- - - COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING - COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, May 19, 2005, 10:00 a.m. - - - Bill 050236 - An ordinance dissolving the 1600 North Broad Tax Increment Financing District and creating the Avenue North Tax Increment Financing District, being the approximately three acre site at 1600 through 36 North Broad Street, generally bounded by Cecil B. Moore Avenue on the north, Broad Street on the east, Oxford Street on the south and Carlisle Street on the west. Bill 050190 - An ordinance dissolving the Networks Tax Increment Financing District, being the area generally bounded by 16th Street on the west, Spring Garden Street on the north, Hamilton Street on the south and 15th Street on the east. BILL 040767 - An Ordinance amending Section 18 19-2604 of The Philadelphia Code, relating to tax rates, credits and alternative tax computation for the business privilege tax, by reducing certain tax rates, all under certain terms and conditions. - - - V A R A L L O Incorporated Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2 BILL 040789 - An Ordinance amending Chapter 19-2600 of The Philadelphia Code, entitled "Business Privilege Taxes," to provide for an exemption from the tax on gross receipts for certain new businesses, under certain terms and conditions. BILL 050001 - An Ordinance to adopt a Capital Program for the six Fiscal Years 2006-2011 inclusive. BILL 050002 - An Ordinance to adopt a Fiscal 2006 Capital Budget. BILL 050003 - An Ordinance adopting the Operating Budget for Fiscal Year 2006. BILL 050007 - An Ordinance amending Chapter 19-1200 of The Philadelphia Code, entitled "Parking Tax," by establishing a rate of taxation on parking transactions for Fiscal Year 2006 and thereafter and making such rate contingent on certain decreases in business privilege tax rates. BILL 050008 - An Ordinance amending Section 16 19-2604 of The Philadelphia Code, relating to tax rates, credits and alternative tax computation for the business privilege tax, by reducing certain tax rates and making such reductions contingent on an increase in the parking tax. BILL 050383 - An Ordinance amending Chapter 19-1200 of The Philadelphia Code, entitled "Parking Tax," by increasing the rate of taxation on parking transactions for Fiscal Year 2006 and thereafter. RES. 050022 - Resolution providing for the approval by the Council of the City of Philadelphia of a Revised Five Year Financial Plan for the City of 3 Philadelphia covering Fiscal Years 2006 through 2010, and incorporating proposed changes with respect to Fiscal Year 2005, which is to be submitted by the Mayor to the Pennsylvania Intergovernmental Cooperation Authority (the "Authority") pursuant to the Intergovernmental Cooperation Agreement, authorized by an ordinance of this Council approved by the Mayor on January 3, 1992 (Bill No. 1563-A), by and between the City and the Authority. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILWOMAN JANNIE L. BLACKWELL COUNCILMAN DARRELL L. CLARKE COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JACK KELLY COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN BRIAN J. O'NEILL COUNCILMAN JUAN F. RAMOS COUNCILWOMAN BLONDELL REYNOLDS-BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO 4 Whole - 5/19/05 - - - P R O C E E D I N G S - - -
Good morning, everyone. Good morning. This is the Committee of the Whole. I would ask the Council please come to order. I would ask Mr. Auerbach to please read the title of the bills before the committee today.
Bill Number 050236, an ordinance dissolving the 1600 North Broad Tax Increment Financing District and creating the Avenue North Tax Increment Financing District, being the approximately three acre site at 1600 through 36 North Broad Street, generally bounded by Cecil B. Moore Avenue on the north, Broad Street on the east, Oxford Street on the south and Carlisle Street on the west. Bill Number 050190, an ordinance 23 dissolving the Networks Tax Increment Financing District, being the area generally bounded by 16th Street on the west, Spring 5 Whole - 5/19/05 Garden Street on the north, Hamilton Street on the south and 15th Street on the east. Bill Number 040767, an ordinance 5 amending Section 19-2604 of The Philadelphia code, relating to tax rates, credits and alternative tax computation for the Business Privilege Tax, by reducing certain tax rates. Bill Number 040789, an ordinance 10 amending Chapter 19-2600 of The Philadelphia Code entitled, Business Privilege Taxes, to provide for an exemption from the tax on gross receipts for certain new businesses. Bill Number 050001, an ordinance to adopt a capital program for the six fiscal years 2006 through 2011. Bill Number 050002, an ordinance to adopt a fiscal 2006 capital budget. Bill Number 050003, an ordinance 20 adopting the operating budget for fiscal year 2006. Bill Number 050007, an ordinance 23 amending Chapter 19-1200 of The Philadelphia Code, entitled parking tax, by establishing a rate of taxation on parking transactions for 6 Whole - 5/19/05 fiscal year 2006 and thereafter, and making the rate contingent on certain decreases in Business Privilege Tax rates. Bill Number 050008, an ordinance 6 amending Chapter 19-2604 of The Philadelphia Code, relating to tax rates, credits and alternative tax computation for the Business Privilege Tax, by reducing certain tax rates and making such reductions contingent on an increase in the parking tax. Bill Number 050383, an ordinance 13 amending Chapter 19-1200 of The Philadelphia Code entitled parking tax, by increasing the rate of taxation on parking transactions for fiscal year 2006 and thereafter. And Resolution Number 050022, providing for the approval by the Council of the City of Philadelphia of a revised five-year financial plan for the City of Philadelphia covering fiscal years 2006 through 2001, and incorporating proposed changes with respect to fiscal year 2005.
