COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COUNCIL COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, 5/7/01 1:15 p.m. - - - BILL NO.'S 010258, 010259, 010260 - Related to Airport Revenue Bonds (Full text of all ordinances attached hereto.) PRESENT: COUNCILWOMAN JANNIE L. BLACKWELL, Chair COUNCILWOMAN MARIAN B. TASCO, Vice Chair COUNCILMAN DAVID COHEN COUNCILMAN FRANK DICICCO COUNCILMAN JAMES F. KENNEY COUNCILMAN MICHAEL A. NUTTER - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 /00 FINANCE I N D E X Folasade Olanipekun, City Treasurer . . . . . Dan Cantu-Hertzler, Chair . . . . . . . . . . 12 Corporate and Tax Group, City Law Department 6 Charles Isdell, Director of Aviation. . . . . 18 Bob Hazel, Vice President . . . . . . . . . . 30 Properties and Facilities, USAirways Chuck Stipancic, Director . . . . . . . . . . 33 Airport Affairs and Corporate Real Estate USAirways James Roundtree, Director, MBEC . . . . . . . 46 Janice Davis, Director of Finance . . . . . . 87 City of Philadelphia 3 5/7/00 - FINANCE - BILLS 010258, 59, 60 P R O C E E D I N G S
Good afternoon. We'll now begin or Committee on Finance public hearing on Bill No.'s 010258, 59, and 60. We note that a quorum is present: Councilman David Cohen, Councilman James Kenney, and Councilman Michael Nutter are here. We will now ask that those who are going to testify -- our City Treasurer; Charles Isdell, our Director of Aviation; our Deputy Solicitor Dan Cantu-Hertzler; our Director of Airport and Corporate Real Estate Charles Stipancic; and Jim Roundtree, Director of MBEC. Would the clerk please read the title of Bill No. 010258. And thank you all for coming.
Bill No. 010258, an ordinance constituting the Fourth Supplemental Ordinance to the Amended and Restated General Airport Revenue Bond Ordinance; authorizing the Mayor, the City Controller and the City Solicitor, or a majority of them, to issue one or more series of Airport Revenue Bonds of the City of 4 5/7/00 - FINANCE - BILLS 010258, 59, 60 Philadelphia, and to take certain actions with respect to Qualified Swap Agreements, Exchange Agreements, and similar instruments; determining the sufficiency of pledged amounts of available for Debt Service; covenanting the payment of interest and principal; authorizing the Bond Committee to take certain action with regard to the terms and conditions of the Airport Revenue Bonds and Related Agreements; authorizing the Director of Finance of the City to take certain actions with regard to the sale of such Airport Revenue Bonds and the City's continuing disclosure obligation; and specifying applicability of sections of the First Class City Revenue Bond Act and the Amended and Restated General Airport Revenue Bond Ordinance.
Thank you very much. I think that we should maybe have a discussion of all bills in concert, so would you read now the title of Bill No. 010259.
Bill No. 010259, an ordinance constituting the Third Supplemental Ordinance to the Amended and Restated General Airport Revenue Bond Ordinance; authorizing the 5 5/7/00 - FINANCE - BILLS 010258, 59, 60 Mayor, the City Controller, and the City Solicitor, or a majority of them, to issue one or more series of Airport Revenue Bonds of the City of Philadelphia, and to take certain actions with respect to Qualified Swap Agreements, Exchange Agreements, and similar instruments, setting forth the use of such Airport Revenue Bonds; providing for the pledge of certain passenger facility charges for this and certain subsequent series of Airport Revenue Bonds; determining the sufficiency of pledged amounts available for debt service; covenanting the payment of interest and principal; authorizing the Bond Committee to take certain actions with regard to the terms and conditions of the Airport Revenue Bonds and related agreements; authorizing the Director of Finance of the City to take certain actions with regard to the sale of such Airport Revenue Bonds and the City's continuing disclosure obligation; and specifying applicability of sections of the First Class City Revenue Bond Act and the Amended and Restated General Airport Revenue Bond Ordinance. And Bill No. 010260, an ordinance 25 authorizing the Director of Commerce, the Director 6 5/7/00 - FINANCE - BILLS 010258, 59, 60 of Aviation, and other officials of the City to enter into certain lease amendments, amended agreements, or other agreements with the Philadelphia Authority for Industrial Development ("PAID"), and other parties, necessary to permit the completion of two airport terminals and other airport improvements.
Thanks. So you've read the titles of all three bills?
All right. Thank you again, everyone, for coming. Now we will call on our City Treasurer to enter her statement and have her testimony presented. Thank you.
Thank you, Madam Chair. Good afternoon. My name is Folasade Olanipekun, and I'm the City Treasurer. I'm here today to provide in many support of Bill No.'s 7 5/7/00 - FINANCE - BILLS 010258, 59, 60 258, 259 and 260. With me today is Charles Isdell, Director of Aviation, who will describe the airport expansion project; and Dan Cantu-Hertzler, on behalf of Ken Trujillo, the City Solicitor, who will provide testimony describing the amendments to the leases and access agreement; Charles Stipancic, Director of Airport and Corporate Real Estate; and Bob Hazel, Vice President of Property and Facilities will provide additional testimony for USAirways; as well as Jim Roundtree, Director of MBEC. Also here today is Janice Davis, Director of Finance and certain members of the bond finance team Blackwell.
Excuse me one moment. Let me note that Frank DiCicco is also here. Thank you.
Thank you. In terms of the order of testimony, will provide testimony first; then Dan Cantu-Hetzler of the City Solicitor's Office will provide a summary of his testimony; then Charles Isdell, Director of Aviation will provide his 8 5/7/00 - FINANCE - BILLS 010258, 59, 60 testimony by way of a presentation; then the folks from USAirways will provide testimony also as part of the presentation; and then MBEC will provide their testimony in that order.
Madam Treasurer, the last -- I think we had a water revenue hearing on bonds and the request from the committee was that the professional service list would be here. Do you have it, or is it in this packet somewhere?
No, it's not, sir. I have it to provide to you this afternoon.
Okay, great. Thank you. Thank you, Madam Chair. 9 5/7/00 - FINANCE - BILLS 010258, 59, 60
The purpose of Bill 5 No. 258 is to authorize the City to issue general airport revenue bonds, Series 2001B, in one or more series under the General Revenue Bond Ordinance of 1978 in an amount not to exceed $40 million, exclusive of original issue discount, capitalized interests, and cost of issuance. The proceeds of the bonds sale will be used to finance the cost of expansion and improvements to Terminal E at the Philadelphia International Airport. The purpose of Bill No. 259 is to authorize the City to issue general airport revenue bonds, Series 2000A, to PAID in one or more series in an amount not to exceed $175 million, exclusive of original issue discount, capitalized interest, and the cost of issuance. The Series 2001- A GARBs will finance the completion of the airport's new international and commuter terminals and other related projects. The financing is needed because of unanticipated delays and the subsequent additional costs associated with completing this project. 10 5/7/00 - FINANCE - BILLS 010258, 59, 60 Bill No. 260 authorizes the City to execute certain documents, including the terminal lease and ground lease -- it authorizes -- amends certain documents, including the terminal lease and ground lease and access agreement that were entered into in 1998 to facilitate the financing and completion of the international and commuter terminals. This bill also authorizes the City to enter into agreements with PAID in connection with revenue bonds to be issued by PAID in connection with this project. As required by the First Class Revenue Bond Act and the new general ordinance, I am submitting on behalf of the Finance Director her financial report, which is based on the analysis of the airport system conducted by Leigh Fisher Associates, the feasibility consultant, and Urban Engineers, Inc., the consulting engineers. Copies of both reports are being transmitted along with the Director of Finance's report. And I am transmitting that herewith. Subject to necessary approvals, we anticipate selling the Series 2001A and 2001B bonds in late June 2001. Closing is scheduled to 11 5/7/00 - FINANCE - BILLS 010258, 59, 60 occur late in July in order to meet the target completion date. Therefore, we respectfully request approval of Bills No. 258, 259, and 260 before City Council's summer recess. We are also respectfully requesting suspension of the rules so that first reading can be had this Thursday, May 10th. Finally, included in with my testimony is a listing of the bond finance team actually. And this actually concludes my testimony, and I'll be happy to answer any questions. I am transmitting the Director of Finance's report on the ordinances.
Thank you very much, and we would like to hear all of the testimony and then go have questions and answers, if that's okay with members of the committee. Thanks. Mr. Isdell?
Good 12 5/7/00 - FINANCE - BILLS 010258, 59, 60 afternoon.
I'm Dan Cantu-Hertzler, and I'm the Chair of the Corporate and Tax Group of the City Law Department. I'm here on behalf of Ken Trujillo, the City Solicitor. I'd like to also introduce a couple members of my staff that actually did much more of the work on this than I: Joe Messina, who's the Divisional Deputy City Solicitor for Transportation right here; and sitting behind him is Brian Levin, an Assistant City Solicitor who probably did more than the work. If anything is wrong with his testimony, it's my responsibility but I wanted to give them credit for the substantial work that they did.
I am pleased to appear before you to testify on behalf of these three airport bills. As you're aware, the Airport experienced tremendous growth in passenger traffic during the 1990s. In response to that growth, in 1998, the City and PAID agreed to a conceptual plan that was formulated in the first instance by 13 5/7/00 - FINANCE - BILLS 010258, 59, 60 USAirways for the design, construction, and financing of a new international terminal and a commuter/regional terminal as well as renovations to some of the facilities that the Airport already had. In this testimony, I'm call that "the project." In 1998, City Council approved the project, and during the past three years, USAirways, PAID, and the City have implemented the plan, and USAirways has completed a great deal of the required construction. In order to complete the project, USAirways has applied to PAID for additional assistance in financing, and we have resulting new documents, some of which we're asking City Council to approve and others which we think you ought to know about in approving these transactions. The three basic project structures are: Terminal 1, the new international terminal; Terminal F, the new commuter terminal; and a new ramp control tower. And there are also quite a few renovations that were approved in 1998. Now, do you have copies of my testimony? 14 5/7/00 - FINANCE - BILLS 010258, 59, 60
Okay. The City Solicitor testimony, at the top of , lists a number of changes that are being added, the scope changes. And just for the sake of time, I'm not going to go through all of those in detail. On pages --
Okay. These are items that were a part of the original project or just the stuff that was added on?
And, Councilman, if you would like it all read into the 15 5/7/00 - FINANCE - BILLS 010258, 59, 60 record, we can --
No, no, no. I don't want to start following him down the road and not be on the right path. Thank you.
Pages and kind of list how the transaction was structured originally. It's separately set forth beginning on , summarizing the key documents, and maybe it would be more helpful to move there again for sake of time. The bottom of lists four parts of the Airport expansion project that are not being financed by these bonds and are not affected by what we're doing today. Most of those have to do with roadway modifications. And there's also parking garage facilities. Those are being separately financed. Okay. The basic document, I think, is the ground lease. In 1998 Council approved and the City entered into a ground lease with PAID, a ground and improvements lease. The City leased to PAID the sites that the Airport needed for the construction of the two terminals. It also 16 5/7/00 - FINANCE - BILLS 010258, 59, 60 licensed to PAID certain special rights so that the renovations could be completed. And the term is the same as the lease -- as the term of bonds that PAID issued. This is a lease leaseback transaction. PAID issued bonds, the City also issued a bond to paid. Now it's proposed that the City and PAID amend the ground lease to address the scope changes that were described on the top of of my testimony and to reflect the issuance of the new bonds that PAID is going to issue as well as the bond that the City proposes to issue to PAID. That's under Bill 259. Bill 260 is the bill that authorizes the specific amendments, or authorizes the City to enter into these. There's a related access agreement in 1998 for access to the ground outside of the specific projects but to do utility work and other work to facilitate the project. Again, that's to be amended, and the Administration is requesting your approval of that. There's a terminal lease. This is the leaseback from PAID to the City. And, again, 17 5/7/00 - FINANCE - BILLS 010258, 59, 60 approval is being requested of that. There is the development lease pursuant to which USAirways is acting as developer of this project. That's one of the reasons, I think, this has been completed so quickly; USAirways has done largely an incredible job on this. That's proposed to be amended, I think, for the second time. Now, that's between PAID and USAirways, so there's no specific Council approval required. But, again, that's an important part of the transaction, and I believe you have copies of that document as well as the -- the 1998 document as well as the draft amendment. There's a guarantee by USAirways parent. There's also a four-party agreement between USAirways, its parent, PAID, and the City. Those are both for the benefit of the City or PAID. And then there's an intergovernmental agreement between the City and PAID pursuant to which the City is agreeing to indemnify PAID. That's basically what is being approved by Bill 260. The other two bills -- Bill 259 is authorizing the City bond, the financing for this 18 5/7/00 - FINANCE - BILLS 010258, 59, 60 transaction. And then there's also Bill 258, which is authorizing expansion to Terminal E at the Airport. That's unrelated to the two new terminals, but it's another way of increasing the Airport's capacity, by adding four gates at the end of Terminal E. I'll be happy to try to answer any questions you may have.
-- Madam Chairwoman and the members of the Committee on Finance. First I want to thank you for giving us this time to make our presentation to you. We know how busy you are. In the interest of that time, rather than summarizing my testimony, what we thought we could do is move right into a presentation which covers the cogent points, and we can start that immediately with your approval.
