Before the bubble burst. But I keep hearing all of these comments about Sunoco and Comcast and Wal-Mart. People have choices where to work. I don't shop Wal-Mart. I've been in there a few times, I will admit, in the past, but I do everything I can to avoid that place. But that's a choice I make. And people who work there have similar choices, and maybe their only choice is to go work for a place like Wal-Mart, which does not treat its customers fairly, has little or no health 189 11/17/05 - WHOLE - BILL 050669, ETC. insurance, because there are no other jobs for them to go to. So we already know that. We already know that there's a shortage of jobs in Philadelphia. I think it's worth the risk, if you want to use that term, to move forward with tax relief for everyone, because I don't think under uniformity -- and I won't debate Mr. Shapiro, because I'm certainly not an attorney, but I think uniformity would prevent us from doing some of the things that have been suggested. That's what I think. And if I'm correct, we need to at least give this a shot, because we know where we are today. We know what we have lost for the last three decades or so in terms of jobs, and it really only leaves the Wal-Marts of the world for those folks who have limited education, if you will -- and I don't mean that to be disrespectful -- to find those kinds of jobs when those kinds of jobs -- I remember when I was growing up, we had 190 11/17/05 - WHOLE - BILL 050669, ETC. tailor shops, we had printing firms, we had -- I'm moving into a building that was once a warehouse for a publishing company, and the name escapes me right now, Curtis Publishing, and all along Washington Avenue were factories, National Liquorice Factory, Maggio Dairy Factory, whatever. Those were jobs where people who had a limited education could go to work. They are all gone, for lots of reasons, including the cost of doing business in Philadelphia. And it's not just Washington. It's all -- Stetson Hat. We can go on for an hour. And what was left are the service industry jobs. Some of those jobs are decent, and other jobs like Wal-Mart aren't really that good, but they're a job. No less, they're a job. So I think even if the Sunocos and the Comcasts get that break in paying what some refer to as no tax -- and that's not accurate because there's still that onerous and abusive use and 191 11/17/05 - WHOLE - BILL 050669, ETC. occupancy tax that's out there -- they are paying taxes. We're just looking to cut a certain tax or eliminate a certain tax, because historically the data has proven to us that that is one of the main reasons, as Councilman Nutter had said earlier, if not the main reason, why we've lost businesses. And we can debate on who is the better employer, who is the worst employer. That doesn't get us, at the end of the day, where we need to be. And I think it's time to at least take that step. The same way this Council -- and I said this to Councilman Nutter earlier, because it was my bill. It's not why I'm saying it. The same way this Council debated in 1996 through '97 whether we should give wealthy developers a ten-year exemption for improvements to existing vacant buildings, to provide rental living apartment arrangements so to encourage people to move into the City, which we all hoped would repopulate 192 11/17/05 - WHOLE - BILL 050669, ETC. neighborhoods, which would cause an effect to have the need for greater services at the ground level, more restaurants, more dry cleaners, more shoe repair shops, et cetera, or more delis that employ Philadelphians. It worked. There was a Doom's Day theory. My colleague that passed away, Councilman Cohen, said, It's welfare for the rich, Frank. We then went in 2000 and did the flat ten-year abatement for new residential construction and to wind up eventually offering the same ten-year tax abatement for commercial, industrial. Everybody who built something new gets the ten-year abatement. It's worked.
And, again, there were those in Council who said, it's welfare for the rich. In my opinion, rich people will continue to become richer. That's the way it is in this country. But if people at the bottom or people at the lower end of the economic ladder and people in the lesser socio and 193 11/17/05 - WHOLE - BILL 050669, ETC. economic communities have an opportunity to get employment as a result of those tax breaks to the wealthy, it's worth it, in my opinion.
I'm not disagreeing. What I'm suggesting is that we put in the bill how many jobs we hope will be created, and if we don't reach that goal --
But we do that in some instance where PIDC may be involved in existing companies that want expansion. There are criteria that are placed in there. We do have some similar mechanism. And I'm not totally disagreeing with what you're saying, but we've been dealing with this issue for such a long time and every time we get close, another idea comes up. I say let's do this, let's see how it works out, and in the 194 11/17/05 - WHOLE - BILL 050669, ETC. meantime, maybe we can come up with some of those creative ideas, amend this bill, create new bills, but we got to start, because even with all the great things that happened in the last decade, we're still losing jobs. We got to start somewhere.
Councilman, I think we may need a little reality check of what does create jobs or expand jobs. If you look at a Sunoco, is cutting the business tax or ending the business tax over time, is that going to be a factor in whether they add or delete --
I'll give you a reality check. In Port Richmond, the neighborhood I represent, one of the neighborhoods I represent, there's the Port Richmond Economic Opportunity Zone. It's a conglomerate of several different businesses, many of whom were going to leave seven, eight years ago.
