Thank you so much for being here. Please state your name for the record and proceed with an abbreviated version of your testimony because we do have your written testimony. Thank you.
Good afternoon. I believe it is now Chair Gilmore Richardson and other members of the Committee on Finance. My name is Rick Sauer. I'm the Executive Director of the Philadelphia Association of Community Development Corporations. Thank you for the opportunity to testify in support of Bill 250324. As requested, I'll summarize my written testimony. It was already submitted. I just also want to acknowledge that a number of our members have also submitted written testimony that won't be testifying in person here today. First of all, we want to express our gratitude to Councilmember Gauthier for sponsoring this legislation as well as the eight other Councilmembers who have signed on as cosponsors, demonstrating the strong citywide support and impact this funding will have. As mentioned, the city relies on community development corporations to deliver a range of critical services to residents and small businesses, such as addressing key affordable housing, social service and neighborhood economic development needs. 4 billion in economic impact of the city of Philadelphia. So for a modest investment, the city is making and they're getting much more out the back-end. Despite this reliance on CDCs to deliver services that are much needed by our residents, the critical resources that the city provides to CDCs through a range of programs tend to be very programmatic-specific and they're often insufficient to cover the increased cost of running an organization and aren't always flexible enough to respond to many new emerging needs in our communities. These funds are also allocated on a yearly basis, which makes it more difficult to engage in long-term planning and to attract and retain qualified staff. This bill addresses these shortcomings by creating a new program to provide reliable, accountable, flexible and multiyear funding to CDCs to better enable them to fulfill their mission. The Community Capacity Building Fund, which is the name we put to this, would support 50 nonprofits at level of 125,000 per year which will support a broader range of critical services and essential operations, strengthening CDCs to develop innovative programming that is responsive to evolving community needs in delivering lasting neighborhood change. And as mentioned, this bill provides the Administration with the flexibility to implement it either as a grant program or as an expansion of the city's existing CDC Tax Credit Program, which currently is limited of only supporting neighborhood economic development activities. I will note that that program has been around for 16 years. It has a very strong 17 involvement by both the businesses 18 that are supporting the CDCs that 19 are out there. There is a 20 challenge I think sometimes in 21 lining up a business partner 22 because you have to have a 23 significant amount of tax liability to participate, and that's why the idea of enabling a third business to participate and partner with the CDC was incorporated into the legislation. This bill also represents a strong local leadership we need to meet this moment. The Trump Administration has proposed a 44% cut to the HUD budget and deep cuts to many other federal programs that help our residents. Flexible multiyear support for CDCs will enable the city to better insulate key community supports from harmful actions at the federal level going forward. CDCs are also key providers of affordable housing and related services. E. Initiative and better support the goal of creating equitable solutions to our affordable housing crisis. In closing, we just see that the challenges facing our communities every day, addressing them requires having strong, committed partners on the ground that are trusted in the community. That is the role of CDCs in Philadelphia and that is the strength that this bill builds on. We fully support this legislation and strongly urge members of the Finance Committee to report it with a favorable recommendation. Thank you.
Thank you. Thank you very much for your testimony and for your work. We truly appreciate your work and wanted to recognize Garrett as well. We appreciate each and every one of you. Please state your name for the record and proceed with your testimony.
Good afternoon. Jamila Harris- Morrison, Executive Director of ACHIEVability, PACDC Board President and lifelong West Philadelphia resident. Good afternoon Chairwoman Gilmore Richardson and Councilmembers. We really appreciate you taking the time to take this bill 16 up for consideration and to move it out of the Finance Committee. Today we come to you, as we've heard CDCs are really the lifeline. They are the invisible heroes that keep this city going. Our CDC network of over 50 organizations that touch from Kensington to Kingsessing to Cobbs creek down to Frankford, those groups are working tirelessly building affordable housing, activating our commercial corridors, trying to address the impending gun violence epidemic, making sure that residents, renters can stay housed through eviction prevention services, making sure that homeowners are connected to Basic Systems Repair, title tangled issues and things -- title tangled services that can help them maintain long-term assets. So when we look at this funding, we see it as a critical lifeline to keeping this network going, especially in a very unpredictable funding ecosystem that we're operating in. We understand that Philadelphia has the stubborn notable image of being known as the city with the highest poverty level out of the 10 largest cities. We are working actively each day to undo that name of us, and that number would be infinitely higher if we did not have CDCs on the ground providing vital but also long-term services to residents to keep them whole. This funding we cannot continue to do it on a hope and a hustle. Okay. We have too many people who rely on us as trusted messengers, as people that they can come to in a time of need, as people that they come to, to celebrate a community block party. So CDCs really do weed themselves into all facets of community. So we really encourage and would appreciate the support of Council to support this legislation, which really shows that it's an investment, not just in the organization but in some of our most vulnerable Philadelphians. It's an investment that shows that you trust that CDCs know how to lead, know how to do what's best because many of us have team members that are people with lived experience, directly from the community or have experienced some of the challenges of the residents that we're seeing. And so, this funding will allow us to retain and attract staff. As we know inflation is out of control. Everything costs more. This work is labor-intensive. If you want somebody to knock on the door to see if you're eligible for the Homestead Act, if you want somebody to go talk to a business and see what their needs are, you need somebody who wants to be out in the streets, live customer service, not remote, those people need to be compensated at a rate that they can live on family- sustaining wages. This funding also provides us opportunity to build infrastructure and capacity and the ability to plan. Right now everything is a one-year cycle. And so, this would be a critical difference, this multi-year aspect, that would allow us to think about how we do IT infrastructure, how we do wellness, how we expand the services, how we scale up the things that are actually working. So we really appreciate your consideration of this bill and hope we can count on your support to move it out of committee. Thank you for the opportunity to speak today.