Thank you. 19 5/7/00 - FINANCE - BILLS 010258, 59, 60
The first is a very quick snapshot of where our airport is today. We set a new record last year with million passengers, 5 24,918,000 to be exact. That was the highest 6 total we've ever had. We're ranked 20th in the US 7 in terms of total passengers. 8 We also set a record with takeoffs and 9 landings last year at our airport: 485,000. 10 We're ranked 12th in the US. 6 billion. 13 We are a 100 percent self-sustaining 14 operation. 15 Our passenger mix is 60 percent 16 business travelers. We also know that 60 percent 17 of our travelers originate or end their 18 destination in Philadelphia. 19 Currently, we have 68 employers on the 20 Airport, employing approximately 20,000 people. 21 There are 25 air carriers who operate 22 650 daily departures to over 100 cities. And 23 currently, at least Wednesday of this, week we 24 will have 13 daily nonstops to nine European 25 cities. That includes USAirways' inaugural flight 20 5/7/00 - FINANCE - BILLS 010258, 59, 60 to Brussels this Wednesday evening. Our passenger amenities, including our concession program, have been acknowledged and noted most recently by the Wall Street Journal, which named us "The Best Airport in America" in January. To give you a graphic illustration of our passenger growth over the last decade, this chart shows domestic traffic in blue, international traffic in red. And as the testimony points out, there's been growth in all of these areas, particularly within the last five years and particularly 130 percent growth in the international passenger area. Back in 1998, our testimony emphasized the need for the Airport to compete with other airports in terms of its gate capacity. The numbers of the gates at some of the airports ahead of us have actually increased since 1998, but currently, you see that JFK Airport, for example, has 173 gates, Chicago with 172, and Atlanta with 170. We're down at 63. We actually have fewer gates right now than Charlotte, Pittsburgh, and Baltimore-Washington and certainly far less that 21 5/7/00 - FINANCE - BILLS 010258, 59, 60 Newark. These are airports that theoretically compete with us. The good news is that in June of this year, when our regional Terminal F opens, we will add 38 gates, to go from 63 to 101. And in about a year after that, when we open the international terminal, we'll get another gates. So we'll be 9 up to 114, which we believe gets us back to a 10 competitive position but certainly, you know, does 11 not put us ahead of some of our competitors. So 12 this needs to happen as quickly as possible. 13 We have a quick summary here of our total construction program that's ongoing at the current time, and you will hear reference from time to time to us having a billion-dollar ongoing program. These are the elements that make up that roughly billion dollars. And the two biggest single elements at the top are the two terminals just mentioned, at a 100 million for the regional terminal and 450 for the international terminal. The parking facilities that are referenced at 110 million were financed through a separate Parking Authority bond issue. This is a quick picture of an artist's 22 5/7/00 - FINANCE - BILLS 010258, 59, 60 rendering of the international terminal and a current photograph in the lower right-hand corner showing how it's beginning to take ship. Some facts about this terminal: It encompasses 800,000 square feet; It's producing 3800 construction and 3500 other permanent jobs; As I said, new international gates, 10 12 of which will be wide-body-compatible with the 11 new generation the wide-body aircraft; 12 68 ticket counter positions; 13 56 federal inspection positions; 2800 passenger-per-hour (indiscernible), and those are triple the current capacity of our existing international Terminal A, likewise the baggage claim capacity. We are providing for club space for a USAirways club and at least one additional club, which we hope to negotiate with one of the foreign flag carriers.
And we will be extending our award-winning concession program into the new terminal as well. A separate project is a $15 million ramp control tower, which was precipitated by the 23 5/7/00 - FINANCE - BILLS 010258, 59, 60 simple geographic fact that you cannot see the entire apron area from one location at our terminal complex anymore, so we're actually going to have a ramp control tower at each end of the facility. Those are staffed by airline employees who take planes from the gate to a hand-off point where they're transferred to the federal air traffic control tower and vice versa. There is a $30 million 1500-space parking garage under construction to attach to this terminal, and we are calculating the opening for the summer of next year. A quick picture, again up to the minute, of our regional Terminal F, the artist's rendering on the left and an actual picture from a couple weeks ago on the right. You can see that it is virtually completed on the outside. Some facts about this terminal: It's another 185,000 square feet of facility added to our complex; It's producing 1100 construction jobs as well as 1800 permanent jobs; It will have 38 gates, 24 of which will be compatible with regional jets 24 5/7/00 - FINANCE - BILLS 010258, 59, 60 It will have an additional provision for the concession program in Terminal F and A larger parking garage at that end, because we currently only have four garages A, B, C and D. We do not have an E garage to match up with Terminal E, so we're building an E-F addition along with an interior roadway within the garages so that people will not have to do what they do now, which is drive in and out of the garage, each individual garage. If they can't find a space, they'll be able to connect to all of the garages through an interior roadway; And a new toll plaza and operations building that is under construction currently. This terminal will open with a ribbon-cutting on June the 19th of this year. This is a very quick summary of the DBE participation, which will be elaborated upon by both USAirways and Executive Director Roundtree of the Minority Business Enterprise Council, but a snapshot picture is 20 percent participation on the A and E costs, percent on construction 24 management costs, 27 percent on actual 25 construction contracts, and workforce hours, a 25 5/7/00 - FINANCE - BILLS 010258, 59, 60 total of 25 percent participation, 23 percent minority, and 2 percent female. This is a quick explanation of the financing structure, which, I believe, the City Treasurer and the City Solicitor have explained sufficiently, so we'll move to the next slide. I wanted to give you some quick facts about Terminal E, which is a separate project we've embarked upon to provide as many as four additional domestic gates in a hammerhead type of addition at the end of the pier of Terminal E. It will add another 100,000 -- I'm actually having difficulty seeing that far, so I'll turn to my booklet. 100,000 square feet of terminal space, 14 additional ticket counter positions at an estimated cost of $30 million. And this particular project is being handled separately because it is a totally City initiative, and it's a part of our overall goal to get enough gate capacity so that we can actually attract some low-fare carriers into our airport. The next slide is quick artist's renderings of the I-95 access ramp project. This project is well underway; it's actually three 5/7/00 - FINANCE - BILLS 010258, 59, 60 weeks ahead of schedule right now. It's being carried out by PennDOT. The City provided the costs -- or funded the costs for the design of these ramps. The major improvement will be that you will be able to enter our airport directly from I-95 in both directions.
Currently if you're coming from the Blue Route or from the western or southern suburbs on I-95 North, you have to exit 95 North prior to arriving at the Airport and stop at four stoplights before you actually get into the complex and the Airport roadway system. The new ramps will allow access directly without any stoplights, and they are also necessary so that the roadway in front of the new international terminal will be at ground level rather than in an elevated situation at that point. Again, for purposes of comparison with other Philadelphia development projects, we think that our two projects together are of major significance to the economic health and development of our region. Certainly the international terminal almost dwarfs any other project going on at the present time, including the two new stadiums. And this is being done with 27 5/7/00 - FINANCE - BILLS 010258, 59, 60 no local tax dollars, which I think is very significant as well. So, finally, the things that we think are most important to carry away from this presentation are the fact that it is being done with no local tax dollars, that it produces -- the two terminals together produce 5300 construction jobs and 4900 permanent jobs. They also will be producing $12 million in new annual City tax dollars, a total of $40 million for the entire region, and 51 new gates in half the time. Before I end, I would just like to mention a couple of significant points that weren't mentioned here. One is that the last time we built a terminal at our airport, the bonds were actually sold in 1985, but the terminal did not open until 1991; that was Terminal A. That was a six-year period. For these projects, even though the bonds were sold in the summer of 1998, construction did not beginning until August of nine. Ground-breaking was actually August the 2rd. That was four months behind the target date. But if you count from the August ground- 28 5/7/00 - FINANCE - BILLS 010258, 59, 60 breaking date, we will be opening a $185,000 commuter terminal with 38 gates in less than two years. I think that's quite an accomplishment. And assuming with your indulgence that we're able to continue with the international terminal construction and get it done by next summer, we will have built an 800,000 square foot facility that will be a true gateway to the Airport in less than three years by next summer. To put it all into perspective, I just want to make a final comment, that it's appropriate, sitting in this chamber in this building, and I know that we're all celebrating the 100th anniversary of City Hall this year. My son mentioned to me yesterday when we jogged by here during the Broad Street Run that he had read that this building took 30 years to build. 4 billion, and took 30 years to build a 630,000 square foot facility, the only place where we would fall short with our three-year program of constructing almost a 29 5/7/00 - FINANCE - BILLS 010258, 59, 60 million square feet is that our terminal building and our ramp towers, if you could put the ramp tower on top of the terminal, they'd only be 335 feet high, whereas William Penn sits 510 feet above the City of Philadelphia, but I think that helps to put the whole process into some perspective. And I thank you for your time.
Actually, Madam Chair, Chuck Stipancic from USAir is going to continue.
Before he continues, Dan Cantu wants to complete his testimony.
I just neglected to request that the City Solicitor opinions from Ken on Bills 258 and 259 be officially included as part of the record. I handed up, I believe, seven copies of each, and I have the originals here also for the clerk.
And I have the report 30 5/7/00 - FINANCE - BILLS 010258, 59, 60 to the Director of Finance as well with copies.
Thank you very much. We will make it an official part of the record, per your request.
And this is also a copy of the (indiscernible) lease for Councilman Kenney and other members of the Finance Committee.
Thank you. We will copy this information and make it available to all members of the committee. Oh, we have enough copies, thank you. All right.
Good afternoon. My name's Bob Hazel, Vice President of Properties and Facilities for USAirways. With me is my colleague Chuck Stipancic, Director of Airport Affairs; and my other colleague (indiscernible) Johnson, Manager of Public Affairs.
Good afternoon. We appreciate the Committee's consideration of this important issue. We are here seeking approval of the issuance of bonds necessary to complete the 31 5/7/00 - FINANCE - BILLS 010258, 59, 60 new international and commuter terminals. Based on current projections, bonds must be issued by later this summer to ensure that the project does not run out of funds. The cost of these projects, just to reiterate, is paid by fees charged the airlines and by passenger facilities charges paid by passengers using the Airport. No Philadelphia taxpayer dollars have been spent on this project, nor will any be required in the future. The projects are very important to USAirways, but they are also important to the City. Philadelphia is competing with other major cities undertaking major airport projects, and to list just a few other airports that have underway billion-dollar-plus projects, they included: John F. Kennedy, Miami International, Detroit, Newark, Baltimore, and Dulles. And I would mention that four of those six are completing their projects in the same manner that we are here; that is to say, using the airline as the developer. Airports drive economies. The development of USAirways' major hub at Philadelphia is critical to Philadelphia's 32 5/7/00 - FINANCE - BILLS 010258, 59, 60 competitiveness as a business and financial center, a leading center of learning and medical research, and a tourist destination. And if you look back over the past five years, USAirways' own employment in Philadelphia has almost doubled since 1996, from 3300 to 6400 employees. The number of passengers we carry has grown by 76 percent, from 1996 to the year 2000. And we've added 34 new nonstop destinations since 1996 and built a trans-Atlantic hub that now provides nonstop service to most of the major capitals of Europe. And we would have expanded even more if the facilities had been available. A visit to the airport any day at 6 p.m. will confirm the critical need for additional facilities as soon as possible. More flights and the economic activity they bring requires more gates. Our goal has been to complete the projects quickly, while embracing the important goals we share with the City. Both Chuck Stipancic and Jim Roundtree will provide presentations on our record to date in meeting MBE/DBE goals. I'm confident you'll find we've 33 5/7/00 - FINANCE - BILLS 010258, 59, 60 made a strong commitment in this area. Finally, let me point out that United Airlines, which is awaiting a government approval to acquire USAirways, has committed not only to honor USAirways' contractual commitments but also to add service to additional destinations from Philadelphia upon approval of their acquisition. With that, Chuck Stipancic will provide more details about our projects and about our DBE/MBE status, and we'll be glad to answer any questions. Thank you.
Madam Chair and other members of the committee, I appreciate the opportunity to appear before you here today. As Bob mentioned, my name is Chuck Stipancic, and I'm Director of Airport Affairs and Corporate Real Estate for USAirways. There's really two things I'd like to focus on in my presentation. One is just to give you a quick snapshot of the status of the international and the commuter terminal projects. And the second is just to discuss the need for a 34 5/7/00 - FINANCE - BILLS 010258, 59, 60 completion funding. Charlie went through -- Director Isdell went through a number of these statistics already, but I'll just point out one that we're very proud of, and that is, we're going to develop a 23,000 square foot USAirways lounge as part of this facility. That will supplement an existing 24,000 square foot USAirways club that we have in the B-C connector. Again, we've already seen an artist's rendering of Terminal 1. The current estimated project cost for Terminal 1 is $442 million. The estimated completion date is the summer of 2002. Again, some statistics on Terminal F, two that are pointed out here. One is that this facility will be the first of its kind to actually have passenger loading bridges. This is a type of equipment that people can -- customers can leave the building enclosed, fully enclosed, to board the airplane. And of those gates, of the 38 22 gates, will have these new loading bridges on them 23 the best. And ultimately, we think this will be 24 the best and most modern commuter terminal in the country. We think it's something that USAirways 35 5/7/00 - FINANCE - BILLS 010258, 59, 60 certainly will be proud of and the City of Philadelphia should be proud of as well. Next slide. The current estimated project costs for Terminal F is $99 million. The project is virtually complete. We expect to open it on June 17th, in just about a month and a half from now. Another element that I'll just briefly touch on is the new ramp control tower. And the only significance of this is that when you come into the Airport, it's virtually the first thing you see 'cause it stands about 200 feet in the air, it's about 10 stories high. This will replace an existing ramp control tower that's really just insufficient to meet the needs of the Airport today. And this is where we control all of the ground-control functions in and around the gate areas. The current estimated project cost for the ramp control tower is 17 million, and that project is expected to be completed in later September of this year, which is about three to four months ahead of schedule. Here's a basic snapshot comparing the 36 5/7/00 - FINANCE - BILLS 010258, 59, 60 original budget that we established for the facilities and in the current budget. And essentially, it amounts to about a $158 million shortfall, or about 40 percent of the total cost. And what I'd like to do is just kind of walk you through briefly the reasons for the additional costs as well as the delay in finishing the projects, and it really can fall into three categories: The first one would be the delay on actually stating construction, and I'll speak about that in a moment. Secondly is we found ourselves in a rather competitive construction market, competing with a lot of other projects. Secondly, as with any project of this magnitude, we fully expect to have some scope changes and there were some scope changes in the project that I'll talk about as well. And lastly, we added some additional professional services to the project to help us through the project in the form of program and construction management. Let me just touch briefly on 37 5/7/00 - FINANCE - BILLS 010258, 59, 60 construction delay. Of the $158 million, roughly $35 million we've attributed to the delay in getting started with construction. We had estimated to start in April of 1999; in reality, we didn't start until December of 1999, almost eight months late, for a number of reasons.