Okay. Before we begin, I would like to make an 7 Whole - 5/19/05 announcement to explain how we will proceed today. We will first hear testimony on the two TIF bills, Bill Numbers 050236 and 050190. We will then recess the Committee of the Whole, and the Committee on Law and Government will then meet. When that committee has completed its work, we will then hold our caucus in chambers, and then begin to conduct today's Council session, up to and including consideration of the calendar. After the completion of the calendar, the Council session will be recessed, the Committee of the Whole will reconvene, and we will at that time consider all of the tax and budget-related matters before the committee. After the Committee of the Whole has completed its work, the Council session will then be reconvened to receive a report from the Committee of the Whole and to permit first reading of any bills reported from the committee. 8 Whole - 5/19/05 Finally, please note there is also a Rules Committee hearing scheduled this afternoon at 2:30. At this time we will now hear testimony on Bill Number 050190. I believe Mr. Fina will be testifying. Good morning, Mr. Fina. Welcome. Please identify yourself for the record and proceed with your testimony
Good morning, Council President and members of City Council. I have extra copies of my testimony, should anyone need a copy.
Have they been circulated to all Council members?
Thank you. Good morning President, Verna and members of City Council. I am Robert Fina, Senior Vice President of the Philadelphia Industrial Development Corporation, P.I.D.C., and I am testifying here today in support of Bill 9 Whole - 5/19/05 Number 050190, dissolving the Networks Tax Increment Financing District. In June of 2000 City Council approved Bill Number 000221 creating the Networks TIF District. This district provided Amerimar Enterprises the opportunity to borrow up to $15 million in TIF financing and invest almost $80 million of private funds for improvements of the former SmithKlineBeecham building located at 15th and Spring Garden Streets. At the time Amerimar anticipated repositioning this vacant 1 million square foot building as a state-of-the-art telecommunications and E commerce center to attract businesses into Center City. Since approval of the TIF district, the telecommunications market contracted substantially, and Amerimar is currently marketing the building for business office use and related uses without the TIF benefit. Consequently, they have requested formal dissolution of the Networks TIF District, which P.I.D.C and the 10 Whole - 5/19/05 administration support. I thank you for your time, and I am available to answer any questions you may have on this matter.
Thank you. Are there any questions from members of the committee? (No response.)
Do we have anyone else to testify on this Bill? (No response.)
Seeing none, we will now consider Bill Number 050236. Good morning. Thank you for your patience. Please identify yourself for the record and proceed with your testimony.
Good morning. I'm Stephanie Naidoff. I'm the Director of Commerce and City Representative. Good morning, President Verna and members of City Council. My name is Stephanie Naidoff. I am the City Representative and Director of Commerce, and 11 Whole - 5/19/05 I'm here today to testify in support of Bill 3 Number 050236, creating the Avenue North Tax Increment Financing District. The administration enthusiastically supports creation of the proposed TIF District in order to help make this important urban renewal project a reality. The southwest corner of Broad and Cecil B. Moore Avenues sits at a prominent intersection within the North Philadelphia community, and it sends a strong negative message while it sits in its current vacant state. Despite much hard work, previous efforts to develop a project on that site with a much larger scope, with deeper subsidies did not prove to be successful. Now, with an aggressive local development team, including Tower Investments, represented here today by Bart Blatstein, and Felder and Associates, represented by Darwin German, in conjunction with Beech Corporation, there is a real opportunity to achieve success with a 12 Whole - 5/19/05 smaller, more efficient design. Creation of this TIF will result in a two-story 92,000 square foot retail center, including a seven screen movie theater. In addition to removing the blighting influence of vacant land, the development of a movie theater and quality retail opportunities will energize the community and make a strong statement for North Broad Street. Construction of the project will create over 130 construction jobs and will be performed subject to an economic opportunity plan that has been approved by City Council's technical staff and the Minority Business Enterprise Council. Further, the project will support over 180 permanent jobs. The developer has committed to cooperate with Beech Corporation to identify local labor for the project's operations. Finally, this $5 million investment by the city will leverage a $14 million private investment in North Philadelphia, 13 Whole - 5/19/05 plus a $2 million grant from the Commonwealth of Pennsylvania. At this point I would like to introduce the development team, Bart Blatstein and Darryl German for Fred Felder, the developers, and Ken Scott for Beech Corporation, who will provide a more detailed description of the project, their public commitments and their need for this TIF. At the completion of their testimony Bob Fina and Sam Rhoades of the Philadelphia Industrial Development Corporation will review the technical specifics of the ordinance and project plan. Thank you for the opportunity to testify on this important bill. I'll be happy to remain for any questions.
Thank you very much. Mr. Blatstein, et al, if you will just come to the witness table. Good morning.
Please identify yourself for the record and proceed with your testimony.
Thank you. Good morning, President Verna and members of City Council. I am Bart Blatstein, President of Tower Investments. I'm here today as one of the principals of the Avenue North development. Let me first advise you that my partner, Fred Felder, could not be with us today. In his place is Darryl German. He intended to be with us this past Monday but is currently out of the area, due to a prior business commitment. I'm here along with representatives of Beach Interplex, our community partner. 15 Whole - 5/19/05 While many of you are knowledgeable of Tower Investment's work along the Delaware waterfront, Manayunk and Northern Liberties, I'm here today to speak with you concerning Avenue North. The site is at the southwest intersection of North Broad and Cecil B. Moore Avenue. The Avenue North development blends the needs of the North Philadelphia community by bringing a new 60,000 square foot of retail development to the neighborhood, along with a seven screen movie theater. The retail two-story movie theater complex fronts along Broad Street. This is the TIF District. In addition, behind the complex towards 15th Street is a multi-story 800-bed residential facility that will help meet the student housing needs of the Temple community. The housing component is not part of the TIF, and there is no contractual or financial relationship with Temple University 16 Whole - 5/19/05 for the housing development. In all, the community retail, movie and residential elements of the project approximate over $70 million. As you are aware, this property was acquired, with the approval of City Council, in the late 1990s. It has been conveyed by the redevelopment authority to Beech Interplex on a long-term lease. In return, Beech has leased the premises to us as the developers of Avenue North. As the developers of Avenue North, we are subject to terms and conditions of the Redevelopment Authority, approved by City Council. Beech has been a tremendous help in the development and planning of this development. Their long-term working relationships within the community were invaluable when this development received its land use and zoning approvals last summer. Beech continues to work hand in hand with us, along with the Redevelopment Authority, concerning community outreach, 17 Whole - 5/19/05 construction, participation and local employment. I must say that I am most proud of our ability to bring us a first-rate multi-screen move theater back to North Philadelphia. We believe that while traditional national firms have stayed away from many urban areas, including North Philadelphia, we are confident that this mix of retail, entertainment and housing joined together will be successful with your support. I am here today to answer any questions you may have about this most exciting project.
