COUNCIL OF THE CITY OF PHILADELPHIA CAPITAL PROGRAM & BUDGET HEARINGS BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, February 16, 1999 9:30 a.m. - - - Bill No. 990023 - An ordinance adopting the Operating Budget for the Fiscal Year 2000. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILWOMAN AUGUSTA A. CLARK COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DAVID COHEN COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK DICICCO COUNCILMAN BRIAN J. O'NEILL COUNCILMAN RICHARD T. MARIANO COUNCILMAN W. THACHER LONGSTRETH COUNCILMAN FRANK RIZZO CHARLES MCPHERSON, Chief Financial Officer - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 257 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 I N D E X Gregory S. Rost . . . . . . . . . . . . . . . 259 Chief of Staff to Mayor Edward G. Rendell. Ben Hayllar, Director of Finance. . . . . . . 265 Vincent Jannetti, Secretary . . . . . . . . . 293 Sinking Fund Commission. Dean Kaplan, City's Budget Director . . . . . 297 Joe Herkness, Executive Director. . . . . . . 303 Municipal Pension Fund Nancy Kammerdeiner, Revenue Commissioner. . . 319 City of Philadelphia Denise Garrett, Chief, Water Revenue Bureau 319 Dominic Cermele, Deputy Finance Director and 342 Executive Director, Office of Administrative Review David Glancey, Chairman . . . . . . . . . . . 349 Board of Revision of Taxes Whitney Reid, City Treasurer. . . . . . . . . 356 Louis Applebaum, Procurement Commissioner . . 360 City of Philadelphia James Roundtree, Deputy Finance Director. . . 365 and Executive Director MBEC 258 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 (Index, cont'd.) Joseph R. Perrello. . . . . . . . . . . . . . 376 Deputy Director of Finance, Risk Management Stephanie Franklin-Suber, City Solicitor. . . 381 James Zwalick, Deputy City Solicitor. . . . . 385 Cynthia White-Winters . . . . . . . . . . . . 386 Chief Deputy City Solicitor, Law Department Christopher Lane, Director of Administration 389 Law Department 259 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 P R O C E E D I N G S
Good morning. This is a continued public hearing of the Committee of the Whole. It's continued from Tuesday February 9th. Today we will consider testimony on Bill No. 990023. (Greg Rost comes forward.)
Good morning. Please identify yourself for the record and proceed with your testimony.
Good morning, Council President Verna. My name is Gregory S. Rost, Chief of Staff to Mayor Edward G. Rendell. I am pleased to be here this morning to present this proposed Fiscal Year 2000 Operating Budget for the Office of the Mayor. I would like to provide a brief overview of our budget request first and then offer some details by class. To total amount requested for the Mayor's Office from the General Fund for Fiscal Year 2000 is $2,474,555, which represents an increase of $22,393 from Fiscal Year '99 appropriations. /Budget Hearings/Bill 990023 employee compensation, purchase of services and materials, and supplies and equipment. The remaining portion of the General Fund total -- $200,000 -- is for City scholarships. This amount will provide scholarships ranging from $1,000 to $1600 per student for approximately 200 students who attend classes at area colleges and universities. In addition, $3,253,982 is requested for the Mayor's from the Office Grants Revenue Fund, which represents an increase of $1,094,445 from last year's appropriation. As you know, these dollars are provided by the State and federal government and are not City obligations. We are also requesting funding for the Mayor's Office of Labor Relations. This agency was established as part of the Mayor's Office by Executive Order on November 25, 1996. The Office consists of eight positions and has an annual budget of about $500,000. The OLR funding request is shown in your budget documents as Department 03. Class 100 Expenditures - A total of 45 positions are requested in FY 2000 at a cost of $1,856,071. /Budget Hearings/Bill 990023 Class 200 Expenditures - Requested Class 200 expenditures for Fiscal Year 2000 are $371,209 the largest component of this Class is $276,409, which is earmarked for professional services in Class 250. Over four-fifths of this -- $229,427 -- is the City's subsidy to the Delaware Valley Regional Planning Commission. It is important to note the substantial benefits derived by the City of Philadelphia from its involvement with DVRPC. In Fiscal Year 2000, the City will receive approximately $329,000 from DVRPC for planning staff in the Streets Department, the City's Planning Commission, and the Mayor's Office of Transportation, as well as specific project grants that could total hundreds of thousands of dollars more. S. Conference of Mayors and the National League of Cities. The remainder of the funds are for such expenses as equipment repair and maintenance. /Budget Hearings/Bill 990023 board of directors. Councilwoman Tasco is also on an NLC Advisory Board member Class 300 Expenditures - The Fiscal Year 2000 Class 300 request is for approximately $32,000, the same amount approved in Fiscal '99. The primary expenses for the request is this category is for materials, supplies, and stationery. Class 400 Expenditures - This