COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON FINANCE - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, March 9, 2006 9:15 a.m. - - - PRESENT: COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN FRANK DiCICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN MICHAEL A. NUTTER COUNCILMAN JUAN RAMOS COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILWOMAN MARIAN B. TASCO COUNCILMAN JAMES F. KENNEY BILL 050661 - An ordinance authorizing the creation of a loan or loans to provide funds for and toward various capital municipal purposes; authorizing the Mayor, City Controller and City Solicitor or a majority of them to sell bonds at public or private negotiated sale... - - - V A R A L L O Incorporated Litigation Support Services 1835 Market Street, Suite 600 Philadelphia, PA 19103 215.561.2220 215.567.2670 2
Now the Committee on Finance is being called into order. We're being called to order with regard to Bill No. 050661, and we will ask the Clerk to read the title of this bill, Bill No. 050661. As you know, this will be our third hearing with regard to this capital budget issue. Clerk?
Bill No. 050661, an ordinance authorizing the creation of a loan or loans to provide funds for and toward various capital municipal purposes; authorizing the Mayor, City Controller and City Solicitor or a majority of them to sell bonds at public or private negotiated sale; setting forth the capital purposes and the amounts for which the proceeds of the loan or loans will be expended, including reimbursement of City capital expenditures.
Thank you very much. Certainly we invite anyone who 3 3/9/06 - FINANCE - BILL 050661 would like to come forward with regard to testifying on this bill and if you're prepared to take any questions. We note that this is the third hearing. We held hearings on February 16, 2006 and March 6, 2006 to consider the issues relative to this capital budget bill, and there are still issues that have not been resolved to the satisfaction of my colleagues. We note that we do have a quorum. To my right is Councilman W. Wilson Goode. To his right, Councilman Juan Ramos. We have Councilman Frank DiCicco, Councilwoman Marian Tasco, Councilman Michael Nutter and Councilwoman Blondell Reynolds Brown, who are here, and we thank them all for helping us to certainly have a quorum and to try to get this issue heard before we enter into our regular Council session. We invite you, Mr. Jannetti, if you would like to testify, to identify yourself and testify. 4 3/9/06 - FINANCE - BILL 050661
Good morning, Councilwoman and members of the Committee. I'm Vince Jannetti, Acting Finance Director of the City here on this continuation hearing for Bill 050661. When we were here on Monday, there were some questions from some folks in the Administration who weren't here, and they're here today, so we would be happy to answer any questions the Committee has.
Thank you very much. I will note, Mr. Goode, there is a letter in our packet with response to your concerns. Are there questions from members of the Committee? Councilman Nutter.
Just a 5 3/9/06 - FINANCE - BILL 050661 couple questions. Mr. Jannetti, I was not here the other day, but I know this issue has been heard before. I think I was at that hearing. You were at the witness stand in a different capacity a couple days ago. What, if any, new process has been put in place with regard to -- this is the type of financing that will require the offering of bonds; is that correct?
And a series of various financial and other professionals will have to be assembled to effectuate that transaction; is that right?
Has the Administration put together, since a lot of this discussion emanated from last year, a new system or plan or Executive Order, anything that deals with that?
The Administration is working on a process, an Executive Order, to address the formulation of bond teams. We are not quite there yet. There are some issues that have to be resolved. We're working with the Law Department.
As soon as possible, Councilman. I'm hoping in the next couple of weeks we're going to be done with this.
Can you put back for us on the record, there's an outstanding issue, as I recall, from the FY05 capital budget?
I believe there's an issue with the $7 million of ITEF money.
The '05 authorization as originally presented was -- I actually forget the amount of money -- was $60-some million, and $7 million was added to that --
To a process that is allowed by the Home Rule Charter?
Correct. And so the discussion centers around how we're going to spend that money, what we're going to do with that money.
Right. And this all emanates from a funding process that has exists for however long it's 8 3/9/06 - FINANCE - BILL 050661 existed where a certain amount of funds are allocated to City Council for capital expenditure?
