streets and Services.

Well, do you have a feel for how many bills in Streets and Services actually have a $200 understanding up front and it's not --

The majority of the bills within the Committee have a $200 requirement attached. 123 6/6/06 - FINANCE - BILL 051142, ETC.

So that would be as simple as somebody asking for a no parking or a metered parking in front of their store?

No, sir. They generally will address outdoor cafes, any kind of encroachment ordinance or any kind of right-of-way ordinance 10 whatsoever.

See, I'd feel better if it were clear in this bill, because maybe it hasn't been clear for a long time. This used to be something that was pretty strictly dealt with when I first came to Council more than a quarter century ago, and it's just drifted away. Nobody bothers and I never hear about it. And the areas that you're talking about, I have no problem with it. It's more of a chance to limit the applications of this and to the kind of things you're talking about. I don't think anybody has a problem with someone with an outdoor cafe where metes and 124 6/6/06 - FINANCE - BILL 051142, ETC. bounds are involved and the City has to get into a lot of work doing these things. Just so many of our bills that might fall into that, I'm not sure those people should be paying $200 or $300 because they're sort of just simple pieces of legislation. I'm just hesitant. I don't want to --

Well, for someone who does not -- I never heard of it before. I'm just not really educated enough to really want to vote on this, because I'd like to have more information about who pays and who doesn't pay and what might be charged, because we may pass and think we're dealing with just developers, as the Councilman said, and then someone else has to pay and that probably shouldn't pay. So this is the first I've heard of this. And I served on Streets and Services before when I first came on here and I never heard of the developer fee. 125 6/6/06 - FINANCE - BILL 051142, ETC.

And you are correct, Councilwoman. It is not a fee that is specifically targeted to developers, but it is targeted to special interest ordinances or to private interest ordinances.

Well, I don't know what that means.

It is where the City prepares an ordinance that is delivered from the Administration on behalf of a private interest.

Beg your pardon?

It is where the Administration will deliver a bill to a Councilperson on behalf of a private interest, not on behalf of the Administration, not on behalf of the Councilperson directly, but on the private interest of a developer or private business.

My dry cleaners wanted a sign in the street 126 6/6/06 - FINANCE - BILL 051142, ETC. because she couldn't -- she has a dry cleaners and people park there all day long. Her customers can't park there. Is she charged $200?

No parking signs are not regulated by ordinance.

Well, I put an ordinance in to get the sign.

A no parking regulation is a matter of policy and it would not be considered, at least in our experience, would not be considered a private interest. Private interest would be giving --

Well, is there defined someplace who would be charged and who would not be charged? Is there some history that you could give me that would show me what could be charged and what couldn't be charged?

I will certainly request that from the Law Department. It's not something I've actually seen in writing. 127 6/6/06 - FINANCE - BILL 051142, ETC.

And while I appreciate having you here testifying, I think the Law Department should be here testifying on this bill.

If I knew this many questions were coming up, I certainly would have requested that they be here.

For instance, Brian, you mentioned the Administration sending you a bill, and that's usually when it's typed in on the back.

Yes, sir.

But we get requests for ordinances ourselves. A lot of times I'll say to the developer, Look, you have a lawyer, have the lawyer prepare the bill. I'm not calling the Planning Commission. And plus you're going to wait six months. Your attorney can do it in three days. That's a private interest ordinance when it comes. It doesn't have 128 6/6/06 - FINANCE - BILL 051142, ETC. the developer's name typed on the back. Often times it may have the Councilman's name typed on the back.

Correct.

So I'm not sure we deal with things evenly either. And that lawyer who prepared it may have had all the work done by somebody in City Planning or the Law Department for that attorney, because they don't know necessarily what they're doing, so they ask somebody to help them out in the City, but they actually author the final draft for their client. So I'm trying to figure out why I've never heard of -- why I've never gotten this, at least in the last 15, 19 years, as an issue. 20

And, again, Councilman, I'd be happy to forward the bills in Streets and Services tomorrow.

And you probably have seen this in Streets Committee, because I remember this from 129 6/6/06 - FINANCE - BILL 051142, ETC. years ago, often times there would be an amendment, because sometimes it's a family asking for something and the City prepared it for them, so it becomes a private ordinance and it's got their -- and it says at the end of the ordinance, "upon payment of $200." And some members that were senior to me, I would see them exclude that, exempt that, take that out. I have an amendment here to take out the last sentence, because this is not fair to this family, whatever. That can still be done --

Yes.