The first is, we didn't receive the final environmental approval from the FAA until August of 1999. We had hoped to get that in April, but unfortunately, it just a monumental effort between the FAA, the Federal Highway Administration, as well as PennDOT. We were optimistic that it could be done in April, but unfortunately, the project just took us the amount of time that it took. Secondly, as we -- especially with Terminal 1, which sits in Delaware County, Tinicum Township is the entity which issues construction permits and demolition permits and other permits. And unfortunately, those permits were not issued until December of 1999, which is the first point in time that we could get started with the projects. As a result of those first two items, we missed the whole entire first summer season of 38 5/7/00 - FINANCE - BILLS 010258, 59, 60 construction, where we had hoped to do a lot of site work and other work associated with the project, but we missed that, so it forced us to do a number of these items in the middle of winter. Another element that contributed to the delay primarily with the international terminal is the rupture of Sun Oil pipeline. That cost about a month delay in getting started, and Sun Oil has a pipeline that ran underneath the Terminal 1 construction site that had to be relocated. Unfortunately, there was a completely coincidental pipeline that was unrelated this one that ruptured in the John Heinz Wildlife Refuge, and when that rupture occurred, they put a stop to relocating the Sun Oil pipeline. Again, completely unrelated, but unfortunately, just added to a little added delay. And I talked about the winter weather. Unfortunately, that particular winter when did get started, the winter was rather cold, and there was only a limited amount of activity that we could do outside at that time. The biggest component to the cost issue is the adverse market conditions, which attributed 39 5/7/00 - FINANCE - BILLS 010258, 59, 60 to about $50 million of the 158 million, or roughly a third of the total shortfall, for a number of reasons. One is, there were only a limited number of bidders that we could get on the project. We thought we'd have five, six, seven, eight bidders on projects, where we found out we had one or two. Construction cost escalations were greater than expected. Normally, we budget and expect to be in the to percent range. Unfortunately, we found ourselves in the 8 to 10 percent range. Many bids were significantly higher than estimated. And one in particular was the general trades package. This was a package where the work to finish the drywall and the carpeting and plumbing and the electrical work and things like that. We had sent this out as a single package to be bid. Unfortunately, we got no 21 bidders to bid on that piece of work. So what we had to do was to break that package down into 11 separate packages. And the project that -- that piece of the project that we estimated would cost about $40 million came in at about 40 5/7/00 - FINANCE - BILLS 010258, 59, 60 $80 million as a result of having to break it into a number of different packages. And, lastly, there was a great deal of competition with other projects in the area. There's just a couple listed there, but we found ourselves competing with a number of other projects. I think the important thing for the project delay and the adverse market conditions, that encompassed about close to 60 percent of the $158 million shortfall, things that were completely out of anyone's control. Scope changes accounted for another $39 million of the 158 million. These were changes to the project that were requested by both the City and USAirways. Some examples include busing for contractors. Because the Airport is so landlocked and land-starved, there was no place to park contractors, and we had to set up a shuttle operation to shuttle contractors to and from the Airport. That added about $5 million to the cost.
In addition, there were some unanticipated utility relocations. The concession 41 5/7/00 - FINANCE - BILLS 010258, 59, 60 fed out, which is normally funded by the concession developer, it was decided they would it fund through the project because it was a better cost of borrowing. As well as a shield over the SEPTA line. I would add that all of these changes were agreed to by the City, and the represent only about -- the change orders in total represent only about 7 percent of the total project cost. In our experience, it is not uncommon to experience project changes of 10 to 20 percent in projects of similar magnitude. And, lastly, we needed to supplement and add some additional program management and construction management services where we needed it. Because there were existing operations, we had to coordinate with the federal inspection authorities, and the list just goes on and on. But the projects are very complicated. In addition, there was a requirement for greater coordination with the City, the City Controller's Office, Tinicum Township, and others that weren't anticipated at the outset of the project. Another reason was the City's desire for 42 5/7/00 - FINANCE - BILLS 010258, 59, 60 greater project oversight. As we got into this, I think we found ourselves perhaps closer and more arm-in-arm with the City, which resulted in greater coordination effort through the City itself. In addition, because the projects are taking longer to build, we'll require those services for a greater period of time. That also led to some of the additional -- could we go back one slide Jeff, please. I would add that the total -- revised total professional service budget now accounts for about percent of the total project cost. And 15 in our experience, it's not uncommon to experience 15 to 20 percent for projects of similar magnitude, so we feel that even though there's been a significant increase in that area, we're still in line with other projects. The good news is we now have the PM/CM and resources in place to complete the projects. And in summary, we've heard this from Director Isdell as well as Bob Hazel, but in order to complete the projects on the current schedule, we need funding because the projects are estimated 43 5/7/00 - FINANCE - BILLS 010258, 59, 60 to run out of funding this summer. In addition, there are no tax dollars involved. The additional debt will be fully paid through user fees and PFCs. And, lastly, Terminal 1 and Terminal F, when they're finished, allow USAirways, as well as the other airlines, to continue to grow in Philadelphia, which ultimately leads to more destinations and jobs and greater economic benefits. That concludes the presentation discussion of the need for completion funding as well as an overview of Terminal 1 and Terminal F, but what I'd like to briefly transition into is a quick summary of our DBE and MBE participation in the project. And I have a handout here, if I could make it available. )
Back in 1998, when we were before City Council, USAirways made a couple statements then, which I'll just reiterate now. At the time, we said we share Philadelphia's commitment to minority and disadvantaged business 44 5/7/00 - FINANCE - BILLS 010258, 59, 60 goals. That was then, and we still share that same commitment today. USAirways, from day one, has been a willing and supportive participant -- again, then as well as now. Our objective all along has been to meet and exceed all stated goals whenever we can. Throughout the project, we've worked closely with the City, with Jim Roundtree and the Minority Business Enterprise Council and the Greater Philadelphia Urban Affairs Coalition. While we still have a lot of work to do, we're very proud of the progress that we we've made to date. And I think, as you'll hear from Jim Roundtree a little bit later, he can confirm our record in this regard. Just let me briefly walk you through the status of goals that were established in the project in 1998 and kind of where we are to date. The first slide shows the architectural and engineering design. Again, the professional services, where we had a goal of 20 percent, broken down by 15 percent minority and 5 percent women. To date, we at about 18 percent. About $3.4 million has been awarded to date to 45 5/7/00 - FINANCE - BILLS 010258, 59, 60 disadvantaged and minority contractors. In Terminal F, the goal was 4 percent. Actual to date is about 16 percent. A 5 million dollars has been awarded to date to 6 minority and disadvantaged contractors. 7 The overall program. In construction 8 management for the project, our goal was 9 20 percent; to date, we're actually at 27 10 percent. $3.3 million has been awarded to date to 11 DBE and MBE contractors. 12 With respect to construction 13 management, our goal was 30 percent; our actual to 14 date is about 26 percent. About 4.2 million has 15 been awarded to date to the various contractors. 16 With respect to construction of 17 Terminal 1, our DBE/MBE goal is 30 percent. 18 Broken down, that's 20 percent minority, 8 percent 19 women, and 2 percent disadvantaged. Our actual to 20 date is 22 percent. And I would just add here 21 that the majority of work where we could take 22 advantage of minority and disadvantage businesses 23 has yet to begin, so we expect that number to get 24 closer to 30 percent if not exceed it. And $20 million has been spent to date on disadvantaged 46 5/7/00 - FINANCE - BILLS 010258, 59, 60 and minority contractors. In addition to DBE and MBE are workforce goals for the project. Broken down by minority and female, they are to 33 percent in 6 range. To date, we're actually meeting the 7 25 percent goal. And, again, we still have a fair 8 amount of the project to do and we expect to get 9 closer towards the upper end. 10 With respect to Terminal F, our goal 11 was 30 percent. I'm pleased to report in this 12 regard, our actual to date is 39 percent. 13 $17 million has been spent to date for DBE and MBE 14 contractors. And with respect to the workforce 15 ranges, our goal is 25 to 33 percent, and we're 16 currently at 24 percent today. 17 Again, this is something that we're 18 very proud of at USAirways, and I think we've 19 worked very closely with Jim, and I think Jim will 20 add testimony that will certainly support our 21 commitment to the project in that regard. 22 Thank you. 23
Good afternoon, 24 everyone. My name is James Roundtree, and I'm the 25 Director of the Minority Business Enterprise 47 5/7/00 - FINANCE - BILLS 010258, 59, 60 Council. Thank you for this -- I'd like to thank you for this opportunity to submit my testimony on Bill 258, 259, and 260. Unfortunately, when Chuck and I talked this morning, he said he was going to be brief in his remarks, but he's actually included all of the percentages and participation levels that I would have had in mine, so I won't bore you with reading those over, but I would like to at least read a couple of highlights that I think are important. The percentage that Chuck talked about with regard to participation from professional services -- that's the design and engineering project and construction management -- $11.8 million of those dollars were awarded to minority women and disadvantaged businesses. And, yes, USAir has been a willing and staunch participant in leading the effort to include minority women and disabled businesses in all of their activity. As it relates to construction, as Chuck said earlier, $37.1 million has been awarded to minority women and disabled businesses. Currently, there are 2,531 construction 48 5/7/00 - FINANCE - BILLS 010258, 59, 60 jobs, which represents percent of all the hours that have been performed on the project. I have the same graphs that Chuck had. But I'd like to go to the -- to my 3, which represents 35 minority and women and disadvantaged businesses have participated on the project that represents the 37 percent -- I'm sorry.
Excuse me, I'm 11 sorry. Just so we can clarify your testimony, you 12 had mentioned the issue of person hours on the job 13 site? 14
But they represent 25 21 percent of the construction hours. 22
I'm sorry, that is 25 wrong. 49 5/7/00 - FINANCE - BILLS 010258, 59, 60
Thank you for clarifying that; that is wrong. Let me slow down. Twenty-five percent of the construction hours have been performed by minority and women trade people. To date, 2,500 total workers have worked on the site.
And my testimony will have that broken down by zip code areas and the number of actual minorities and females that have worked on it.
Okay? Thank you. 22 of my testimony breaks down to 23 actual workforce by Philadelphia SMSA, 24 Philadelphia Standard Metropolitan Area. For 25 Philadelphia County, Pennsylvania, Delaware, 50 5/7/00 - FINANCE - BILLS 010258, 59, 60 Maryland, New Jersey, and other states that workers have come from. Now, understand that these are the total workforce, not just minority and female, but this is the total workforce. And then I have also included zip code maps that will identify where many of the workers come from. At this time, I would just like to thank you for the opportunity of being here and providing some testimony, and I'm available for any questions.
Thank you very much. Is there any more testimony? (No further testimony.)
All right, thank you very much. We have a few questions here. Maybe I'll start with Mr. Roundtree since you were the last who testified.
We did submit questions and we would like to ask that the, name, dollar amounts and start and finish dates as well as the scope of work be submitted to the committee; otherwise, we are satisfied with your 51 5/7/00 - FINANCE - BILLS 010258, 59, 60 testimony and with the questions that we supplied in advance.
Yes, ma'am. We're committed to have that information to you by Wednesday.
Thank you very much. In 1998, City Council gave the Airport authorization to issue $453 million in bonds for the Airport expansion project that included building a new international and commuter terminal. Now, in 2001, you're asking for an additional 175 million. Would you explain to the committee what has happened and, again, why you are requesting authorization to issue additional debt on this project? I know it's been touched, but certainly we want to -- (Chairwoman Blackwell confers with other committee members off the record.)
The committee is asking about the 175 million as well as the 40 million, so include that in your question, the difference in the two amounts and also why you're 52 5/7/00 - FINANCE - BILLS 010258, 59, 60 asking for additional debt, if you would.
Okay, just to clarify, in 1998, the bond ordinance authorized up to $500 million of bond proceeds to be sold; and in reality, 400 million were sold for project costs. The estimate of the two projects at that time together totaled 400 million. There was another 443 million in that initial bond issue, for a total of -- I'm sorry, the total was 443 million: 400 for project costs, 43 million was for the various costs of the underwriting, bond counsel fees, etc., and a significant amount of capitalized interest. That left us with a $57 million authorization in the event that we would need additional bonding to complete the projects. When we began to review the total dollars needed, we felt that it was going to be necessary to come back to Council. We were not going to be able to finish the two projects for 57 million or less because we knew probably as much as a year ago that we would need more money than that. So we began to plan at that time and 53 5/7/00 - FINANCE - BILLS 010258, 59, 60 try to find ways, first of all, to reduce the costs, if that was possible between the present and conclusion of construction. We also looked at other possible ways to finance the shortfall that we had. And we ultimately decided last fall, at a time that it was too late to get into the legislative agenda for the fall, that we were going to come back to Council for a new bond issue, and that the amount would be determined as close as possible to our appearance here today so that we would not have to come back again next year. So even though, as Mr. Stipancic and Mr. Hazel pointed out, the current shortfall is approximately 157 million or 155 million, I believe they testified, we're asking for 175 million so that we have enough contingency to finish this project and not have to come back for further authorization. The distinction of the $40 million separate ordinance for an addition to Terminal E is really a separate project that the Airport is initiating. We would not really -- in good conscience, I don't think we would ask USAirways 54 5/7/00 - FINANCE - BILLS 010258, 59, 60 necessarily to build that addition through the same financing structure or the same development arrangement that we are doing for the two terminals that they're already working on, primarily because our goal in building these four additional gages, with no offense to USAirways, would be to bring in competition on those gates. So our goal with that four-gate addition to Terminal E is to build gates in a traditional bonding structure that will require the debt service be paid by rates and charges of all of the airlines at the Airport, and that is done through a majority and interest vote of all of the airlines. And I don't know if I'm answering your question or not, but Mr. Hazel wanted to respond as well.