Did I mention Sunoco? 195 11/17/05 - WHOLE - BILL 050669, ETC.
You guys want to go after big business. That's your motive. Have a good day and do it. These are businesses in Port Richmond that cumulatively employ over 2,000 people at good-paying jobs with good benefits, but one of the reasons they're still there is because we created a -- it was almost like a KOZ. It wasn't a business. A business improvement district that we infused some government money in. So we took taxpayers' dollars and gave it to wealthy business people, who benefit by it, but so does the community, the citizens of the --
You've made out the case for targeted help right there, and what we're talking about is targeting help and not doing blunderbuss help. And if we can't distinguish the Sunocos, 196 11/17/05 - WHOLE - BILL 050669, ETC. Comcasts, Wal-Marts, et cetera, and there are others, from those businesses and others, then perhaps we're not doing our jobs to make distinctions that are relevant.
And maybe going forward we can figure that out, but we got to start somewhere. That's all I'm saying.
All we're here to do today is ask you to start thinking about that.
We're thinking, and I'm suggest we're going to continue to think about it.
Gentlemen, I think this little debate has to come to a close, because there are a number of Councilmembers that would like to be recognized. So at this time, I would recognize Councilwoman Tasco.
Thank you. My comments will be very brief. 197 11/17/05 - WHOLE - BILL 050669, ETC. I mean, we all have our businesses we don't like. I don't like the porno stores and the dance halls, but they're going to get the tax breaks too because they employ people. The concern I have is that this bill covers the small businesses. And in my neighborhood where we're trying to bring in small businesses and generate neighborhood economic development, the greatest complaint we get is that we have to pay that dag-gone business privilege tax, I can't expand. Some businesses have to pay more to get -- the cost of purchasing is more because they're small. They don't have the advantage of buying large wholesale. That gives them the money to invest in their business. I have Paul Biel, who has been up on Ogontz Avenue, and we talked about him last year when we were trying to pass this bill. He could be here testifying if he had an employee that could take his place. He's in that store every day. 198 11/17/05 - WHOLE - BILL 050669, ETC. So this is important to him, to me and the small businesses. And if we have these small businesses come in and we generate jobs, then we can cut the number of PGW households who can't pay their gas bills, because people need jobs. They need jobs in the City, not to have to go out to the suburbs to get employment. So I agree with Councilman DiCicco, we have to start at some point. And it is the major complaint that I get particularly in my neighborhood when we talk about -- and I'm not talking to Wal-Mart and I'm not talking to Comcast. I'm talking to Paul Biel. I'm talking about the guys who run the art and the war. I'm talking about the business woman who runs the county service on the strip. I'm talking to those people who have maybe one or two employees who would like to expand but because of this tax, they can't. So thank you. 199 11/17/05 - WHOLE - BILL 050669, ETC.
And one thing about this, as Councilman Nutter said, we're a legislative body. We legislate all the time. If something is not working, you can change the rules.
You can just change the rules. You're not locked into something forever, but it's better for the businesses to have some predictability that they're going to have a break, they can plan. They don't do business on a yearly basis. They have strategic planning. They plan years out. Well, next year we might have the tax cut. Oh, no. Maybe we will or maybe we won't. You can't ask businesses to negotiate and operate in that venue.
I think at the federal level, we had a situation where there were across-the-board tax cuts that 200 11/17/05 - WHOLE - BILL 050669, ETC. were given that provided small benefits to small people with low incomes, but gave the vast majority of their tax breaks to high-income individuals, thus kind of starving the federal budget. Now, I'm not saying that that is happening in this case, but I don't think that we have the information that we need in this context to know that it actually is sound, either morally or fiscally, to give large tax cuts to large enterprises at the same time as our small enterprises.
Thank you. The Chair recognizes Councilman Nutter.
Thank you, Madam President. I actually have no questions for the witnesses. I have one request. But, first, I wish to ask if Councilman 201 11/17/05 - WHOLE - BILL 050669, ETC. Kenney will submit himself to interrogation.
Madam President, I would like to know if Councilman Kenney is now or has ever been a customer of Wal-Mart.
I don't think I've ever been in there, to tell you the truth. I've never been in there. I have no stock in it either.
Very good. Madam President, in a more serious vein, Madam President, I would like to ask, as you accommodated us at the beginning of the hearing, and I know that there are still other witnesses who wish to testify, I'm just wondering if it 202 11/17/05 - WHOLE - BILL 050669, ETC. is at all possible that we might be able to move into a public meeting on at least one of these bills or any of them.