request for $10,000, which is the same as the Fiscal '99 appropriation, is for office equipment and furniture. Class 500 Expenditures- for Fiscal 2000 is a request of $200,000. This amount is for the City scholarships referred to previously. Grants Revenue - This total request for FY 2000 of $3,253,982 is an increase of $1,094,445 over the Fiscal Year '99 appropriations. This figure reflects federal and State grants to the Mayor's Commission on Aging and will enable funding for the following programs: occupational training and subsidized employment for older adults conducted by the Commission on Aging; staff support and tutor recruitment for the Literacy Commission; and planning staff for the Mayor's Office of Transportation. /Budget Hearings/Bill 990023 the Mayor's Office of Community Services at a future date. This concludes my testimony. I would be happy to answer any questions that you may have.
Thank you. Are there any questions from members of the committee? The Chair recognizes Councilman Rizzo.
Thank you, Madame President. Could you explain the role of the Office of Labor Relations? Many people are confused on exactly what the charge of that group is. I've been asked why, during SEPTA, they weren't involved or at least didn't appear to be involved. I believe I know the answer to that question. Also, during the COLA controversy, which wasn't really labor negotiations. Could you just briefly describe when they're in and when they're out.
Yes. The Mayor's Office of Labor Relations was created at the conclusion of our '96 negotiations. At that point, there was a 264 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 recognition by the Administration that there were various persons interspersed throughout the government that had responsibilities for labor relations. Some people were housed in the personnel office, some people were housed in the Law Department, others were housed within still others other places within the government. In an effort to coordinate Labor Relations moving forward, the Administration created the Mayor's Office of Labor Relations, drawing those various people out of their departments and placing them in the Office of Labor Relations. They deal specifically with issues pertaining to the municipal unions. And that's why they hadn't become directly involved in this instance insofar as your question is concerned with the SEPTA negotiations. I think the fundamental idea was that they would serve as single point of contact for any questions that would arise pertaining to labor relations moving forward.
Yes, Madame Chair. 265 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 Thank you.
Thank you very much. Are there any other questions from members of the committee? (No questions.)
Thank you. (Finance Department panel members come forward.)
Please identify yourself for the record and proceed with your testimony.
My name is Ben Hayllar, and I'm the Director of Finance. With me is Budget Director Dean Kaplan and Deputy Director of Finance, Linda Orfanelli. Unless Council is desirous of hearing it, I will dispense with the with the valedictory that is probably appropriate at this time 266 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 concerning the successes and projects that the Director -- the Office of the Director of Finance has been involved in in the past year, and simply discuss our budget proposal. The Office of the Director of Finance budget proposal requests for all funds totals $833,574,319. The General Fund budget request is $645 million. Now, the largest component of our budget is employee benefits, which is budgeted at $560 million. Of this, $503 million is from the General Fund, where there is a $9.5 million increase, just for fringe benefits. A large element of the Finance budget is: legal services -- witness these Hero awards and the Community College subsidy; refunds for overpayments of City fees, taxes and indemnities. The Office of the Director of Finance Direct Appropriation General Fund Budget for FY 2000 is proposed to be $19,481,785. Appropriations are allocation for the many operation of six divisions whom you will be hearing from later in the morning. I would like to just briefly, having 267 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 summarized our budget proposal, mention a couple of things. One, Council has raised the issue repeatedly of the time it takes the City to pay its vendors. For the last months, the 6 Accounting Bureau has been installing a new system 7 for vendor payments; all departments are on it, 8 and departments now average 46 days over a 9 three-week period to paying their vendor bills. 10 This is a 32 percent improvement over the time 11 this initiative was started at the request of City 12 Council. 13 I would also like to bring Council's 14 attention to the fact that on February 3rd, this 15 department closed on a $1.25 billion pension 16 obligation bond that improved our Pension Fund 17 funding from 50 percent to 73 percent. This is a 18 singular accomplishment that does a great deal to improve not only the Pension Fund, but the operations of the City. We would be happy to answer any specific questions you have concerning our budget proposal.