Thank you very much. Thank you, Mr. Blatstein. Are we going to hear from the other witnesses? Do they have testimony?
Yes. I don't have written testimony. I'm Kenneth Scott, the Vice President of Beech Interplex. And I just wanted to officially put my testimony on 18 Whole - 5/19/05 the record, that we're in full support of this project. We have been working on this project for over ten years and have gone through two other developers. To see this dream come to fruition and the job creation for the community is amazing. So, we have our full support behind this project of Beech Interplex and the local Cecil B. Moore community. Thank you.
As much as I support this project, there's no way we're going to let you leave without answering any questions. Thank you, Madam President. Can you talk to me briefly about where we are, as it relates to, in specific terms, about employment opportunities, both 19 Whole - 5/19/05 in construction and long-term for the site, what you're doing to ensure that we get the appropriate support, as it relates to the neighborhood.
Sure. Right now, you know, we have goals set for minority participation at -- the total is about 40 percent. Currently on the construction site there's two site contractors and Justic Steel is a minority firm, along with a majority firm. The numbers right now are over 50 percent minority participation on site. Long-term employment goals are, we are looking at a couple hundred jobs in the retail and through the housing sector.
What are we doing to ensure that the appropriate people are prepared and ready?
Well, one of the things, this past Saturday we just held a job fair to take applicants. We're also referring people to the apprenticeship programs and working with 20 Whole - 5/19/05 O.I.C. and the African American Chamber and the N.A.A.C.P. and the North Philadelphia Chamber of Commerce, to provide training opportunities so people will be prepared for these jobs, long-term, after construction employment and during construction employment.
All right. As it relates to your construction efforts, what are you doing? I mean, are you working with any groups or individuals to ensure that we get the appropriate support?
Yes. We're working with the Redevelopment Authority and M.B.E.C. along with the Chamber and Beech Interplex to monitor monthly meetings and monitor these employment goals.
All right. If anyone is interested in an opportunity, be it retail or employment, who should individuals call?
Retail Tower Investments. Employment opportunity, Beech Interplex, Ken Scott. 21 Whole - 5/19/05
But I would also like to add, Council President, that without the leadership of the district Councilman Darrell Clark, this project would never be in the ground. He's just a very special man. We all thank him.
Are there any other questions from members of the committee? (No response.)
Good morning again, President Verna and members of City Council. My colleague, Sam Rhoades, will distribute additional copies of the project 22 Whole - 5/19/05 plan which is an exhibit to the ordinance 3 because we have amended it. There are two slight -- two small changes that we had to amend the project plan. And by procedure we must distribute them to you now. So that's what will happen. And I will refer to them in my testimony. Again, I am Robert Fina, Senior Vice President of the Philadelphia Industrial Development Corporation. I am appearing today to testify on Bill Number 050236, creating the Avenue North Tax Increment Financing District. Also with me is my colleague, Sam Rhoades. C is staffed to the Philadelphia Authority for Industrial Development, PAID, which under the state TIF Act is responsible for recommending the creation of a TIF to the School District and City Council, as well as preparing and submitting the project plan. The School Reform Commission has agreed to participate in the creation of a TIF district, as expressed in the project 23 Whole - 5/19/05 plan, and as an exhibit to the bill. , City Council staff, and the Redevelopment Authority. C has reviewed the plan and incorporated comments from the Controllers Office and PICA. The proposed TIF of approximately two acres is located at 1600, 1636 North Broad Street, bounded by Cecil B. Moore Avenue on the north, Broad Street on the east, Oxford Street on the south and Carlisle Street on the west. The proposed TIF district is presently vacant land owned by -- owned for the past eight years by the Redevelopment Authority. The Redevelopment Authority will lease the property to Beech Interplex, Inc. which will sublease to Broad Retail Associates LP, an affiliate of Tower 24 Whole - 5/19/05 Investments, and Felder and Associates. Beach's involvement is to assure community participation in the project. As you have heard, the project consists of 92,000 square feet of retail and cinema uses. 9 million will be secured by the developer, including the $5 million to finance the TIF note. The remaining $2 million will be provided by the Commonwealth's Redevelopment Assistance Capital Program. Incremental increases in real estate, city sales and Business Privilege Taxes shall be pledged to repayment of the TIF note, up to a term of years. 18 You will note that use and occupancy 19 taxes that accrue totally to the School 20 District are not being utilized to secure the TIF note. The project is expected to create 133 construction jobs and approximately 184 full-time equivalent permanent jobs. The TIF district currently does not 25 Whole - 5/19/05 generate any tax revenue to the City or the School District. When the project is completed, it is estimated it will provide $800,000 in tax revenue in its first year and $19 million over the 20-year term of the TIF. 5 million. The TIF creation date is July 1, 2005. Tax increments that are authorized but not required to pay the debt service on the TIF note will be applied to prepayment of the principal of the TIF note, subject to the lender's prepayment restrictions and/or return to the city and the School District. The amount of the TIF note was determined based on projected market conditions. Should the developer's net income exceed those expectations, then 50 percent of such excess shall be applied to prepayment of the TIF note and/or returned to Whole - 5/19/05 the city and the School District. As I indicated earlier, there are two minor technical changes to the project plan that we had originally circulated. First, construction employment during the TIF term is reduced from 178 jobs to 133 jobs. This reduces the wage tax during the term from $312,000 to $234,000. Second, the Business Privilege Taxes originally were incorrectly calculated. Correcting this error increases Business Privilege Tax receipts over the term of the TIF note by $184,000, approximately $95,000 per year. 9 million to $19 million. 1 million.