You still have a question? I think Councilman Kenney's light was on. He wanted to be recognized.
First of all, I don't think we're going to win this argument, because there's a philosophical position that these gentlemen have and have a right to hold that we're never going to break through. There seems to be this hatred of large companies, which is fine. I mean, people have a right to dislike anybody they want. But when it comes to companies like Sunoco, I just want to read just a couple numbers of what they bring to this region and to the City. First of all, there's 4,000 employees in the region. There's 1,600 employees in the City of Philadelphia alone. Their estimated 203 11/17/05 - WHOLE - BILL 050669, ETC. business privilege tax payments this year will be between $8 and $10 million and their wage tax payments through September are 1.5 million for City residents they employ and 5.8 million for non-City residents they employ. There's 37 gas stations, Sunoco gas stations, in the City. A good percentage of them are franchises. They're small businesses. They're going to be affected by this. And if you factor in the Welcome America participation, all the other charitable stuff they do, I'm glad they're here. I'm glad Comcast is here, because I'm sure their numbers are similar there. And although you may have some difficulties with Wal-Mart on their philosophy of retailing and the way they deal with their employees, I'm sure they have a major contribution that they make to the City in the way of taxes. Of at least two of the three companies, I'm happy they're here. I 204 11/17/05 - WHOLE - BILL 050669, ETC. think Comcast gets vilified, Sunoco gets vilified for what? Because they're successful? Because they decided to stay in Philadelphia? And that the savings that they will make as a result of some of this tax stuff will be plowed back into infrastructure, will be plowed back into R&D and will be plowed back into new jobs. What is wrong with being a successful company?
Councilman, no one criticized what they're paying. We're saying they don't need a $10 million gift from the City and eliminating their business taxes.
Despite the fact that they can use that money to secure themselves even more? Do you think Comcast has to be here? Do you think that Comcast needs to be in the City of Philadelphia? It can sell us cable and Broadband from Brazil if they want. They don't have to be in the City of Philadelphia, especially in that 205 11/17/05 - WHOLE - BILL 050669, ETC. business. Sunoco has more of an infrastructure investment, harder to move, but it's not impossible to move. So why would I not want to keep Comcast here?
Well, you're making a leap to say that if you don't end the business privilege tax, you're going to lose Comcast.
There's no evidence of that. There's no evidence of Sunoco leaving if they don't get their $10 million back.
Big successful cities have big successful businesses and big successful buildings that they occupy, and that's what I want to make this City. You go to Chicago. Why does Chicago work? Chicago works because it's got a business community that's unbelievable. Why does New York 206 11/17/05 - WHOLE - BILL 050669, ETC. work? What do we want to do? Are we better off not having these companies and farming instead? What are we supposed to do?
Well, Wal-Mart has decided to come into the City despite the business privilege tax.
We don't want to prolong the discussion. I'll just point out, in your own words, New York City has a higher tax burden and it's a successful city, your own words.
Everybody goes to New York no matter what it costs. 207 11/17/05 - WHOLE - BILL 050669, ETC.
But there are other successful cities in this country that are cleaning our clock, and worse yet, we're losing people to the immediate suburbs and businesses and jobs to the immediate suburbs, because supply side on the local level works, whether you agree with it or not.
Before I came here, I read an article in the National Geographic Magazine, which I'm sure everybody is familiar with, which said that this is the next great city in the United States.
It did not say only if we cut the business privilege tax. It talked about a thriving city. I don't think this is a bad city.
We're not going to convince each other. I don't want to sit here and have large corporate 208 11/17/05 - WHOLE - BILL 050669, ETC. citizens who contribute much to the City vilified like they're some kind of bad guys. I mean, Sunoco and Comcast are good companies in the City, and I'm glad they're here, and if we help them stay here, I want to do it.
Councilman, just to clarify, we're not vilifying them. I'm saying let's not give them a free gift of taxes back to them.
It's not free. They pay a lot of taxes and employ a lot of people who pay a lot of taxes.
I don't think they should get $10 million if they're not making any commitment to us that they're going to put that into new jobs in the City.
They're here. Never mind. I just want on the record --
Councilman Kenney, I think you're on 209 11/17/05 - WHOLE - BILL 050669, ETC. record at this time. I recognize Councilman Kelly.
Yes. Thank you, Madam Chair. I don't think these gentlemen want to hear any comments from me. I'm just going to say, I am a republican and leave it go at that. So I'll just leave you off the hook. Thank you.
Thank you. Councilman Nutter, do you have any other further questions of these witnesses?
