Committee Hearing, March 19, 2007

COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, March 19, 2007 2:30 p.m. - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL, CHAIR COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN WILLIAM GREENLEE COUNCILMAN JAMES F. KENNEY COUNCILMAN BRIAN J. O'NEILL COUNCILMAN JUAN RAMOS COUNCILWOMAN BLONDELL REYNOLDS BROWN BILLS 060052, 060108, 060109, 060389, 070150, 070169, 070072, 070073, 070089, 070090 and 070091 - - - 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. Thank you for your patience this afternoon and thank you for your attendance. There are many bills to be considered. First will be the issue of the biosolids bill, and before we make our announcement, we will have the Clerk read the title of the bills so there will be no questions.

Bill 060108, an ordinance authorizing the Water Commissioner and the Procurement Commissioner, on behalf of the City of Philadelphia, to enter into a service contract with the Philadelphia Municipal Authority, pursuant to which the City will assume certain obligations under an agreement that the Authority will enter into with Philadelphia Biosolids Services, LLC to design, finance, build, own and maintain facilities and equipment, and provide operating services for the management of the City's 3 3/19/07 - FINANCE - BILL 060052, ETC. wastewater treatment solids, all under certain terms and conditions; and Bill 060109, an ordinance 5 approving an extension of the term of existence of the Philadelphia Municipal Authority and authorizing the Authority to design, build, finance, own, operate, maintain and lease facilities and equipment, and provide related services for the management of the City's wastewater treatment solids, all under certain terms and conditions.

Thank you very much. We read that bill first because we would like to announce that this bill 18 will be held subject to the call of the Chair. So if there is anyone here -- (Applause.)

Thank you very much. So if there's anyone here who is here just for that purpose, do understand that this bill will not be heard today. And "subject to the call of 4 3/19/07 - FINANCE - BILL 060052, ETC. the Chair" means it would have to even be advertised were we to consider it in the future. Thank you very much. Thank you all for coming out in this slippery weather. Thank you very much. Having said that, we note a quorum. To my left, Councilman W. Wilson Goode. To my right, Councilman William Greenlee. To his right, Councilman Frank DiCicco, and for the purposes of our quorum, we also have Councilman Jim Kenney. Thank you. Next we will hear the RCAP bills, and we will certainly ask Paul Deegan to come forward to testify with regard to the Redevelopment Capital Assistance bills. Thank you. Please identify yourself for the record and begin your -- I'm sorry. I forgot to have them read. Thank you. The Clerk will read the title of all four bills. 5 3/19/07 - FINANCE - BILL 060052, ETC.

Bill 070089, 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 $1 million to assist in the conversion of the former Wills Eye Hospital in Philadelphia to the Jefferson Hospital for Neuroscience, and authorizing the City to enter into an agreement with PAID in furtherance of grant requirements, all under certain terms and conditions; and Bill 070090, 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 million to assist in the development of the WHYY Learning Lab, and 6 3/19/07 - FINANCE - BILL 060052, ETC. authorizing the City to enter into an agreement with PAID in furtherance of grant requirements, all under certain terms and conditions; and Bill 060389, an ordinance 7 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 $1 million to assist in the development of the Maria de los Santos Health 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 070169, an ordinance 20 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 7 3/19/07 - FINANCE - BILL 060052, ETC. not to exceed $2,100,000 to assist in the development of the Jewish Employment and Vocational Services, the Jewish Community Center of Philadelphia and the Pilgrim Gardens Retirement Community, and authorizing the City to enter into an agreement with PAID in furtherance of grant requirements, all under certain terms and conditions.

Thank you very much. Again, thank you, Mr. Deegan. Please identify yourself for the record and begin your testimony.

My name is Paul Deegan, D-E-E-G-A-N, and I represent the Philadelphia Industrial Development Corporation and Philadelphia Authority for Industrial Development. Thank you for listing the bills. I have submitted written testimony, so if you'd like, I could summarize each project. As you know, redevelopment grants are funded by the state's capital 8 3/19/07 - FINANCE - BILL 060052, ETC. budget and generally sponsored by the local state legislator -- can you hear me?

Thank you, Mr. Deegan.

These grants are typically sponsored by the local state legislator. The recipients of the grants are non-profits, generally colleges, museums, hospitals, social service providers. The state provides the funding through each county's industrial development authority; in this case, the Philadelphia Authority for Industrial Development, and the recipient of the grant must at least match the grant amount with funding from non-state sources. So it is a 50/50 match program. 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. That requires City Council approval and that's why these bills are 9 3/19/07 - FINANCE - BILL 060052, ETC. here today. So let me just summarize the projects that are the subject of the four bills. Bill 070090 is for the WHYY Learning Lab and it authorizes us to apply for a grant in an amount not to exceed $2 million to assist in this project. The Learning Lab at WHYY will be built adjacent to the station's existing Philadelphia headquarters. It will cover roughly 10,000 square feet. And 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. Using advanced technologies, the Learning Lab programs will train both community groups and students, K to 12 students, to produce their own videos. It will also be used for corporate training, training teachers via distance learning and with face-to-face sessions 10 3/19/07 - FINANCE - BILL 060052, ETC. in the Learning Lab. Finally, the Lab will provide facilities to create electronic field trips and interactive musical performances for schools, exhibit digital art, and connect the region's citizens in ways never before possible. The total project cost is approximately $6 million. I think I've gone through the rest of the testimony first, so I ask that the Committee report this bill out of Committee with a favorable recommendation. I'll be happy to answer any questions you may have. I'll just go on to the next project, which is 060389, and this is authorizing PAID to apply for a Redevelopment Assistance grant in an amount not to exceed $1 million for the Maria de los Santos Medical Center at 4th and Allegheny Avenue, and that's in the Seventh Council District. The Maria de los Santos Health Center is the Delaware Valley Community 11 3/19/07 - FINANCE - BILL 060052, ETC. Health Incorporated's largest health center located in the heart of the Latino community. I think the other two are in Norristown and I think there's one in Fairmount. The project will consist of renovating a 29,000-square-foot building currently owned by the organization to house its expanding operations. 3 million, and I ask that the Committee report this bill out with a favorable recommendation. I'll be happy to answer any questions about this project. And if not, I can go on to the next one. Bill 070169 authorizes PAID to apply for a Redevelopment Assistance grant in an amount not to exceed $2,100,000. This is for three projects in Northeast Philadelphia: The Jewish Employment and Vocational Services, JEVS; the Jewish Community Center of Philadelphia; and the Pilgrim Gardens Retirement Community in Northeast 12 3/19/07 - FINANCE - BILL 060052, ETC. Philadelphia. All of these are in Northeast Philadelphia. 2-acre site adjacent to the Northeast Airport. The space will consist of two adjoining buildings totalling approximately 88,000 square feet. They will house the education trade components of JEVS' services and also the administrative offices. I believe JEVS has been in business for over 50 years. They're currently in an obsolete facility at Rhawn and Dungan, and the new site will provide all the room they need to continue their job-training activities.

The Jewish Community Center of Greater Philadelphia project includes the partial demolition and rehabilitation of the JCC's Klein Branch Facility, which is located at 10100 Jamison Avenue. That's right at Red Lion and Jamison in Northeast Philadelphia. The Klein Branch 13 3/19/07 - FINANCE - BILL 060052, ETC. Facility is a 30-year-old community center that serves Philadelphia's senior citizens. The total project cost for the renovation is $1 million and the RACP grant is $500,000. And the third project in this bill is Pilgrim Gardens, which is a non-profit subsidiary of Wesley Enhanced Living. They'll be renovating an existing building located at 7023 Rising Sun Avenue into an assisted living facility for low-income seniors. The newly renovated space will consist of enlarged living quarters and community space. The renovations are scheduled to begin in October 2007 and conclude in January 2009. 5 million and the RACP grant is $1 million, and I ask that this bill be reported out with a favorable recommendation at the next meeting of Council. I'd be happy to answer any questions about these projects. And the last one is Bill No. 14 3/19/07 - FINANCE - BILL 060052, ETC. 070089 and this bill authorizes PAID to apply for a Redevelopment Assistance grant in an amount not to exceed $1 million to assist in the development of the Jefferson Hospital for Neuroscience. Thomas Jefferson University will renovate and convert the former Wills Eye Hospital building located at 9th and Walnut Streets in Center City Philadelphia into the Jefferson Hospital for Neuroscience. The rehabilitation of this building will provide dedicated space where neuroscience physicians and researchers will address the management of neurological diseases, including prevention, diagnosis, treatment and cure. The new JHN facility will occupy an eight-story building that is approximately 200,000 square feet, plus an attached garage. The total project cost is $11 million and the grant is $1 million, and I ask that this bill be reported out of Committee with a favorable recommendation at the next 15 3/19/07 - FINANCE - BILL 060052, ETC. session of City Council. I'll be happy to answer any questions about any of these bills or any of the projects. Thank you.