-- correct?

Correct.

Either before it's introduced, the sponsor can delete it --

Or it can be amended in the Committee.

Or it can be amended afterwards? 130 6/6/06 - FINANCE - BILL 051142, ETC.

Correct.

Any further questions? (No response.)

Thank you.

Everything will be the same except this $300 in advance, right?

Correct.

And the sponsor can take it out and the Committee can take it out?

I would have to --

If there's an amendment.

Because this bill would actually require the fee to be paid in advance as preparation. But, again, if the Councilmember requests the Law Department to prepare the ordinance, the fee is never included to begin with.

I don't 131 6/6/06 - FINANCE - BILL 051142, ETC. feel comfortable, but I learned a lot.

Thank you very much. Thank you very much. You did a great job, Brian. He did do a great job. It's just unfortunate that the description of the bill does not describe who the affected parties are, and that is why we have all these questions. Is there anyone else here who would like to testify? (No response.)

That concludes our stated hearing. We will now enter into the stated meeting. The Chair recognizes Councilwoman Blondell Reynolds Brown with regard to a motion, all of these with suspension of the rules, with regard to Bill No. 051142.

Madam Chair, I make a motion that Bill No. 24 051142 be reported out of Committee with a favorable recommendation and further 132 6/6/06 - FINANCE - BILL 051142, ETC. move that the rules of Council be suspended to allow reading at the next scheduled session of Council. (Duly seconded.)

All in favor will say aye. (Aye.)

Opposed? (No response.)

The ayes have it and so Bill No. 051142 is reported out of Committee with a favorable recommendation, also a recommendation for a suspension of the rules so as to be read at our next session of Council. The Chair recognizes Councilman Goode for a motion regarding Bill No. 21 060227.

Thank you, Madam Chair. I move that Bill 060227 be reported out of Committee with a favorable recommendation and that the 133 6/6/06 - FINANCE - BILL 051142, ETC. rules of Council be suspended so as to permit first reading at our next Council session. (Duly seconded.)

It has been moved and seconded that Bill 060227 be reported out of Committee with a favorable recommendation and a recommendation for a suspension of the rules. All in favor will say aye. (Aye.)

Opposed? (No response.)

Said bill is reported out. The Chair recognizes Councilman O'Neill with regard to Bill No. 060242.

Madam Chair, I move that Bill 060242 be reported out of Committee with a favorable recommendation, also a recommendation that the rules of Council 134 6/6/06 - FINANCE - BILL 051142, ETC. be suspended to allow first reading at our next session of Council. (Duly seconded.)

It has been moved and seconded that Bill No. 7 060242 be reported out of Committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. We will hold Bill No. 060243. That was just discussed regarding special rights and an increase of a $100 fee. The next bill, 060245, we will call on Councilwoman Tasco for a motion.

Madam Chair, I move that Bill 060245 be reported out of Committee with a favorable recommendation and with a request for the suspension of the rules so this bill can be heard at Council's next session. (Duly seconded.)

It has 135 6/6/06 - FINANCE - BILL 051142, ETC. been moved and seconded that Bill No. 3 060245 be reported out of Committee with a favorable recommendation and also a recommendation for suspension of the rules so as to permit first reading at our next session of Council. All in favor will say aye. (Aye.)

Opposed? (No response.)

Thank you very much. The ayes have it and the bill is reported out. The next bill, Councilwoman Blondell Reynolds Brown, is Bill No. 18 060375 and we'll entertain a motion.

Madam Chair, I move that Bill No. 060375 be reported out of Committee with a favorable recommendation and a recommendation for suspension of the rules to allow first reading at the next scheduled session. 136 6/6/06 - FINANCE - BILL 051142, ETC. (Duly seconded.)

All in favor will say aye. (Aye.)

Opposed? (No response.)

The ayes have it and so Bill No. 060375 is reported out of Committee with a favorable recommendation, also a recommendation for suspension of the rules so as to permit first reading at our next session of Council. The Chair recognizes Councilman Goode with regard to Bill No. 060377.

Thank you, Madam Chair. I move that Bill 060377 be reported out of Committee with a favorable recommendation and that the rules of Council be suspended so as to permit first reading at our next Council session. (Duly seconded.) 137 6/6/06 - FINANCE - BILL 051142, ETC.

All in favor will say aye. (Aye.)

Opposed? (No response.)