No further questions, Madam President. I want to go back to the earlier request.
Any other members have questions or comments of the witnesses? (No response.)
210 11/17/05 - WHOLE - BILL 050669, ETC. Gentlemen, thank you very much.
Madam Chair, again, I want to be respectful with regard to any other witnesses who have been here for a long period of time. I know a number of them have testimony, which I'm sure you would take into the record. Some may need to get to the table for their own reasons, at least just for identification purposes, but I did want to ask if we might be able to move into the public meeting, take whatever action might be possible on any of the bills and, if necessary, of course, go back into the public hearing, but at least then there would be an action by the members given the hour.
I don't know how members feel about this request.
I would 211 11/17/05 - WHOLE - BILL 050669, ETC. agree to that.
At the request of Councilman Nutter, we will recess the public hearing and go into our public meeting, and at this time, the Chair recognizes Councilman Nutter.
Madam President, I move that Bill 050669 as amended be reported out of this Committee with a favorable recommendation and a further recommendation that the rules of Council be suspended so as to permit first reading at our next session. (Duly seconded.)
It has been moved and properly seconded that Bill No. 050669 be reported out of Committee with a favorable recommendation as amended. Also, that the rules of Council be suspended so as to permit first reading at our next session of Council. All in favor will indicate by saying aye. 212 11/17/05 - WHOLE - BILL 050669, ETC. (Aye.)
There's one negative vote, and that is from Councilwoman Brown. All other members have voted in the affirmative. Councilwoman Brown, what is your position on your three bills?
And I believe that Councilman Goode also indicated that he would be holding his bills.
Madam President, I associate myself with Councilwoman Brown's vote.
All right. So the record would reflect that there were no no's and seven yes's. We will now go back into our public hearing. We will reconvene our 213 11/17/05 - WHOLE - BILL 050669, ETC. public hearing, and I would ask Mr. McPherson to please call upon the next witnesses to testify. MR. McPHERSON: The next panel is Alan Feldman, Philadelphia Bar Association; Mark Merlini, President, Building Owners and Managers Association; and Brett Mandel, Director of Philadelphia Forward.
And while you're getting yourself together, I would ask Mr. McPherson to please read a letter that I received from Charlie Pizzi, Tastykake. MR. McPHERSON: "Dear President Verna, as a Philadelphia business person and employer, I am writing to share with you my support for legislation that would greatly reduce both sides of the business privilege tax and, eventually, phase it out. "I have long contended that this tax drives businesses away from the City and greatly diminishes our chances 214 11/17/05 - WHOLE - BILL 050669, ETC. when competing for business with surrounding counties who do not impose such an onerous tax. The City has lost 250,000 jobs since 1970, and it is time we became more competitive and won some of those jobs back. "I am aware that there are several bills being considered and wish to express the urgency that Council approve a long-term schedule of guaranteed reductions. "Thank you for your support on this urgent matter for the business community. Sincerely, Charlie Pizzi," with a copy to all members of City Council.
Thank you. Gentlemen, thank you for your patience, and at this time, I would recognize Mr. Alan Feldman.
Thank you, Madam President. My name is Alan Feldman, and I am the Chancellor-Elect of the 215 11/17/05 - WHOLE - BILL 050669, ETC. Philadelphia Bar Association. I will serve as Chancellor of the Association in 2006, and it's an honor for me to appear here today before you. First, I do want to thank Council for the opportunity to testify on tax reform. My testimony has been distributed, and because of the late hour and because many points have been made already, I will significantly truncate my remarks, but I do want to focus on a few issues that are of concern to Philadelphia's legal community. I am glad to hear from the discussion today that we seem to have turned a corner and the discussion is no 18 longer about whether or not we should reduce or eliminate the business privilege tax, but how we can go about that. I think that's a wonderful accomplishment, and on behalf of the 13,000 members of my association, I want to thank Council for arriving at this new consensus to reduce or eliminate the 216 11/17/05 - WHOLE - BILL 050669, ETC. business privilege tax. The issue of the business privilege tax is an issue that has gone back for many years. My three predecessors over the past three years have testified before this Council regarding the business privilege tax and the onerous impact it has had on the growth and development of law firms in Philadelphia, and I'm here to add my voice today and to reiterate that the Philadelphia Bar Association supports the