In other words, Bill No. 010259 258 that relates to Terminal E --
-- is not going through PAID. It's separate, it's through the traditional bonding structure -- 55 5/7/00 - FINANCE - BILLS 010258, 59, 60
-- we usually do to allow for competition since USAirways is the one who is paying for all monies that deal with the other two bills. Am I correct? My committee, they're kind of grumbling about the --
Yeah, they're not clear on what the refinancing and why there's a 175 million. They're not clear on the response, so we need another explanation.
Was there a contingency number in the original request?
Well, obviously. 56 5/7/00 - FINANCE - BILLS 010258, 59, 60 But I guess the question is, if there is a contingency number in the original request, not only is this a $215 million additional request, it's 215 plus the contingency that you went through already on the project. I mean, that's what the contingency's for. And if that, I hear, is anywhere from 60 to 70 million, it's actually not a $215 million, it's 215 plus the contingency amount. I mean, that's why we put contingencies aside so when we come up against bad weather and pipelines and other kinds of things, you have the contingency. If you spent the contingency already, you got to add the contingency, at least in my view, to the additional request for additional financing. That's, I think, only fair. Why'd we put the contingency there in the first place, in '98?
Before you respond, let me note that Vice Chair Councilwoman Tasco is here and let me thank her and all of the representatives. All but one committee member was represented at the tour and briefing last week. Thank you very much. 57 5/7/00 - FINANCE - BILLS 010258, 59, 60
The one clarification, if I may, for Councilman Kenney. It's not -- the 175 and the 40 are two totally separate things. So it's not 215, it's 175.
The 40 million is to build four new gates at the end of Terminal E separate and apart from --
You can assume that -- (Unintelligible, parties talking over each other.)
It had to be an original part of the budget, wasn't it? Wasn't there a specific line item?
We can go dig it out, but let's assume it's in the 10 range, okay? 10 to 15 percent. And I'm not going to disagree that if you want to go back and say, you know, take -- your increase relative should include your contingency. If you want to look at it that, you certainly can.
But it doesn't mean you have to spend the contingency.
That's why it's called "contingent." 59 5/7/00 - FINANCE - BILLS 010258, 59, 60
Not at all. You mentioned that cost overruns caused this request for additional money. What part does the Department of Aviation play in the issuance of additional bonds? I assume that you were involved in the planning stages as well, and that will help clarify some of the questions here as well.
Yes. As Mr. Stipancic pointed out in his testimony, the main areas that we participated in in terms of scope changes and amendments as the project went along, that's done when a need for something unforeseen comes up, there is a process whereby USAirways, again, as our construction manager brings that to our attention, and the City Division of Aviation has to review those types of scope changes and increases. And occasionally they actually result in decreases -- not as often as we'd like, of course. But those -- any changes like that have to be approved by the Division of Aviation 60 5/7/00 - FINANCE - BILLS 010258, 59, 60 representing the City as well as USAirways. And they are also -- I believe they're reviewed by the City Controller prior to any processing of the amendment or ultimate payment of that amount.
Why are we doing this bond issuance, which is part of the confusion, at the same time as the PAID bonds? Why are we doing this $40 million bond issues at this time?
We had two reasons for, again, asking for your indulgence to do this together. And one is simply that the cost of simply assembling a bond team of the size and scope of the one that we have right now, in itself, we get an economy of scale by doing the two bond issues while the team is already assembled. And the second reason is that we are aware -- and I'm sure that you're all aware -- that we have a very good window of opportunity with interest rates right now, and if we were to do this as a separate ordinance in the fall, we would most likely pay higher interest rates. So that, again, those were our two 61 5/7/00 - FINANCE - BILLS 010258, 59, 60 primary motivating factors. And I would say overriding all of that is the simple fact that Philadelphia International Airport was one of, I believe, 29 airports that were required by the FAA last fall to do a competition plan, detailing what we would do as an airport to try to bring competition and low-fare carriers into our facility. And one of the things that we committed to do at that time was to build some additional gates both at the end of Terminal D, which are currently under construction, using PFC revenues, and at the end of the Terminal E, where we, as I said, are going to use a traditional airport revenue bond structure. But those total of eight additional gates are really an Airport initiative to bring competition and lower fares to our region. And, again, I say that with all due respect to USAirways, who has been a great partner, but we think there's a need for some additional gate capacity in our domestic terminals as well. Those were our motivating reasons.
How soon do you expect to issue the bonds and when will debt 62 5/7/00 - FINANCE - BILLS 010258, 59, 60 service be paid on these bonds? Can you explain the nature of the debt service payments? I understand that a portion of the bonds will be paid by the rates and charges from planes landing and taking off.
Councilwoman, if the committee reports this favorably -- if the Finance Committee reports these ordinances favorably out of committee and City Council as a whole approves the three ordinances, we anticipate being in the market sometime in late June. If we are successfully able to market these bonds and sell them, we assume paying debt service on the PAID bonds and the Airport bonds beginning July 2002. There's going to be a period of time where we're going to capitalize the interest. And what that means basically is we're going to borrow money to pay debt service during construction since there's no cost center in existence; or rather, if it's not completed, we needed a period of time to complete the construction, after which time we can then begin to pay debt service. So for a period of one year, we will borrow money to pay the debt service that's 63 5/7/00 - FINANCE - BILLS 010258, 59, 60 actually factored into this bond financing, and then we'll begin paying debt service in July of 2002 on the PAID bonds and the general airport revenue bonds. Oh, and you're asking about rates and charges. For the PAID bonds, up to 75 percent of passenger facility charges will be used to secure the bonds and percent will come from rates and 10 charges, and on the GARB bonds, the 40 million 11 bonds will be straight rates and charges. 12
Thank you. 13 How soon do you expect this project to 14 be completed? 15
July of next year is the 16 target completion date for the international 17 terminal, and for the Terminal E gate addition, 18 the projected completion date is July of 2003. 19
And if I could add -- 20 this is Chuck Stipancic. With respect to Terminal 21 F, which is the new commuter terminal, that's June 22 17th of this year. And then the ramp control 23 tower is September 26th of this year. 24 And -- 25
With respect 64 5/7/00 - FINANCE - BILLS 010258, 59, 60 to USAirways equal opportunity requirements, can you tell us how Philadelphia compares with other cities that you are in? And with respect to your corporate citizenship, can you tell us what you have done for the City beyond the airports and whether or not you have any plans for additional activities?
Let me try to answer that. In terms of Philadelphia, percent of 11 our employees are minority employees, 44 percent 12 of our employees are women. System-wide, the 13 figures are lower. Fifteen percent of our 14 employees system-wide are minority employees, and 15 approximately -- I'm sorry. Slightly over 16 40 percent are women, I can get you the exact 17 figure. 18 In terms of the corporate citizenship, 19 we've tried to be an active participant in the 20 community and have sponsored a variety of events 21 and (indiscernible) Johnson, who's with me, could 22 give you a short list of some of those events if you'd like. There's a long list, starting with Welcome America. There's a long list. We try to be active in the community and we certainly will 65 5/7/00 - FINANCE - BILLS 010258, 59, 60 continue to do so. You know, Children's Hospital, Welcome America, Philadelphia Cares, Philadelphia Community Health Alternatives, Philadelphia Academy, Philadelphia 2000, MANNA. The list goes on. We could give you a full list. We try to be a good corporate citizen and we certainly will continue to do so.
Thank you. We would like a copy of that equal opportunity report for our records.
Thank you. Back to this lease. Can you explain to us -- and this was a part of the questions that the committee had about why -- the nature of them and why they needed to be amended. And then I have one final question before I turn it over to the other members of the committee who have other questions.
Thank you, 66 5/7/00 - FINANCE - BILLS 010258, 59, 60 Mr. Isdell.
I can probably answer the question more in general than in specific. But in general, the lease and the other documents provided specific things that were to be done by specific dates, had the scope of work. And as indicated in my testimony, the scope has changed, the financing is proposed to change. So that's the basic idea.
Okay. It is my understanding -- my final question -- that USAirways is in merger talks with United Airlines. Can you explain the nature of the merger and where you are in that process. Also can you explain how that merger will affect this transaction.
We have signed an agreement with United Airlines to be acquired by United Airlines. That agreement is currently being reviewed by the Department of Justice, and we are awaiting approval of that acquisition. If the agreement is approved, United Airlines' parent company will acquire USAirways and ultimately merge USAirways into United Airlines. 67 5/7/00 - FINANCE - BILLS 010258, 59, 60 In our view, that merger will be extremely good for the City of Philadelphia because the City of Philadelphia will not only have the benefits of the north-south strength that USAirways has in terms of flying within the East Coat and north-south in the US, but also the advantages of United's worldwide global network. So that Philadelphia residents will be able to fly all over the world on the airline that has the largest worldwide network. In addition, our employees have a guaranteed no-furlough provision so that we think this is an opportunity for our employees to have greater job security with an employee-friendly company. Finally, United is extremely excited about the City of Philadelphia and is committed to add new service upon approval of the merger, including two destinations that we could not successfully serve. In terms of contractual commitments, United will honor all of our contractual commitments, including completing the terminals, etc. Thank you. 68 5/7/00 - FINANCE - BILLS 010258, 59, 60
Thank you very much. There are -- I will now turn -- open the questioning to other members of the committee. Councilman Kenney.
Thank you, Madam Chair. I just want to touch a minute on this issue that keeps on being raised throughout the course of this hearing, that there's no tax money being used to fund any of this stuff. While I agree with you, who in fact is paying for all of what goes on at the Airport?
I could answer it from an airline perspective and then I'm sure Charlie can answer from an airport perspective, but the way that the use and lease agreement is structured at the airports, it's as if it's own self- sustaining cost center. All costs and expenses at the Airport are treated as kind of a single cost center that are not impacted by the City finances whatsoever.
So the revenue comes from where? 69 5/7/00 - FINANCE - BILLS 010258, 59, 60
Revenues come from the airlines in the form of landing fees and rents for facilities, from concessionaires from your fixed-base operators, etc., etc.
But realistically out of the pocket of the people who use the Airport.
And those charges and costs are passed on to the customer.
As most businesses do. How's Philadelphia rank in the price of traveling out of Philadelphia? I know we've had a lot of problems lately and a lot of competition with BWI, Newark, Atlantic City, and I understand we've been losing significant amounts of passengers to those airports. And what does the effect of the cost of flying out of Philadelphia 70 5/7/00 - FINANCE - BILLS 010258, 59, 60 -- I flew out of Philadelphia recently to Pittsburgh, and it cost me $648, which seemed to be a bit odd. Maybe we -- part of what I'm concerned about is that when you say it's not coming out of the taxpayers' pocket coming, it's coming out of the riders', the flyers' pocket. And what effect do these kinds of issues for requests for money have on the cost of tickets? How is it passed through? how is it passed through in the concessions? And in the end, aren't our regional population paying for all this in the end? So it is somewhat public money.
Those are good points. Let me just try to address some of them. The cost of operating an airport is obviously a cost that we need to recover if we're to make a profit. The cost of operating in familiar Philadelphia is about average for airports of its size. And if you look at what we project the cost will be when this project is completed, we will still be operating at a medium-priced airport. If you look at other projects around 71 5/7/00 - FINANCE - BILLS 010258, 59, 60 the country, you can find airports that are much more expensive and you can also find some that are less expensive.
But it's fair to say that the public's paying -- that the riding, flying public is paying for all that goes on at the Airport.
Okay, all right. I would like to request from the Airport a detailed and itemized accounting of each of the cost overruns, change orders, increased labor costs that have resulted in this request for $175 million in new money to complete project. I'd also like to know what the amount of the contingency in the original approval was and how much that was to add to the project. And for now, if you can't give it to me -- obviously you have to give it to me at a different date because I know it's a lot of information. But for now, what's the general nature of cost overruns, change orders, and increased labor costs, and why do they occur and 72 5/7/00 - FINANCE - BILLS 010258, 59, 60 who controls that? Is there a project manager? I know in the presentation we learned that we have a project manager, a construct manager on board now, but did we always have one? Who oversaw these projects. And one other issue as it relates to one of the costs -- for higher cost overrun was the issue of cold weather. On one hand, PGW will come in here and tell us that the winters weren't cold enough; on the other hand, the Airport comes in and tells us that the winters were too cold to get the work done. So Councilman Nutter and I are somewhat accused.
I don't think it was that the winter was so harsh. It may have been a little harsh but not particularly. The issue was a phasing issue. What you want to do is start your project and do the outside work, the utility -- move the utilities, do the heavy earth work when the weather is good. If you start that in the middle of the winter, it puts you off phase. 73 5/7/00 - FINANCE - BILLS 010258, 59, 60 And that was the point on the weather. That's the main point on the weather, just so we're -- we're not trying to --
Okay. Additionally for the Airport, I'd like to know, what were the amounts of each of the Bond offerings relative to the Airport over the last ten years and what was the purpose of each bond offering? How much was spent and was each project on budget? And what were the cash reserves for each bond offering? And how much funds were actually left over. I mean, are there areas within Airport bond issues that we have not spent all the money on that are sitting there in various accounts that we would have access to, to perhaps cover the cost of these overruns rather than going to the market again to borrow?