Thank you. Thank you very much, Madam Chair of the PACDC Board, and representing obviously ACHIEVability in West Philadelphia. You forgot one title and that's a former --
-- Gomper Stomper for full disclosure for the committee. We thank you very much for your testimony. I'd like to say for the record we recognize the presence of Councilmember Jeffrey Young from the 5th Council District. We thank you for being here. Also wanted to say for the record that we did receive written testimony that we will submit for the record from Mount Airy CDC. And then we'll recognize now our two additional witnesses from the other CDCs for your testimony. So please approach the witness table. State your name for the record and proceed. I apologize if I said 6th. I meant 5th Council District. You know I know that. Okay. Please state your name for the record and proceed with your testimony.
Good afternoon, Chair Gilmore Richardson, esteemed Councilmembers. My name is Majeedah Rashid. I'm Chief Operating Officer of the Nicetown CDC and a member of PACDC. I thank you for allowing me to testify this morning -- this afternoon on Bill 17 No. 250324, the proposed Community Capacity Building Fund. My testimony today will give the perspective of the Nicetown CDC regarding this bill. The Nicetown CDC was founded in 1999, and our headquarters and program facilities sit centrally in Nicetown's commercial corridor. Since our inception, we have established a succession of corridor neighborhood plans, a comprehensive NAC program, economic and mixed-use development, affordable housing, Rebuild projects, land management, corridor cleaning and violence prevention programs and more. We have been on the ground and in the mix serving very low, low and moderate income residents and businesses with what we have been blessed to achieve and from the muscle. Despite our track record of success, we have also had many failures and struggles. These challenges were primarily related to a lack of flexible funding that would allow us to more effectively address the wide range of acute and chronic needs in the neighborhoods that we serve. We all too often have to turn clients away or send them to hard to reach places only to be again turned away. Additionally, we have always been in need of key personnel that will lift the burden and need for our existing staff to wear multiple hats. We constantly struggle to maintain the balance needed to be productive and serve our constituents effectively. The Community Capacity Building Fund would provide a reliable source of flexible funding that would not only help alleviate the lack of specific resources needed for our organization, but will allow us to better serve and build the capacity of our communities to become self-reliant. That is of the highest importance. Like many of our fellow CDCs, we may be awarded grants, contracts and other funding that have limited timelines, typically one year. As soon as we are able to really make a difference, the funding runs out. This threatens interruption of services and may cause us to cease operations or providing critical services and resources. The same is true of development, whether affordable housing or economic or commercial development. We need the Community Capacity Building Fund because it will provide multiyear funding and allow CDCs to be more reliable, sustainable and effective in our efforts. CDCs have been one of the primary producers of affordable housing. We need to ensure that our CDCs are strong with the capacity to continue helping to address the affordable housing crisis in Philadelphia. Especially with the current goals, we know the CDCs will have a major role in bringing those goals to reality. Our city relies on CDCs that have been impactful with affordable housing and providing vital services to our constituencies for decades. Now is the time to support CDCs that are the first responders to ever- increasing and multi-level community threats. This includes our collective efforts with gun violence prevention, public safety, community engagement and organizing. We are faced with numerous alterations and cuts to funding streams federally, which extends statewide and locally. Our current funding streams too often fail to cover our organizational costs, which may weaken our stability and hinder the growth of our programs and projects. This proposed bill cannot be kicked down the road. It is needed now more than ever. These and all coordinated efforts of CDCs are worthy of support and the proposed Community Capacity Building Fund will definitely be a positive step in the right direction. On behalf of the Nicetown CDC, our fellow CDCs and all of the communities that we serve in this city, I ask that you approve Bill No. 250324. Thank you again for this opportunity to testify.