recommendation of the Tax Reform Commission, and we certainly and emphatically support scheduled reductions and the eventual elimination of the business privilege tax. Studies have time and again shown that the City's tax structure is one of the principal reasons why businesses do not locate in Philadelphia, do not expand here or never locate here at all. These studies confirm our own experience as lawyers, as well as those 217 11/17/05 - WHOLE - BILL 050669, ETC. of our clients. In dealing with business clients in this region, lawyers have repeatedly heard businesses express their concerns with the City's tax structure. We understand those concerns, and regrettably the current tax structure actually encourages lawyers to follow their clients out of the City. Over the past years, our 11 surveys show that Philadelphia law firms 12 have been opening satellite offices in 13 surrounding counties at an accelerating 14 rate. Yes, the area's major law firms, 15 including many national and regional powerhouses, have continued to maintain their headquarter offices in the City. They are still here because they really want to try to stay here, because they, like all of us, have a commitment to the City that we all love. But how much longer can this go on? The time has come to signal to the Philadelphia legal community through tax policy that we want these firms to 218 11/17/05 - WHOLE - BILL 050669, ETC. make a long-term commitment to our City, to grow their practices in our City and that this Council and this Administration values the contribution of the Philadelphia legal community. For too long, City businesses have paid what is or is near to the nation's highest local tax business rate. We must reverse this trend. We also ask the City to address the inequality that is inherent in the business privilege tax and correct the overtaxation of professional firms that are organized as partnerships. Specifically, the City taxes partner income at a higher rate than compensation paid to employee owners of businesses operated as corporations. This discrimination against partnerships and the extremely high rate of tax is, we believe, a major factor in the large shift of service sector jobs from the City to the suburbs. I know this firsthand because I have a law firm in the City. I am the 219 11/17/05 - WHOLE - BILL 050669, ETC. Managing Partner of that law firm. It is not a large firm. We have lawyers. 4 We have about 35 employees. We are 5 located in Center City.
We desperately 6 want to grow right here in this City that 7 we were born in, but we need to remove 8 for my firm and for all others the road 9 blocks to the kind of dynamic birth that 10 we believe tax reform can and will 11 produce. 12 The top 22 Philadelphia law 13 firms employ at least 8,500 people in the 14 City of Philadelphia at good-paying jobs with terrific benefits. They pay nearly $44 million annually to the City in taxes, including net profits, wage, business privilege, use and occupancy and real property taxes. These same firms pay nearly $70 million annually to lease 14 percent of all office space in Center City. But most of the law firms in the City are not big firms. Most of them are like mine. They're small and medium-sized firms. And when we add in 220 11/17/05 - WHOLE - BILL 050669, ETC. those small firms, the figures that I've just described to you about the number of people employed and taxes raised are actually much higher. The Philadelphia Bar Association is currently in the process of conducting a much broader economic study of law firms so that we can demonstrate more accurately what we know is the fact, that a large majority of our lawyers who are operating small businesses also made very substantial contributions to Philadelphia's tax base. The City's tax structure greatly impacts on these small and medium-sized firms, as it does in larger firms, and those small firms are just as much in need of tax relief to grow their practices and help them fuel the overall growth of the City. Taxes affect everyone, small businesses, large businesses, families, laborers and professionals. It makes no 25 sense to pit one group, one class or one 221 11/17/05 - WHOLE - BILL 050669, ETC. segment against another. A lower business privilege tax, coupled with the robust economic growth we are convinced it will produce, will help all of us. It will give true meaning to Philadelphia's proud new title, which National Geographic Traveler Magazine recently bestowed on us, American's Next Great City, and I believe the title that USA Today gave us in last Friday's edition, the United States' Hippest City. On behalf of the Bar Association, Madam President, I want to thank you and tell you that the Bar Association welcomes the opportunity to work with Council and the Mayor to provide necessary tax relief for the legal community and the larger business community of our great City. Thank you.
Thank you very much, Mr. Feldman, and I certainly appreciate your patience. I know that you've been here for quite some 222 11/17/05 - WHOLE - BILL 050669, ETC. time. Thank you very much. Our next speaker?