In closing, I would like to note that today's hearing is required by the Pennsylvania Tax Increment Financing Act to 27 Whole - 5/19/05 create the TIF district, and the Act requires City Council to wait at least three weeks for final consideration. Therefore, City Council will not be able to approve the bill before its regularly scheduled meeting of June 9, 2005. Thank you for hearing my testimony. Mr. Rhoades and I would be happy to answer my questions.
Thank you very much. The Chair recognizes Councilwoman Tasco.
Good morning. Thank you. On page... On the executive summary you talked about the remaining $2 million will be... I'm sorry. The incremental increases in real estate, city sales and Business Privilege Tax will pledged for repayment of the TIF. Would you explain that to me, please?
Yes. Under the tax act, under the TIF act, only certain taxes are 28 Whole - 5/19/05 eligible to pay the TIF note, to pay the debt service on the TIF. The developer will borrow the money from a specific lender to be named in the future. That lender's debt service will be paid out of the incremental taxes, the new taxes on real estate, Business Privilege Tax, and the city's one percent sales tax. So, during the years those taxes will pay the 11 $5 million TIF note. 12
Taxes that are not 17 currently being paid to the City. In this 18 case there are no taxes being generated 19 from -- 20
You're talking about the taxes that this company would pay, his business -- their Business Privilege Tax.
Yes, the owner of the property and the businesses that are in the development. 29 Whole - 5/19/05
Okay. Based on the current rates that is calculated on the current rates we have -- we're paying now?
Yes. It's calculated on the current rates that are approved by the Finance Department.
Okay. Would any impact -- What would the impact be on the Business Privilege Tax, if there is any cut?
If there's a decrease in the Business Privilege Tax, there will be less taxes for the developer to pay that TIF note. That TIF note, the debt that he borrows for the TIF, the $5 million, would then be his obligation to pay, not the city's, not P.I.D.C.'s, not the Redevelopment Authority's. It would be the developer's obligation to pay that TIF note if the taxes do not materialize.
Thank you very much. The Chair recognizes Councilman Clarke.
Thank you, Madam President. Good morning. I noted that there was some discussions about clawback provisions, particularly related to some of the more recent TIFs. Is there a clawback provision in that? If it is, let us know that. And can you be can -- you give us some sense of what specifically that is.
Yes, Councilman. There is a clawback which... Basically, there's one basic clawback built into the actual TIF and any TIF, that if the -- as Councilwoman Tasco indicated, if the taxes do not materialize, it is not the obligation of the city to pay the TIF note, to pay the debt service. It is the developer's obligation. So that's somewhat of a clawback. So, if the 31 Whole - 5/19/05 development does not reach the estimated value, and the taxes are not generated, it is the obligation of the developer to pay those taxes. But we also added another clawback in this case. We said, if the developer based on his market projections, does better at this development than anticipated, some of those -- some of that money must go to pay the TIF note earlier or be returned to the School District in the city. So, we get 50 percent of his net income over a certain profit level to pay the TIF note prior to its due date, so that way the city will get its revenue and the School District sooner or the taxes are returned directly to the city and the School District.
Thank you. Mr. Fina, I'm assuming that the bill 25 has to be amended. The bill has to be 32 Whole - 5/19/05 amended?
Yes. We replaced Exhibit A in my testimony. It will indicate that amendment.
So Councilman Clarke will offer the amendment at the appropriate time. Thank you very much. Are there any other questions or comments from members of the committee? (No response.)
Seeing none, thank you very much. Do we have anyone else to testify on this?
I do want to note there are illustrations of the proposed development behind you to your left. Thank you.
They look very nice. Thank you. Do we have any other questions or comments? Anyone else to testify? Councilman Ramos. (No response.)
Councilman 33 Whole - 5/19/05 Ramos, sir, your light is on. (Councilman Ramos spoke briefly, away from the microphone, not reportable.)
Oh, I thought you were making lemonade. Yes. Yes, sir.
There was testimony earlier that I think it was 50 percent. The gentleman from Beech Interplex testified that there was 50 percent minority participation. Was that contracting or employment on the ground?
Councilman, I'll allow my colleague, Sam Rhoades, to answer that question. We have those statistics.
Ken Scott is also here from Beech Interplex, Inc. that could respond to that question.
I'm Sam Rhoades for the Philadelphia Industrial Development 34 Whole - 5/19/05 Corporation.
Mr. Rhoades, you're going to have to pull the microphone closer.
I'm Sam Rhoades with the Philadelphia Industrial Development Corporation. The economic opportunity plan that's included in the ordinance calls for... I believe it's 50 percent participation by minorities in the operations of the project.
I'm sorry. Does that mean -- Is that people who are contract subcontractors for the construction project or is it people who are on-site permanent employees in supervisory roles? I'm really more concerned about the construction side than I am about the permanent employee side.