That's correct, Councilman, but I think the issue is our ability to use capital dollars shrinks should everything shrink with it.
I understand. So that issue is unresolved and now on top of it, we have this bond offering. This question came up once again. This is a second bill for the FY06 capital budget question?
Isn't this the same bill that failed last spring or last fall?
Last 9 3/9/06 - FINANCE - BILL 050661 question. Yesterday I believe in a different hearing an issue arose with regard to another borrowing, upwards of $80 million for --
Is there an $80 million borrowing anticipated for the Youth Study Center?
Well, that's subject to legislation from Council, but, I mean, there is anticipated a borrowing to build a new facility.
All right. And how is the $7 million issue going to get resolved from FY05?
I think we're going to have to have a discussion. You know, we're going to have to have a discussion to resolve it.
Do you think it might help to not only seek to get a resolution to FY05 but kind of a universal agreement with regard to the FY05 money and this FY06 authorization or ballot question? I mean, why don't we try to wrap this up all at the same time.
I think that anything we on the Administration side decide to do, the Mayor would have to sign off on it. So I'm not sure that we can resolve it here.
I'm just asking your personal opinion. Wouldn't it make sense to try to get all these 11 3/9/06 - FINANCE - BILL 050661 financial issues resolved at the same time?
Thank you, Madam Chair. Very quickly, Mr. Jannetti, per the e-mail you sent, assuming this was yesterday at 5:19, are you suggesting through the e-mail that pre-qualification from trust services are the same as the requirements for City depositories?
I think the question was, if I recall correctly, Councilman, was about the deposit of these funds?
So, I mean, these funds, whenever we fund this, would 12 3/9/06 - FINANCE - BILL 050661 be deposited to Wachovia and then invested by Evergreen. And Wachovia did in fact send in information to the Procurement Department.
Because that's the bank we use for these funds. I mean, it goes into Wachovia and then it goes out and gets invested.
The question was, why are we almost exclusively using Wachovia? Why are we using only Wachovia and PNC, and beyond that, what is necessary in terms of pre-qualifying all the other City depositories to hold the money, particularly since it's only being held to be invested by other investment managers?
The issue with the other banks -- I got into that this week with our Treasurer and the Procurement Commissioner, and we're working on that. 13 3/9/06 - FINANCE - BILL 050661
My question is, are the other seven authorized City depositories qualified to provide trust services, and, if so, why aren't we spreading the work around?
If you're talking about corporate trust, corporate trust is like a checkbook, right? So it's a practical matter to use one checkbook for one type of bonds. You do general obligation bonds, we use Wachovia. Or authorities like the PAID bonds is JP Morgan Chase. The NTI bond money is, the corporate trust for that is Commerce Bank. So we do spread it out a little bit. Not all banks offer corporate trust work.
You're leading me to another question, though, 14 3/9/06 - FINANCE - BILL 050661 and the other question is whether any financial institutions that provide trust services have to be authorized City depositories or authorized by this Council to hold money from the City treasury. I believe that's what the City Charter says. And if that is the case, I simply need to know that all of the financial institutions that provide trust services are authorized City depositories and how many of the City depositories are qualified to provide trust services and how much we're spreading the work around.
I really hate to ask you this question, because I 15 3/9/06 - FINANCE - BILL 050661 know it's really not your decision, but we've gone for a long time around on this $7 million from 2005. Do you think it will ever be resolved, in your opinion?
It's been two years. How long do you think it's going to take?
I don't know how long it will take, but I'm confident that it will be resolved.
It doesn't necessarily mean it gets resolved to one 16 3/9/06 - FINANCE - BILL 050661 satisfaction.
On the '06 capital budget relative to the questions that Councilman Nutter asked about the Executive Order around selection of the bond team, how far along is that? I mean, where is it in the process, that discussion?