Good evening, President Verna and members of City Council. My name is Mark Merlini. I'm a Partner and Vice-President with Brickstone Realty. Our company has developed nearly 4 million square feet of office and retail space on East Market Street, including the Wanamaker Building, Lit Brothers, 1234 Market Street and City Hall Annex as the 500-room Marriott Courtyard. I am here today as the President of the Building Owners and Managers Association of Philadelphia, commonly referred to as BOMA, in support of the reduction of the business privilege tax. BOMA member buildings provide 51 million square feet of office space for over half a million office workers. 6 billion, providing real estate tax 223 11/17/05 - WHOLE - BILL 050669, ETC. revenues to the City of approximately 133 million annually. 16 billion annually. 3 billion each year. Our industry as a whole represents 70 percent of the tax base in the City of Philadelphia. As a representative of those who work daily to attract and retain Philadelphia businesses, I can tell you that our efforts are hindered severely by the current tax structure. Other cities and even suburbs, unburdened by such taxes, are more able to offer more attractive possibilities to new companies looking for a home. In addition, they're able to lure away many existing companies who find themselves overburdened and 224 11/17/05 - WHOLE - BILL 050669, ETC. underappreciated. The most detrimental of these taxes is the business privilege tax. With the level of competition that currently exists to attract employers and jobs, we must change our perception of privilege. It is no longer a company that is privileged to do business here, but we that are privileged to have them. Companies bring jobs and tax revenues, without which Philadelphia cannot continue to grow and prosper. To tax them incrementally for doing so is self-destructive. We want to thank Councilman Nutter and Councilwoman Reynolds Brown and their sponsors for recognizing the need for a shift in perception and a change in taxation. Both of the bills they have presented are positive steps toward our goal of incrementally eliminating the business privilege tax by 2015 and toward a better, more prosperous future for the City of Philadelphia. The 225 11/17/05 - WHOLE - BILL 050669, ETC. deep cuts offered by Councilwoman Reynolds Brown will attract many potential businesses, while the Five-Year Plan presented by Councilman Nutter will provide companies with the confidence to plan for a future here. Companies do not make long-term strategic decisions based on one-year tax policy. Decisions are based on the overall long-term impact on an organization. The success of Keystone Opportunity Zones is a testament to this fact. A ten-year preferred tax abatement not only resulted in existing Central Business District tenants recommitting to the City, but was instrumental in attracting new businesses to the City. We do not advocate targeted incentives, but broad based reform which fosters an even greater economic growth. Doing so will benefit your existing constituents by providing new jobs and greater economic opportunities. A larger employee base will increase tax revenues 226 11/17/05 - WHOLE - BILL 050669, ETC. through wage taxes, and higher real estate tax revenue should result from increased property values due to higher occupancy in our buildings. Thanks to the excellent management by City Council and the resulting flexibility in the budget, now is the time to institute these changes to the tax code. Philadelphia cannot delay in its pursuit of more business, more jobs and more revenue. Without decisive action, we risk getting left behind as other cities and suburbs attract the companies and industries of the future. The prosperity of our City depends on your ability to institute meaningful tax reforms today. Thank you.
Good afternoon, Madam President. My name is Brett Mandel. I'm the Executive Director of 227 11/17/05 - WHOLE - BILL 050669, ETC. Philadelphia Forward. I'm joined by Tom Forkin, who is a Board member of Philadelphia Forward, former fellow member of the City's Tax Reform Commission. I previously had been joined by more than 100 fellow Philadelphians, employers and others here cheering your efforts on. I will promise to be brief, no 11 matter how long it takes. The Mayor is right, that line always works. I will submit truncated comments. We could not be happier that this debate on this topic has evolved from questions about whether it makes sense to reform our taxes, to questions about whether we can afford to do it, to questions about how we are going to make it happen. And similarly, we could not be more pleased to see so many Councilmembers offering true leadership here bringing different proposals to the fore. 228 11/17/05 - WHOLE - BILL 050669, ETC. We encourage City Council to combine the best features of each of these proposals into a consensus bill 5 that can create a reliable and certain phase-out schedule for the job-killing business privilege tax so we can grow jobs in Philadelphia. I'll address two points that have been made and then answer any questions that you might have. One is that we are questioning the idea of whether we should fix these cuts, whether we should lock them in. As everyone here knows, we budget now in five-year increments. We always lock in, at least in theory, what we think is going to happen over five years. But more to the point, I don't have to belabor the point that any year you can go in and legislate or you can make any changes, but I'd just like to remind this Council of how many things that you actually have locked in over the next five years, ten years, 30 years that truly cannot be undone. The 229 11/17/05 - WHOLE - BILL 050669, ETC. Stadium deal and any long-term lease, any long-term bond issue literally will be indebting my grandchildren that cannot be changed legislatively next year, the year after, any years going forward. On a shorter time schedule, any contracts that we do with our unionized workforce obviously is locked in for however many years. That cannot be changed by legislative action. This Council, I trust. I believe in this Council's ability to make decisions down the road if it has any qualms about what's going on with taxes. And I was very encouraged by the idea put forward by Councilman O'Neill that you could vote for a rolling five-year schedule, where essentially every year you could just approve the last year of the fifth year. So you would always be budgeting within the five-year time framework that is allocated by our Five-Year Plan schedule that we produce every year, while providing that need and 230 11/17/05 - WHOLE - BILL 050669, ETC. certainty for the business community that this tax will go away eventually, but we will every year look at the last year. Do we still think we can add one more year and one more year and one more year. And as has been pointed out at the state level with the capital stock and franchise tax, it is not uncommon for a legislator to look and say, You know what, I don't think this year we can do it and so we can pause the schedule. But I have faith in this Council that you will act correctly. I have faith in the Philadelphians who have been deluging your offices with calls and e-mails and faxes and letters over the past years. This is a job-killing tax. The Tax Reform Commission, the Mayor's 21st Century Review Forum, the Mayor's Economic Summit have all said it should go. We hope that we can get to a place with a consensus bill and everybody can get as much credit as they want and make it go away. 231 11/17/05 - WHOLE - BILL 050669, ETC.