Thank you, Mr. Deegan. Are there any questions from members of the Committee? (No response.)

The Chair would also like to note that Councilwoman Blondell Reynolds Brown is present. Thank you very much. Is there anyone else here to testify on these RCAP bills? (No response.)

Thank you.

Thank you for your time and thanks to the District Councilpeople for introducing these very important bills and getting them scheduled so quickly. Thank you. 16 3/19/07 - FINANCE - BILL 060052, ETC.

Thank you. Next we will hear at the request of the bill sponsor -- and then we'll come back to you, PGW -- we will hear those listed in our packets as No. 8 5. That is the condo tax credit bills introduced by Councilman Kenney. We will ask the Clerk to read the title of Bill No. 070073.

Bill 070073, an ordinance amending Chapter 19-1300 of The Philadelphia Code, entitled "Real Estate Taxes," to provide a credit against the tax for owners of condominiums and cooperatives who do not receive regular City refuse, recycling and bulk item collection services, all under certain terms and conditions.

Thank you very much. The Chair likewise notes that Councilman Juan Ramos is here. As witnesses, we call to 17 3/19/07 - FINANCE - BILL 060052, ETC. testify Mr. Gary Krimstock, Esquire. Next will be Thomas J. Davis, President of the Philadelphia Condo Association, Condo Residents. Welcome. Feel free to identify yourselves to the record.

Madam Chairperson, members of the Committee, my name is Gary Krimstock. I'm an attorney in Philadelphia. I'm here as legal counsel for the Philadelphia Condominium Managers Association. Tom Davis to my left is the President of PCMA, the Philadelphia Condominium Managers Association. He also is the Property Manager at the Kennedy House cooperative. I would like to take this opportunity to thank Councilmen Kenney and DiCicco for introducing this bill and supporting PCMA in its battle over the trash issue for lo these many years. I have submitted written testimony to the Committee, and in an effort to be brief, I would just 18 3/19/07 - FINANCE - BILL 060052, ETC. summarize and hit some of the high points of that testimony, but I would request the Committee to read the information contained therein, as it has some details that I won't cover unless there are questions from the Committee.

Thank you. We're happy to submit your entire testimony as part of the record.

Thank you. PCMA was formed in 1985 among a group of condominium and cooperative associations in Philadelphia for many issues of support, coordination, to develop synergies in the professional management of these associations, and one of their issues that was a primary focus from the very beginning was the inequality of municipal services, which is not unusual to encounter in Philadelphia or in other municipalities across the country. And as the condominium regime type of ownership has grown across the country -- and we're all 19 3/19/07 - FINANCE - BILL 060052, ETC. familiar with it now. We probably have children or parents or friends or ourselves who reside in common-interest communities, community associations. This issue has become ever-more important. It has been addressed in various other municipalities in other ways. Most closely, our neighboring state of New Jersey has had a municipal services equalization legislation since 1991. Councilmen Kenney and DiCicco recognized this need several years ago, and as the Committee may recall, there was a bill, a prior bill, 010659, which was passed unanimously by City Council, that addressed the issue of fairness in municipal services; namely, trash collection services. And that bill 21 finally decided, once and for all, that if residents and households and taxpayers in the City of Philadelphia who reside in community associations, whether they be condominiums or co-ops or homeowner 20 3/19/07 - FINANCE - BILL 060052, ETC. associations, they are paying the same taxes as other households and taxpayers and residents in the City of Philadelphia, but they were not receiving municipal trash collection service. This was unfair, this was not equal, and Council recognized this by passing that bill. Unfortunately, it was not implemented as a law until after a long battle and successful lawsuit was instituted by City Council against the Mayor. In 2005, the City Streets Department came up with some regulations to provide this service that was now mandated for these homeowners in the City of Philadelphia, because, in effect, all of these residents, all of these taxpayers are paying twice for trash removal service. They're paying once with their City taxes, as do other taxpayers in the City, and they're paying a second time in their association dues to their community association, who is 21 3/19/07 - FINANCE - BILL 060052, ETC. required to provide private hauling service for this trash since the City is not picking it up. As a little bit of background, there's probably a little misperception among many people about the nature of the homeowners and residents in these types of units. Some people believe that all of these condominiums are luxury buildings, they're all located at Rittenhouse Square and all the residents and owners are wealthy people, and that's certainly not the case. If you look around, you'll see that these types of developments are cropping up in every neighborhood in the City. They're not all in Rittenhouse Square. The residents are not all wealthy. In fact, there are many owners who are young, single people or young couples just starting their careers and this is a small living space that is often the only type of housing that they can afford. It's also occupied by older people, retired people who are 22 3/19/07 - FINANCE - BILL 060052, ETC. on low or fixed incomes and, again, purchase these units because they are small in size and they are easy to afford compared to single-family homes in the City. We also have a number of City employees and public servants that need to live in the City and be convenient to public transportation. Those are also some of the owners and occupants of the condominiums in the City.

So no matter whether you live in a large single house in Chestnut Hill or in Center City or in a smaller rowhouse in South Philadelphia or in Northeast Philadelphia or whether you live in a high-rise condominium on Rittenhouse Square or a small condominium in the Northeast, you still pay the same taxes, you're still entitled to the same services, and you still need to have your trash collected, and, fortunately, that's what this bill addresses. Now, this bill in particular I 23 3/19/07 - FINANCE - BILL 060052, ETC. think provides a simple, a clear, an efficient and a less expensive way of providing this service to the households in Philadelphia than for the City to actually go out and pick up the trash. We've seen from some of the City's own estimates -- the Streets Department did a survey and came up with estimates back in 2002 when there were approximately 20,000 common-interest association units in the City of Philadelphia and they developed figures which showed that there would be a substantial investment in capital equipment that would be required in terms of trucks, dumpsters. Special labor would need to be trained to operate that equipment, and, of course, more manpower would be needed. So there was an initial large capital investment that would be required, as well as additional operating costs on an annual basis. The bill that is before the Committee today provides for a tax credit to be offered to the unit owners to 24 3/19/07 - FINANCE - BILL 060052, ETC. represent the costs that they are now incurring for the private collection of their trash, and that would eliminate the need for the City to make any investment in equipment, to incur any additional payroll or labor expense or any additional training that might be required. It should be kept in mind that these studies, even assuming they were accurate, were made in 2002. We're now five years later. We estimate that there has at least been a ten percent increase in the number of condominium units in the City, so that we're probably at about 22,000 now. As you well know, there are many hundreds more that are in the process of development, construction or on the planning boards, and certainly these will be growing in the future. The numbers will be growing. Just as an example of a statistic that's worth noting, there are now approximately nationwide 250,000 25 3/19/07 - FINANCE - BILL 060052, ETC. common-interest community associations housing more than 50 million people across this country. Obviously this is a trend that's going to continue and will grow in the future. If the City were to make the investment in the equipment necessary and the labor necessary to provide this service, as is now mandated by the law, that cost would be growing exponentially into the future. The issues presented by the tax credit would be at $200 maximum per unit per year. The costs of the condominiums, most of them don't even approach that cost. 4 million a year. We estimate it's more likely to be less than $2 million, substantially less than $2 million per year in the cost to the City in affording these tax credits, while the investment in capital equipment and the additional labor required to 3/19/07 - FINANCE - BILL 060052, ETC. actually provide the service would be much more expensive than that. We have trash pick-up now for other households in the City. The Streets Department provides a pick-up of an average household's trash output once per week. That's bags of trash or six 9 cans of trash equivalent to a maximum of 10 240 pounds of trash per week. In many of 11 the community associations, those are 12 often in high-density, multi-family buildings, whether they be high rise or garden complexes. And that normal average household output of trash would certainly be a huge concentrated volume of trash that could not be picked up in a one-day-a-week collection.

That would impose upon the associations a tremendous burden in the purchase of additional equipment that would be required to store, refrigerate the trash waiting for pick-ups, provide dumpsters that would accommodate the City vehicles, whereas now all of the trash is picked up, 27 3/19/07 - FINANCE - BILL 060052, ETC. removed from the City in a very effective and cost-efficient manner by these households providing the service for themselves. So the point is that they are perfectly willing to continue to provide that service for themselves, but they don't want to pay twice for it, and this bill will eliminate that problem. Tom Davis is going to speak for a couple of minutes about some additional background here. If the Committee has any additional questions for me, I'd be happy to answer them, but we do urge this Committee to support the passage of this bill. It's a very valuable and important right for a large population in this city that's growing every day. Thank you.

Thank you. We're happy to hear all the testimony, then we'll raise questions.

Thank you.