I'm Kenneth Scott from Beech and I spoke earlier. My statement was that, yeah, we have set a goal -- total goal of 40 percent on the project. Currently on-site as of this morning 35 Whole - 5/19/05 we have over 50 percent participation on-site of construction.
How about in employment, employees physically on the site.
So, half the employees on the site are either minority or women?
Yes. And as a matter of fact, I even brought some photos. If you'd like, I'll share them with you.
And what phase are you in now? How many employees are there?
Currently... Construction workers, I believe we have about 36 Whole - 5/19/05 25, maybe.
Right now the employees that on-site are predominantly what trade?
Laborers, operating engineers. I think there's, what? Three cranes and a drill.
Do we anticipate the 50 percent number to be maintained as we get to 133?
Yes. That's our goal. 37 Whole - 5/19/05 Our goal really is 40 percent. Of course, you know, that's kind of a minimum standard that we're setting. But, yes. You know, we have monthly meetings, and that is our goal.
What's the end of your construction -- your proposed construction period? When will it be finished?
And your highest level of construction point will probably be what month?
Okay. Are you 38 Whole - 5/19/05 able to get back to us and report the progress on it?
Thank you. Are there any other questions or comments from members of the committee? (No response.)
Thank you. That completes the hearing on Bill 19 Numbers 050236 and 050190. As explained at the beginning of this hearing, the Committee of the Whole will now stand in recess until immediately after consideration of the calendar, this morning's session of Council. (Recess at 10:30 a.m.) 39 Whole - 5/19/05 (Reconvening at 12:45 p.m.)
May I have everyone's attention, please. The Committee of the Whole is now reconvened. I would ask Mr. McPherson to please read the title of the bills before the committee today. MR. McPHERSON: Bill Number 050236, an ordinance dissolving the 1600 North Broad Street Tax Increment Financing District; Bill 12 Number 050190, an ordinance dissolving the Networks Tax Increment Financing District, being the area generally bounded by 16th Street on the west, Spring Garden Street on the north; Bill Number 040767, an ordinance 17 amending Section 19-2604 of The Philadelphia Code relating to tax rates, credits and alternative tax computation for the Business Privilege Tax; Bill Number 040789, an ordinance amending Chapter 19-2600 of The Philadelphia Code entitled Business Privilege Taxes, to provide for an exemption for the tax on gross receipts for certain new businesses; Bill Number 050001, an ordinance 40 Whole - 5/19/05 to adopt the capital program for six fiscal years, 2006 through 2011; Bill Number 050002, an ordinance to adopt the fiscal 2006 capital budget; Bill Number 050003, an ordinance 6 adopting the operating budget for fiscal year 2006; Bill Number 050007, an ordinance 8 amending Chapter 19-1200 of The Philadelphia Code entitled parking tax, by establishing a rate of taxation on parking transactions for fiscal year 2006 and thereafter; Bill Number 050008, an ordinance amending Section 19-2604 of The Philadelphia Code, relating to tax rates, credits and alternative tax computation for the Business Privilege Tax by reducing certain tax rates.
Excuse me, Mr. McPherson. The noise level is much too high. Anyone having private conversations, I suggest you do it in the corridor. Please proceed, Mr. McPherson. MR. McPHERSON: Bill Number 050383, an ordinance amending Chapter 19-1200 of The Philadelphia Code entitled parking tax, by increasing the rate of taxation on parking 41 Whole - 5/19/05 transactions for fiscal year 2006 and thereafter; and Resolution 050022, resolution 4 providing for the approval by the Council of City of Philadelphia of a revised five-year financial plan for the City of Philadelphia, covering fiscal years 2006 through 2010.
We completed the hearing of Bill Numbers 050236 and 050190 this morning. All other bills before the committee have had extensive public hearings, except Bill Number 050383 relating to the parking tax. We will therefore begin with testimony on this bill. Is there anyone here to testify on Bill Number 050383? If anyone is here, please approach the witness table. I think we have a list of witnesses. MR. McPHERSON: Is the Revenue Commissioner here? (No response.)
There's somebody. Oh, what a minute. He's coming up. 42 Whole - 5/19/05 MR. McPHERSON: He works for Darrell. Rob Zuritsky and the parking association.
Good afternoon. Welcome. Please identify yourself for the record and proceed with your testimony.