Thank you very much. Are there any questions or comments from members of the Committee?
Just for the record, I know the hour is late, so I'm just going to truncate my remarks to say that I think we all agree what we've heard today the consensus is that the elimination or the phase-out of the BPT is a good idea. Now it's just a pragmatic political issue of force trading, whether it's rolling schedule, fixed schedule, Councilwoman Reynolds Brown's idea of deeper cuts. I encourage this Council, please get together, do what you have to do pragmatically enact a bill that can form a consensus that sends a message to the small business owners like myself that I represent on the American Street Corridor that are not 232 11/17/05 - WHOLE - BILL 050669, ETC. Wal-Marts, by the way, that want a message that it's a good place to do business in Philadelphia and this Council is committed to that in whatever form or fashion it makes sense. I'll end there because I know the hour is late. Thank you.
Thank you. Any questions or comments from members of the Committee? (No response.)
Gentlemen, again, I thank you very much. Our next witness? MR. McPHERSON: The next panel is Kevin Mazzucola, Auto Dealers Association; Bob Previdi, Director, Chestnut Hill Business Association; Michael Stalbaum, CEO, Unreal Marketing Solutions; David Lane, Leve Lane Advertising.
Good evening and welcome. Please identify 233 11/17/05 - WHOLE - BILL 050669, ETC. yourself for the record.
I'm Kevin Mazzucola. I'm the Executive Director of the Auto Dealers Association of Greater Philadelphia. I promise not to use the word "truncated." I didn't know what that meant until today. But I be brief. I guess that means the same thing. But I represent the 29 automobile dealers, franchise, new car dealers in Philadelphia, and they are a bunch of small business people as well. They average about 55 employees, but they have large gross receipts, about $1.5 billion in gross receipts from the dealers. So it is a large amount of gross receipts. I'm trying to brief. The big thing is that we want the two components. We talk about the business privilege tax and the gross receipts coming down, but also the net income component is very, very important to us. A tax burden of 6.5 percent is extremely detrimental to 234 11/17/05 - WHOLE - BILL 050669, ETC. maintaining a business in Philadelphia. So to be brief, I think the gentleman earlier said it very good, pragmatic, let's get together, let's get a bill that can go forward and hopefully be passed and to the Mayor and get it done, and it's very important to our small businesses. With that, I'll let you go.
Thank you very much. Any questions or comments of this witness? (No response.)
Seeing none, I thank you, and thank you so much for waiting.
You've been very patient. Bob Previdi, I knew you couldn't stay away. Please identify yourself for the record and proceed.
Thank you, Madam 235 11/17/05 - WHOLE - BILL 050669, ETC. President. I'm Bob Previdi. I'm the Executive Director of the Chestnut Hill Business Association, as well as the Executive Director of the Business Improvement District. Thank you for this opportunity to speak. It's nice to see you again.
I represent over 200 merchants, 50 property owners and 200 professional businesses in the Chestnut Hill community. Many of them are small business owners who are suffering from the impact of this tax. The City offers tax-free zones, tax abatements in census, as well as the state, for a lot of areas of the City, but for small businesses, and there are a lot of them in Chestnut Hill, it is a big burden. I think it's very important for the City Council to come to an agreement on this, on both ends of the business privilege tax, to reduce it. Council has 236 11/17/05 - WHOLE - BILL 050669, ETC. to find a middle ground, stay the course and show a commitment of five years. You need to have faith in Philadelphia that this place is going to grow. I'm a New Yorker that moved down here, and when my accountant told us about when we were thinking about places to live, two things come to mind. One is that they said, Well, if you move into the City, you're going to have the wage taxes and you're going to have the business privilege taxes, and my accountant strongly urged that we wouldn't move into the City. And I think that's the kind of discussion that really, really hurts the City. If we're going to grow this City back from 1.5 million people back up to 2 million people, that will bring the taxes back. And I just wanted to say on behalf of all businesses in Chestnut Hill, keep doing this good work, get the taxes down on the business privilege as soon as you can. Thank you. 237 11/17/05 - WHOLE - BILL 050669, ETC.