So we get Mr. Tustin in with his bricks and mortar with the woe and tale that the City Hall is falling apart so that we will rush to pass the legislation to go on the ballot, but there's no real effort to move the process along to come up with a recommendation or an Executive Order. So the move to resolve it is to force us to make us look bad. City Hall is falling and we have to have something and woe all these agencies are here because their 17 3/9/06 - FINANCE - BILL 050661 projects are not going to get done.
Right, but we could not issue bonds on this authorization until -- we have to go to the voters. So that would be sometime in May and --
So until that happens, we can't issue any bonds on this authorization.
Thank you very much. Are there further questions?
But I think Councilman Ramos is a member of the Committee.
Thank you, Councilman Nutter. I believe all of us got a copy of a letter sent by the Mayor to the Council President emphasizing how if we don't get this done very soon, that this will cause some grave disruption in services that we provide in so many different ways and through so many different departments of the City. What deadline are we looking at before we come close to possible -- at least in the letter, it sounds like there's going to be chaos if we don't get this done in a timely manner because we won't be able to get it on the ballot on May the 16th. 19 3/9/06 - FINANCE - BILL 050661
If we don't do this in a timely manner, I want to know what time is left if we don't get it --
Well, I understand that. We're looking for a date. Today is the 9th, right?
So a decision would have to be made by this Committee and voted on by March 30th?
So we need 20 3/9/06 - FINANCE - BILL 050661 to get these issues resolved so we can move and not cause disruption that will impact negatively on services that our people in this City expect and deserve. Thank you, Madam Chair.
You're welcome. And the Chair also notes that this letter is stamped that it was received on March 7th, although it's dated February 28th, and it was regarding a hearing we held on March 6th. So it was received in Council after our hearing date. Are there any more questions from members of this Committee or Councilmembers. Councilman Nutter.
Thank you, Madam Chair. I deeply appreciate the Chair raising that particular issue so that I didn't have to raise it. This is going to be a great day. As a follow-up to both the Chair, Councilwoman Tasco and Councilman 21 3/9/06 - FINANCE - BILL 050661 Ramos's various questions, I read this letter also and, Mr. Jannetti, I don't know whether it's your question or Mr. Tustin. As a couple Councilmembers have pointed out, there needs to be a little more, I think, honesty in this process. It's not like the City has no 9 money. I mean, there have been reprogrammed capital dollars. I realize there are dollars that are programmed for other things, but, I mean, you're not going to sit at that table and say that if there were an emergency, a critical capital emergency need, that the City would not be able to respond to it.
We're going to respond. I mean, we have a laundry list of projects, many of which have designated funds for them if this issue gets resolved, but I think it goes back to what Councilman Ramos directly said 22 3/9/06 - FINANCE - BILL 050661 and Councilwoman Tasco raised as well. We need a resolution --
-- to all of this. I mean, we can kind of keep going back and forth and see who blinks and all this other kind of stuff. Can we get beyond that, have a serious discussion, get a universal resolution to all these issues and move on with all of our respective lives? So, I mean, creating these deadlines -- I like as much drama as the next person, and I respect Mr. Tustin and concrete balls and slabs and all this other kind of stuff going on, but if we were only engaged in inside baseball, that would be one thing. I think we cannot show ourselves as two important components of government, the legislative branch and the executive branch, that we have no idea what we're doing and we can't resolve some of these issues. This is about money, it's about 23 3/9/06 - FINANCE - BILL 050661 process, it's about procedure, and all of this money ultimately is going to serve the citizens in some way, shape or form.
This isn't a debate about who gets to control what and who has historically done what with which dollars. We should be able to move beyond that. And it's not like absolute action must take place today. We know what our respective deadlines are, even within the current context, even regarding the May ballot question. I mean, we know how many Thursdays are left in the month, and this is not the last one. So I'd only encourage between the two of you, and you have seriousness in your jobs and you have great influence in the Administration, we need to finish up the '05 business, move into the '06, and then maybe we won't have this same problem as we're now trying to deal with 24 3/9/06 - FINANCE - BILL 050661 '07. We had three budgets worth of conversation and debate going on all at the same time. Thank you, Madam Chair.
Are there further questions from members of the Committee? (No response.)
Thank you, Councilwoman. My name is Rick Tustin. I'm the Director of the City's Capital Program Office. I agree in concept with everything that's been said concerning resolving these issues, and I would like to get them resolved as --
Excuse me. Could we ask those who are having their conversations to keep them 25 3/9/06 - FINANCE - BILL 050661 down, please. Thank you. Sorry, Mr. Tustin.
I would like to get these issues resolved to everyone's satisfaction more than anyone else, because every year that we don't have a budget passed does create chaos for the Capital Program Office and the City as a whole. Last year when this authorization wasn't passed and there was no money available in July of '05, which was '06 fiscal year, we spent literally weeks, if not months, of time trying to figure out how we could take carry-forward money from other projects that were sitting there and basically robbing Peter to pay Paul to keep things going from July until now, and we've stripped about everything we can find from every other project out there that is not in one stage of movement to continue the City business. I'm sure the Streets Department has done the same 3/9/06 - FINANCE - BILL 050661 thing. I'm sure all the other City agencies that are in the same boat as we are have done the same thing. The reality is, on the exterior of City Hall, which this is my third day now testifying about that, we are at a critical stage, and if this issue and the bond ordinance or the authorization does not get passed and we have money in July, we will be in trouble. We've used all the money we can find for City Hall, which will take us until August of this year, at which point in time the contractor will leave the job and we will have scaffolding and windows boarded and roof leaking on the exterior of the building and nothing we can do about it. I would also like to say that that next stage of work that we have to authorize or give a notice to proceed, we have to notify them by the end of this month whether we're going to proceed with that next stage or not. So urgency is an issue here for me in particular, and I'm 27 3/9/06 - FINANCE - BILL 050661 speaking personally now, not for the Administration but for me, and I just wanted to be on the record so that everybody understood that. Thank you.
I agree with everything you said. This is an issue that could be solved in two minutes, and I think both of you know that. It's not your fault. But there is a solution. It's not complicated. I mean, you didn't have to go to MIT to figure it out. It's a two-minute solution. Thank you. Thank you, Madam Chair.
Thank you, Madam Chair. I'm just questioning in general terms. When I came here in '92, I really had no experience of the capital budget, but I understood it ran totally 28 3/9/06 - FINANCE - BILL 050661 different, that there was a lot more input from District Councilpeople. For me as an at-large Councilmember, I don't have any really vested interest other than seeing the system work as well as it can. So the Rendell Administration changed that process into a more, I guess, unified or uniform process of putting all the money kind of in one pot without real input from District Councilpeople and then kind of prioritized the big issues, the big items, and then cut some money loose for District Councilpeople to kind of set some priorities. But during the course of that whole process and I think since I've been here, it's hard to know where projects are, where they're funded. I kept on hearing the pipeline, the pipeline, it's in the pipeline. It seems like in an effort to streamline and make the process more, I guess, cost effective, you've lost any semblance of understanding where 29 3/9/06 - FINANCE - BILL 050661 projects are at any given time. I mean, you could obviously look at the building out here. It's a big major project. It's not an individual District Councilperson's project. The City owns it as a whole and it needs to be dealt with. But when it comes to rec centers and pool improvements and police stations and firehouses in people's districts, there never seems to be an understanding of when it's funded, when it's going to be completed, what capital budget year it's in. And as a non-District Councilperson -- they are confused. I'm even more confused, because I don't see the benefit of this. Because it's hard for District Councilpeople to articulate to their constituents what it is they're doing for them on the capital side when you can't identify when the projects get funded, when they get done and under what capital budget year it gets done in. If I were a District Councilperson, I'd be yelling about it 30 3/9/06 - FINANCE - BILL 050661 more than I am right now. But I understand the desire to make things streamlined and uniform, but you get it to the point where you can't even find out where things are and when they're getting done. I don't see the benefit to it, to tell you the truth.