Good afternoon. I'm Robert Zuritsky. I'm the President of the Philadelphia Parking Association. And members of Council, I am here again to ask you to vote against any increase in Philadelphia's already burdensome parking tax. Most of us understand that tax increases hurt the tax base that we are desperately trying to attract. Philadelphia has the highest tax burden of any city in the country. We earn this distinction year after year, even after the combined gradual reductions in the wage tax that were started 12 years ago. The result is that Philadelphia businesses are at a severe competitive 43 Whole - 5/19/05 disadvantage against companies based outside the city. The parking tax increase will only compound the problem. Philadelphia's existing parking tax of percent is already 7 the highest -- the fourth highest parking tax 8 in the country, when compared to cities with 9 a half million citizens or more. 10 City businesses will not sit still 11 if the tax burden for themselves and their 12 customers and employees continues to 13 escalate. All taxes are aggressive, 14 including the parking tax. 15 The city needs to attract jobs and workers. The Philadelphia Parking Association recently commissioned a study of the parking tax in Pittsburgh which has a population under 350,000, and found that Pittsburgh lost 1.3 million parkers last year due to their parking tax increase. If you calculate that each car had one and a half people, that means that Pittsburgh lost 2 million people coming into the city to do business, to go to sporting 44 Whole - 5/19/05 events, to go to hotels. Granted, Pittsburgh's tax increase was higher than what Philadelphia is proposing, but Pittsburgh's overall tax burden is lower than Philadelphia's. Because of this city's already heavy tax burden, any additional increase will have an immediate adverse impact on the economy -- on our economy and vitality. Last year Philly lost 10,000 jobs, second only to Detroit in the country. The Philadelphia Business Journal yesterday reported that the office buildings in town are already reducing their real estate taxes because of projected further reductions in occupancy. Philly is not in a good position, and any indication of a tax increase will trigger additional company flight, as well as worker flight. Yesterday's Inquirer had an editorial from Kevin Joyce. And I'll just read a little bit of it. He says that the city's office vacancy rates in Pittsburgh are 45 Whole - 5/19/05 increasing as businesses are deciding to move, 5,000 to 15,000 square feet at a time, from the city's core to suburban locations where parking is free and plentiful. These lease decisions are made for five- to ten-year periods, so the results are long-lasting. As occupancy rates decline, the values of our downtown buildings also decline, resulting in lower property taxes. The number of evening and weekend parkers decreased so sharply, the study said, that an estimated $17.5 million in revenue has been lost by entertainment, sports, retail. And retailers were hit hardest. He says since his departure from Philadelphia in the '70s, he has been marveled at the city's growth. It has become a major tourist destination and a hub for a large regional economy. However, he is concerned that Philadelphians don't make the same mistake that Pittsburgh made. When they are trying to attract -- They're chasing away the people that they are desperately trying to attract, 46 Whole - 5/19/05 the people that are spending money and shopping, eating in their restaurants and visiting their cultural sites. The higher taxes are aggressive tax that punishes the very people that we are dependent upon to fuel the economic engines of our city. So, again, we plead with this chamber to not -- to help the city continue to improve and not increase our taxes. Thank you.
Thank you very much. Any member have any questions? Councilman Kenney.
Thank you, Madam President. Mr. Zuritsky, you probably have opportunity to view parking rates around the region, around the city. And you probably keep track of some of that stuff, as a competitive business person. Would you tell me how much it costs to park your car at the Deptford Mall? 47 Whole - 5/19/05
How about the business areas and businesses located in Malvern and Route 202 corridor?
Zero. And what do you think that says for Philadelphia's ability to continue to compete?
I think that says a wonderful thing about Philadelphia. I think that everybody -- This is a value. The reason that you move your city into Philadelphia and that people are moving 48 Whole - 5/19/05 in to live in Center City and people still choose to work in Center City and enjoy the wonderful things that we have in the city is a testament. And people don't come into the city to park. No one does. Nobody goes to the King of Prussia Mall to park. So, the fact that people will come into cities -- And we're not different than any other major city in the country. You pay to park because space is limited, and that's the nature of big cities. It's a wonderful thing that we have -- that people see a value in this city and they're willing to pay to park, just like they're going to sporting events also. There's a cost involved in cities.
Do you have an idea, if this bill were to pass, approximately what would be the dollar amount, on average, that the rate would have to be raised? What would an average parker pay under this new construct of taxes?
I'm not sure which 49 Whole - 5/19/05 bill you're talking about. There's, I think, two or three bills now that involve parking taxes. And if all of them went into effect, I think there would be a percent increase 6 in the parking tax. 7 I think that parking tax rates could go up 7 percent. They could go up or 15 9 percent or they may not go up at all in 10 certain specific facilities. Every parking facility is a different market. And some places you're able to get increases and they would try to get increases. And this is something that -- it's just -- it's just another tax burden on the Philadelphian who wants to come in and do something in town. It's just like another wage tax or other taxes. It's taking money. It's making you -- It's making people make decisions about what they're going to do and where they're going to spend their money, at the Deptford Mall or come into town.
Do you believe 50 Whole - 5/19/05 that such an increase would make people angry enough to make a choice not to come into the Gallery, not to come onto Walnut Street, not to come into town to shop? And even more so, the problem -- Even additionally the problem that I believe will happen is that as restaurants get much better reputations in the suburbs that are in free parking areas, that people will make an additional choice to stay home or to stay in their own area in the suburbs, as opposed to coming in and spending the leisure dollars in Center City.
That's an excellent question. Will a dollar more to come in to park make someone's decision whether they come into town? I'd say yes. I think if you're going to have a business in Philadelphia, and you're going to employ 20 people, and you need to pay for their parking, if you lowered the Business Privilege Tax by that much (indicating small amount) but you increase a dollar per car per customer, that somebody -- 51 Whole - 5/19/05 that business has to pay, I think when you weigh your decisions, I think you do leave. And two years ago when I came here and testified, I was at an event. I was talking about the parking tax increase. I sat next to a gentleman who has a small accounting firm of people. 9 He told me that just the fact that 10 the administration was talking about an 11 increase in parking taxes, they had already 12 decided to move their business -- their 13 accounting firm of 15 people to Bala Cynwyd, 14 and they already moved. 15 And he said -- I didn't -- I didn't ask that specifically. He said, that was the last straw. You didn't pass the parking tax last year. Talking about raising taxes has an effect. And makes -- and has people's -- it forces people to make decisions.
I just believe that we are going to reward or this proposal is going reward the great investment that businesses have made in the city in office 52 Whole - 5/19/05 buildings and re-upping their leases, re-upping their leases in investment in restaurants, investment in high end retail, with a slap in the face of an increased parking tax. And I think that to do that to them, to put them at a further competitive disadvantage with the suburban malls and now the rising number of suburban restaurants, is just really a shame. And I will be voting against it.
Thank you. Any further questions or comments of this witness? (No response.)