I will certainly get that information for you, Councilman Kenney, but the quick answer to your question is, there is some -- there are small amounts of money left over from previous bond issues but nowhere near enough to cover the amount of money that we --
Well, if you know 74 5/7/00 - FINANCE - BILLS 010258, 59, 60 how much it is, we'll be able to determine whether or not -- and are those funds legally available for operations at the Airport?
We will check that out for you, Councilman Kenney, but I might also point out that the bonds that we're request -- the authorization that we're requesting from City Council under Bill No. 259, the PAID structure, you cannot commingle the funds 'cause the other outstanding series of bonds that we've issued are your straight general airport revenue bond issues. So with respect to PAID, the PAID bond transaction, we cannot use the funds -- if there are any prior funds outstanding under the GARB structure, you can't use them under the PAID structure. But we will check that out for purposes of the $40 million request for Terminal E. There may be some opportunity there.
All right. Is there currently going on now, I understand, the construction of a Parking Authority administration building at the Airport?
Yes. That was mentioned 75 5/7/00 - FINANCE - BILLS 010258, 59, 60 as part of the E-F Parking Authority garage project.
And the funds for that construction is coming from where?
The Parking Authority issued its own parking revenue bonds in 1999.
And that's going for the construction of the administration building?
The administration building, two new garages, and new roadway.
-- being used for the construction of the administration building.
We're strictly prohibited from using parking revenue bonds for Airport purposes.
What is the percentage of the revenue that the Parking Authority takes from parking at the Airport? The 76 5/7/00 - FINANCE - BILLS 010258, 59, 60 passenger pays the -- the parker pays a fee?
And what percentage of that fee leaves the Airport and goes to the Parking Authority?
It's currently capped at, I believe. . . The administrative fee is capped at 28 percent of the total revenue collected.
How does that compare to other airports around the country?
Or maybe I should ask USAir how that compares to other airports around the country.
I don't know, but I know that that number was the result of a settlement that was reached with the FAA. I believe the settlement was signed in 1999.
And it was the result of a dispute that arose, I think, back in 1996 where the FAA Office of Inspector General reviewed the amount of money and the methodology used to 77 5/7/00 - FINANCE - BILLS 010258, 59, 60 compute that amount of money by the Philadelphia Parking Authority, and ultimately it was resolved with this cap in 1999.
I think it varied from year to year, but it was probably higher.
Can we get an idea of what it was at the time of the -- prior to the settlement with the FAA? We know it's 28 percent now, but what was it before.
Just to the time prior to the settlement with the FAA capping it at 28 percent.
I guess the question is, if we had -- and can USAir respond at all to how it compares to other cities or other airports and what the parking situation is there? I guess the end line of this 78 5/7/00 - FINANCE - BILLS 010258, 59, 60 questioning is, could the money that's being taken for parking at the Airport by the Parking Authority be used to fund debt service on construction projects related to the Airport, which seems to be the most likely use for that money, because the activity's generated as a result of Airport operations. And if it's taken from the Airport for its use and given to other uses, perhaps there's an explanation for that, but I don't seem to know what it would be.
Yeah, I'm sorry. Obviously, it's in our interest to have the administrative charge as low as possible, but we're not in a position to hold ourselves out as experts on what other airports take as the percentage.
I would like to formally request that, if the Airport could give us an idea as to what other parking arrangements there are in international airports that are a similar size to Philadelphia and what percentage, either the municipality, the state, the authority that runs it gets as it relates to Philadelphia? And perhaps we could be utilizing those dollars to 79 5/7/00 - FINANCE - BILLS 010258, 59, 60 be putting into construction projects at the Airport or overruns or things rather than borrowing additional money and putting it on the backs of the flyer. One other question, one other request. What is the percentage on this issue request and on the prior issue, the percentage of professional service fees as it relates to the bond issue, the percentage of the deal?
The lawyers, bond counsels, underwriters, the consultants, advisors, chief cook and bottle-washers, whoever we hire, what is the percentage of the deal, the percentage of those fees as it relates to the amount of money we're borrowing?
Well, the cost of issuance for the two transactions that we're proposing are estimated to be a total of $2.2 million. 80 5/7/00 - FINANCE - BILLS 010258, 59, 60
If we're looking at a total bond size of about $200 million, we're looking at a 2 percent.
Okay, okay. Does the federal government or FAA have any standards relative to the size of professional service fees as it relates to borrowings for airport purposes?
Well, the City generally has a standard whereby cost of issuance shall exceed no more than 2 percent of the total bond side.
That's the City's policy, but it's also the industry policy for the most part, unless you have a transaction that is very complex. This is not necessarily a complex 81 5/7/00 - FINANCE - BILLS 010258, 59, 60 transaction.
I'd be interested in knowing if there is an FAA policy on that and whether or not other airports -- how we relate to the cost of I guess general airport revenue bonds and other types of bonds as it relates to airports.
We'll check 'em. I'm not sure if there's an FAA policy with respect to that.
Okay, and there's other questions, but just one final question. Councilmember Nutter and myself recently wrote a letter to Mr. Isdell relative to the issue of concessions. And in your presentation, there was about 36,000 new square feet of concession space that will be available both in Terminal F and in Terminal 1. Is it the intent of the Airport to extend the existing concession contracts to those facilities or to bring that concession back to City Council for approval of a long-term deal -- more than one year obviously -- that this charter requires? 82 5/7/00 - FINANCE - BILLS 010258, 59, 60
Well, the intent actually is -- there was an RFP put out in early 1999, and the result of the RFP was only one -- there was on one respondent, which was the Marketplace Redwood Development, a firm that is already doing the existing five terminals. So we negotiated and (indiscernible) ultimately to their existing agreement to extend it into Terminal F and the new international terminal and --
And I believe that's already been finalized and certified. I'm not sure.
Madam Chair, as a member of this Council, I have a real serious concern about that. Number one, I don't think that any entity of the City should be extending any contracts beyond a year. It is not within the scope of their ability to do so relative to the charter. And I would suggest that that should 83 5/7/00 - FINANCE - BILLS 010258, 59, 60 have come back to here for approval by this Council and that this is still -- at some point in time, I don't care if it stays a City facility, but at this point in time, it is a City facility and I think that we as a Council have the responsibility to approve any contracts or extensions beyond a year. And I think the charter's clear about that. And the fact that happened, and happens in other instances, needs to stop come, and we need to have this stuff come back to Council at least for our approval and information purposes so we know what we're doing. I don't think that was an appropriate thing to do, to simply extend that unilaterally without the approval of this Council. And we will have discussions as to what we should do about that, but I think that that is extremely problematic. Thank you.
Thank you. And the charter is the charter, and certainly we try to do our part to work with you, but certainly the charter is our constitution and we do want it adhered to. 84 5/7/00 - FINANCE - BILLS 010258, 59, 60 Councilman Cohen?
Could we have a response to this question from the City Solicitor's office?
I absolutely want to respond first to the question of whether prior bond proceeds might be available. If you look at Section 2 of both Bill 258 and 259, it lists the purposes of the bonds proceeds with some specificity. I haven't reviewed the earlier unrelated bond issuances, but I would be surprised if any would be available from prior bond issuances.
Well, there may be prohibitions on its use but I want to know if the money's sitting there and how much is sitting there and in what accounts and for what purposes.
And by the way, I'll just add one addendum. I understand there are also leases for property off-site of the Airport, that there are also accounts that may be available that have money in it that from comes from property that's leased around the Airport but 85 5/7/00 - FINANCE - BILLS 010258, 59, 60 not on the Airport facility itself -- or not on the Airport proper but contiguous to the Airport, that we either have control of or own, that are leased, and what the revenues that comes from those leases go to and for what purpose they're used.
Okay. And if you want to talk about the charter, I'd be happy to hear it.
Well, on the charter issue, I'm not prepared to give an opinion of the Solicitor, which Ken would need to do. However, it's my general impression that a concession is not the type of contract that has ever required Council approval because it is not committing City funds; it's money coming into the City and not going out.
And we have -- I think the spirit of the charter is clear that they 86 5/7/00 - FINANCE - BILLS 010258, 59, 60 put it in there. I didn't write it. It was 1951, I wasn't born.
But they must have put it in there for a reason and anything over a year needs to be approved by this body, in my opinion, and maybe that's something that needs ultimately to be litigated, but I really do believe that not only in this particular instance, but in the last administration going on through this administration, there have been continuous efforts to get around the charter by doing option years, which I think is clearly against the spirit of the charter, and I know there's a solicitors's opinion that says that's okay. It doesn't mean it's right, it just means the Solicitor thinks it's okay. And nothing against Ken, Mr. Trujillo, I think he's a fine lawyer and a fine person. But at some point in time, this activity of trying to go around this body in an effort to give contracts away to people for terms longer than a year needs to be addressed because I think it's terribly unfair and I do believe personally that it is 87 5/7/00 - FINANCE - BILLS 010258, 59, 60 against the spirit of what the charter intended.
Yeah, I absolutely oppose going around Council and I am dedicated to upholding the charter and I'd be happy to do continue the discussion.
When these contracts were extended to Terminal F and 1, was the City Council President advised, was the Director of Finance advised, the Chairman of the Commerce and Economic Development Committee that has juris-purview or jurisdiction over the Airport advised, or was it just done as if this legislative body just doesn't matter? I mean I -- you don't have to answer it; I'm just talking here.
If I might address the parking issue. My name's Janice Davis and I'm Director of Finance for the City of Philadelphia. Having been a member of the Airport community in a former life, to the extent that there is a negotiated rate with the FAA, those are 88 5/7/00 - FINANCE - BILLS 010258, 59, 60 determined to be funds that are suitable for taking off of the Airport. To that extent, those are funds that are not available for Airport construction and so would not have been available for use on the Airport. Also, with regard to the parking, I think the parking structures that you see from airport to airport are as varied as the airports themselves. For example, at the DFW Airport, to enter the Airport, you pay a parking fee; whereas at others, there are different structures, depending on the relationship at the airport.
But the FAA did not require us to take a 28 percent cut, did they?
They did not require it, but to the extent that they negotiated the settlement, they are saying that this is something that is okay to be removed; otherwise, it would be viewed as revenue diversion and subject the City to strict penalties, very severe penalties.
But there's nothing that says we have to take 28 percent or 30 percent or 40 percent. We could be taking 10 percent. I mean, that doesn't -- we -- there's no -- the FAA 89 5/7/00 - FINANCE - BILLS 010258, 59, 60 doesn't structure our deal with the Parking Authority and the parking revenues at the International Airport. And the City, if it felt the policy needed to be changed, could change that policy and have those dollars available for issues that go on at the Airport.
First I wanted to join Councilman Kenney in the concern about ignoring Council's role. Even in the presentation, in the basic testimony, there were comments made from time to time that, Well, this doesn't need Council's approval. It seems as if in many matters, every effort is made to not need Council's approval, which means not to discuss things with Council and to kind of rule Council out of the picture. And I join with Councilman Kenney and, I think, the overwhelming number of Councilmembers who feel that Council ought to be much more involved, and that administrations ought not to 90 5/7/00 - FINANCE - BILLS 010258, 59, 60 try to find ways not to have to come to City Council. I further am a little stunned by the pride expressed in the fact that the Airport rates twentieth in passenger traffic, when we are the fifth largest city and the fourth largest media market. And it would strike me as something not to boast about but to be very concerned about that we're so very far behind some other areas. And I wonder what your response is to that.
Well, my response to your first comment, Councilman Cohen, is that as a 29-year City employee and 7 of those years were spent in the City Procurement Department, I certainly respect the charter and I respect Council, and we will do everything we can to respond to the concerns that you and the other members of the committee have requested. In terms of our ranking, one of the points that was made three years ago in this Council, in this same venue, by Dennis Bouey, one of my predecessors, was the fact that we are not where we should be partly because we do not have 91 5/7/00 - FINANCE - BILLS 010258, 59, 60 enough gates. The airports that rank ahead of us, as we re-illustrated in one of our slides, in some cases have more than twice and almost three times as many gates as we do. So there are various choke points that would prevent us from handling more passengers, and that's primarily terminal facilities, which is what we are building right now. That will enable us to be competitive with airports that serve other metropolitan areas in the country. But in addition to that, we are also working on improvements to our airfield because if and when we solve our gate capacity problem, we still have the problem of getting planes in and out of our airfield efficiently, which certainly needs some improvement, and we will be working on that as our next phase. We are not particularly proud of the fact that we are twentieth in total passengers, but relative to the amount of acreage that our Airport has, which is the second smallest of the top airports, the only one that is smaller is 24 LaGuardia Airport. 25 In terms of the number of gates that we 92 5/7/00 - FINANCE - BILLS 010258, 59, 60 have and in terms of the challenges that we have, in terms of our air space, which is somewhat squashed beneath the air space of the New York and Washington markets in the FAA's air space design, we do, I think, very well with what we have. We certainly want to do more. I don't want to overlook the fact also that there is more than one way to measure an airport's activity. Total passengers is one, and we have jumped from 24th or 25th just five years ago, we've moved up to 20th, so there has been progress there. But if you look at the number of total takeoffs and landings at our airport, we actually have more takeoffs and landings than some of the more highly-renowned airports in the US and internationally, including San Francisco, London Heathrow. We push more planes in and out of our airport, but we don't get the benefit of large aircraft with lots of passengers on them. We have a high percentage of our aircraft traffic that is relatively small aircraft, with 18, passengers 24 on them. So in effect, we're working harder and 25 ultimately getting fewer passengers. 93 5/7/00 - FINANCE - BILLS 010258, 59, 60 These are things that need to be addressed, and they need to be addressed both in the short term and in the long term. So we're trying to build gate capacity in the short term, we want to build airfield capacity in the long term because we'd like to be certainly in the top ten, if not fourth or fifth, in accordance with our metropolitan area's population statistics. And one other thing that I think is important in answering your question is, our geographical location between New York and the Baltimore-Washington area means that a large number of people from Philadelphia who would be traveling to either one of those two locations, they certainly have two other options: they can drive and they can take the train. That has another significant impact on our total passenger traffic. Those are the best answers I can give. I don't know if the USAirways representatives have other thoughts.