The ayes have it and so Bill No. 060377 is reported out with a favorable recommendation and also a recommendation for suspension of the rules so as to permit first reading at our next session of Council. Councilwoman Tasco, we'll call on you with a motion with regard to Bill 17 No. 060378.

I move that Bill 060378 be reported out of Committee with a favorable recommendation and a request for the suspension of the rules so that this bill can be read at Council's next session. (Duly seconded.)

All in 138 6/6/06 - FINANCE - BILL 051142, ETC. favor will say aye. (Aye.)

Opposed? (No response.)

The ayes have it and so Bill No. 060378 is reported out of Committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. The Chair recognizes Councilman O'Neill with regard to Bill No. 060381.

Madam Chair, I move that Bill 060381 be reported out of Committee at our next session of Council and also that the rules be suspended to allow first reading at that time. (Duly seconded.)

All in favor will say aye. (Aye.) 139 6/6/06 - FINANCE - BILL 051142, ETC.

Opposed? (No response.)

The ayes have it and so Bill No. 060381 is reported out of Committee with a favorable recommendation and also a recommendation for suspension of the rules so as to permit first reading at our next session of Council. The Chair recognizes Councilman Goode with regard to Bill No. 060387.

Thank you, Madam Chair. I have an amendment to Bill 16 060387 that's circulated to all members of the Committee. If you notice, on 2, there are actually two Section (b)'s. We would eliminate the first Section (b), which has July 1, 2007 timetable. We will eliminate all timetables in this bill, per the request of the Administration. I move the amendment be adopted. (Duly seconded.) 140 6/6/06 - FINANCE - BILL 051142, ETC.

It has been moved and seconded that the amendment be adopted. All in favor will say aye. (Aye.)

Any nays? (No response.)

The ayes have it and so the amendment is adopted. The Chair now recognizes Councilman Goode for a motion on Bill No. 15 060387 as adopted.

Thank you, Madam Chair. I move that Bill 060387 as amended be reported out of Committee with a favorable recommendation and that the rules of Council be suspended so as to permit first reading at our next Council session. (Duly seconded.)

All in favor will say aye. 141 6/6/06 - FINANCE - BILL 051142, ETC. (Aye.)

Opposed? (No response.)

The ayes have it and so Bill No. 060387 as amended will be reported out of Committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. The Chair now recognizes Councilwoman Blondell Reynolds Brown with regard to Bill No. 060394.

Madam Chair, I move that Bill No. 060394 be reported out of Committee with a favorable recommendation and a recommendation for the suspension of the rules to allow first reading at the next scheduled session of Council. (Duly seconded.)

It has 142 6/6/06 - FINANCE - BILL 051142, ETC. been moved and seconded that this bill be reported out of Committee with a favorable recommendation and for a suspension of the rules. All in favor will say aye. (Aye.)

The ayes have it and so Bill No. 060394 is reported out. The Chair recognizes Councilman Goode with regard to Bill No. 060438.

Thank you, Madam Chair. I move that Bill 060438 be reported out of Committee with a favorable recommendation and that the rules of Council be suspended so as to permit first reading at our next Council session. (Duly seconded.)

All in favor will say aye. (Aye.)

Opposed? 143 6/6/06 - FINANCE - BILL 051142, ETC. (No response.)

The ayes have it and so Bill No. 060438 will be reported out of Committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. The next bill listed on our calendar, Bill No. 060466, was listed in error. This bill is being heard tomorrow at 3:00 p.m. in front of our Housing Committee. The Chair recognizes Councilman Goode with regard to Bill No. 060469.

Thank you, Madam Chair. I move that Bill 060469 be reported out of Committee and that the rules of Council be suspended so as to permit first reading at our next Council session. (Duly seconded.)

All in favor will say aye. 144 6/6/06 - FINANCE - BILL 051142, ETC. (Aye.)

Opposed? (No response.)

The ayes have it and so Bill No. 060469 will be reported out of Committee with a favorable recommendation and also a recommendation for suspension of the rules so as to permit first reading at our next session of Council. The Chair will hear from Councilman O'Neill with regard to Bill 15 No. 060473.

Madam Chair, I move that Bill 060473 be reported out of Committee with a favorable recommendation at the next session of Council and also that the rules of Council be suspended to allow first reading at that time. (Duly seconded.)

All in favor will say aye. 145 6/6/06 - FINANCE - BILL 051142, ETC. (Aye.)

Opposed? (No response.)