Seeing none, The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you, Madam President. And good afternoon, Mr. Zuritsky. What is the total number of employees that the parking industry in 53 Whole - 5/19/05 Philadelphia employs? Do you have an idea?
We estimate about 2500 employees. COUNCILMAN DiCICCO: Full time?
Full and part time. COUNCILMAN DiCICCO: Full and part time. So, in addition to the fact that if this tax were to pass that we may see a reduction in people coming, that it would also have an impact on employment as well?
Yeah. The article 14 that was in the Inquirer yesterday actually responds to that. The head of the Parking Authority in Pittsburgh was forced to... I think he laid off -- I think it's in here. It's maybe 125 fewer employees working at private garages and the city garages. Again, they lost 1,300,000 people driving into the city. It's -- It's a staggering number, staggering. COUNCILMAN DiCICCO: What is the -- Is there an average stay that an individual 54 Whole - 5/19/05 who parks his or her car in a garage? Is it an hour? Is it two hours? Is there any way of... What I'm getting at is, if you talk about a dollar increase, I would assume that's on an hourly basis but not for the five-hour stay or whatever it may be.
We have different customers that park in our facilities. We call them early birds and monthlies. They come in. They're the workers, you know, who work in the stores and the restaurants and the hotels and the office buildings. And then you have daily customers that come and go. You have evening parkers. So, each segment is different. You know, you have people parking eight to ten hours and you have people that are coming in for a half an hour on an hour. If you're just talking about the people coming in for short visits, for a lunch or for a doctor or lawyer visit, we average hour and a half, hour and 40 minutes. So, again, the increase in the 55 Whole - 5/19/05 actual dollar cost could be $.75 to -- or $1 or more per visit. COUNCILMAN DiCICCO: What about that segment that come to the city for the -- the dining group, the people coming for dinners and the entertainment venues? Is there a number of hours that you can identify that they would stay?
Basically -- COUNCILMAN DiCICCO: I mean, that's going to be the bulk of the issue for me, anyway, and that impact, if there's a negative impact, as is being suggested and being reported, the hotel, restaurant and the entertainment industry as well. They're going to see a decline in participation, people coming to visit the venues, the hotel -- the entertainment and/or restaurant venues.
The report that we distributed that Martin Hack did, he got actual data from the Parking Authority which actually broke down how many cars they lost during the day and in the evening and 56 Whole - 5/19/05 weekends, mostly when the people were going to the restaurants and to the theater. And I -- I -- I think it's in the hundreds of thousands of cars that did not come down. And if you figure going to the theater, you're definitely coming with one or two or three people. And each one of them is spending money on dinner. And the amount -- the number of hours that they stay would probably be two hours to three hours, if they're having dinner. And the amount of dollars that are lost to the cultural institutions, the restaurants, it's -- it could be staggering. And that's really what this report says, is that the fallout... You're going to make a couple dollars more from raising the parking tax, but the fallout could be much greater, as we know when we raise taxes. It's a regressive thing. COUNCILMAN DiCICCO: I have a copy of that report. I apologize. I never really got to complete it. I started it, and 57 Whole - 5/19/05 then...
You can have mine. COUNCILMAN DiCICCO: I have it in my office in... actually in my briefcase, but it's one of those things I just never finished reading, but thank you. Thanks for coming out today.
Mr. Zuritsky, with the increased number of valet parking, is that skewing your numbers any way? Have you been able -- All of the finer restaurants now have valet parking. So, if you're losing parking spaces, are you taking in consideration that many people are now valet parking?
Valet parking is a funny thing. We don't do too much valet parking. 58 Whole - 5/19/05 The valet parking probably hurts our business. It does hurt our business because the cars are being picked up and they're typically being taken someplace else, supposedly to parking facilities. And sometimes they are, you know. But what happens is, if you think about it from the city's perspective, we're paying the parking tax on every car that comes into our facility. Every time that a car gets valeted, you know, the city is losing that parking tax. I mean, percent is -- I mean, is an 15 amazing margin. If I made 15 percent on all of my parking facilities as a margin, a profit margin, I think I'd be in better shape, I can tell you. But the city is our partner. I mean, the city makes a lot of money on the parking tax. It brings in, you know, $40 million, I think, last year. It's an incredible amount of money. The valet takes -- I think, takes 59 Whole - 5/19/05 away because they are not controlled and taxed as well as we are.
Are you telling me that if ABC garage -- I hope there's not one of those -- engages with a valet parking company, that we're not getting the 8 percent tax on that park, unless they're 9 doing what... There's speculation that 10 sometimes they park the cars in bus stops or 11 at meters and other locations. 12 But let's say that they're doing it 13 the right way. We still get the tax. 14
I think they are. I 15 mean, I know some of my, you know, competitors are here. And they have... I'd like them to come up. They have deals with valet companies. They charge the valet company a very small amount, you know, $2, $3, $4, and the valet company gets the rest. So, they are paying the parking tax on the $3. I know that. I mean, you know, I'm sure of that. But the rest of the dollars I don't think are taxed. So, that's where I think 60 Whole - 5/19/05 the -- I think what the Mayor had -- you know, is proposing, I think it's going to now tax that, those dollars as well. So, it is being lost from the tax rolls.
Okay. I appreciate that. I just wanted to make sure that when we talk about a decrease, we don't want to send a message out. It may be a decrease to you but there's a reason for the decrease because they're parked in other places.
Yeah. I don't begrudge the restaurants from doing what they have to do. I mean, they feel that they need it. If that's -- And they're doing well. That's good.
The only reason I brought it up is because everyone listening to this thinks that there's fewer people coming to Philadelphia, there's fewer people coming based on the fewer number of vehicles that you're reporting. But I just wanted the record to reflect the fact that there's other reasons for that occurring. 61 Whole - 5/19/05
And I don't want to belabor this. And I think I've gotten my answer. And I appreciate it.