Thank 28 3/19/07 - FINANCE - BILL 060052, ETC. you. Is Joan Rosenfeld here, too?

Yes.

Thank you. Please identify yourself and begin your testimony.

Good afternoon, ladies and gentlemen. My name is Tom Davis and I am the President of the Philadelphia Condominium Managers Association as well as the General Manager of the Kennedy House. We have been getting together like this for the last ten years. Your faces are very familiar and your names, too. We want to thank you for the opportunity, Councilman, for bringing this up, and, Councilman DiCicco, we owe you both a debt of gratitude. We're only talking here about the most minimal service a city can give its residents. We're not looking for gold-plated streets or new lighting or 29 3/19/07 - FINANCE - BILL 060052, ETC. anything else. We're just asking to have our trash picked up. Like the little girl said in Poltergeist, "we're back" and we are here again to solicit your assistance and help. You were right and did the right thing two years ago, as well as City Council. We're asking you again to stand by our request and do it again. I just want to reiterate something that our counsel mentioned a minute ago. Too often we think of condominiums as being for the wealthy. Kennedy House is a cooperative. William Penn House is a cooperative. The Penn Center House is a cooperative. 2101 is a cooperative. They were built for middle-income people. They were built by HUD. They remain for middle-income people. These are people who work for a living like you do and like I do. They need to get this tax break. I appreciate your time and your consideration. 30 3/19/07 - FINANCE - BILL 060052, ETC. Twenty-two thousand units represents 22,000 families, and these people are the ones who vote every time, and they need your support just like you need theirs. Thank you very much. We look forward to it. Thank you.

Thank you very much. Joan Rosenfeld is the only other person who is due to testify, unless there's someone else here, and then we'll have the Commissioner, Nancy Kammerdeiner, come forward. And we'll ask questions, so don't go far, because we do have questions. Thank you. Good afternoon. Welcome. Please identify yourself for the record and begin your testimony.

Good afternoon. I'm Joan Rosenfeld and I'm here representing the Community Association Institute, the CAI, and CAMCO Management Company, the company that I serve as 31 3/19/07 - FINANCE - BILL 060052, ETC. President. To my left is Tony Campisi, who is the Executive Director of the CAI. Now, that's CAI, Community Association Institute. We are the trade organization that represents planned communities throughout the United States and the chapter that is Pennsylvania Delaware Valley chapter. We also want to express thanks to Councilmen DiCicco and Kenney for bringing this to the group again and for the Committee's consideration. The way this bill is presented, it is the most efficient and effective way for you to treat those folks in the City and a lot of them who are in planned communities. They are taxpayers, and obviously if you credit their taxes, that will benefit what they pay ahead to the association for trash collection. So this is an arrangement that serves both groups well. We are not asking for the City to add employees or equipment. The 32 3/19/07 - FINANCE - BILL 060052, ETC. associations are perfectly willing to continue with their private haulers, but the relief is to the voters. And obviously in our associations, CAMCO represents -- some of them wealthy, some of them not -- Society Hill Towers, Hopkinson House, Center City, The Barclay, The Grandview, Waterfront Square, Naval Square, Wanamaker House, The Dorchester, Tivoli. But there are a lot of folks who are taxpayers and there are a lot of folks who are voters, and for them to get some relief in this area and equality in this area is what we are advocating. So I thank you for your time and your consideration of this bill. Thank you.

Thank you very much. Would members of the Committee like to raise questions now or would you like to wait until the Revenue Commissioner comes forward? 33 3/19/07 - FINANCE - BILL 060052, ETC. (We'll wait.)

All right. Thank you very much. Thank you all very much. Nancy Kammerdeiner, Revenue Commissioner. Mr. Malley, thank you very much. Mr. Malley first please come. Thank you. I'm sorry. I didn't know you wanted to speak.

Sorry, Madam Chair. I thought you were aware that we were testifying on an amendment that was drafted by Councilman Kenney, the prime sponsor.

I'm sorry. I am now, so all is well.

I'm with Nancy Goldenberg from the Center City District and she has a statement she'd like to make on the amendment.

Thank you.

Thank you. 34 3/19/07 - FINANCE - BILL 060052, ETC. Good afternoon. My name is Nancy Goldenberg. I'm the Vice-President of Planning for the Center City District. The Center City District clearly understands the logic of providing condominium owners and residents of cooperatives with a tax credit. These same residents directly benefit from services provided by the Center City District, including daily supplementary cleaning and daily security patrol provided by our community service representatives. They also benefit from more than $45 million worth of public improvements that the Center City District has made in the public environment through the installation and ongoing maintenance of lighting, signage and other pedestrian amenities like trees, bus shelters and benches. Therefore, in order to eliminate any confusion, we very much appreciate Council's willingness to clarify with this amendment that the exemption granted 35 3/19/07 - FINANCE - BILL 060052, ETC. in this ordinance does not extend to special service districts or neighborhood improvement districts. Thank you.

The only part of the amendment that we're interested in is Paragraph 3, the last paragraph. On the bill itself, we have no problem with it.

Thank you.

Thank you.

Thank you. Ms. Marsha Bacall. Is there anyone else before we hear our Commissioner and then we'll have discussion? (No response.)

Thank you very much.

Thank you, Madam Chair.

Thank you. Welcome. 36 3/19/07 - FINANCE - BILL 060052, ETC.

I should be very used to this because I've been coming back to speak to all of you in one way or another for the last eight or nine years. But I did not come prepared to speak, but it occurred to me that you need to hear from a citizen, somebody who lives in a condo, who is on fixed income, who bought the condo when it was relatively cheap and is being pressured from all sides. I do not see this as a tax relief. I see this as a guarantee that vertical people will be reimbursed for what horizontal people have been taking for granted for a long, long time, and that is the only reason why I am sitting here and speaking. It's been too long denied. You get awfully tired of hewing to the same line over and over again. Take care of this. Just take care of it. People who live in condos and co-ops deserve equal treatment under the law, and that's all this is, fair, equal treatment. 37 3/19/07 - FINANCE - BILL 060052, ETC. I thank you.

Thank you, Ms. Bacall. Would Commissioner Nancy Kammerdeiner come forward, our Revenue Commissioner. Please identify yourself for the record and make your testimony, and, again, afterwards we'll have any discussion necessary on the issue. Thank you. COMMISSIONER KAMMERDEINER: Good afternoon, Councilwoman Blackwell and members of the Committee on Finance. I'm Nancy Kammerdeiner, Revenue Commissioner, and I'm pleased to be with you today to present testimony regarding Bill No. 070073. This bill will amend Chapter 21 19-1300 of The Philadelphia Code, entitled "Real Estate Taxes," to provide a credit against the tax for owners of condominiums and cooperatives who do not receive free regular City refuse, 38 3/19/07 - FINANCE - BILL 060052, ETC. recycling and bulk item collection services. The Administration is opposed to this bill. The credit would be equal to the amount the owner paid for refuse, recycling and bulk item collection services that were rendered during the prior year when the City did not provide such collection services at no cost to the condominium or cooperative, provided that the credit does not exceed $500 for any tax year. If approved, this credit would be effective for the tax year 2008 and thereafter. To receive the tax credit, the taxpayer would be required to submit an application to the Department of Revenue --

Excuse me, Commissioner. Point of information. Councilman Kenney.

Thank you, Madam Chair. I'm sorry to interrupt, but there are going to be amendments. One of 39 3/19/07 - FINANCE - BILL 060052, ETC. the amendments we've talked about was the special service district, but there's another amendment that's changing the 500 to 200. So any of your calculations in your testimony should be based on the $200 number, not the $500. COMMISSIONER KAMMERDEINER: At the time it was written, it was 500.

It's not your fault. I just wanted to make sure that the record was clear that your calculation is based on 500. That will now be 200. COMMISSIONER KAMMERDEINER: And exactly why I kept the 500 in there. I had heard that there will be an amendment.

Yes. COMMISSIONER KAMMERDEINER: But wasn't sure when it would be submitted and so --

Today. COMMISSIONER KAMMERDEINER: -- I did not alter the testimony. 40 3/19/07 - FINANCE - BILL 060052, ETC.