Well, it seems to me that from complaints my office receives that another serious problem is that most 94 5/7/00 - FINANCE - BILLS 010258, 59, 60 Philadelphians, or many Philadelphians, are being priced out of the use of the Airport. I find staff members of mine traveling to Baltimore- Washington to pick up relatives and driving them in from that airport to their homes in Philadelphia. I was stunned by the prevalence of that practice. And when I inquired, well, why are you doing that? I thought it was maybe something magical about Baltimore or the Washington Airport. I learned that the price differential is so great that apparently, many thousands of Philadelphians are just not using the Philadelphia Airport because it's too expensive. And I was wondering, is it a City policy, is it a USAirways policy? Why is Philadelphia that expensive and so exclusive?
Let me answer that first and then address it to Mr. Isdell. Obviously, it's not our policy to be expensive. We try to be competitive. We are a high-cost carrier, as you know, and that is the primary reason why we are merging with United Airlines. Having said that, if you book in 95 5/7/00 - FINANCE - BILLS 010258, 59, 60 advance, you will find that our fares are competitive and you will also find that Mr. Isdell has done a good job in attracting new entrant carriers, low-cost carriers to this airport that are providing a variety of alternatives similar to what Baltimore has. And what Baltimore has is Southwest Airlines, and we are not Southwest Airlines. It might be -- some people might like it if we were, but we simply do not have the cost structure to operate like Southwest Airlines. We have labor contracts that that are well-established and that cause us to have costs like other major carriers. American, Delta, etc., and you'll find that our costs and our fares are similar to other major carriers.
Well, I don't dispute the policies of USAirways; they're a private company and I can understand that they may want to, you know, exercise their own judgment with respect to the pricing. But I am concerned about the governmental policy of the City of Philadelphia, which apparently results in denial to 96 5/7/00 - FINANCE - BILLS 010258, 59, 60 Philadelphians of the use of their airport, and I would certainly hope that something is done to correct that policy in the near future. I just think it's shameful that Philadelphians feel they have to use a different airport because the Philadelphia Airport doesn't provide them with enough options. It may not be USAirways' problem but I think it is the problem of the City of Philadelphia.
I'll just tell you one story, which is that Baltimore and Maryland officials come to us and say, Why can't we be like Philadelphia? They have the international service, they have the destinations, they have first class on their flights. And so I very much appreciate what you're saying about fares, but there may be two sides to that issue.
The City Councilmembers don't represent the officials in the Baltimore-Washington Airport; we represent Philadelphians, and Philadelphians are the ones that seem to be suffering from an inability to use 97 5/7/00 - FINANCE - BILLS 010258, 59, 60 the Airport. I think we ought to want to be proud of the Airport and we ought to want it to make it available to every Philadelphian. And that's what I'm concerned about as a City policy. As I said, it may not be the concern of a private carrier, but it's certainly the concern of the municipal government.
May I just say also, we are working very hard to try to attract low-fare competition into the Airport, but the bottom line is, if we don't have gates for them to operate on, we can't get them in here. So that's one of the reasons we want to build the gates that we're talking about today. It's the only way we're really going to get some competition and lower fares into the Airport. And the other thing that we do that we work very hard at is to be as efficient as we can be as an organization. And, as I think Councilman Kenney mentioned earlier, we need to keep our costs down because lower-fare carriers have a much lower threshold that they can tolerate in terms of their costs. So we're working in both of those 98 5/7/00 - FINANCE - BILLS 010258, 59, 60 directions to make our airport attractive, but the bottom line is, if there isn't anyplace for people to do business, we don't have a place for them. We're trying to build places for them to do business.
Well, I just suggest, you know, the Airport is not a brand-new venture. We've been at it, as you indicated yourself, for many, many years. And I would have hoped that this problem would have been raised and dealt with a long, long time ago so that we wouldn't be suffering from the complaints of our constituents presently with respect to being denied the use. Also, is there any way of making an analysis? We were told originally on this project that you're presenting to us today that the way to do it the smart way is to have not government do it; government is just an abject failure, we were told, and that private enterprise is the way. Yet I hear the same story about delays and cost overruns that I've always heard about government projects. So apparently, the fact that the project managers are private enterprise and 99 5/7/00 - FINANCE - BILLS 010258, 59, 60 everything is going through a private enterprise has not cured the situation of the delays and the cost overruns. Now, is there any way of comparing what would have been the cost overruns and the delays if it had been managed by the City with what is happening now? It seems to me this is a pretty huge cost overrun that we're talking about.
If I could just comment before Mr. Hazel. I would say one thing that we haven't said today, which was brought out, I think, at the briefing that we had last week, is simply the fact that when this bond, the original bond issue, was brought to Council in 1998, you really had only a conceptual design of what was going to be built. One of the points that was made very strongly at that time, again, by Mr. Bouey, who testified as the director, was that we were trying something new to get the terminals built quickly because we were already way behind what he called "the power curve" in terms of gate construction. So we basically started and we did what we called a phased design process rather than the 100 5/7/00 - FINANCE - BILLS 010258, 59, 60 traditional design completion followed by bid, followed by construction. We were designing while we were building, which is, I think, unique. It was an aggressive approach. It certainly had a cost, which partly had to do with the delays in the initial approvals that were needed by both the federal government and our neighbors in Tinicum Township. But, again, if you look at the result, we have done our own independent analysis -- we, the City. We believe that the cost increases, as a result of our analysis, that they are justified, that they are reasonable, and that the benefit of getting the terminals open in such a short period of time will pay dividends into the future. And there's a certainly a benefit to getting these terminals built as quickly as they were built. So I'll turn it over to Mr. Hazel.
Well, can you tell me what was the amount of the original bond issue?
The original bond issue had $400 million for the project plus another $43 million for capitalized interest and issue -- 101 5/7/00 - FINANCE - BILLS 010258, 59, 60
Did that include the contingency fund that Councilman Kenney referred to before?
We're going to provide the background on the contingency. I would just say when we say any project budget, there's going to be some amount of contingency included. If you asked me how much to build a building and I say it's $10 million, I'm going to have a little bit of contingency planning, but we will get you the exact numbers on the contingency.
Not to diminish your point, what I'm just saying is that when you do the contingency number, it's based on change orders, cost overruns, delays, labor changes. So there were those kind of things in consideration prior to the beginning of this. So, again, I think it's fair that when you take the 175, you add whatever that contingency is, and you're actually, that's what your over-budget because the budget was what it was, plus the contingencies based on delays and all of the other things that create costs. 102 5/7/00 - FINANCE - BILLS 010258, 59, 60 But not to acknowledge it as such, I think it is --
Our original budget was 400 million. I wouldn't say it was 360 million plus a contingency; I would say it was $400 million.
But there was a line item in the budget that said the --
I know, but I'm not quibbling about the number. What I'm saying is that there was a line there that said "contingencies," and then there's a number associated with that. So that was the cushion.
My memory may be faulty but I don't have any recollection of anybody suggesting that this is a specially aggressive approach that may cost us a lot of money but it's worth taking the risk. I didn't hear any of that at all. We heard that it was a very conservative estimate that was being given, that it could be achieved at that figure. Now, I understand that there are cost overruns; I'm just indicating that apparently 103 5/7/00 - FINANCE - BILLS 010258, 59, 60 doing it by private enterprise or government, it still doesn't seem to make much of a difference.
I mean, we could go back and debate that point perhaps, but I think the one thing that is pretty clear is that the speed of this project is unprecedented using traditional governmental methods. And in our view, the projects are desperately needed now. And so while we might debate the benefits, the cost benefits, of using private- sector approaches, and I would still suggest that it makes sense to do it that way. And by the way, other airports are using those same methods. I think if you look at the speed with which these projects are being built -- the commuter terminal is being built in year and a half year, or a year and a half, plus one month. And by the way, that commuter terminal will also accommodate AirTran, a low-cost, new-entrant carrier, one that opens next month. The international terminal is being built in just a hair over two and a half years in terms of 104 5/7/00 - FINANCE - BILLS 010258, 59, 60 construction period, and it is an enormously complex project. It is -- there are few airport projects in the country that are as complex as the international terminal. Not only environmental issues, not only the Wetlands issues, not only building over the train line, not only moving the road. It is a enormously complex project. And, yes, we did run into the difficulties that Chuck Stipancic has described.
The last airport director had some concerns about whether the Parking Authority was the best agency for running parking at airports, saying that airport people know the special problems of airports and can adjust parking schedules and all of the activities related to parking in a much better way, since they're used to doing it, they know their field, while the Philadelphia Parking Authority concentrates mostly on other kind of airports. Has there been any consideration given to that thinking? Is there any merit to it?
Councilman Cohen, I was actually with the Parking Authority when that 105 5/7/00 - FINANCE - BILLS 010258, 59, 60 whole notion was raised, and if the City was seriously interested in having the Airport assume the operations of parking facilities there, there would be a very detailed process in which to do that, and that would include having some entity assume the debt of the Parking Authority with respect to the Airport garages. Currently, the Airport garages were built by bonds that were issued in prior years, and the debt service is being serviced by the rates that are charged for parking at the garage. So in order for -- whether it's the City or through the Division of Aviation to take over the Parking Authority, there would have to be a form of defeasance of the bonds, which I'm not sure the City's prepared to do at this time. And I think that was one of the reasons why that whole notion was put to rest.
I'm confused by that answer. I understand it, but I'm confused as 106 5/7/00 - FINANCE - BILLS 010258, 59, 60 to the policy direction behind that answer. I would ask USAir -- I mean, are you guys happy with the parking charges at the Airport as we speak compared to other airports where you operate? I mean, are your customers flying out of Philadelphia paying comparable rates in parking as they are in other areas where you have, you know, a lot of business? Are you guys happy with the rate structure at the Airport? I mean, you are a customer there.
Not to evade the question but, again, parking rates are all over the lot. If you look at LaGuardia or Boston, you're going to get some very high rates. If you look at some other airports, you're going to get lower rates. And it's the kind of question that some analysis has to -- you really need to look at a spreadsheet. And, again, I don't mean to be invasive.
But the 28 percent that's being taken out of the Airport on the parking charges to the Parking Authority, all of that's going to debt service? 107 5/7/00 - FINANCE - BILLS 010258, 59, 60
Councilman, may I just clarify? I gave you a wrong impression a few moments ago. The 28 percent -- the cap is on -- the Parking Authority cannot charge the Airport any more than 28 percent of its administrative costs.
It's not 28 percent of our total gross parking revenues at the Airport. The Parking Authority has to, on an annual basis, provide us with a justification for whatever costs they assess before they give us the net.
It's 28 percent of their administrative cost centers; it's not 28 percent of our total revenues.
Well, what's the percentage of total revenues that they requested last year?
And is that justified -- I mean, what justifies that number? 108 5/7/00 - FINANCE - BILLS 010258, 59, 60 How many employees of the Parking Authority are there at the Airport?
I don't know the answer to that question, but it's easily discovered. I would also say, though, just to kind of get back to one of your previous questions, we participate -- every year, there is a survey of airports through the Airports Council International that survey parking costs throughout the country. And they are -- they really are all over the place, and a good number of airports just simply do not respond to the survey so that when you get the results of the survey, it's some what skewed. It's pretty much -- the statistics are based on those airports that want to respond because they feel like they have something to brag about, and those that don't respond. So I don't have a real good answer for you.
What's reflective, what's the components of the rates? What makes up the final rate of a person parking at the Airport? What are the components involved in that? Is it employee costs, is it -- what are all 109 5/7/00 - FINANCE - BILLS 010258, 59, 60 of the issues involved?
It would be a combination of the debt service that the City Treasurer spoke of and this --
Debt service just for facilities built at the Airport only? So there's no other --
That is correct. The garages at the Airport are governed by an indenture specifically relating to the facilities, the parking facilities at the Airport. The downtown garages operate under a totally different indenture.
But the Parking Authority doesn't operate -- the Parking Authority operates the garages at the Airport?
They contract, exactly. They have a contractor who manages the operations at the Airport, but they --
And do we know what 110 5/7/00 - FINANCE - BILLS 010258, 59, 60 those costs are as it relates to the contract?
And is it more? Is what the Parking Authority -- is what the Airport provides to the Parking Authority more than what the cost of operating the parking is?
The way the indenture is set up is that the Parking Authority is required to set rates and charges sufficient to pay the debt service on the bonds as well as to maintain the facility in a good operating condition. That's the general set statement. Based within the covenants under the indenture, the Parking Authority sets those rates and charges sufficient to meet the requirements.
So it's the Parking Authority that sets the rates and charges.
And then they bill 22 the Airport and they get paid from the Airport revenue for people parking at the Airport?
No, no, that's not how 111 5/7/00 - FINANCE - BILLS 010258, 59, 60 it works.
Does the Parking Authority send us the bill and we pay them?
But they're a Parking Authority subcontractor. The Parking Authority employees or their private parking company?
Okay, so it's between the Parking Authority and the private operator --
Well, that -- when they set rates based on their costs, those rates must be approved by the Commerce Director.