I think the parking business has been fairly stable in Philadelphia. I mean, it was doing very well, you know, before 2001. Recently it's kind of -- it went down, and then it's been kind of stable. I think the reason that it's stable is because of the nightlife and the people living downtown. We're steadily losing jobs in Center City, 10,000 last year. It's staggering. That hurts our business. I mean, that is a direct killer of our business. The fact that there are more people living downtown and eating downtown and coming to the theaters is balancing things out, from my perspective. 62 Whole - 5/19/05
That's fine. I appreciate that. Thank you, Madam Chair.
You're welcome. The Chair recognizes Councilman DiCicco. COUNCILMAN DiCICCO: Thank you. I think the question was answered as a result of Councilman Rizzo's question. So, the valet parking tax, if that were enacted, has no real impact on your industry.
No. We -- We pay -- We pay parking tax. Allen does a lot more of this stuff, you know, in some of his garages. We pay the parking tax on the parking revenue. And you get $3 or $4.
Allen Blake with Central Park. If I could just address that. With our company we do have agreements with valet operators who do restaurant parking. They put the vehicles in our garage. They pay a lower rate to us which we're 63 Whole - 5/19/05 remitting parking tax on. I can't address any other additional fees that they are charging, whether there's being tax paid on that.
And at the same time, don't you have the liability of insurance?
So you have to pay insurance for the cars that come and pay $17, plus the cars that are valet parking that you're only getting $3 for. Is that as I understand it?
It doesn't seem very fair. COUNCILMAN DiCICCO: That's a business decision that the parking garage --
Yeah. I'm taking those cars later at night when I don't have the full capacity. And it makes sense for me to fill an empty space and get something out of it. 64 Whole - 5/19/05
It's better than getting nothing. $3 is better -- You're not going to get $17. At night our rates and the weekends our rates could be a half or a third of our all day rates during the week, because we're trying to attract that precious business at night. So, certain facilities may be closed if they weren't getting valet business. So, it's really -- It's just getting a little bit of extra business.
Catch 22. I didn't mean to interrupt you, Councilman. COUNCILMAN DiCICCO: No further questions.
I just heard the $3, and it just doesn't seem very fair.
I don't have any 65 Whole - 5/19/05 testimony, prepared testimony, at this time. So...
Okay. How about you, sir? UNIDENTIFIED PERSON: No, I don't.
Fine. Thank you. MR. McPHERSON: Is Ms. Kammerdeiner in the chambers, the Revenue Commissioner?
Is Ms. Kammerdeiner here? All right. Fine. Would you please approach the witness table. Gentlemen, thank you very much. Good afternoon. Please identify yourself for the record. Do you have any prepared testimony on... COMMISSIONER KAMMERDEINER: Yes. Copies were made, and I believe copies have been distributed before, but some additional were just made. I'm not sure where they are at the moment. They were taken by your staff. 66 Whole - 5/19/05
We're checking to see if they're at the table. Thank you. COMMISSIONER KAMMERDEINER: Should I wait?
All right. Ms. Kammerdeiner, you can now proceed. Thank you. COMMISSIONER KAMMERDEINER: Thank you. Good afternoon, Councilwoman Verna and members of the Committee of the Whole. I'm Nancy Kammerdeiner, Revenue Commissioner. And I am pleased to be with you today to present testimony regarding Bill Number 050383. This bill would amend Section 22 19-1200 of The Philadelphia Code, entitled parking tax. It would increase the rate of tax from 15 percent to 17 percent on parking transactions for fiscal 2006 and thereafter. 67 Whole - 5/19/05 The parking tax is imposed upon every person parking or storing a motor vehicle in or on a parking facility in the city. The tax rate is applied to the amount charged for the transaction. Since 1987 that rate has been percent, the taxes collected 8 by the operator of the parking facility and 9 paid over to the city, in accordance with the 10 provisions of Section 19-1200 of The 11 Philadelphia code, and the regulations of the 12 Department of Revenue. 13 In fiscal year 2004 the city 14 collected $41,748,000 from the parking tax, 15 and we project collections of $44 million in fiscal year 2005. Therefore, a two percent increase in the rate of tax would be expected to result in an increase in revenue of approximately $5.9 million per year. You will recall that in his fiscal year 2006 budget message and proposed five-year plan, Mayor Street recommended an increase, in the parking tax rate to 20 percent and linked that increase to a 68 Whole - 5/19/05 reduction in the rate for the gross receipts portion of the Business Privilege Tax. This proposal's before you with Bills 050007 and 050008 that are pending before this Committee of the Whole. As indicated by Chief of Staff, Joyce Wilkerson, in her testimony before this committee on February 16, 2005, research has shown that the gross receipts portion of the B.P.T. is an impediment to economic growth in Philadelphia. Accelerating the proposed reduction in this tax is an investment in economic development, if done in a way that does not cause deficits or service reductions that would undermine the value of tax reductions. The administration continues to believe that any increase in the parking tax, whether the five percent increase proposed in Bill Number 050007, or the two percent increase proposed in this Bill, Number 050383, should be directly linked to tax rate reductions, preferably in the B.P.T. gross receipts rate. 69 Whole - 5/19/05 This concludes my testimony, and I'd be happy to answer any questions you might have.
Thank you very much. Are there any questions of this witness? (No response.)
Are there any questions of this witness? (No response.)
Thank you very much. COMMISSIONER KAMMERDEINER: Thank you.
Councilman Nutter, did you indicate that you had some questions for the Revenue Commissioner?