Today. But thank you. Sorry. COMMISSIONER KAMMERDEINER: That's okay. To receive the tax credit, the taxpayer would be required to submit an application to the Department of Revenue, along with documentary proof of their eligibility to receive the credit. I have a number of issues and concerns about this proposed legislation as drafted. First, the Constitution of the Commonwealth of Pennsylvania requires that all taxes shall be uniform upon the same class of subjects. The Constitution calls upon the General Assembly to establish standards and qualifications for any special tax provisions and specifically mentions the establishment of a class or classes of persons who because of age, disability, infirmity or poverty are determined to be in need of tax exemption or of special tax provisions, special tax provisions for a 41 3/19/07 - FINANCE - BILL 060052, ETC. limited time period to encourage improvement of deteriorating property and special tax provisions for long-time owner-occupants when the values of their properties have increased because of the restoration of other properties or construction in their neighborhood. With these exceptions, the General Assembly and the Courts have generally not supported the creation of special classes of real estate taxpayers. The creation of a special class of real estate taxpayers for those who did not receive City refuse, recycling or bulk item collection at no cost is especially problematic. Although it is correct that at one time the City did not provide such collection services to condominium and cooperative buildings with more than six units, following the resolution of a court case, the Streets Department does now offer collection to condo and co-op owners on the same weekly basis that collection is provided to 42 3/19/07 - FINANCE - BILL 060052, ETC. other property owners throughout the City. To date, few condominium or cooperative buildings have accepted the City service. Most have opted to continue to pay for private collections. It would be difficult to identify and support a uniform class of taxpayers who should receive special tax treatment because they've decided to continue to buy private services instead of accepting the service that the City is offering. Even if such a class of taxpayers could be supported under the Pennsylvania Constitution, there are issues with the cost of this proposed legislation. The number of condominium and cooperative units is increasing. Depending upon the timing and the source, the numbers I've seen range from 22,000 to 28,000 units whose owners might be eligible for these real estate tax credits. If all applied for the maximum credit -- and, again, as the Councilman has pointed out, these calculations are 43 3/19/07 - FINANCE - BILL 060052, ETC. based on $500 -- the cost to the City's General Fund would be between $11 million and $14 million annually. 4 million. At a time when there are more demands on the General Fund budget than can be funded, the loss of this real estate tax revenue would require reductions in expenditures in FY08 and beyond. There will be administrative costs to implement and maintain this credit program. Programming will be required to add the credit to TIPS, the integrated tax system, so that there are screens for data entry and retrieval and the credit is recognized in the real estate bill calculations and payment processes. Permanent staff will need to be trained so that they understand the credit program and can provide appropriate customer service. Temporary staff will need to be hired each year to 44 3/19/07 - FINANCE - BILL 060052, ETC. assist in the review of the applications and the data entry of the approved credits to each taxpayer account. Regulations will need to be developed and procedures implemented to deal with issues like the application of credits when a property is sold and how to handle the credits if the amount exceeds the tax liability or the tax account is delinquent.

In addition, this credit program will affect the way the split of real estate taxes between the City and the School District is handled. Currently, all collections for a given tax year are split on the basis of the tax relationship for that year. Since this credit program will only affect the City's share of the tax, the split will need to be adjusted for every payment that includes a condo/co-op credit. In addition to the constitutional and cost issues already identified, there are a number of additional problems with the legislation. 45 3/19/07 - FINANCE - BILL 060052, ETC. The legislation does not distinguish condominiums and cooperatives used for residential purposes from those used for commercial purposes. There are differences in the City services provided for other residential and commercial properties. Council's intention here should be clarified. In the case of a cooperative, the legislation, as currently drafted, would apply to the cooperative association that owns the real estate, not the individual shareholders or members who hold a cooperative interest. As a result, the maximum credit of $500 would apply to the entire cooperative, no 18 matter how many individual units it might contain. Council's intention should be clarified here as well. The bill requires each taxpayer to apply for the credit. However, condominium associations generally pay the cost of common services like trash collection from the condo fees collected 46 3/19/07 - FINANCE - BILL 060052, ETC. on a proportionate share basis from the owners of the units. As a result, administrative burdens would be created for the individual owners who must apply with documentation, the condo associations that will need to provide pro rata documentation to the owners of the individual units, and the Department of Revenue that will need to review thousands of applications. The flexibility to allow Revenue to provide in the regulations for applications from condominium or cooperative associations on behalf of all the units they represent could alleviate some of this burden. I understand that amendments may be offered to this legislation that will address some of the concerns I've raised. I would welcome the opportunity to work with you to address the other issues of this legislation if it's to move forward. This concludes my testimony.

Thank 47 3/19/07 - FINANCE - BILL 060052, ETC. you very much. I think we'll have several questions here. Obviously one of mine was the issue of dealing with recycling, but it seems to me -- and I'll question the sponsors of this -- that this amendment you gave us this morning does define residential planned community as opposed to other condos and it does deal with an area that's already defined as a community in an economic improvement district. And so it clarifies those two areas, but there are many other areas that the Commissioner raised with regard to the law and special taxation. And her testimony obviously, as we all just heard it, states that the City has offered to provide a service that the condo associations have refused and many others. So we certainly would hope there's somebody who can respond to the issues raised today. Having said that, I'll call on my colleagues to be more specific. Councilman Greenlee. 48 3/19/07 - FINANCE - BILL 060052, ETC.

Thank you, Madam Chair. COUNCILMAN DiCICCO: It's Greenlee.

That's what I said. Listen, I tell you, when he first was elected, I heard somebody on the radio say Councilman Greentree. So anything close to that is not bad.

I've been known to answer to a lot of things. Good afternoon, Commissioner. COMMISSIONER KAMMERDEINER: Good afternoon.

A couple things that occurred to me through your testimony. One -- and I know this probably doesn't involve as much money, but I remember years ago -- I don't know if you were involved then -- that there were adjustments made to people's water bill, water and sewer bill. I particularly recall some people in the Somerton section of the City who did not 49 3/19/07 - FINANCE - BILL 060052, ETC. have sewer services and they were always paying water and sewer bills and there were adjustments made there. COMMISSIONER KAMMERDEINER: The water fees and the sewer fees in terms of the rates are separate and so we can charge specifically for water and specifically for sewer, and I think that's why they were able to be severed in that manner. There are some people in various areas of the City who don't receive sewer services. They have septic tanks or --

Cesspools. COMMISSIONER KAMMERDEINER: -- whatever the situation might be, and we do have a number of water only customers.

But I think at one time they were paying and there were changes made when it was realized that that wasn't equitable. COMMISSIONER KAMMERDEINER: I think that might be true, but also I 50 3/19/07 - FINANCE - BILL 060052, ETC. think the original rates were lumped together and a number of years back the rate hearings established separate rates for water and sewer, and I think that's at the point in time it happened. I wasn't involved in it, so --

I think the residents had to go to court to get it, though, from what I remember. COMMISSIONER KAMMERDEINER: I wasn't involved in it at the time.

Similar to what these folks had to do. COMMISSIONER KAMMERDEINER: I just know that they are separate and there's separate rates there.

And I guess -- and maybe this is addressed better if the Streets Commissioner was here, but it would seem to me that this makes a lot more sense than all these people -- I see my friend from the Philadelphian back there. I don't know where they would 51 3/19/07 - FINANCE - BILL 060052, ETC. put all that trash to get it picked up once a week by the City. You have all kinds of issues of going on private property and all that kind of thing. Here it just seems to me off the top to be a lot -- no pun intended -- cleaner to do it this way. And I know there will be adjustments that you have to make as the Revenue Commissioner. I understand that. Obviously there will have to be tremendous adjustments, it would seem to me, that the Streets Department would have to make to pick up all that trash, because right now, I mean, we hear they barely get through the day and sometimes they get backed up and all that kind of thing. If you start collecting this much more trash, that sounds to be a burden there, too. So it's a burden one way or the other, isn't it? COMMISSIONER KAMMERDEINER: I can't comment completely on it, but in preparing this testimony, I did receive some information from the Streets 52 3/19/07 - FINANCE - BILL 060052, ETC. Department where they outlined the number of trucks, the number of staff that they would need in order to collect from all of the condominiums that they had identified at the time that they put together the proposal, and it's on that information that I based the cost figures I included in my testimony on what it would cost or what we estimate it would cost for the City to do once-a-week pick-up.

Madam Chair, just for a point of information, because it's a little aggravating. Back in 2001 when we had this discussion, we were trying to get the City to pick up the trash and they didn't want to pick up the trash. The estimates for the trash removal were between $5 and $8 million. Now that we've gone all through court and now the City has to pick up the trash, the estimate for picking up the trash is 3.3 million. Now, it seems to me that the 53 3/19/07 - FINANCE - BILL 060052, ETC. number will be variable based on whether or not you want to pick up the trash back in 2001, which you didn't. Now in 2007 when you're forced to pick up the trash, now you want to pick up the trash and not give the tax credit, but the cost of picking it up is $5 million cheaper. It's just stunning. It's stunning. I'm going to go back and get the notes of testimony, because it was between 5 and 8 million when you didn't want to pick up the trash. Now it's 3.3. Magic. Anyway, thank you.

The Chair notes that Councilman O'Neill is present as well.