Thank you, Bob, and thank you for your patience and waiting. We appreciate your coming in to testify.
I'm Michael Stalbaum from Unreal Marketing. We're an advertising agency out in Narberth, Pennsylvania, and I appreciate, Madam Councilwoman Verna and members of the Committee of the Whole, to hear me, and I appreciate the opportunity to be here today. Like I said, I'm a CEO of a 37-person advertising agency out in Philadelphia. We've been around for about five years, but as I sit here and I listen for the past five years, I'm not overly political. I happen to be on the Board of the YPN. I happen to be involved in Philadelphia Forward. I've listed to Select Philadelphia as well, 238 11/17/05 - WHOLE - BILL 050669, ETC. and the one thing that affects me, why I am in Narberth -- I'm a Philadelphia local. I live in Center City, but to me, I'm the poster child of this business privilege tax. I am the ideal -- the business that I am employ to 8 students over the past couple years, I've 9 here fighting the brain dream that 10 everyone talks about in Philadelphia, and 11 I don't see any incentive for companies 12 like me to either stay in Philadelphia or 13 to move into Philadelphia. In fact, I 14 see this business privilege tax as the 15 number one disincentive for companies 16 like me. 17 And as we talk about things -- 18 this year has been a big year of blocking 19 and tackling for us as a company, and you 20 talk about things like predictability and 21 five-year plans. I'm about to sign 22 another lease right now. People don't 23 offer a one-year or two-year lease. They 24 want you to move in for five years. So 25 for someone like my business to commit to 239 11/17/05 - WHOLE - BILL 050669, ETC. the City for five years or seven years, there needs to be that predictability of a long-term reduction in this business privilege tax. I think I've seen the City -- I've been a Philadelphia native -- grow and how well-positioned we are to take this to the next level. You see the people moving in from the residential perspective and you see the businesses moving out. As I heard all of these people talk, I think we're too mired in the political discussions rather than looking at the practical discussions of a business owner; in other words, why am I in Narberth, Pennsylvania. And I happen to play a double role. I have a law firm as well in Center City, and we're a small five-person law firm. However, we're considering moving out of the City, because in both advertising and the legal business, gross receipts -- we're going to do $10 million in gross receipts this year, but as most of or some of you may 240 11/17/05 - WHOLE - BILL 050669, ETC. know, we only keep percent of that at the end of the day. So to get taxed on that $10 million cuts into our commissions. And same thing with the legal fees as well on the legal side. And I'm naive to the exact specifics of the tax code, but from what I understand, we pay on the gross receipts that we bring in whether they sit in a trust fund for a client or they're spent for costs of good sold in my advertising business. So I appreciate the opportunity to be here today and again just to put my name on the record to say that I am the business that you guys sit here and talk about from a political aspect, but don't forget the sort of down-to-earth day-to-day requirements. One other thing I wanted to point out is, once we do tackle the business privilege, you're then going to have to overcome the parking taxes and everything else that get associated with 241 11/17/05 - WHOLE - BILL 050669, ETC. it, because at the end of the day, even if I were to move my business into the City, I still hear from my employees, Well, where am I going to park? How am I going to get to work with regard to the SEPTA issues that we're thankfully dealing with and things like that. But, again, I appreciate it. I think we need to get more creative.
I think that those three guys that sit here and talked about tax the Wal-Mart, and I stay away from that, but I don't know why there's not something you can do as far as abatements for small businesses like you talked about and perhaps tax brackets of some sort. I know there's a uniformity issue, but I don't know if tax brackets are a way to get around that. But, again, I appreciate it. I thank you, and this was worth my four hours to sit here. It was very interesting, and I'm glad to get on the record.
Thank 242 11/17/05 - WHOLE - BILL 050669, ETC. you very much. We appreciate your coming in to testify. Our next witness? MR. McPHERSON: Renee Webb, Jerry Sweeney, Derrick Zahn. (No response.)
Do we have anyone else to testify on the bills? (No response.)
Mr. McPherson. MR. McPHERSON: We had testimony that was left by the Homeowners Association of Philadelphia, and that will be given to the stenographer and put into the record.
Thank you. At the request of the sponsors of Bill Nos. 040776, 051063, 051064 and 051065, those bills have been held. Therefore, this Committee will stand in recess until the call of the Chair. Thank you all very much. 243 11/17/05 - WHOLE - BILL 050669, ETC. (Committee of the Whole adjourned at 6:10 p.m.) - - - 244 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on November 17, 2005, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)