Thank you. Councilman Nutter, did you want to be 268 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 recognized?
Yes, Madame Chair. Charlie, I didn't start speaking yet. This is going to be a long budget hearing process. Mr. Hayllar, your testimony makes reference to the tax lien sale of -- was that last year?
Right, okay. Yeah, you're right. At the time, there was some discussion -- right, FY '97 -- of the prospect of future tax lien sales either similar to what we did that year or other outstanding taxes that might become a part of future tax lien sales. Can you share any information today as to how far along we may be on that or --
We have not contemplated recommending to Council another securitization of 269 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 debt of any type -- be it parking fees, L&I fees, or anything like that, or taxes, for several reasons. One, the tax lien sale that we participated in was of such size that there is still a great deal of effort being made and still to be made in collecting on behalf of the bondholders the revenue. We've made every payment but the process has proven to be slower in that the mechanisms through the Courts and the Sheriff's Office, the simple job that the collectors, the firms doing the work have to do has been slower for them than they anticipated.
A number of reasons. We didn't know what the capacity of the Courts and Sheriff's system was for filing and perfecting municipal liens and judgments. We are learning in increasing that number --
I didn't hear the word you said. Was it "did" or "did not?"
At the time we didn't 270 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 know 'cause nobody had brought this number of liens through. They are now being processed. I believe one firm has 500 liens in the court system right now; the others are either close to that or are very close to soon having that number. In addition, at least one of the servicers had a lot of internal disruption in their operations that set them back. Before we contemplate doing another securitization, I want to make certain that we know better how the process will work and digest the one we've done before we take on another operation like that.
They just had internal changes in their local operation. And this was true of their operation nationally. This is an industry that seems to have expand all across the country. We were the largest tax lien sale done 271 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 up to Puerto Rico, where the entire island did a tax lien sale. The same firms that participated in ours are participating down there. So there's a point where their ability to perform becomes dissipated by the amount of work they get. Until they're ready, you know, to beef up and do that work, their efforts can get thin.
Are there other firms that have entered the marketplace?
I'm only aware of one very large firm. I'm aware of several that have entered and wish they hadn't. There's a firm that did Allegheny County from out of Atlanta, Georgia, and they have had real difficulty collecting on those liens.
And let me point out, the City is not obligated for the payment of these liens. The payments are being made, but this is fully insured.
It was issued by PAID but 272 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 fully insured, and therefore, no one is at risk. We want to see it succeed and support --
I understand. Notwithstanding your concern, could you get me a list by department and amount of all of the various revenue sources or debts, fines, potentially lienable assets that anyone would contemplate for future tax lien sale, whether it's L&I fees, parking tickets. What are some of the other revenue --
Okay. I'd like to see an expansive list of where those opportunities may be.
And the where the actual dollar amounts that correspond to them.
I think you'll find the demolition one is the one that will pique your interest, as it has ours.
Okay, thank you 273 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 very much. Thank you, Madame Chair.
Thank you. Mr. Hayllar, on -20, what is Philadelphia 2000, and how will the $5 million be used?
That is the cost of the millennium. . . Oh, I stand corrected. It is our prebid for the Republican Convention. If there's another hard question, I'm going to turn this over to Mr. Kaplan.
On -56, why are you requesting in Class 800 funds for FY 2000? How are these funds going to be used?