I'm sorry. I'll be finished in a minute. I guess it was just along the lines that Councilman Kenney just said, I remember the Administration fighting so hard to have to do this. And I think the idea of a tax credit was always floated 54 3/19/07 - FINANCE - BILL 060052, ETC. out there. I mean, this isn't something new. And I think a lot of the advocates for the tax credit -- and I wasn't here at the time, but if I was, I think I would have been one of those -- was the argument that we're making now, that it just seems to make more sense for everybody. It's going to be cumbersome in some ways, no matter how you do it, but this would seem to be -- just seems to make more sense. And, again, you can't answer some of the issues the Streets Department would have to do, but it would seem -- COMMISSIONER KAMMERDEINER: You would have to talk with them.

-- to me -- and maybe they could have been here, too, or somebody speaking for them, because it would just seem just the logistics could be -- I can picture some of these buildings. It would be a problem. And that was brought up from 55 3/19/07 - FINANCE - BILL 060052, ETC. the beginning. This isn't something that's just being discussed now. So it just seems to me that this is the better way to do it. And Councilman Kenney does raise a question. I haven't seen things get that much cheaper in the City over a few years. I was wondering what the difference was there. I don't know, again, if you could answer that, but that is a significant difference. I wish everything got cheaper over the last five years. COMMISSIONER KAMMERDEINER: I only have the current information from Streets. I don't have the comparative data.

Okay. All right. Thank you. Thank you, Commissioner. Thank you, Madam Chair.

Thank you. Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, 56 3/19/07 - FINANCE - BILL 060052, ETC. Madam Chair. Good afternoon, Commissioner. COMMISSIONER KAMMERDEINER: Good afternoon. COUNCILMAN DiCICCO: On that same line of question from Councilmen Greenlee and Kenney, the estimate from the Streets Department, 3.4 million, do you happen to know whether that was an estimate based on what a per household property owner pays citywide and calculating that against the to 28 14 thousand units? Is that how they got to 15 that number? 16 COMMISSIONER KAMMERDEINER: I 17 don't believe so. I think they 18 identified the number of trucks, the 19 number of routes, the number of trucks 20 and the number of staff they would need 21 in order to support that. 22 COUNCILMAN DiCICCO: Personnel, fuel, equipment, et cetera. COMMISSIONER KAMMERDEINER: Right. 57 3/19/07 - FINANCE - BILL 060052, ETC. COUNCILMAN DiCICCO: Hypothetically, if we use Ms. Bacall's analogy and every one of these vertical units were laid down on its side and we had to 28 thousand more individual 7 rowhouses to pick up from, how much do 8 you think that would cost us? 9 COMMISSIONER KAMMERDEINER: I'm 10 afraid I'm not qualified to answer that 11 question. 12 COUNCILMAN DiCICCO: I mean, 13 it's got to be an astronomical number. 14 And I'm almost tempted -- and lately I've 15 become in a protesting mood. I've been 16 taking to the streets lately, and that's 17 something I normally don't subscribe to. 18 But in addition to maybe moving all the 19 trash we collect down to two very 20 spectacular sites on Delaware Avenue, 21 maybe -- we need to look at this. I 22 mean, I got to ask Councilman Kenney. We've been dealing with this since '01?

'01. 58 3/19/07 - FINANCE - BILL 060052, ETC. COUNCILMAN DiCICCO: And we're back to where we started. And I know you work for the Administration. I know you're here to give testimony that the Administration is asking you to do, but it just doesn't make any sense to just keep dragging this thing out any longer. But maybe the other thing in the protesting mode that I'm in these days, maybe the condo units who have not yet complied with putting the trash out, maybe they all should one day a week put all the trash from every high rise that you have out on the curb. Do it. Society Hill Towers, Wanamaker House, every single co-op, every single high rise, take the time -- you have building managers over there. Bring one day's worth of trash out to the sidewalk. I think we may get a better response. That's just a wild suggestion, but maybe that's what you need to do. Because I could imagine the Towers alone, they'll probably have trash around the entire 59 3/19/07 - FINANCE - BILL 060052, ETC. perimeter of that place down Front Street, Chestnut Street, Spruce Street, you name it, Walnut Street, whatever. Maybe that's what you need to do. Because apparently I think, unfortunately, we're going to pass this bill out today, I assume. We're going to wind up right back where we were. The Administration is not going to agree to do it and where do we go? My next term -- hopefully my next term -- I guess we'll be talking about it in '11. But this is getting to be -- it's ridiculous. I mean, I don't know how else to describe it. This has been six years of this. And Citizens Alliance may be able to come out and help you put the trash out when they're done sweeping my sidewalk or whatever, but in any event, we'll try and help you out as best we can to get your trash taken away, but I think you might want to consider that.

60 3/19/07 - FINANCE - BILL 060052, ETC. Councilman Kenney.

Thank you, Madam Chair. The Mayor and I get along better now, so I'm going to be calm. And I do like him and I appreciate the interaction with him now. Since 2001, this is a cat chasing its tail. We tried to get the City to live up to their responsibilities to collect the trash. They didn't want to do it. So we passed the bill. The Mayor vetoed it. We overrode the veto. He refused to do it and then we went to court and we won. Now you're forced to pick up the trash. We had the discussion on how the cost went down as opposed to what it was before, but there always was a simple solution to this and it wasn't a tax credit. I mean, the reason we're here with the tax credit is because we tried to do the trash, we tried to negotiate just a reimbursement. My whole 61 3/19/07 - FINANCE - BILL 060052, ETC. goal from the beginning on this was to have the City sit down with the associations and say, Look, show us a bill for your costs during the course of the year. They get two days' pick-up cheaper than it costs for us to pick up one day, in my opinion, but that remains -- that could be argued. Just sit down and negotiate a reimbursement annually. We don't need the tax credit. We don't need to go through all the extra employees and all the paperwork. We don't need to do any of that. It's an issue of fairness, and the fairest way to do it is to reimburse all or some of the costs directly so we can get around the uniformity clause. We don't have to hire another whole slew of people, accountants and bookkeepers. We don't have to hire all new sanitation workers and new trucks. It's just a negotiation. That's all it ever was. When we were going through the litigation, all I ever wanted was 62 3/19/07 - FINANCE - BILL 060052, ETC. negotiation. There's so many condo associations and co-ops in the City, let's just sit down with their lawyers and our lawyers and say, What percentage, if not a hundred percent, what percentage? Because as we said earlier on, some condos and some co-ops will reimburse their people directly. But I know a lot of condos and co-ops that I've talked to, especially the condos, who would take that money and do something else with it. They'd beautify the area. They would fix the concrete. They would fix the benches. They would landscape. They would do things to improve the entire area that surrounds them or they'd give the money back to their members, whatever their members decided they wanted to do with it. I'm just tired of jumping over hurdles on something that's so simple. It's so simple. We don't need new trucks. I don't even need a tax credit or any new office to administer the tax 63 3/19/07 - FINANCE - BILL 060052, ETC. credit. All we need to do is to sit down and say, You know what, this is fair, let's negotiate it, let's come up with a number, and every year the City writes a check and it's over. That's all. I mean, I don't know. (Applause.)

I think I was very nice.

Councilman Greenlee.

Just one last thing I meant to ask you, Commissioner. I guess I'm not asking for a comment. I guess I'm making a speech. But it says in your testimony the creation of a special class of real estate taxpayers. Aren't they special now because they're not getting a basic service? COMMISSIONER KAMMERDEINER: But some are and some aren't, and so -- (Applause.) COMMISSIONER KAMMERDEINER: -- 64 3/19/07 - FINANCE - BILL 060052, ETC. with the state Constitution, it has to be uniform across everyone who meets the same definition, and the only definitions that have been sanctioned via the Constitution involve income, poverty. There are a couple of specific things that I mentioned in the testimony that are in the Constitution, and otherwise no 10 classes have been approved for real estate tax. There have been more opportunities for creating special classes for business taxes than for real estate tax.

As I said, I guess maybe in the legal term I'm not right, but in reading real words, "special class of real estate taxpayers," I would say they are now because they're not getting a basic service. But that's just me. Thank you. COMMISSIONER KAMMERDEINER: It is from a legal perspective.

Thank 65 3/19/07 - FINANCE - BILL 060052, ETC. you. Are there further questions? Councilman Kenney -- Councilman O'Neill. I'm sorry.

That's all right, Madam Chair. I just want to emphasize my support for -- Councilman Goode and I were just talking at sidebar about what Councilman Kenney then started talking about, which is I believe what happens in most jurisdictions is, there's a reimbursement or a contribution towards, depending on the level of service the local condominium association wants, recognizing the burden that's lifted off of the municipality, the intricacies and differences between each building in pick-up processes as opposed to normal homes on the street that are all the same, the City does. And all these companies that do their pick-up at condominium associations all over the country have to learn, and it takes a 66 3/19/07 - FINANCE - BILL 060052, ETC. while, I'm sure, to learn each condo's nuances. Why can't we just do that? It's cheaper. We don't get into all this. I mean, fortunately, most of the people that got paid for all these opinions are working for us in the Law Department. But special classes of taxpayers. I mean, it's a municipal responsibility. We're meeting that responsibility in a taxpayer-friendly way but also a condominium-friendly way. So I hope we can get there and get there in a hurry. Thank you.

Madam Chair, just one more comment.

Certainly. Councilman Kenney.

I agree with everything all the colleagues on the Committee have said and I appreciate your allowing me to have comments, although I'm not a member of the Committee formally. 67 3/19/07 - FINANCE - BILL 060052, ETC. I think this bill is important as a mechanism to get to where Councilman O'Neill and Councilman Goode were talking about, and, that is, I don't want to be in a position where we say, Let's hold the bill and then we'll see if we can negotiate a reimbursement, because that's not going to happen. I'd like the bill 10 to be a vehicle for discussion so that we may be able to get to some semblance of reality here. Two issues that you raise. One, I don't know who is going to challenge this other than the City on the uniformity clause part of it. I don't know of any normal residential homeowner who gets their trash picked up that cares that somebody else is getting an equal service. The condo people and the co-op people certainly aren't going to challenge it. The only entity that challenges under uniformity would be the City. So if they don't challenge it, it's not going to be challenged. 68 3/19/07 - FINANCE - BILL 060052, ETC. And on the other issue is when it comes to access to the condos, the reason -- your testimony said that very few condominium associations have taken advantage of it. There's a reason for that. There is all kinds of civil liability issues that go with the insurance covenants, that the trucks got to come on the property and that -- I mean, Councilman O'Neill said the system of trash collection now in condos and co-ops are in place. Why do we want to recreate the wheel at I believe a more expensive cost? And I don't want the record to bear the fact or portray the fact that somehow the condo people are refusing the City service. They're not refusing the City service. Their insurance companies won't allow the City to come onto the property and collect. They have all kinds of liability issues. So their hesitance on accepting the service is not one of just dismissing it. There's real civil liabilities there how 69 3/19/07 - FINANCE - BILL 060052, ETC. it relates to City employees on their property. I mean, there's a whole mess of issues that can easily be resolved by a negotiation using this bill as leverage on the tax credit to just do the reimbursement we've been asking for for eight years or seven years, six years, in there. That's all. Thank you.

Thank you. Before we continue, we announce that the Committee on Public Property and Public Works for Bill No. 060111 is likewise recessed subject to the call of the Chair. This was a companion bill to the biosolids legislation. Again, the Public Property and Public Works Committee with regard to Bill No. 060111 will continue its hearing subject to the call of the Chair. Thank you. Are there further questions with regard to this bill? Anyone else 70 3/19/07 - FINANCE - BILL 060052, ETC. who would like to testify? Yes, sir.

Gary Krimstock again, Madam Chairperson. I would like to just make a couple of comments in regard to the questions and the comments that have been raised. First of all, with regard to Councilman O'Neill's statement, it is a fact and you are correct, sir, that many other municipalities across the country in other cities have resolved this issue by reimbursement and do not provide the service as a municipality because of all the various complicating issues that Councilman Kenney has raised. In addition to the City vehicles and equipment and personnel needing to come onto private property, the condominium owners, as Councilman DiCicco said, would need to have new facilities, new compactors, storage that is just not there to have this trash stored for a week. You'd need to refrigerate it. 71 3/19/07 - FINANCE - BILL 060052, ETC. And, Councilman DiCicco, I happen to have the calculation. I did it before today's hearing. I happen to have the calculation that if Society Hill Towers put their trash out on the street for one week on one day, the amount of trash that the City collects from the average household once per week, the City collects up to 240 pounds per week from an average household. At Society Hill Towers it would be over 85 tons of trash on the streets. So we may need more streets and curbs. The other point is, with regard to the economics, we are talking about the City saving money by this bill. We're talking about spending less money. The City will spend less money with this bill, whether it be a reimbursement or tax credit, than they will by picking up the trash. Even if they could and would do it properly and effectively to serve these households, it would be more expensive than under this bill. 72 3/19/07 - FINANCE - BILL 060052, ETC. Thank you.

Let me ask a final question, and, that is, we understand you've been to court and that this is cheaper, but how does this reconcile with other homeowners who might want to get a tax credit? Is the complaint that the City was not in fact picking up enough trash? How does this relate to recycling services and how does it relate to what other homeowners in the City may request? COUNCILMAN DiCICCO: Other homeowners, as are most of us are, I believe, we get a basic City service, whereas the people who live in the vertical buildings are not provided that service on a weekly basis. So if whatever the City's budget is for collecting trash, if you divide it by the 500-and-something households in the City, it comes to whatever, $150 a year, but people in the condominiums are not benefiting by that tax money that they're 73 3/19/07 - FINANCE - BILL 060052, ETC. paying into the General Fund by virtue of the fact they don't get any trash pick-up.

Let me ask one final question. COUNCILMAN DiCICCO: I don't know if that's your question.

According to the Commissioner's testimony -- you all forgive me for asking these questions. I don't try to offend you. According to the Commissioner's testimony, the City offered to make the collection, but it was not accepted. COUNCILMAN DiCICCO: For the reasons that have just been pointed out, especially I think by Councilman O'Neill and Councilman Kenney. In most cases, it's either physically impossible to do and that the systems are set up where the trash is contained in a certain area of the building and you would have to get the City sanitation truck to go on the 74 3/19/07 - FINANCE - BILL 060052, ETC. premises. There are liability issues with that. And they would have to hold the trash for a week. I think they would have some serious health violations. I mean, it could go on and on and on. It's just not the practical way. And as Mr. Krimstock reported based on Councilman O'Neill's question, there's other municipalities that have done the same thing. If you took all these buildings, as Ms. Bacall said, and you laid them down horizontally, we would be picking up their trash once a week.

Thank you.

Thank you.

Certainly. Yes?

Joan Rosenfeld. May I add something as a manager of associations? We have trash pick-up at Society Hill Towers and our other vertical buildings six days a week. So 75 3/19/07 - FINANCE - BILL 060052, ETC. that we are always holding two or three. We move them away from the compactor and then we're loading more. So other than Sunday, we're picking up trash. We also do recycle in our buildings, and that is picked up in different separate containers. So, one, it's a logistical issue. We just have a huge volume. And as was eloquently said by Councilman DiCicco, where can you store all of this without having other sanitation problems? The offer that was made by the City was to have a particular kind of receptacle that must be put out on the street. Well, because the trash trucks in the City are larger than the private haulers, so we couldn't take advantage of it, A, because we couldn't save the trash for a whole week and, B, there wasn't enough room on the street to put it out, and that would have been a terrible eyesore as well as -- I hate to say the word -- a rodent problem if you really lined up all those dumpsters. So it 76 3/19/07 - FINANCE - BILL 060052, ETC. wasn't a solution to the problem. It was a piece of a solution that was not viable or could be effective for associations.

Thank you for the clarification. Councilman Greenlee.

Yes. If I could just add, Madam Chair, if my memory serves me, the arguments against the City picking it up back in 2001 was the City's arguments. They were the ones who were saying they couldn't do it for the reasons that now the condo people are saying. And that's, again, from my memory, why the whole idea of tax credits or reimbursements was brought up. So this is obviously not something new. This was something that has been discussed for a long time, and, again, it just seems to me to be the more sensible way of doing it. Thank you, Madam Chair.

Thank you. 77 3/19/07 - FINANCE - BILL 060052, ETC. Further questions? (No response.)

Thank you very much. Thank you all. We will now consider PGW bills. While the Clerk reads the title of the bill, we will ask Janet Parrish, Executive Director of the Gas Commission, and Bill Gallagher to come forward. Thank you.

Bill 070150, an ordinance amending Bill No. 060378, entitled "An ordinance 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 by approving a revised Capital Budget for Fiscal Year 2007.

Thank 78 3/19/07 - FINANCE - BILL 060052, ETC. you very much. Thank you for your patience. Good afternoon.

Good afternoon, Chairwoman Blackwell and members of the Committee. I'm Janet Parrish, the Executive Director of the Philadelphia Gas Commission. Seated to my left is William Gallagher, the Director of Budget Reporting at the Gas Works, who is here today on behalf of Mr. White, who submitted written testimony in support of the bill. Rather than go through the testimony in detail, if we may, I have submitted in lieu of written testimony a copy of the Gas Commission's resolution 19 in this matter setting forth our recommendations to Council which are embodied in this bill, 070150. Simply said, we've recommended an amendment of the approved Fiscal Year 2007 PGW Capital Budget in the amount of $765,000. It's a relatively small amount, but it does need 79 3/19/07 - FINANCE - BILL 060052, ETC. to be done and approved by Council, with two minor constraints; that is, that the funds that we are recommending be added to the budget be limited strictly to the purposes of those three line items we recommend the addition of. We're asking that you report the bill out of Committee with a favorable recommendation and a suspension of the rules so first reading may be had at the next session of Council.

Thank you very much. Are there questions? Councilman O'Neill.

Thank you, Madam Chair. Mr. Gallagher, I'm always supportive of capital improvements for the Gas Works because it usually means replacing all lines that could be very dangerous to a whole lot of people and much more costly to the Gas Works in the long run, but I also from time to time 80 3/19/07 - FINANCE - BILL 060052, ETC. have expressed my concern at some past habits of the Gas Works where you would come to us for Capital Project approval and -- or Capital Budget approval and had already spent much of the money before you came. I don't think that's been going on for a while, but could you put on the record whether what we're voting on today is proposed to be spent or whether it's already partially spent.

That is correct. None of the funds have been spent on this. We're waiting for approval so we can start the projects.

Thank you. I just wanted to clarify that. And good luck.

Thank you.

One final question. Were these costs arrived at through competitive bid?

This is an engineering estimate at this point in 81 3/19/07 - FINANCE - BILL 060052, ETC. time by our engineering department and it will be put out to a subcontractor and they'll bid on it. It's just an estimate at this point in time.

Thank you. Further questions? (No response.)

Thank you very much.

Thank you.

Thank you.

Thank you very much. The Clerk will now read the title of Bill No. 070091 authorizing Sovereign Bank as a City depository. We ask Mr. John Nacchio, City Treasurer, to come forward.

Bill 070091, an ordinance amending Chapter 19-200 of The Philadelphia Code, entitled "City Funds - Deposits, Investments, Disbursements," by amending Section 19-201, entitled 'City 82 3/19/07 - FINANCE - BILL 060052, ETC. Depositories,' by authorizing the City Treasurer to deposit funds in Sovereign Bank, under certain terms and conditions.

Thank you very much. Please identify yourself for the record and make your testimony.

Sure. Good day, Madam Chairman and members of the Committee on Finance. I am John Nacchio, the City Treasurer for Philadelphia. I appreciate this opportunity to testify before you on matters related to City depository financial institutions authorized to accept City deposits. In this proposed legislation, Sovereign Bank is being added to the existing list of nine authorized depositories. In the information search by my office, we found on their website text indicating that there are partnerships of many state governments within its footprints in which the bank provides access to affordable capital for growing 83 3/19/07 - FINANCE - BILL 060052, ETC. businesses. In addition, that Sovereign has received a Community Reinvestment Act, CRA, rating of outstanding from the Office of Thrift Supervision, OTS, from its most recent CRA exam. However, in the information submitted to the Treasurer's office for review, Sovereign Bank did not disclose its total presence in Philadelphia or the nature of its reinvestment in the community. This bank meets the financial criteria required by The Philadelphia Code which requires depositories, one, to have at least $100 million in assets; two, been in business for the last five years; three, been profitable for the last two years; and, four, are favorably insured. Also based on information available, there appears to be the banking capacity to meet the various business needs of the City based on its asset size of $90 billion. Although, this assessment is conditional in that Sovereign Bank would need to meet the 84 3/19/07 - FINANCE - BILL 060052, ETC. criteria requirements to maintain annually its depository status as set forth in Chapter 19-200 and 17-104 of The Philadelphia Code. There is no objection in a revision of The Philadelphia Code to add Sovereign Bank as an authorized City depository. That concludes my written testimony.

Thank you very much. Are there any questions for the Treasurer? (No response.)

Thank you very much.

Thank you.

The Clerk will now read the title of Bill No. 22 060052 dealing with Wachovia Bank.

Bill 060052, an ordinance amending Section 19-201 of The Philadelphia Code, entitled "City 85 3/19/07 - FINANCE - BILL 060052, ETC. Depositories," by revoking the depository status of Wachovia Bank, and revising the list of City depositories, under certain terms and conditions.

Thank you very much. Jonathan Stein and Donna --

Madam Chairman, we would prefer to --

Sorry. Wachovia. We'll call on Wachovia Bank first. Bill Knott, Executive Vice-President, Philadelphia Regional President; Jonetta Allen, Senior Vice-President, State Government Relations; and Jeff Gish, Senior Vice-President, Community Relations. Thank you very much for your patience. We welcome you. Please identify yourself for our record and begin your testimony.

Good afternoon. My name is Bill Knott and I'm the Executive Vice-President responsible for financial 86 3/19/07 - FINANCE - BILL 060052, ETC. services activities at Wachovia in Philadelphia. We value our relationship with the City of Philadelphia, and I want to start by apologizing for the way we showed up at the January 31st hearing. As I said, we value the relationship and it was not our intention to show any disrespect to this Committee or to members of the City Council. We understand, in retrospect, how some may have interpreted our actions that way. We're deeply sorry for that. The relationship has been rewarding to Wachovia and we believe economically beneficial to the City as well. With me are Jonetta Allen. Jonetta runs our state government relations. She's been with the bank 12 years. I think most of you have had the opportunity to meet Jonetta. She took over in May of last year our state government relations function. Jeff Gish joined us in 87 3/19/07 - FINANCE - BILL 060052, ETC. September, and Jeff is responsible for our community relations. I want to reaffirm today our desire to be a key ingredient in the financial well-being of residents in the City of Philadelphia. We have a longstanding record of community service in Philadelphia and we're proud of that legacy. We intend to continue to support our commitment to the City of Philadelphia through affordable lending solutions in low- and moderate-income areas, to providing small business loans to Philadelphia entrepreneurs in low- and moderate-income areas, and to expanding our financial literacy programs to more participants throughout Philadelphia. We're here today to respond to questions about Wachovia, its business policies and its commitment to the community. Thank you.

Thank you very much. 88 3/19/07 - FINANCE - BILL 060052, ETC. Councilman Goode.

Thank you, Madam Chair.

Certainly.

Good afternoon, Mr. Knott, Ms. Allen, Mr. Gish. Let's start with your January 31st testimony offered by Jim Eisenhower in which he testified on both Bills 060052 and 060939, which has since been enacted into law. Mr. Eisenhower chose to testify on both bills. Mr. Eisenhower chose to testify on both bills and respond to potential testimony by Community Legal Services and in that testimony addressed the issue of Community Reinvestment Agreements and whether Wachovia enters into Community Reinvestment Agreements or not. Can you tell me for the record whether Wachovia enters into Community Reinvestment Agreements in writing and, 89 3/19/07 - FINANCE - BILL 060052, ETC. if not, why not?

Certainly. Thank you for the question, Councilman Goode. We have chosen to move to a strategic focus. We chose to begin moving to a strategic focus for a community as a whole and not enter into specific community agreements. We believe that community agreements, for the most part, are individual-organization focused and don't allow the breadth of the services to be allocated throughout the entire community. That's why we stopped entering into community service agreements. Having said that, we partner with community organizations that meet our strategic goals and initiatives. Currently, we have about 260 community partnerships that are outstanding that help us meet those strategic goals. In addition, we have something called Wachovia volunteers for our employees. We pay for four hours of community 90 3/19/07 - FINANCE - BILL 060052, ETC. service work for those employees --

Mr. Knott.

Yes, sir.

You know that's not what this discussion is about. This discussion is about your lending performance, and in the discussion of your lending performance is also not just about whether you enter into Community Reinvestment Agreements with individual communities, individual organizations. It is about whether you enter into Community Reinvestment Agreements even on a citywide basis or in terms of the market. It is not uncommon for a bank or banks, other than your bank, to come into a market, particularly when they are acquiring another bank, when they are merging with another bank -- in fact, some of your predecessors did it -- to come into the market and to negotiate a Community Reinvestment Agreement about how that particular financial institution 91 3/19/07 - FINANCE - BILL 060052, ETC. plans on servicing that particular market. So this is not just a discussion about whether you will negotiate a Community Reinvestment Agreement with one particular group or one particular section of the City. The issue is whether you actually have a policy within Wachovia that you do not negotiate Community Reinvestment Agreements at all.

Councilman Goode, we've done multiple acquisitions and, to the best of my knowledge, we have not entered into community --

Do you have a policy against entering into Community Reinvestment Agreements in writing?

We do not.

You do not have a policy against entering into Community Reinvestment Agreements in writing?

No. 92 3/19/07 - FINANCE - BILL 060052, ETC.

Would you entertain entering into a Community Reinvestment Agreement within this market if you felt that those that you were negotiating with represented a broad enough coalition of community stakeholders?

Councilman, would we be willing to sit down and converse and talk to those institutions or individuals? Yes.

I'm not asking you to sit down and talk to any specific groups. We're still talking from a policy standpoint in terms of how you plan on addressing this marketplace. Your predecessors chose to negotiate Community Reinvestment Agreements. Obviously when Wachovia came into the market, for whatever reason, it decided not to negotiate a Community Reinvestment Agreement in writing. I won't even get into why that was. Instead, what I will say in addition to 93 3/19/07 - FINANCE - BILL 060052, ETC. whether or not you have a policy against it, if you don't, are you willing to negotiate with a broad enough representation of community stakeholders and discuss with those stakeholders your lending performance within this market?

Are we willing to -- and I don't want to go ahead and miss your point. We have filed a strategic plan with the City in June of last year relative to our overall focus within the City of Philadelphia. Where we find that community organizations marry up to that plan that was filed, we're willing to work with them in any way. Are we willing to go ahead and put something in writing? We've got 260 community organizations today that we have not found any need to put --

Mr. Knott, I am extremely familiar with how Community Reinvestment Agreements have worked within this marketplace and within other marketplaces. I'm talking specifically 94 3/19/07 - FINANCE - BILL 060052, ETC. whether you're going to utilize that tool. If not, just say you're not.

Councilman Goode, I don't see us utilizing that tool because, again, my belief is they're too organization focused and centric and don't give us the breadth that we're looking for.

Mr. Knott, I'm talking about the practice of using Community Reinvestment Agreements nationwide. I'm not talking about any specific proposal that has been given to Wachovia here locally. What I'm talking about is a tool that is used generally when a financial institution comes into a marketplace. Your predecessors did it. They do it in other jurisdictions. I'm asking specifically are you against Community Reinvestment Agreements?

Yes, sir, as a matter of policy.

Okay. And in lieu of a Community Reinvestment 95 3/19/07 - FINANCE - BILL 060052, ETC. Agreement, have you proposed a strategic plan that you think does what it needs to do instead of the Community Reinvestment Agreement?

We followed a strategic plan that I believe you're familiar with. Is it everything we would like it to be? No. Will we continue to work harder to achieve or exceed those goals? Yes, sir.

You're familiar with past studies done by the National Community Reinvestment Coalition and commissioned by this Council that show Wachovia doing very well in terms of home improvement lending and home refinance lending, but doing not so great in terms of home mortgage lending and small business lending, particularly as it relates to the percentage of that lending to African-Americans, to Latinos, to low-income people.

Yes, sir.

And does 96 3/19/07 - FINANCE - BILL 060052, ETC. your strategic plan deal with those disparities as identified within that report or those reports?

Councilman Goode, Jonetta Allen. If I could address that question. Affordable mortgage lending is part of that strategic plan, but specifically the question that you're asking around home purchase financing is where we were underperforming in comparison to our competitors, and we have taken a look at that. One of the things that we do recognize and we recognized even before these numbers were before us was that our mortgage business needed to be more robust. And you may be familiar with our recent affiliation with Golden West Financial. It is part of that affiliation we're taking on a segment of our business where we're underperforming in that particular loan category not only in this market and not only to African-Americans. And referring to the numbers 97 3/19/07 - FINANCE - BILL 060052, ETC. that were provided by NCRC, just to illustrate the case in terms of our being competitive with that product, when you look at the loans accepted -- applications accepted to the loans originated in comparison to our competitors, our rate was at the 43 percent as compared to 71 percent of loans closed. We recognized --

Ms. Allen, you know perfectly well that's not what we're here to talk about today.

Yes, it is.

No, no. 16 What we're here to talk about today is whether your strategic plan addresses disparities as disclosed in the NCRC studies.

Our strategic plan does include home --

Does it address those disparities?

Yes, it does.

Because the 98 3/19/07 - FINANCE - BILL 060052, ETC. next thing I'm going to ask you is, what are your new numbers as compared to your old numbers.

Our new numbers for -- we have not received the 2005 data.

I can speak to the first six -- excuse me. I can speak to the first six months of our --

Please identify yourself for our record.

Oh, I'm sorry. Thank you. Jeff Gish, Community Relations Executive with Wachovia. In the first six months of our strategic plan, which began July 1, 2006, we originated over 323 small business loans, providing over $27 million in the first six months of that plan, and that is at 108 percent of our plan goal to date. And in that first six months as well, we've provided 1,300 --

Mr. Gish, what percentage of those loans were under 99 3/19/07 - FINANCE - BILL 060052, ETC. $100,000?

One moment. I can tell you.

That's what the NCRC reports told us.

Now, of course, in the first six months of our plan, we do not have the spread peer data because that won't be available for some --

I'm asking simply about Wachovia. What percentage of your small business loans were under $100,000?

I have that, but it's not on this immediate sheet. Is that something I can get back with you, Councilman Goode?

Absolutely not.

Okay. If you'll give me one moment, I'll find that number for you.

Councilman, while he's looking for that, one of the 100 3/19/07 - FINANCE - BILL 060052, ETC. people --

I'm only interested in the numbers.

Okay.

There are about five or six numbers I'm going to ask for, and that's going to tell me everything I need to know today.

Okay. (Pause.)

Can you repeat the question, Councilman Goode, so I make sure I give you the right --

What percentage of small business loans were under $100,000?

That would be 60 percent.

So that is actually a decrease from 2004; is that correct?

I'd have to get the 2004 numbers to compare.

2004 you 101 3/19/07 - FINANCE - BILL 060052, ETC. were far below the marketplace at 73 percent. Actually, in 2004, there were about 22,000 small business loans made in the City of Philadelphia. Over 20,000 of them, or roughly 90-some percent of them, were under $100,000. Part of the reason for your poor ranking in terms of small business lending is because you only came in at around 70 percent, and now you're telling me that based upon implementing your new strategic plan, you're even lower, at 60 percent.

Well, there are some compensating factors that I'd ask to be taken into consideration. When looking at those numbers -- and this was noted as part of the NCRC study and in our comments to NCRC after their release of the data, and that was the fact that a large number of the loans that we do --

Mr. Gish, I'd rather move on and just ask for more numbers.

Well, if I could 102 3/19/07 - FINANCE - BILL 060052, ETC. just provide some context around the two issues.

The context of this is supposed to be whether your strategic plan addresses disparities as disclosed in the NCRC studies. There's no need for any interpretation of anything. We can just look at the numbers. What percentage of small business loans were done to small businesses with less than a million dollars in annual revenue?

Councilman, we do not that information for 2005 in front of us.

I don't understand how you could not have that information.

Councilman Goode, we have the numbers in terms of overall production. We don't have the breakdown to the degree that you're asking for today in those -- 103 3/19/07 - FINANCE - BILL 060052, ETC.

That's what the NCRC study addressed. That's what your strategic plan is supposed to address. You said in your testimony and other comments that your strategic plan does address those disparities. I'm simply asking for the numbers. For the one measurement so far, we see that in 2004 the market gave over 90 percent of its loans to businesses that were receiving loans of $100,000. Wachovia only gave 70 percent of the loans, roughly 70 percent of the loans, in 2004 and since that time in 2005 it fell. Another key indicator that I'm, of course, looking at is the amount of loans to businesses with revenues with less than a million dollars. That's a key indicator that anybody would look at and that's a key indicator that you would expect me to ask about and that's a key indicator that you should have prepared for if you actually came here to discuss 104 3/19/07 - FINANCE - BILL 060052, ETC. the numbers.

Regretfully, we did not come with those particular numbers. We came prepared to discuss the percent originations in low- and moderate-income areas and geographies, and I could readily provide you that data, but we didn't --

So if I begin to ask you about your denial disparity ratios for home mortgages, you probably don't have that either.

No. I have that data.

Okay. What is your denial disparity ratio to African-Americans for home mortgages?

In 2004, that was 1.91, and in 2005, it was 2.14.

Aside from the fact that I can speak to the 2004 number, the NCRC report says your denial disparity ratio was 2.45. Nonetheless, even looking beyond that, what you said 105 3/19/07 - FINANCE - BILL 060052, ETC. was in the year in which you ranked dead last in terms of providing equitable access to home mortgage to African-Americans, since that time, your denial disparity ratio has actually gone up. In other words, you are more likely to deny an African-American a home mortgage than when you ranked dead last in the last NCRC study.

Councilman, I do stand corrected. I was looking at the 2003 number -- oh, that was the summary, and you are correct that in terms of home purchase, it was 2.45, but the number that I gave you previously was for overall all home-related loans.

I'm asking your denial disparity ratio specifically for home mortgages to African-Americans.

Purchase, refinance or both?

No, no. 24 Just home purchase.

Home purchase -- now 106 3/19/07 - FINANCE - BILL 060052, ETC. wait a minute. That's purchase and refinance.

Mr. Gish, no 5 disrespect, but this is what you do for a living, right?

Yes, sir.