They were most recently reviewed and approved this spring, and a rate change took effect on April 1st of this year. Before we did that rate change, we did some comparisons with other airports on the East Coast, and we felt that our rates in some cases were actually well below some other airport rates, particularly in the economy-parking area. But in general, they were within what we thought were reasonable ranges of comparable airports in this 113 5/7/00 - FINANCE - BILLS 010258, 59, 60 part of the country. And in some cases, when we made the rate adjustments in April, some of the rates went down and some went up. The reason -- the other thing that's important in setting the parking rates at the Airport once you get beyond the cost issues is that you also have the same type of challenges that you have, say, at metered parking in Center City, where part of what you're doing in establishing a rate structure has to do with changing behavior, that if you want to have short-term parking available and people not monopolizing it all day, you have to make those rates high enough so that people will get in and out. So it's not a hundred percent based on costs, but it has to be supported by a cost structure that's reviewed and approved by the FAA, or, as the Finance Director said, they would label any additional money that's taken off of the Airport and not used for Airport purpose as revenue diversion. And we went through that scrutiny --
So they argued that 114 5/7/00 - FINANCE - BILLS 010258, 59, 60 we were diverting revenue from the Airport, was their position.
In 1996, they at least raised the question as a result of an audit that they did, and we entered into a dialogue with them that ultimately was settled in 1999, and I believe that we did a good job on that.
Do you believe that the Airport should be setting its own charges for parking?
I think that the current system works very well. And my only experience with it has been this time, this spring. And I think I've said this before earlier this year at a budget hearing when you asked some questions related to the Parking Authority. I mentioned that I thought we had a marriage, and you asked me it was a good marriage at the time, Councilman, and I sincerely believe that the efforts of our Commerce Director, Jim Cuorato, to bring the Parking Authority management and the Airport management together in a businesslike like way that works for our customers and meets all of the local and federal standards has been successful. 115 5/7/00 - FINANCE - BILLS 010258, 59, 60 And I think that, you know, we're doing very well. We're also bringing in on a monthly and annual basis, our revenues have really increased over the last three or four years significantly.
Does the Parking Authority hold a number of slots for its own use at the Airport? Are there a number of spots that only the Parking Authority controls at the Airport? Are you aware of any?
They have some areas not in the garages, for example, not in our short-term areas. They have some employee parking areas that are separate from what they call "the revenue control system."
How far away are they from the terminal? I mean, are they remote?
The ones that I'm thinking of are actually in the vicinity of their toll plaza and administration building, which is a little bit further away than the baggage claim building, sort of between baggage claim and the 116 5/7/00 - FINANCE - BILLS 010258, 59, 60 rental-car areas.
Might I also add that the Parking Authority cannot reserve parking spots for any entity because that would constitute a private use, and you can't do that.
No, no, in the parking system -- in the garages, off the garage -- they're not part of the garage system. (Unintelligible, parties talking over each other.)
Okay, so there's no 24 segregated parking spots in the garages --
There should not be 117 5/7/00 - FINANCE - BILLS 010258, 59, 60 any.
The garages that were built by bonds issued for it, you cannot have private parking spaces. But if there are other areas under the control of the Parking Authority that were bought outright, that are not subject to any bond requirements, you could allocate them will as you will. I mean, you --
Just a couple of questions. Let's go back to the 1998 transaction for a second. That authorized up to $500 million in bonds for this particular project? Is that 118 5/7/00 - FINANCE - BILLS 010258, 59, 60 correct?
Okay. And was the earlier testimony that you actually did 443?
That's right. It was 400 million in project costs and the other 43 was for the capitalized interest and the transaction costs.
Well, my understanding at the time was that the preliminary budget indicated that $400 million would be enough to cover both projects. And I think, you know, with hindsight, we can say that that was probably incorrect. But at the time, my recollection was, the kind of rule of thumb that we used in talking about the two terminals was that the international terminal would cost 325 million and the regional terminal 119 5/7/00 - FINANCE - BILLS 010258, 59, 60 would cost 75 million, for a total of 400. Those are just round numbers, but that's what was in my mind three years ago, when this --
I think we're close to 450 million on the international terminal and probably close to 100 million on the regional terminal.
Mm-hmm. On the presentation, I don't know whether that was your regular slide show or Power Point or, you know, we get so many presentations, it's hard to keep track of 'em. One of the slides, or the screen, showed something about some industry averages or just -- actually, I think it's in this thing -- about, you know, we were at 7 percent of something and, you know, 10 to 15 or something like that was the norm. Yeah, represents only 7 percent of the total project costs were scope changes/change orders, not uncommon to experience project changes of 10 to 20 percent in projects. And then you 120 5/7/00 - FINANCE - BILLS 010258, 59, 60 talked -- in another one, you had this PM/CM. What is that, project management, construction management?
At percent. And 7 it's not uncommon to have 15, 20 percent for that 8 range. 9 Now, 175 million is what percent of 10 400? What's that, about 40? 11
Okay. So is it normal to have about a 40 percent underestimation of costs?
We're obviously not glad to be here asking for authorization to sell additional bonds.
Well, we're always pleased to have you in the room, it's no problem. 121 5/7/00 - FINANCE - BILLS 010258, 59, 60
But if you look around the industry at projects of this type, I think you'll find that this sort of cost increase is found elsewhere. And, again, I'm not glad to be here asking for this amount, but San Francisco starts at 500 million and winds up well over 800. Look at Miami, it's probably more than doubled. And, by the way, it took five years for it to get started.
It's hard to compare project to project to tell you what's typical.
But I'm sure you can appreciate that the "everybody-else-is-doing- it" excuse is probably not going to get you very far.
That was not part of our 122 5/7/00 - FINANCE - BILLS 010258, 59, 60 presentation, but I'm trying to be responsive.
Okay. No, I appreciate that. So it happens and it happened everywhere else and --
No, I really don't think we've presented it that way or feel that that's the reason. As we've said, we start with an aggressive schedule.
And we were unable to begin when we plan to. And once that happened --
Well, when the original idea came forward, I mean, were these things so, you know, bizarre and extraordinary that they were not anticipated?
There were two ways to do it -- well, there were several ways. One was, we could design the project and actually start it and do a series of bond issues, and that way, we would sort of know, as we got further along the project exactly how much we needed, or at least we'd have a much better chance. We decided to do it this way because the interest rate environment was particularly 123 5/7/00 - FINANCE - BILLS 010258, 59, 60 favorable at the time, and so we took our best shot. And that's what we did.
We'll get you the official statement but I think you'll find that it was quite favorable. And my recollection is we sold bond at 5-point-something percent, and I'll get you the exact number. They were pretty favorable.
Okay. Now, my recollection back at the time was, at least for us, I think this was somewhat of a new and unusual, if not exciting and innovative, arrangement. And you'll forgive me if I don't remember all of the details, but I think -- I mean, there was going to be this bond offering, and then the money, I think, was actually going to go to you so that -- (Unintelligible, parties talking over each other.)
I thought that was slightly unique features, that we weren't going to be in control of it or it wasn't kind of us so much doing it. Or why don't you tell me about 124 5/7/00 - FINANCE - BILLS 010258, 59, 60 that.
Do you want me to tell you in simple terms? Actually, we could have the --
Sure. The way the 1998 bond financing was structured was that PAID would issue PAID bonds in the amount of $443 million. The City would then issue at the same time GARB bonds (General Airport Revenue Bonds) in the same amount. The bond proceeds from the City GARBs would be used as security with PAID debt service on the PAID bonds.
That's the basic fundamental structure of the transaction. And we're mirroring -- pending Council approval, we will be mirroring it the same way in the 2001.
I understand that part, but I thought that there was this other component that allowed for maybe things to move a little quicker, a little more nimbly, and we could, you know, kind of avoid some of the complications that go with City work, and that this was, I mean, on time, on budget, on its way, folks flying right out of the that terminal, 125 5/7/00 - FINANCE - BILLS 010258, 59, 60 whatever the anticipated date was. I mean, that's what was sold as a part of this whole thing and why we should do it. I mean, I remember a big hearing, and we had a lot of people here, you know, TV cameras and everything. So, I mean, what happened?
The arrangement was set up so that we could use private sector, or I'll say maybe slightly modified private-sector procurement methods. And that's what we've done.
And I don't think we're -- we're not here suggesting that the procurement process has been the issue, because we haven't suggested that at all. And also, once we start construction, I think you'll find that the projects have moved very rapidly. What happened is what we said happened: We started late and we got into a very overheated construction environment, which is, you know, you could say good news/bad news. It's a little bit good news in that the Philadelphia economy construction market at least was very, 126 5/7/00 - FINANCE - BILLS 010258, 59, 60 very strong.
I actually was trying to understand that. What do you mean by that?
What we meant was that we found fewer bidders than we had ever seen before on construction packages of this size despite efforts to do so and --
Because everyone was busy, exactly. And number two, more importantly, the bids were coming significantly higher than estimated. And --
Exactly, exactly. And as Chuck Stipancic gave one example before of a package where we took it apart to try to get bidders. We broke it down into smaller and smaller packages. The end-result was still significantly higher than we had estimated.
Councilman Nutter, if I 127 5/7/00 - FINANCE - BILLS 010258, 59, 60 could just add. I think one of the other problems we faced too, when we appeared before you in 1998, the project design was in its infancy and the budget was established in its infancy. And I think in hindsight, it would have been nicer for us to have come and simply design it 60 percent complete or 100 percent complete. Unfortunately, it wasn't at the time. So we established a budget based on what we knew at the time. And in hindsight, you know, maybe it could have been designed a little faster or a little more complete. But at the end of the day, we were -- we established a budget based on what we knew at the time. The other point that I would add -- you've heard it from a few already -- is that the project -- the international terminal project is going to be finished in under three years, the commuter terminal project in about a year and a half. We firmly believe that if this were a traditional public project -- and I think we have Terminal A as evidence that it took six to seven years to finish. Clearly, this project would not -- we would not be having the ground-breaking for 128 5/7/00 - FINANCE - BILLS 010258, 59, 60 the commuter terminal next month or in June, and the international terminal more than likely wouldn't be finished in the summer 2002. It would be many, many, many, many years down the road. So I think at the end of the day, even though we're not happy about the cost increase -- and believe us, none of us are, because we don't want to sit here and subject ourselves to this. But at the end of the day, we think it really did work and it does work. And I think the other thing that we mentioned in 1998 as well is that if we didn't get this project on line quickly as a company, you know, we have a choice in which to put our airplanes: We can go to Pittsburgh, we can go to Charlotte. We chose to make Philadelphia our international gateway. It works for us, we think it works for you. And at the end of the day, this process really helped us to achieve that goal a little faster. So we're proud of it in terms of how to make it work and when it's going to be finished. But, no, we're not happy about the cost increases.
Do you expect that 129 5/7/00 - FINANCE - BILLS 010258, 59, 60 the -- and I appreciate the answer, and we're glad you're here and we're not trying to obviously run you out. But, you know, we need try to kind of get a little information as we go through this process. Do you expect that that will continue in -- those kinds of statements about your presence here and the hub here and all of that, do you expect to be able to continue that level of presence in a post-merger environment?
Absolutely, absolutely. I think one of the attractions of USAirways to United Airlines is the Philadelphia market and the Philadelphia hub. United Airlines announced -- when they announced the acquisition that they were going to add more international service, we actually sort of beat them to the punch with Amsterdam -- Brussels starts this week. But they're also adding a --
Well, United has several hubs. We have three, they have five. Their hubs are San Francisco, Denver, Chicago, Dulles. 130 5/7/00 - FINANCE - BILLS 010258, 59, 60
And do we have any reason for concern that because of the proximity of the -- what is it, Washington-Dulles? -- that, again, in a post-merger environment, there will be some effort to move everything to that location?
In my view, we have no 11 concern. United has said they have no concern. And why would United -- I guess my question is, why would United Airlines buy USAirways, where the premier international hub is Philadelphia, to dismantle it? It makes no sense. They want Philadelphia. And what Philadelphia gives United Airlines is not only a large metropolitan area but further strengthen the north-south market, which is what we being to United Airlines.
Okay. Well, I mean, I won't comment on whether a particular business decision makes sense or not. You know, it wouldn't necessarily be the first business that did something that other people thought was unusual or bizarre. But, you know, in this 131 5/7/00 - FINANCE - BILLS 010258, 59, 60 context, you know, I just need to ask the question, and if you want to give us that comfort level on the record, I'm more than happy to accept it. Thank you. In the brochure -- I mean in the little package we got here, it said, "Due to the complexity of the projects, additional PM/CM services were needed." What did it start out at and what was the additional and what's the cost differential between them?
Can I take that from a narrative standpoint, and then maybe Chuck has numbers. We started the project with one firm managing both the international terminal and the commuter terminal. And that was Gilbane (ph.), and as we got into the project, candidly, the complexity of the project became more and more apparent. And frankly, the level of involvement by the Airport was different from what we'd expected. We were sort of used to running private-sector projects. And those two factors together led to us divide the construction management into Gilbane 132 5/7/00 - FINANCE - BILLS 010258, 59, 60 doing the Terminal F, the commuter terminal, and Turner doing the international terminal, and Turner has done other airport work, including work in Philadelphia. In addition, we added our own staff representatives instead of building a big staff of our own. We added our own staff representatives on an out-sourcing basis. And finally, the City, which had its own people watching the project in the form of "Dim Jim" [sic]. It had a Dim Jim on it so that explains the role --
Previously known as Day & Zimmerman Aviation. They've been active at the Airport for a long time. 133 5/7/00 - FINANCE - BILLS 010258, 59, 60
That's actually how they're referred to in the industry. So those of the roles of the four firms that you may see the names of as you go deeper and deeper into this.