Councilman, again, Rick Tustin with the Capital Program Office. I disagree. I'd be more than happy -- we keep monthly reports on every single project that's being done, whether it's a Fire Department, Police Department, rec center, and if you were to contact our office on any one particular project, we'd be able to tell you the year it was funded, when the design started, when the construction started, the substantial completion date. Any information that you would need to pass on to your constituents, we'd be more than happy --
I'm sure 31 3/9/06 - FINANCE - BILL 050661 you have the records. The problem I have is, it is my understanding in past years prior to '92 that once a budget deal, a capital deal, was cut with the District Councilpeople, those things got done. The Administration now has the ability, and the last Administration did, too, to hold things up, to slow things down, to move priorities around, to kind of manipulate the capital process as it relates to the rest of the government activity and Council relationship, and that's what I find offensive. And it's not just this Administration, because I'm not only picking on these guys, but the last Administration did it, too. These capital dollars are not, in my mind, for the Administration to control the ebb and flow of when they feel it's appropriate. Again, large capital projects, major issues that need to be dealt with, the public safety issues, no one is going to argue, but whose District Councilperson's rec center 32 3/9/06 - FINANCE - BILL 050661 gets done as opposed to somebody else's firehouse to me is kind of a manipulation of the process. It's unfair to the taxpayer and constituents, and I just -- you disagree with me, and I understand you have all the records you need. You can tell me when it was authorized, when it was funded, when it was contracted, designed. I understand you have the records, but when the bricks and mortar are able to be seen is a total confusion, and I think it's utilized in this Administration and the last in a way to keep Councilmembers in line. When they don't like the way Councilmembers are voting or doing things, things kind of get slowed up, slowed down, things get put in priorities that delay things. And I think it's a manipulation of the capital budget that I think is not fair.
I know you don't do it yourself, but I'm sure you get some advice on what to do. 33 3/9/06 - FINANCE - BILL 050661
Councilman, since you're not a District Councilperson, you wouldn't know, or maybe not know, that our office meets with each District Council at least once a year to review all of the projects and what stages they're in. In addition to that, the staff from my office have constant communications with the staff from each one of the Council offices. So --
-- that may be the case, but I don't hear a lot of complimentary comments from District Councilpeople, from all District Councilpeople, as it relates to what's going on their districts. And, again, I support District Councilpeople with my vote. I have no ability to direct anything or to designate anything. I try to support all the District Councilpeople 34 3/9/06 - FINANCE - BILL 050661 with my vote on the capital budget, but we shouldn't be in here talking about this now. I mean, I don't get it. But all I'm saying is, I think that the desire to streamline and make this thing uniform was all well-intentioned. I think where we are now some years 9 later, it needs to be a little re-tooled, 10 in my opinion. 11 Thanks, Madam Chair. 12
Thank 13 you very much. 14 Any other questions or 15 comments? (No response.)
Seeing none, we will make closing remarks. At the Administration's request, this Committee held hearings on February 16th and March 6th to provide the Administration an opportunity to respond to concerns raised by Committee members and other members of Council. To date, these concerns have not been 35 3/9/06 - FINANCE - BILL 050661 addressed to the satisfaction of this Committee or other Councilmembers. While this Committee and Council are sensitive to the time constraints related to authorizing the borrowing needed to fund the Fiscal Year '06 capital program, it is certainly the Administration's responsibility to submit a loan authorization that addresses the concerns of Council to the extent that they feel that a recommendation is warranted from this Committee. In light of the fact that Councilmembers feel that their concerns have not been addressed to their satisfaction, this Committee will not recommend that we report this bill out today. We invite the Administration to continue its efforts to address the concerns of Councilmembers, and this hearing will be recessed until March 16th at 9:00 a.m. This will allow a sufficient amount of time within which to 36 3/9/06 - FINANCE - BILL 050661 place the loan authorization on the May '06 ballot for consideration by the electorate should the loan authorization request meet with the Committee's approval by the March 16th hearing date. Having said that, thank you very much, and we will recess into the Caucus Room for a caucus. Thank you all. (Committee on Finance adjourned at 9:45 a.m.) - - - 37 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on March 9, 2006, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)