This is Kaplan, the City's Budget Director. The $2.5 million, I believe -- and we'll double-check and correct ourselves if we're mistaken, but I believe that represents the 274 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 appropriation authority so that the City can pay its share of the 911 revenue that it receives properly into the Capital Account. Under the agreement with the sale of the City's 800 megahertz spectrum, as you will recall, the cities around the country are required to --
With that being said, why did we not need to use these funds in FY '99?
That may be a question best directed to the Managing Director's Office. My understanding is that the 800 megahertz project generally was put on hold while the City and the State and other counties negotiated with the Governor's Office so that we could use those monies for the 800 megahertz sale. That issue was resolved last year spring, and the City has apparently reopened negotiations this past fall with the vendors on the 800 megahertz system. And my understanding is, it's planning to make that award later this year. Regardless of that, the City is going 275 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 to receive additional payments under its arrangement for getting off certain parts of the spectrum. And in order to put these in the Capital Account, we need the appropriation authority to move it.
Does the FY 2000 Operating Budget provide for the $15 million grant to the School District?
The traditional way we've handled the grant to the School District is to non-appropriate it directly at the beginning of the year on the grounds that, first of all, as we discussed last week in some detail, we have appropriated money in the School District line assuming that the Courts will come under State control. If that does not happen, what we have traditionally done is come back, as we did this year in the spring, and use some of our target budget reserve to fund that item.
On -58, why have you chosen to keep the Defender Association at the same level as FY '99? Did the Defender request an increase? And if so, why was 276 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 it not granted?
Yes. The FY '98 and '99 Defender payments include some funds for the fit-out of the Defender's new location at 17th and Arch Streets. And I don't know the number off the top of my head, but I can provide it for you. So the numbers for '98 and '99 are a bit higher than just their normal contract with us. There is actually provision for an increase in FY 2000. However, the Administration, at the request of the Defender, the Bar Association and others is involved right now in discussions with the Defender about ways to increase salaries in the Defender's Office across the board. I believe, as we've discussed here before, the Defender's Office's pay scale is below that of the Law Department and also below that of the District Attorney's Office. We have -- there is sufficient funding in this line to provide the first step of a phased increase for the Defender's Office. However, we are still in negotiations as to exactly what that amount would be.
On -66, 277 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 what is the FY 2000 savings from the pension obligation bond? Why is the City's General Fund pension payment only being reduced by less than $300,000? What is the City's payment on the pension obligation bond, and where in the budget is the payment budgeted?
After some fairly intense discussion between the Controller's Office and the Accounting Bureau, it was determined that the most appropriate place to budget the pension bond payment was with the pension contribution in Line 191. The reason the number is not significantly less than the original FY '99 appropriation is that the savings for FY 2000, which are approximately $15 million, that number is the savings against what we had originally assumed our payment would be. And, as you know, each year, we have to budget the pension payment before the actuarial number is given to us as to what we have to pay. So if you look in Column 4, where our '99 original appropriation, our assumption of what we'd have to pay is $230 million, our 278 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 assumption originally for FY 2000 would be that our payment would be approximately $240 million. You compare that to what our proposed obligation level of $224 million is in Line 6, and that represents the approximately $15 million savings in FY 2000 as a result of the pension bond.
Thank you. The Chair recognizes Councilman Kenney.
Thank you very much, Madame Chair. I just want to return for a moment to the issue of the tax liens. I would like to make a request and a suggestion. If there would be possible a way to develop an easily read and understandable process that individuals and organizations could employ in order to find out, number one, the status of the property, where it is in the system, how they can go about making requests to obtain that, who they have to deal with, what fees may be involved. There's a large number of properties that people call about constantly, and we refer those people to our District Council members, but there's also, even within those offices, some 279 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 confusion as to where exactly a property is located at a particular time in the process. And, for example, in my own neighborhood, there are properties -- usually corner properties -- that organizations or other individuals would like to acquire, and there seems to be a lot of delay and misunderstanding and misinformation about what it is they have to do step-by-step to get to engage the process of acquiring that property.
We'll do something along those lines. If the lien has been sold, it is a difficult process, and we're not always -- the City and PAID are not always sure where the servicer is because they have taken what they believe to be the most readily collectable, and pushed them to the head of the line. And we get and you get a list of those properties that are now before the courts or about to be before the courts. But it's not in a system that will solve your problem, and I will try to get something together to help you with that.
One of the things 280 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 in addition to the revenue that would be generated up front from the tax lien sale, one of the issues that was discussed as being a good thing to do was that these properties would be taken out of this limbo status, and have an opportunity to be developed and used. Right now, other than the revenue-generation issue, I don't see any of the back end of the re-utilization of those properties. And it's a major neighborhood economic development issue because you have these abandoned, blighted properties which we try through, the L&I Department, to keep cleaned and sealed. They get broken into again. And what happens is, they deteriorate to the point where they can't be used, and then we wind up having to demolish them. And that was the old system. The new system that we employed for the tax lien sale doesn't seem to be any different than the old system.
And part of the reason is that any ability of the services to turn a property, rehab property, maintain and manage the 281 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 property, can only take place once they've taken it. And they have not taken it yet; they're still in the collection phase. They have not assumed ownership or title to the property.
Without holding you to a specific time frame, when do you think -- how much longer do you think it would be before these properties start to get to a point of someone owning them so that we can send someone somewhere to negotiate the potential sale?
An answer based almost on complete ignorance of what happens next in the process is that I think by the summer of this year, we will know a lot more about what the numbers will look like, and we can give you a better answer. It has been slower than we anticipated, but we also have to remember this is a seven-year process, and we are only in the second year.
Thank you. The Chair recognizes Councilman Cohen.
Thank you, Madame Chair. 282 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 My understanding of the cable TV franchises is relatively limited.
Well, I'm hoping yours is not going to be as limited as mine. But we recently have been hearing from groups of people who are interested in removing one blot on Philadelphia's name -- and that is that we're maybe the only major city that doesn't have public access in its cable TV system. And my recollection is that in the agreements we have with the cable TV companies, they pay a fee to the City for the use of the streets or the underground area. I think Councilman Longstreth at one time introduced something to permit their use. And my understanding is that each of the four original franchisees paid a fee -- maybe in the dollar figure of something like $300,000 each year. And from that money was to come the financing for public access TV. Now, those franchises have been in agreement for a long time -- have been in 283 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 existence for a long time, but there's been nothing that's happened on public access TV. At one point, there was an articles of incorporation on the desk of Mayor Goode -- that's how far back this goes, and he just never signed off on the articles of corporation; they had to be sent to Harrisburg, and I think they've never been sent and there's never anything been done. Now, have those fees been paid? is what I'd like to know. And what has happened to them; are they being segregated for use so that when public access comes about at sometime, as it must, that that there will be, you know, a kitty already set up that will meet all of the costs?
I have not been involved in, I think, in five years in any public policy issue concerning this subject. I believe Mr. Kaplan can be helpful insofar as he can discuss how the finances of that transaction went.
And is the money being paid, and what's happened to it?
I can be somewhat helpful, although I think we'll have to get you a more full 284 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 answer when the Managing Director and Public Property Commissioner testify, since they've been more intimately involved in this. We do receive payments from the various cable companies which total approximately, depending on the year and the terms of the agreement, approximately $9 million a year. To my knowledge, there has never been a set-aside or any sort of assumption that the fees would be --
I missed you after you said, to your knowledge, there has never been. . .
Right, to my knowledge, there has never been any sort of special treatment of those fees, and they have been treated as all other non-tax revenues of the City and assumed as part of our General Appropriations -- I'm sorry as General Fund revenues.
Like Allegheny Hospital has used all of the special funds for research and everything else that just went into 285 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 the same general treasury and was spent for purposes other than for the purposes for which it might have been delegated.
That's the general way that all the cities' general revenues are handled. I'm not aware of any specific -- and, again, I'd be happy to look into it, but during the time that I've been working on revenues, I have not been aware of any legal requirement that the City segregate those funds. There are certain funds which are required to be legally segregated, and they are; I don't believe that this is among them. But I'll be happy to look into it.
Would you? And you say Public Property would be the department --
Public Property has handled most of the issues surrounding the cable TV franchises. And I'll be happy to work with them so that we can give you an answer before they appear either later this week or next week.