I think I would add that in terms of putting specific dollar-amounts, when we refer to the PM/CM budget, I'm really referring to the professional services budget, which includes the program manager, the construction manager, the architects, the engineers. Initially, we had budgeted about $49 million for those services; it's now at about $84 million. And the 84 is what represents the 15 --
49 to 84, that's correct. That's for the architects, the engineers, the program managers, the construction manager, etc., etc. And that's what represents 15 -- approximately 15 percent of the 558 million.
Well, yeah. I 134 5/7/00 - FINANCE - BILLS 010258, 59, 60 mean, I can, you know, I can barely, you know, put up a shade in my house. So, I mean, I'm no 4 construction wizard, but you said you went from 49 million to 84 million just on --
And what -- I mean, if you tell me about, you know, Tinicum Township doing something to you or the Sun Oil line, you know, cut exploded or, you know, whatever happened to that and environmental reports and the like, but, I mean, how does that happen? I mean, how do you not know you need all of all of these additional people?
Well, I think as Bob Hazel mentioned with the narrative in terms of -- we started out one firm -- that was with Gilbane -- that was estimated about $9 million to do the program management for both projects as well as the construction management for both projects. At the time, we selected Gilbane 135 5/7/00 - FINANCE - BILLS 010258, 59, 60 through a selective bidding process. They were one of the lower bidders, if not the lowest bidder at the time. So we selected them, thinking full well that they could rise up to the occasion and deliver the project and deliver those services. And I think what we found out as got started on the project, again, because we had more coordination with the City, with Tinicum Township, with the Controller's Office, with the FAA, more coordination than what we envisioned before we knew a lot about what the project was going to be, that caused us to add Turner Construction as the construction manager for Terminal 1.
Well, maybe you would have made out better to stay less coordinated. You might have saved a little money. I mean, I mean that facetiously. But, I mean, if you got all this coordination going on but your price almost went up by double, what's the story?
Well, again, at the outset of the project, we envisioned this to be a truly private project, with minimal oversight, with minimal coordination.
But in reality, it's a quasi-public project. We still have the benefits of some private-sector methods, but in reality, it has certain public aspects to it.
Well, why don't we do this. I mean, as a part of the information stuff, why don't you tell me who all was a part of the $49 million package, and then tell me who ended up being a part of the additional -- what's that, 35?
Sure. I can. And, Bob, you may need to help me with this. The original 49 million primarily the big players -- your architects -- in this case, that was Cohen, Peterson & Fox, who was the designer for Terminal 1; the Shuard (ph.) Partnership, who was the designer for Terminal F; and then we had Gilbane, who was the program and construction manager for both projects.
Well, just, you know, kind of lay 'em all out, where did you have them in your budget, what were they --
You want me just to provide that as a supplement? 137 5/7/00 - FINANCE - BILLS 010258, 59, 60
What were they supposed to get, what were they supposed to do. That's on the $49 million crew. And then tell me what the other $35 million worth was and who they were and what they were supposed to do and how much and all those details.
Okay. And if you can give as well, I guess, a timeline is what the Councilman was talking about, about who came on when.
Thank you. Two last questions -- maybe three. The 450 PFC charge; now, when did that start?
Right, no, I remember that. And that was pursuant to an ordinance?
No, that's basically an application that we do to the FAA, asking for their permission to impose the additional $150.
Didn't we have to authorize the first one, though, the $3? Didn't we do something with PFCs at one time?
It's part of our rates and charges regulation, which, as I understand it, is a promulgated regulation; it doesn't come through an ordinance.
Oh, I think Mr. Cantu-Hertzler wants to get up there and say, well, it's something he's doing -- that David D Cohen slide, yes. (Laughter.)
Have a seat, please. We got a lot of chairs around here. Just make yourself comfortable.
The other thing that the ordinances specifically authorize is 139 5/7/00 - FINANCE - BILLS 010258, 59, 60 pledging use of PFCs as part of --
But when that whole PFC concept came about, there was no action over here on that particular matter?
I wasn't here then. I don't believe that that's the case.
Okay, all right. Maybe we just heard about it in a hearing or something and -- okay. Now, in the MBE/WBE charts, not to be confused with the "Dim Jim" chart information, that would be DBE/MBE, I added up -- every other page or so has, you know, 3.4 million awarded to date to this group and a million to the other group and 3.3 to the other group. And I think I got them all, and it seems to be -- what's the total amount of dollars that have been spent so far. I mean, have you spent the 443 or are you on your way to the 443 or --
Actually, in the presentation, the award, it really should be spent to date. That was a mistake.
Where it says that this 140 5/7/00 - FINANCE - BILLS 010258, 59, 60 amount has been awarded, it's not awarded, that's an amount that's been spent to date at this stage of the project. It's really two different, because when a contract is initially awarded, there will be a commitment in there with -- like today, we've only spent of that commitment X-dollars.
Okay, so then how much have you spent to date then? 'Cause you're saying that this should really be -- those numbers add up to $48.9 million. Are you saying that you've -- that they have actually spent --
I thought you just said 49 million. Jim, maybe you can help me with that. I can pull my calculator out and --
Oh, in terms of the project? 141 5/7/00 - FINANCE - BILLS 010258, 59, 60
We'll have to get you that information. I don't have it off the top of my head. In terms of how much we spent to date, it's probably in the range of --
We actually know how much has been spent on the minority side, but we don't know the global spending on the project.
I understand, okay. Now, at the present time, in various forms of consideration, we have a Water Department offering that we're talking about, which I think does not involve you guys, right? You're not getting any of the water money, right?
Okay, all right. And then we've got PGW, the Airport, NTI, the City, and have we done the stadiums yet?
All right. Now, in the testimony with regard to the Water Department, is it my recollection that -- we did a couple things: One, that was originally going to be a $250 million offering, we amended it in the hearing to 500 million.
To accommodate an additional $250 million in refinancing, which I think we're going to do in the fall?
Okay. And that was because we believed that based on where we are today, we wee an interest rate continuum going in a downward direction toward the fall?
We actually -- the way rates are today, don't expect rates to -- we don't expect the Federal Reserve -- not the Federal 143 5/7/00 - FINANCE - BILLS 010258, 59, 60 Reserve, excuse me, FOMC to increase rates in the fall, so they'll probably be where they are or they may decrease.
Okay, 'cause I remember Mr. Isdell talking about the interest rate environment, and he said that, you know, now was the best time. I thought I had a recollection of that over the next few months, where we're anticipating either level or possibly lower. We have a number of offerings that are going to take place, and so part of my concern was that we literally have a whole lot of Philadelphia paper out on the market at the same time.
Two things, Councilman Nutter. The Director of Aviation is correct in terms of interest rates being very favorable, but the other fact is that they are running out of cash; this is why they need to be in the market, in time to -- by the end of July -- excuse me, by the end of June. The --
A lot of people are 144 5/7/00 - FINANCE - BILLS 010258, 59, 60 running out of money right about now.
You are absolutely correct. The other issue about there being a lot of Philly paper in the market, you're correct, and I'm actually challenged with that. And we're working in my office to sort of space it out. And while they are different credits -- Water's its own credit, Aviation is different, as is the stadium. You're right. One of the things we have to be sensitive about is the amount of Philadelphia paper that's in the market. We don't want to price ourselves out of the market.
And so we're really conscious about that. In terms of priority of issuance, based on where we are in the schedule, the Airport may be going first. It's a tie between the Airport and PGW, which I didn't want to bring up until tomorrow.
No, I don't. 145 5/7/00 - FINANCE - BILLS 010258, 59, 60 (Laughter.)
We've savaged -- the folks from USAir may have felt bad before the hearing and now you want to put PGW on 'em. I mean, you know, even I would have to rise to their defense. Geez. (Laughter.)
The Airport is probably going to be -- it's going to be Airport, PGW, and Stadium. And we're sorting out the order of that.
Hmm, okay. Well, I appreciate all of the information. I know you're going to be getting back a fair amount of requests, data to members of the committee.
Mm-hmm. We will put together a comprehensive response package.
Information from my department, from Aviation, and the various sources that will compile that, including the Parking Authority material. And we'll have a comprehensive response to you. 146 5/7/00 - FINANCE - BILLS 010258, 59, 60
It will take us about a week, if that's okay, Councilman.
Just one expansion of my request, one clarification of my request: I would like to see the actual change order documents and all of the issues that are -- I don't want -- what I don't really want is a synopsis of what was changed and how much it was; I'd like to see what the specific changes were. I mean, if that's available. I mean, it's similar to what we asked for on contracts. I mean, I don't want a list of the contracts; I want to see the contracts, or I want to see the specific orders. And I'd like to read it myself, rather than have somebody read it and give it to me.
And we want you to consider, if you will, that if you want these bills reported out today, you've got to be able to get all of this information back to us in order to get your vote. So consider carefully your response. 147 5/7/00 - FINANCE - BILLS 010258, 59, 60
I'm sure when there is either a cost overrun, a change order, or increased labor costs, I'm sure there's document that's submitted to the general contractor. I mean, that's just --
We'll provide what you want. It was only a question of dealing with the volume, you know, and whether you're going to want, you know, multiple boxes. We'll get you what you asked for, absolutely.
And we've got to find enough people to read it. Thanks.
Councilman Kenney, if I may just ask if it's possible to either, you know, now or after the hearing is closed, could -- I just want to make sure 'cause you did ask us for a good number of items rather quickly and I think I got them all down. I think the City Treasurer was also making a list. We just want to make sure that we get everything you want. Would you want to do that after?
What I suggest is maybe tomorrow, you can fax me what you think I asked for, and then I'll add to it. 148 5/7/00 - FINANCE - BILLS 010258, 59, 60 (Laughter.)
I mean, just so you understand what you think you're looking for. It should probably be everything I asked for, and I'll call and tell you it's all right.
Why don't we fax you all of the questions we think the committee has asked us, and if we have missed the point, the community can have an opportunity to modify the requests as we understand that you're requesting.
Could I ask Councilman Kenney's indulgence to give us a day and a half to get this material to him, questions to him.
Absolutely. And I will be glad to confer with members of the committee to make sure that we have all of their questions intact and get back to you so that there is no problem with regard to what is requested by 149 5/7/00 - FINANCE - BILLS 010258, 59, 60 any member of the committee. So if you certainly field that information to us, we can -- we will make sure we get in touch with the committee members and have all of their questions addressed, in addition to the ones we submitted at the beginning of this hearing.
We will provide the questions to you Wednesday morning for your approval and comments, and then once we get them back, we will have the information to you within a week from the time we get that back from you, if that is permissible by Council. Okay, so Wednesday morning.
Are there any other questions from members of the committee? (No further questions.)
We're waiting for another committee member to come down who's on her way down. (Councilwoman Tasco returns to chamber.)
Thank you, Councilwoman. 150 5/7/00 - FINANCE - BILLS 010258, 59, 60
I would like to restate, if you would indulge me, Councilwoman Blackwell, the timing of the information and how this is going to work. What I'm proposing, if Council is agreeable to it, is that Wednesday morning, the day of tomorrow, we provide to you a list of questions as we understand it to be, which represents material and information that the committee is requesting. We hope that the committee can turn the questions around to us within hours. And if we get it back on 14 Thursday, we will guarantee that we will get 15 responses to all of the questions as we 16 collectively understand it back to you by 17 Wednesday of next week, which is the 16th, and so 18 we will get it back to you by Wednesday, the 19 16th. That is when we will have responses to the 20 questions, if Council -- if the committee is 21 agreeable to that. 22
All right. 23 Then we here on this committee are willing to 24 report these out with a suspension, with the proviso that we have all of the information before 151 5/7/00 - FINANCE - BILLS 010258, 59, 60 there is a final vote.
We will ensure that we have that information to you, Councilwoman.
Madam Chair, if I could just restate you commitment that you will hold the bill until we feel as committee that we have enough information to make a reasonable decision.
Thank you. All right, having said that, we will now conclude public hearing and enter our public meeting. - - - 152 5/7/00 - FINANCE - PUBLIC MEETING
I will now entertain a motion from Councilman Kenney with regard to Bill No. 010258, that it be reported out with a suspension of the rules and with a favorable recommendation, and I will so entertain that motion at this time. Councilman Kenney?
Thank you. Bill No. 010258 has been reported out of committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. All in favor? Opposed? The ayes have it, and so this motion is carried. Councilwoman Tasco, I will ask far a similar motion with regard to Bill No. 010259.
Madam Chair, I move that Bill No. 010259 be reported out of committee with a favorable recommendation and with a recommendation that the Council rules be 153 5/7/00 - FINANCE - PUBLIC MEETING suspended so that this bill can be read at the next Council session.
All right. It has been moved may I have a second. (Duly seconded.)
It has been seconded that Bill No. 010259 be reported out of committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit first reading at our next session Council. All in favor? Opposed? The ayes have it and so it is carried. Councilman Nutter, we will ask you for a motion with regard to Bill No. 010260.
Thank you, Madam Chair. Madam Chair, I move that Bill No. 010260 be reported out of 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 154 5/7/00 - FINANCE - PUBLIC MEETING properly moved and seconded that Bill No. 010260 be reported out of committee with a favorable recommendation and also a recommendation that the rules of Council be suspended so as to permit first reading at our next session of Council. All in favor? Opposed? The ayes have it and so this motion is passed. We thank everyone for their cooperation and willingness to work together. We might also mention that we have a young lady, Jamilla (ph.) Brown, who is here, visiting from Houston School with the City Treasurer, and we thank her for attending and hope it hasn't been too laborious for her to follow and that she's enjoying her visit. Let me thank all the members of the committee as well as those from the Administration and the Airport who are here. Thank you David L., and we'll try to get it all done.
So this ends our committee. This committee hearing and meeting 155 5/7/00 - FINANCE - PUBLIC MEETING is adjourned.
Thank you. (Adjourned 4:03 p.m.) 156 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Monday, May 7, 2001, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE ON FINANCE BILL NO.'S 010258, 010259, 010260 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter