How would you characterize the Administration's overall revenue-growth assumptions contained in the Five-Year Plan?
I guess we would characterize them as cautious. I mean, there is -- conservative. We assume a relatively flat economy throughout the life of the Plan, and so the tax revenues aren't consist with that.
You indicate that you are projecting General Fund revenues to grow by an average rate of 2.2 percent from FY 2000 through FY 2005. Is this the growth rate before or after the adjustments of the proposed tax decreases?
On , regarding the real property tax, what are the assessment growth assumptions contained in the Five-Year Plan for both commercial and residential properties?
I'm checking through the 67 2/7/00 FISCAL STABILITY - RES. 000002 Plan now to find that.
We forecast that the combined residential and commercial assessments will grow about 1.3 percent through the life of the Plan.
What is the Administration's strategy for improving the collection of delinquent taxes? I know we talked about the Revenue Department having new systems. Are these systems -- these systems are currently online, are they not? COMMISSIONER KAMMERDEINER: Good morning again. This is Nancy Kammerdeiner. Most of the systems improvements that have been referenced over time are online, but we are still in the process of moving two of the larger land-based taxes into our consolidated system. By June of this year, we expect to be moving the business use and occupancy tax into our 68 2/7/00 FISCAL STABILITY - RES. 000002 consolidated base, and then approximately one year later, the real-estate tax would be moved to the consolidated base. That doesn't mean that we --
How are -- excuse me, I don't mean to interrupt you, but how long have the new systems been in place? COMMISSIONER KAMMERDEINER: The initial consolidation of the integrated tax system that has all of the self-assessed business taxes went online in February two years ago. We have added, I believe, school income tax to that base since then. And we have seen some great improvements in our ability to manage the process as a result of having the integration on one platform instead of having multiple taxes systems. The main thrust we have been working on with that integrated system has been improving the kinds of messages that we give to taxpayers when there's a problem. When we process their tax return, we are now sending out notices to tell someone that there's been a calculation error, that there's a missing schedule -- all of those things that have in the past resulted in bills 69 2/7/00 FISCAL STABILITY - RES. 000002 that the taxpayers couldn't understand. We're trying to do a better job of communicating with the taxpayer and helping them to understand what it is they owe so that they can and will pay the balance that's due or be able to provide additional information to us in order to correct their record.
With all of that being said, how successful have we been in collecting many of the delinquent taxes? COMMISSIONER KAMMERDEINER: I think that success rate is shown in terms of the collection amounts that we're seeing with the last two fiscal years, where, in spite of rate decreases, we're showing higher collection amounts. And we are up in our collection of delinquent taxes as well as the current year taxes. One particular area where we've had a great deal of success is with the school income tax. We've been matching our records to the IRS records. And this fiscal year -- and we're only now seven months into that fiscal year -- we have far exceeded the budget expectations of the School 70 2/7/00 FISCAL STABILITY - RES. 000002 District on the collection of delinquent school income taxes as a result of that special project. We spent the budgeted amount by October of '99, and we continue to work with that compliance project to bring in additional funds for the School District as a result of our use of the system that the computer system and the matching capabilities we now have with IRS data. And that's just one small example, but it's typical of the kinds of things we're now able to do and are doing on an increased basis.
You certainly can. The Chair recognizes Councilman Cohen.
Is it possible that in the City's own administration that there could be as many as, say, 35,000 uncollected accounts 'cause the City records don't know of them, just as we're hearing rumors in the Gas Works? Would that be possible? COMMISSIONER KAMMERDEINER: With the business taxes, they are self-assessed taxes, we don't always know if someone has a liability. 71 2/7/00 FISCAL STABILITY - RES. 000002 We're using as many resources as we can to identify those who may have a liability who are not currently registered with us if. But if they're registered with us, we are billing them. We, to my knowledge, have no 7 unbilled accounts for taxes where we have a known liability.
In connection with that, would you be checking with the Gas Works to see how they discovered if they have discovered the existence of these other kind of accounts to see whether a similar situation might exist in the City? COMMISSIONER KAMMERDEINER: We've had some discussions with them. I think their situation is with new meters, new accounts that were installed and not put on their system and some accounts that were left behind when they went from their old system to their new one, and they're in the process of identifying them and bringing them over. I don't think we have a comparable situation that we're looking at, but we certainly will be reviewing our water accounts as we verify that we are billing everyone there. 72 2/7/00 FISCAL STABILITY - RES. 000002 To my knowledge, we have no similar problems in our water and sewer accounts to the Gas Works, and that would be the most comparable area that we would have.
I am told that there's a property, for example, that's long been in existence at the corner of 16th Street and Champlost that goes under the name of -- at least the sign outside says "National Transmissions." It's been there for many, many years, and I'm told there are no City records on that property. COMMISSIONER KAMMERDEINER: No City records for --
On that property at all. COMMISSIONER KAMMERDEINER: For real estate or what?
Nothing exists. COMMISSIONER KAMMERDEINER: Nothing exists.
That no taxes have been paid for many, many years. It's a corner property. COMMISSIONER KAMMERDEINER: We 73 2/7/00 FISCAL STABILITY - RES. 000002 certainly will look into that.
Could you check into that? COMMISSIONER KAMMERDEINER: We certainly will.
And see if that leads to similar kinds of situations? COMMISSIONER KAMMERDEINER: We certainly will. And anytime anyone identifies a situation -- there could be isolated instances like that where -- particularly in corner properties, you find that we are more in jeopardy of having two records for it: one, in this example, on 16th Street, and one on Champlost. I will be surprised if we don't have a record for it in one way or the other there, but I certainly will check into that.
And if you'd be good enough to notify me. COMMISSIONER KAMMERDEINER: Yes, we will.
Thank you, ma'am. COMMISSIONER KAMMERDEINER: Yes, mm-hmm. 74 2/7/00 FISCAL STABILITY - RES. 000002
Thank you. At this time, the Chair recognizes Councilwoman Brown.
I have a follow-up question to Councilman O'Neill's discussion about our dual status as city/county and draw your attention to the last paragraph on of your testimony, Stephanie, where you acknowledge that the Commonwealth is not living up to its responsibility, and that that has not taken place since '96. So does the City have a plan, or a revised plan of action, for addressing that? And/or are there any negotiations underway with the Commonwealth for the Commonwealth to honor its obligation?
It will be one of the agenda items in the upcoming meeting with the Governor on the 11th.
The Chair recognizes Councilman Nutter. 75 2/7/00 FISCAL STABILITY - RES. 000002
Thank you, Madam Chair. On a different part of Councilman O'Neill's question, if I can make an additional request. Madam Chief of Staff, does the Mayor intend to pursue the level of involvement and oversight and coordination between the City and the School District here in any comparable fashion to what Mayor Daily did in Chicago as it related to that city and the involvement and oversight of the school district there, and specifically in the area of finances that Councilman O'Neill was talking about? I think the City Charter calls for, if not requires, some level of coordination between the City and the School District, but I think that Councilman O'Neill's question went more to efficiencies and operations, the finances and the accounting function. The Mayor, as a result of some action by the City Council, has received powers much greater than any other mayor has on January 1st of this year and by way of his appointment to the School Board. Just how far does the Mayor plan to 76 2/7/00 FISCAL STABILITY - RES. 000002 go in terms of his involvement with the School District and specifically with its operations?
Well, you've raised one issue, which is the School Board, and as you know, the Administration is in the process of accepting applications and looking at potential changes to the School Board.
But I think the most significant change in the Administration was the creation of a cabinet-level position, the Secretary of Education, whose sole focus is on speaking for the Administration on education issues and making sure that there is ongoing monitoring and coordination with the School District, and that's the focus of that position. And in addition to meeting with the Governor, there are ongoing meetings that the Mayor holds with the leadership of the School Board, the Secretary of Education, and the U.S. Secretary of Education recently --
-- came to visit the Mayor. And so there are -- 77 2/7/00 FISCAL STABILITY - RES. 000002
Not to cut across you, Madam Chief of Staff. What I'm actually talking about again is within the realm of what Councilman O'Neill was talking about. When the City, upon the inauguration of Mayor Rendell, and recognizing what our financial system was like and the systems and programs and efficiencies and savings that were accomplished over a series of years, which have now obviously led to the much discussed and touted $205 million surplus, and I know Miss Kahn and respect her a great deal. I don't necessarily know that she's going to spend each and every day either down in the Finance Office or working with the unions or anyone at that level to get those kinds of efficiencies and changes and savings made. So my question goes back to, does the Mayor intend to try to do some of things that Mayor Rendell did as mayor and the current mayor supported as the council president in terms of the fiscal operations and efficiencies of this city government and look to do many of the same things at the School District because he is the Mayor and will have appointed his own school board in a very 78 2/7/00 FISCAL STABILITY - RES. 000002 short period of time? That's really the question.
When I responded earlier, I pointed out that there is an ongoing transition committee that has been looking at not only educational reform but also management and productivity initiatives.
Once there are recommendations made -- I mean, I certainly think that the Mayor intends on looking at management and productivity and savings in the School District. I cannot tell you whether the strategies he will adopt will be the same as those used by Mayor Rendell or Mayor Daily in Chicago. But I do know that that is significant and I do know that we are actually looking at new and different and more innovative strategies, which is why we have gotten involved in the process all of the local Chambers of Commerce. So, yes, the Mayor will adopt a strategy for management, productivity enhancement, and savings at the School District.
I can't say if they will be exactly the same as the Rendell Administration or the Daily Administration.
I understand, and I'm not saying that the Rendell Administration stuff was good, bad or indifferent, or the greatest thing since sliced bread. All I'm saying is, when the transition committees' and all the various committees' work are done, they don't work with the School District. And similar to any transition committee recommendations that Mayor Rendell may have received from whoever he talked to, they didn't implement them at the City level. People who work here implement them and the people who work at the School District will have to implement them. Lastly, in this same area, we talk about the -- your testimony makes reference to the $15 million for the School District, which has been supported as, I guess, kind of a one-time payment for, I think, the last at least three, maybe four years, and it's proposed that we continue that. Can anyone tell us at this point where 80 2/7/00 FISCAL STABILITY - RES. 000002 that figure came from, why does it stay the same? And, I mean, is there any discussion about that particular number? I mean, I certainly support the School District. Why is that the number?
Mr. Dubow, you get the award for the most honest answer anybody has given. (Laughter.)
We can try to find out, and if we're able to do that, we can give you the information.
All right. Lastly, and I'm sure the agenda's full between the Mayor and the Governor. But, again, does the Mayor, given what we've talked about earlier, there were other components of kind of an educational reform agenda, the first component of which had to do with the School Board, and that's one of things that we could do at the local level. Does the Mayor intend to talk to the Governor and/or the state legislature about 81 2/7/00 FISCAL STABILITY - RES. 000002 changing state law as it relates to the City Council's ability to review and adopt the budgets for the School District? Presently, we're not legally able to do that.
I'm not aware that he intends on discussing that with the Governor.
Is it fair to say that you're also not aware that he may, in fact, intend to talk to the Governor about it? Or you're not saying that he's not going to talk to the Governor about it? Could we make that a -- can we put that on the agenda?
As part of the education reform strategy, that has not been one of the issues that we have discussed. And so, therefore, it is not on the agenda for discussion with the Governor.
Okay. Well, as a member that's been here for a little while, and the President's certainly been here much longer than myself, I mean, the current -- the reality is that the School District comes over. Our only legal authority and responsibility is to 82 2/7/00 FISCAL STABILITY - RES. 000002 reauthorize the taxes, which, you know, we could do, I guess, in the next couple weeks and not have them over here. I mean, to have no oversight, legitimate oversight over their budget or any ability to pass on it, at some level, it becomes somewhat of a sham process. I mean, it's all the same people. And so we pass the budgets to decide whether someone's trash is going to get picked up, but we don't approve budget that decides whether someone's kid's going to get an education. That doesn't seem to make a lot of sense to me. But we need state authorization to make that change, and I would more formally request that there be some discussion about that. When the Mayor was then-candidate back in, I believe, April, he did come here to testify with regard to the ballot question, but there were other items on that particular agenda that basically said, If we do this, we should next seek authorization from the state to look at approval of budgets, the Mayor's more direct involvement in the appointment or nomination of the school superintendent, as well as the Mayor's direct 83 2/7/00 FISCAL STABILITY - RES. 000002 involvement and responsibility for signing the contracts between the School District employees and the School District of Philadelphia. Those three items all require support from the state legislature and approval of the governor because of the appropriate state statutes.
Thank you. Thank you, Madam Chair. I know my time is up.
Thank you. The Chair recognizes Councilman Goode.
Thank you, Madam President. Good morning to Mrs. Franklin-Suber and members of the Administration.
Along the lines of carryover language from previous five-year plans, can you clarify the unprecedented 6-year $7 billion Economic Stimulus Program, that phrase? Does that refer to six years of unprecedented economic investment, six years of unprecedented job growth? Or what does it refer to? 84 2/7/00 FISCAL STABILITY - RES. 000002
It's throughout the document. The question really is, if you compare the same six years within the last decade, 1984 to 1989, what has changed in terms of economic investment and job growth? It's on of Miss Suber's remarks.
Councilman Goode, let me take that question for now and look at it, and then we'll come back before the end of the session.
Okay. I have a couple other questions. How has economic development strategy changed over the last two decades? And as you look at that comparison between the same 6-year period, 1984 to 1989, and 1994 to 1999, how do you account for the greatest success in terms of job creating during the '80s? And what is the projected job growth for the first six years of the Street Administration?
Excuse me, Mr. Mjenzi, before you respond, would you please identify yourself for the record. 85 2/7/00 FISCAL STABILITY - RES. 000002
M-J-E-N-Z-I. Last name, T-R-A-Y-L-O-R. Council, we think that this -- the answer to your questions can best be dealt with through in conferring with Mr. Hankowsky from PIDC, who is not here this morning, and we would like to ask to be able to get back to you with the response.
There is a representative from PIDC here. (Paul Deegan comes forward.)
Good morning. My name is Paul Deegan, D-E-E-G-A-N, and I represent PIDC. Philadelphia Industrial Development Corporation.
Yea, I think I would have to echo the Commerce Director's answers. We can go back and get numbers and submit them to Council. I think we can answer the question; I 86 2/7/00 FISCAL STABILITY - RES. 000002 don't think we have the numbers right here, though.
The purpose is not just comparison of numbers; it seems to suggest in the Five-Year Plan that we should continue the course according to the Economic Stimulus Program because it is a, quote/unquote, unprecedented 6-year $7 billion Economic Stimulus Program. If is not six years of unprecedented economic investment, if it's not six years of unprecedented job growth, if there is a period to compare it to within the last -- the previous decade, 1984 to 1989, the question is, is economic development strategy changing, is it intended to change? And what is the job growth projections for the Street Administration?
In terms of the job growth, we will have to get back to you with those numbers. But in terms of the strategy, the strategy, in terms of economic development, has been outlined at length by Mayor Street in his inaugural address, in his budget address, in his 100-Day Plan. 87 2/7/00 FISCAL STABILITY - RES. 000002 And basically, we're going to continue to focus on the development of Philadelphia as a hospitality and tourism destination, but also, we're going to focus on revitalization of the neighborhoods, strengthening small businesses buttressing existing businesses, identifying emerging industries, and trying to expand in new and innovative ways the local economy. Part of that is the Economic Stimulus Program, which is why we have a specific $5 million line item in the upcoming budget. And so we're going to continue to provide as much support as possible to existing businesses through the combination of programs that are currently in existence, with the Commerce Department also working still in conjunction with PIDC and PAID, as we have in the past, but also probably implementing some new and different strategies which will come out of the transition process I've referred to previously.
So is the Economic Stimulus Program a program or is it actually economic development strategy? I heard you differentiate between the two. 88 2/7/00 FISCAL STABILITY - RES. 000002
The Stimulus Program is a program and is one aspect of the overall economic development strategy.
And it is a program that is actually funded by the City through a contractual relationship with PIDC and PAID. And so it's an ongoing program.
But the $7 billion for the Economic Stimulus Program does not refer to the contractual relationship, does it?
It's more than just the funding that we have provided over the past several years of the Rendell Administration. We can get --
My question is that there not a $7 billion contractual relationship between the City and PIDC regarding the Economic Stimulus Program, is there?
The $7 billion does not refer to $7 billion in funding for the Economic Stimulus Funding Program, that is correct.
Councilman, you're asking 89 2/7/00 FISCAL STABILITY - RES. 000002 if there is a contract with PIDC for that amount of money? The answer ---
No, that's not the question. I know the answer to that questions. Seven billion dollars refers to both public and private funds.
That's right. If you look at on the Plan, it lays out the $7 billion and where they come from.
So in answer to my question, it would continue the same strategy from the previous six years?
Thank you very much, Councilman. The Chair recognizes Councilman Kenney of.
Thank you, Madam Chair. I want to go back a minute to the School District and the issue surrounding the $15 million appropriation that we have been doing 90 2/7/00 FISCAL STABILITY - RES. 000002 for the last number of years. Is there any idea or any accounting for what that $15 million is spent on? Part of problem that I've had annually in dealing with this issue and in dealing with School District funding generally has been my belief, and I think echoed by Councilman Nutter, kind of the lack of accountability to this particular legislative body that the School District has or has not as it relates to the monies that they expend. Has there ever been a consideration of in some way maybe setting up a $15 million productivity fund or loan bank or something that we could at least, from our perspective, understand what it is that particular money's being used for? Whether it's books, technology whatever it it's -- whatever it is. I mean, I don't want to have to direct them how to spend it, but I would like to see what projects and programs they're initiating with the $15 million. And I'll tell you why. From time to time, the School District makes, or the Board makes, decisions at the request of the Superintendent that somehow fly in the face of the 91 2/7/00 FISCAL STABILITY - RES. 000002 fact that we are in fact in this fiscal crisis that we keep on hearing about, and primarily it's issues of raises that are given to administrators occasionally. I understand that there may be a new round of raises that is being discussed or considered as we sit here today for sometime in the near future within a week or so. I think part of the problem is twofold. Number one, we don't mind giving the $15 million up -- maybe we should be giving more money, as Councilman Nutter alluded to. But at the same time, there are actions often taken or sometimes taken by the Board and by the Superintendent that fly in the face of this overall concern about fiscal crises and deficit. Is there some consideration to perhaps being more accountable with this 15 million?
I certainly think that -- I certainly think that consideration can be given to the expenditure of the $15 million. It's my understanding that we simply give the $15 million, it's unrestricted. Whether or not it can be earmarked, whether or not it can be used in the way of a productivity fund or something along 92 2/7/00 FISCAL STABILITY - RES. 000002 those lines, I think, are all issues that can be seriously considered and explored by the Administration.
By the Administration in conjunction with the Superintendent or the Board or with us? 'Cause it's -- I mean, even though it's a pittance, a comparative pittance, it's still our million. 10
I think in 11 reaching a decision, the Administration would 12 include in the decision-making process members of 13 City Council as well as the Board. 14
I would appreciate 15 that. But let me ask you a question about the School District's and the Administration's overall strategy as it relates to trying to coerce, cajole, beg, plead more money from the Commonwealth of Pennsylvania. There has been an ongoing philosophy or strategy or approach that basically says that the Commonwealth of Pennsylvania has been unfair to the School District of Philadelphia and its children because there exists a $2,000 or $1900 gap per pupil in 93 2/7/00 FISCAL STABILITY - RES. 000002 spending for the School District of Philadelphia as compared to the surrounding counties of Philadelphia, who spend $1900, $2,000 more per pupil. The people who live in the suburbs -- state legislators, other county commissioners township people -- would contend that that gap is created by the fact that the real-estate taxes in their communities are substantially higher than they are in Philadelphia, and also counter with the fact that 60 percent of the School District's budget is provided by the Commonwealth of Pennsylvania, which is an unprecedented number when you compare it to other counties throughout Pennsylvania. Now, while I recognize that the City of Philadelphia and its students have peculiar and unique problems of poverty and disjointed families and other kinds of issues that create an additional need, how do we expect to be successful in arguing that the Commonwealth of Pennsylvania has been unfair to us, taking into consideration those issues?
That was a 94 2/7/00 FISCAL STABILITY - RES. 000002 strategy pursued by the Rendell Administration. The Street Administration starts from the proposition that all children are entitled to an opportunity for a quality education. And if you start to focus on the quality of the education, the programs and the activities, and if you look at the issue from a statewide perspective, putting the money aside, it becomes a question of what the Commonwealth's commitment is to that proposition. Once you start to focus on programs, the quality of programs, the quality of education, then it seems to me if -- and it seems to the Street Administration that it's easier to reach common ground because you're starting from a different perspective. And so, the position is simply, the children in Philadelphia and the children across the Commonwealth are entitled to an opportunity to receive a quality public school education. That's what they are entitled to receive.
How does the Administration intend to take that admirable, which I agree with, philosophy and move it to the point of reality wherein the State acknowledges 95 2/7/00 FISCAL STABILITY - RES. 000002 the need for additional funds for the City and provides it, without the continuing rancor that is, I guess, been one of the Superintendent's hallmarks in kind of being a confrontational speaker when it comes to his remarks vis-a-vis state legislators and senators and even the Governor. I mean, certainly our Mayor Street has shown public support for Superintendent Hornbeck, but at the same time, he goes off and makes a speech or two which puts us what I believe may be four five paces back in our attempts to meet or match that common ground. And I mean, a lot of it is philosophy, and it's also practical politics and practical approach to politicians and people who can make these decisions for us. I mean, why are we continuing in a position where we say we need to find common ground, and on the other hand, are calling people unfair and racist and other things?
Well, I am not aware that you're referring to any speeches that the Superintendent may have made after Mayor Street came into office. 96 2/7/00 FISCAL STABILITY - RES. 000002 Mayor Street is setting the strategy for education reform for the City of Philadelphia. And the Superintendent and all of the members of the School Board and the Secretary of Education and other members of the Administration will follow his lead. And the starting point is the meeting with the Governor on the 11th so that they have an opportunity to get to know each other and to assess the extent to which we can resolve the issues amicably and reach common ground. It is our understanding that the Governor is committed to quality education. And Mayor Street is committed to quality education.
If that resolution 16 includes the potential of the establishment of a pilot voucher program in the Commonwealth of Pennsylvania, would that be something that this administration would be supportive of, if in fact it means additional dollars for the public schools of Philadelphia?
Has the Administration or yourself or anyone met with any 97 2/7/00 FISCAL STABILITY - RES. 000002 legislative leaders -- Majority Leader Perzel, Senator Salvatore, or other members of the Pennsylvania delegation to the State House -- as it relates to the strategies that need to be employed to bring more money to Philadelphia?
The Mayor has been in the process of meeting with various members of the General Assembly.
Has he met with Majority Leader Perzel or with anyone in leadership? Speaker Ryan, anyone?
I do not know the extent to which he may have had informal conversations with them. I know he intends to meet with them if he hasn't met with them already.
Is my time up? What I would like to do is come back around. Madam President, as I said, my light is broken here, so just put me on the next go-around. Thank you very much.
Okay, we'll come back to you, then. The Chair recognizes Councilman Nutter.
Thank you, Madam 98 2/7/00 FISCAL STABILITY - RES. 000002 President. To stay in the education area, first, Miss Suber, in your testimony on , down at the bottom, the paragraph starts with the ambitious agenda outlined by Mayor Street and then goes on to continue "spearheading efforts for educational reform and exploring reasonable strategies to build world-class facilities for professional sports." I think I've privately and publicly articulated a general interest in these world- class facilities for professional sports, and I'm sure we'll have a little bit of discussion about that over the next few months. But certainly, it would also be good in that discussion to have a plan and I'd like to know what the plan is for world-class facilities for public education. Is there a plan for the immediate improvement of the condition of our public schools from a capital standpoint? Miss Kahn, are you satisfied with the condition of our public schools?
Debra Kahn, Secretary of Education. 99 2/7/00 FISCAL STABILITY - RES. 000002 The School District, as you know, has its capital budget process.
And always on a regular basis, it allocates dollars for renovations of schools as well as new construction where needed and supplemental facilities. I think that there has been tremendous improvement in the condition of the schools. But, no, I don't think that we could say that we would be satisfied with the condition of all of our schools.
So you wouldn't today classify them as world-class educational facilities?
I think there might be a few that might meet that standard and in some of our newer schools and some of -- you know, other schools. And I also don't think that you can always judge, and I think that you know that the quality of what goes on inside a school necessarily by either the age of the building or what its facilities always look like, but clearly 100 2/7/00 FISCAL STABILITY - RES. 000002 many of our schools need improvements.
Okay. And is there anything beyond the regular plan to have an accelerated improvement in the infusion of capital dollars to bring schools up to standard as quickly as possible?
Well, as part of this comprehensive plan that the Mayor has promised, I think we certainly have to include a look at the capital facility.
Okay, thank you. Later on -- well, why don't I ask you while you're sitting there. Further in the testimony, on 5, there's discussion about your recent appointment, recent charter reforms, Administration Secretary for External Affairs, to promote the City's education agenda at the federal and state levels. I mean, is there, I guess, an outline of a particular plan to get additional funding for public schools?
Okay, thank you. 101 2/7/00 FISCAL STABILITY - RES. 000002 On , Madam Chief, your testimony talks about how Philadelphia's tax structure remains the least competitive in the region and one of the most costly in the nation. Other than the previously discussed continued decreases in taxes, does the Administration have any particular plan to look at the overall tax structure of Philadelphia? And do you plan to participate in the upcoming hearings, as approved by the City Council last week, to look at our overall tax structure and see where we might make ourselves more competitive, notwithstanding the incremental decreases in our current taxes?
As part of the transitional process, there is a Committee on Tax Reform, and we are expecting recommendations shortly.
Very good. Let me move to a couple items in the Five-Year Plan. First, in the L&I section, it's my understanding that L&I, for its licenses and 102 2/7/00 FISCAL STABILITY - RES. 000002 inspections, for some time, has been trying to get a productivity loan to improve and update their record-keeping system, the computerization of their operations. Can you tell me what the status of that loan is and what, if any, difficulty there's been in getting that improved? Councilman Kenney was Chair and I was Vice Chair of L&I for eight years, and many of us, I know, worked with that department on a regular basis. And if anyone needs record-keeping update capacity, it is certainly that department and it's well deserved. What's going on with their productivity loan?
I think we all agree that they need some information-system enhancements, and we've been working with them to make sure that we understand that they're doing it the best way possible. So we have spent a lot of time with them on that. And I think that their application is actually now in pretty good shape at this point and --
When will it be approved, Mr. Dubow? 103 2/7/00 FISCAL STABILITY - RES. 000002
Well, we have to bring it to the Loan Committee, and we don't have a meeting scheduled, but we'll have to look at that shortly, right.
How long does it take for the Loan Committee to decide to have a meeting?
Well, part of the problem is that a lot of Loan Committee members are also involved in this process, so the two are overlapping. So it's likely that we'll get to it as soon as the budget process is over.
Do many of the Loan Committee members ever call L&I for service?
Maybe upon your return, you could tell us when the Loan Committee is going to meet. I'm pretty serious about this matter.
Okay, thank you. In the Fairmount Park area, I was 104 2/7/00 FISCAL STABILITY - RES. 000002 trying to understand -- maybe I wasn't reading the numbers correctly. On , for Fairmount Park, the Five-Year Plan talks about the $1 million for street-tree maintenance, which I'd be glad to go into further when Fairmount Park comes up. But it says that prunes from only -- "Increase the number of street trees it prunes from only about 1,000 trees annually before FY '98 to 8,233 trees in FY '99, with approximately 8,000 trees projected in FY 2000 and 2001." That's on . On , selected service level performance measurement, there's a box in very small print that says "Street and Park Trees Pruned." Trees: FY 2000 target projection - 10,455. FY 2000 current projection - 10,455. FY 2001 projection - 10,405. There seems to be a couple thousand trees we've lost track of.
I think the difference might be, in reading this, number on refers to street trees, and the one on refers to street and park trees. But I'll check that for you. 105 2/7/00 FISCAL STABILITY - RES. 000002
All right. So are you saying, Mr. Dubow, that the 2,000 tree difference is including the park trees, which are not mentioned on of the testimony.
Okay. On and 184, this is the Recreation Department, the programmatic initiatives area. You make mention of the Philadelphia 76ers. I believe this is actually Athletic Shoe Company and one neighborhood basketball league. You also talk about the Philadelphia Kicks, you talk about the Philadelphia Flyers, and I didn't see any mention of the Philadelphia Phillies or the Philadelphia Eagles in terms of their relationship with the Department of Recreation. Now, I'm, one, under the impression that they do actually have a relationship -- maybe this is either an oversight or the relationship is not particularly active. You can get back to me on that issue and desperately scour the room, looking for some to help you at the table. Can you also get back to the Chair with 106 2/7/00 FISCAL STABILITY - RES. 000002 information on how many children -- this is now on , expanding after-school programs to provide continuous year-round service. Can you tell us later on how many kids are participating in our current after-school programs? How many do you estimate will be participating with the tripling of the dollar amount? And if you could also tell us how you arrived at the tripling figure. What that was based on? Was it just what you thought you could afford at the time or that it was a significant -- a tremendously significant increase in the number of children being served?
Thank you. There's one question for the water area. Has my time expired? It expired a long time ago. Appendix 3, on , let me go there and then I'll come back to the Water Department. Can you explain in the FY 2001 estimate column, Line Item No. 26, funding for contingencies? It seems to be a deficit figure of -- it appears to be $80,843,000. What is the meaning of that figure?
In essence, it allows us to 107 2/7/00 FISCAL STABILITY - RES. 000002 fund deficits in the years after that. If you look at the 2002, 2003, 2004, that $80 million gets eaten up over those three years. Those four lines add up to zero.
Do you want to take me back through that, Mr. Dubow? You had 80,843,000 in FY '01.
In 01. And then we have 50,843,000 plus 20, plus 10 in the next three years.
The 50,843,000 plus the 14 plus the 10 equal the 80,843,000. 15
It's really a calculation 18 based on what that gap was going to look like in 19 the next three years. 20
Okay, all right. The Water Department, in Appendix 1, on , there's reference made to revenue strength and that the Water Department is going to continue to work with the Water Revenue Bureau, and the Mayor's Office of Information Services expects to bring on a customer data information system to deal with billing and collections and a whole host of other issues. My simple question is, is the same vendor going to do this work that did the work over at PGW? (Laughter.)
Thank you very much. Commissioner, you're safe. Thank you, Madam Chair.
Thank you. I just have a question or two. On , you state that the City's Pension Fund remains severely underfunded. What 109 2/7/00 FISCAL STABILITY - RES. 000002 is the unfunded liability of the Pension Fund in dollars and as a percentage of the total fund? Tell us how this liability all came about. Is it as a result of the employees not paying their required share or the City not paying their required share?
I'm sorry, you're going to have to identify yourself for the record and speak closer into the microphone, please.
I'm Linda Orfanelli, Acting Finance Director. There's a historical unfunded liability that goes back many years. In fact, former finance employees sued the City because it wasn't making the proper payment to the fund. This goes back many years. The fund, until recently, was only funded at about 50 percent so that the liability was quite large. Recently, the City got involved and funded a pension obligation bond, which has brought the funding of the fund to over 110 2/7/00 FISCAL STABILITY - RES. 000002 70 percent. The actuary report with the actual numbers will be coming up very shortly to give you more specifics, and we can present that to you as soon as it is available.
On , you state in the Five-Year Plan that the City liberalized pension benefits to its employees by allowing new exempt employees to vest after five years instead of ten years. I am not clear as to what is the point of this statement? We know that that happened, and I believe we agreed that the vesting period was for exempt employees. Wasn't that a recruitment issue?
It was definitely a recruitment issue. Prior to this change, the vesting was ten years for everyone except Councilmembers, which had been changed a few years. A problem existed because when we tried to hire employees, they could anticipate a four- or eight-year term, 111 2/7/00 FISCAL STABILITY - RES. 000002 which means that they would be contributing to the Pension Fund but they would walk away with nothing. The Administration looked at that and decided that it would help us recruit people knowing that within five years they were vested, and they, after the service time that they provide the City, they would have a pension. And as a result, the Administration came to Council and asked for this change to be made, and it was a part of the overall change to the Pension Ordinance. We believe that now and for the future, it will help us to attract good people in high-level jobs.