Well, I would like to get it soon. And my understanding was that the money 286 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 was specifically paid for that purpose, for the purpose of providing for public access. That was a major part of the original debate prior to the granting of the franchisees. And I'd also like to know whether payments are being made -- whether, one, there is a requirement that contracts with the franchisees that they make a payment, all of which or part of which is designated for public access, and how much those funds far.
Sure. I'll be happy to do that. Again, my knowledge, to the extent that there is a public access fee, it's remitted as part of their overall payment to the City, and it's not legally required to be segregated, and to my knowledge, it has not, but I will get back to you as soon as I can.
Well, could you tell me whether there's been any recording kept as to how much money had been paid for public access?
Could you check that too? 287 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023
I don't see why we couldn't have that answer in advance of the Property hearing, which I think is next week.
Okay. And, second, is it the Finance Department that deals with the financial aspects with respect to retirees? I just find it an impossible job to try to determine if a retiree comes in and wants to discuss something to know what health, dental, prescription benefits they get. Is there anybody in the City that --
The Board of Pensions have people that deal with that exclusively. The retirees who have questions about their benefits and people who are contemplating requirement should go to the Board of Pensions, and they have counselors there to --
Does the Board of 288 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 Pensions administer the benefits like prescriptions? 'Cause I understand they were supposed to --
And who pays for that; is it the Pension Board or the City General Fund? My understanding is that it's the General Fund.
And, therefore, I understood that it's the City that administers those --
Yeah, that's done through the Department of Personnel. But if an individual has a question on a post-retirement matter, the counselors at the Retirement Board should be able to assist them.
Well, let's forget the retirees and now let's talk at City Council. I would like to know, for example, how many 289 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 different benefit plans are there, and to whom do they apply? So we're in some position to understand when somebody comes in.
Okay. Much of that can be found in the Five-Year Plan, but that is administered through the Personnel Department, and I'm sure Director Seyda will be more than happy to give you any specific information you're looking for.
And do you keep -- for example, do you know for example how much is spent for benefits applicable to each separate plan?
Now, could you break that up as to who gets what? Because I understand the benefits vary greatly between the different plans.
And I'd like to understand why. And wouldn't it be much better 290 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 and simpler if all plans were the same? We could certainly in the Council offices deal with them much more easily if they were.
Two things happened: one, that those are bargainable issues; and, secondly, when Act 205 was created, there was a requirement --
Act 205 is the State law governing municipal pensions. And in creating Act 205, there had to be a change in our Pension Plan which took place some 10, 12 years ago, which differentiates between two of the fundamental plans. Again, we would be more than happy to get you that history. And if you wish to see a difference in the various plans, we'll have that prepared for you.
Well, could that be done? 291 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023
I think it would be important for every member of Council to have that.
I want to talk to Director Seyda, but I'm sure within 10 days.
All right. Do they testify before that time? I would like to make sure we have it in time, you know, a day or before the testimony.
If possible, by the end of the week. 292 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023
Now, the other thing I just wanted to mention, I think you've assumed responsibility for the Gas Works, I think the result has been a very positive result. I found that dealing with Gas Work problems under your administration is a vast improvement over what existed before, and I just wanted to state that for the record.
Because I have the habit of calling Mr. Hayllar very late at night very often if emergencies reach me late at night. And I figure it's his responsibilities, and I found that he's very cooperative and that the department -- PGW responds, the separate Gas Works.
And I just wanted to publicly state that I think there's been a real improvement.
Thank you. I may not be coherent when you call, but it does seem to get 293 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 done 'cause nobody calls me back.
Thank you. Are there any other questions from members of the committee? (No further questions at this time.)
The Sinking Fund Commission is next to testify. (Vince Jannetti comes forward.)
I'm Vince Jannetti, Secretary of the Sinking Fund Commission. I'm here to testify on behalf of the Commission on the Fiscal Year 2000 Operating Budget. The Commission's General Fund request totals $146.5 million and includes $46.1 million for capital lease payments and $100.4 million for debt service expenditures. The request for the Water Fund total $155.3 million, all in Class 700 294 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 for Water and Sewer bonded debt payments. The Aviation Fund request in the amount of $57.5 million -- again, all Class 700 -- is for Airport bonded debt payments. This concludes the brief summary of the brief testimony. And at this time, I'd be happy to answer any questions that the Council may have.
I have just one question. Does the Sinking Fund's budget anticipate refunding any of the City's outstanding debt during the year?
At this point, I do not believe that any refunding's in the future, you know, for next year are contemplated.
Thank you. The Chair recognizes Councilman Cohen.
Just very briefly, could you state the purpose of the Sinking Fund?
'Cause during the course of the year, we almost never hear of it, and I'd --
Well, there's two things, Councilman: there's the Sinking Fund and 295 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 the Sinking Fund Commission. The Sinking Fund is the fund entity on the City's books where the payments for the general obligation bonds go into and out from to pay the bond orders, people who buy City bonds. The Commission is the three-member body that's described in the City Charter that manages the Sining Funds.
That's the City Controller Ex Officio, the Finance Director Ex Officio, and a banker appointed by the Mayor.
The banker is a gentleman by the name of Anthony DiSandro (ph.), who's the President of Pennsylvania Savings Bank.
And what are the functions of the Commission, what do they do?
Are they in charge 296 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 of this fund or this paperwork that exists?
Yes. They're in charge of money that's used to pay off all bonds of the City.
Is it actually a fund of money, or is it paper transactions?
For the most part, it's paper transactions. For example, when the General Fund pays a portion of general obligation bonds, the money moves from the General Fund into the Sinking Fund, out to the bondholders. So the money is in the Sinking Fund for, you know, usually a fleeting moment.
If I asked you today, what is the balance in the Sinking Fund? would you be able to come up with a figure? Or as of any given date?
And would it be merely a paper figure? It would be money that were in the General Fund actually? Or is there a separate Sinking Fund corpus? Or is it like the Social Security trust fund, the trust fund that exists only in the 297 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 imagination of. . .
Yes. Dean Kaplan, the City's Budget Director. By and large monies, though, the monies need to be available when payments are due. So except for in some cases, there is a legally required amount which has to be put in reserve, for example; and those are usually held in the case of specific bonds for payment of specific --
In the case of specific bonds. For example, if we have funded an issue, we will buy securities that mature on certain dates to make those payments. But generally what happens is, the City's appropriations to the Sinking Fund Commission, those monies are held generally in cash during the year ago. And before the payments are due to bondholders, they're transferred to the 298 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 Sinking Fund Commission, and the bank makes those payments to the agent for the bonds. So would happen is if a bond payment were due on March 1st, sometime before then, Mr. Jannetti would be responsible for making sure that those monies are transferred.
Mr. Jannetti, the Secretary for the Sinking Fund Commission. He would make sure that the monies are transferred to an account from which payments are then made to the bondholders.
And before the monies were transferred, where would they be?
So would you, then, make a demand upon whoever it is that supervises the accounts in the General Fund to transfer money to the Sinking Fund? 299 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023
From the General Fund, it's in relation to general obligation bonds. If you're doing payment on a Water revenue or an Airport revenue bond, we would request funds from the Aviation Fund or the Water Fund.
Do they actually exercise any function that the Finance Director could not do? I don't want to embarrass you --
Most of these are obligations of the City which the City obviously would only fail to pay at its peril in terms of 300 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 its need to maintain its credibility with bondholders. So, you know, by its nature, then, the Commission obviously was created by the Charter to make sure that these payments happen. Now, at this point, you know, 50 years on, we're in a position where most of this is relatively routine. I think that would be fair to say.
So of the three-member commission, two are City officials, and the third is an outside banker. But as I gather, it's mostly an honorary position -- the outside banker. That the decisions are made internally by the City Finance officers. They would have two out of three votes anyway.
That's true, Councilman. I mean, the City has covenanted each time we do a bond issue to make certain payments on certain dates so --
So there's nothing to consider, whether to do it or not; you just 301 2/16/99 WHOLE COMM./Budget Hearings/Bill 990023 have to do it.