Well, now we're up against an economic problem. The economy is so tremendous that the salaries we are offering -- although, as you know, we came to you a few years ago and increased salaries to levels we believed would help us recruit, it is still a problem, or is a new problem, because the economy is so 112 2/7/00 FISCAL STABILITY - RES. 000002 wonderful.
Thank you, Madam President. Just to continue on one question that you were on. Could you tell me under what circumstances the question of the current Pension Fund's assets would become questionable? You know, can you give me some example of when we might expect to have a problem resulting from this unfunded liability?
I'm not sure that I'm clear on your question, but I'll take a crack at what I think you mean, Councilman. The Pension Fund depends tremendously on performance of its assets. The City makes a contribution, the employees make a contribution, but the investments are a very big part of where we are. The economy has been, tremendous, equities have done well, we have a balanced portfolio. But in the event that the economy took a nose-dive and equities did poorly, then the Pension Fund would not do well, and we would have 113 2/7/00 FISCAL STABILITY - RES. 000002 less money coming in to fund our pensions. Is that what you're driving at?
I recollect when I came into City Council a goodly number of years ago, the Pension Fund was a half a billion dollars, which means this is about 10 times that amount of money. I'm just baffled always by the discussion of an unbalanced Pension Fund as being anything like a problem, 'cause the government is not a business. We're never going to go out of business. I can't foresee any time when Philadelphia would go out of business, except when kind of the whole world no longer existed. A fully funded Pension Fund means -- could I state my meaning and they you can correct me if I'm wrong? I think being fully funded means that if the government closed tomorrow, every pension obligation now on the books could be immediately paid in full. And I can never 114 2/7/00 FISCAL STABILITY - RES. 000002 understand anything like that kind of a scenario ever existing. And so my eyes glaze over and I usually find the auditors, whom I question, their eyes glaze over, when I say, "Forecast for me a circumstance under which there could be a problem." And the present state of funding, actually when it was 50 per or 40 percent, and I've never yet had anybody come forth with a scenario which suggested that in a the lifetime of any yet-to-be-born grandchildren, there could be a problem. Do you know of any scenario like that? I mean, other than repeating to ourselves the words that we have an unfunded liability that must be dealt with and kind of shaking our heads warningly, is there ever a scenario that anybody's ever projected that would indicate that any employee of the City of Philadelphia would ever fail to have pension funds available?
I can answer that question. 115 2/7/00 FISCAL STABILITY - RES. 000002
You're talking about theory, the 100 percent funding, etc. But the reality is that if the burden on the residents of this city became too great because of the funding of the Pension Fund, the General Fund obligations to the General Fund could become burdensome, and that would cause us to have to raise taxes. No, we're not going out of business, but what burden do we want to place on the citizens of this city to fund our pension?
Well, that's the kind of answer I always get, and it never answers the question. All right, we'll go on to other areas. I'm wondering, does Mayor Street have any anticipation -- I hope not, so I give you the answer first that I want to hear. But I wonder, are we going to one day awaken and find that Mayor Street, like Mayor Rendell, has asked the Governor to take people off of welfare and have them have no income? 116 2/7/00 FISCAL STABILITY - RES. 000002 That's what Mayor Rendell did in the last month or two. He complained to the Governor that people were still remaining on welfare that shouldn't have been, according to the Mayor, by the Mayor's own standard. I'm hoping this mayor will have a different definition. Because on the one hand, I hear the terrible consequences that will accrue to Philadelphia if people come off of welfare. We shudder at the thought of all the burdens we'll have to assume. And yet the Mayor, Mayor Rendell, was asking the Governor to take people off of welfare.
Mayor Street does not have any plans as ask the Governor to take people off of welfare.
All right, thank you. Thank you for that. Now tell me the answer to another very simple question. We have a $207 million surplus, give or take a million or two of that?
205.7 million. Now, 117 2/7/00 FISCAL STABILITY - RES. 000002 is that a surplus I can touch? Is the money somewhere in the bank and I can go there or open a safe deposit box or do something like that? (Laughter.)
Mr. Dubow actually keeps it in a very safe place. (Laughter.)
Absolutely, absolutely. You're going to have a lot of visitors tonight.
It's on the books. It's not actually sitting in a bank account anywhere. It's on our books.
Well, a surplus means -- in common vernacular, it's extra money. 118 2/7/00 FISCAL STABILITY - RES. 000002 It's leftover money, it's untouched money at the moment, unused money. Is it in any of those forms? What is the form of the surplus?
Actually, we call it "unused money." Over the course of this plan, if you read through, we actually project that the surplus year by year will go down to 5 million at the end of 2005.
But right now, does it exist? Are we being told the facts when we're told there's a surplus of 207 million?
It exists. Now, in what form does it exists? Are they certificates of deposit? Is it bank books that the City carries around with it?