Thank you. So wonderful to see you. We thank you very much for your great work in Nicetown. We certainly appreciate you. And I know Councilmember and our Vice-Chair Councilmember Bass appreciates you as well. Okay. Please state your name for the record and proceed with your testimony.
My name is Michelle Feldman and I'm the Executive Director of the East Falls Development Corporation. And first, thank you to the Finance Committee, to Councilmember Gauthier and all of City Council for the opportunity to offer comments in support of the CDC Community Capacity Building Fund. I offer my comments in my role as the Executive Director of the East Falls Development Corporation. Our organization is laser-focused on commercial corridor revitalization along Ridge and Midvale and Conrad Street in Northwest Philadelphia. We carry out our mission through one-on-one technical assistance, convening our business association, comprehensive neighborhood planning and capital improvements to enhance the vibrancy of our business district and neighborhood. While we are a community filled with gems such as (inaudible) and Vault and Vine, we experience a growing commercial vacancy rate and a business district in need of physical improvements to increase foot traffic and create a sense of place. We like to say we are a small but mighty CDC with one full- time staff member and three additional part-time staff, along with a network of wonderful volunteers, including board members and committee members. And while we work each and every day to address the issues our small business community faces from both a micro and a macro perspective, additional funding will be transformative for our organization and our community. A second full-time staff member would allow us to better serve our existing businesses and recruit new ones. Further, additional funding would meet gap or matching funds for innovative projects like our Boat Launch, the East Falls River Landing or substantial seed money for our growing business association to begin our evolving rainy day loan fund for our entrepreneurs. We hope you will consider this a new and vital resource for our city's community development corporations, as organizations like ours continue to work on the ground to serve our residents and small businesses. Thank you for your time and attention this afternoon and we are happy and eager to answer any questions or share any additional information.
Thank you. Thank you very, very much for your testimony and thank you for your work in East Falls. We appreciate you very much. Thank you all so much for being here. I'd like to recognize the presence of our Council President Kenyatta Johnson. Thank you for being here, Council President, for our Finance Committee hearing. We certainly appreciate all of your hard work. Thank you all so much. We're now going to proceed. Are there any other questions for this panel? Any questions for this witness? (No response.)
Okay. Seeing none, we're going to proceed now to Bill 2 No. 250568. If you could please, Clerk, call the first panel we have and the only panel we have on 250568. You can state your name for the record and proceed with your testimony.
Panel 1 for Bill No. 250568 Matt Bowman, Deputy City Treasurer. (Witnesses approached witness table.)
Thank you very much for being here again. State your name for the record and proceed with your testimony.
Matt Bowman, Deputy City Treasurer. Good afternoon, Chair Gilmore Richardson and members of Finance Committee. My name is Matt Bowman, Deputy City Treasurer. Here with me today is our Finance Director Rob Dubow, City Treasurer Jackie Dunn and other senior representatives from the Administration. We're here to testify in support of Bill 250568. once amendments are agreed upon and finalized. We continue to work through amendments and are confident that through collaboration with our partners in City Council we will end up with a draft that we can all support. E. Plan, a program to build and preserve 30,000 units of new and existing housing and otherwise support affordable housing across the city. The bonds would be issued in an aggregate amount up to $800 million outstanding, plus related cost of issuance, credit enhancement and discount. The bonds would be secured by the city's obligation under the service agreement to budget and appropriate annually amounts necessary to pay the service fee, which would be sufficient to pay debt service on the outstanding bonds. E. is a transformational investment to provide quality, safe and affordable housing in Philadelphia. The bond proceeds would be used to preserve homes, make homes more affordable, build more housing and improve municipal customer service for homeowners, renters, landlords, developers and contractors. Ultimately, the bond proceeds would be spent to prevent housing instability and homelessness, ensure that housing and neighborhood infrastructure are in a state of good repair and more resilient, redevelop vacant lots and buildings, beautify city blocks in order to promote the health, welfare and safety of the residents of the city, prevent and eliminate blight and encourage the provision of healthful homes, a decent living environment and adequate places of employment for residents of the city through redevelopment, renewal, rehabilitation, housing, conservation, urban beautification and similar activities which may also be undertaken in commercial and mixed-use areas. Our intention is to issue the bonds in two tranches of approximately $400 million each, as proceeds are needed. This proposal is fiscally responsible as the estimated additional debt service is in line with our long-term debt management policies and maintains the declining debt structure consistent with best practices. Additionally, the flexibility to manage the allocation of proceeds for investments is really a key benefit. We are well-positioned to disperse these funds quickly because they largely support existing programs. For the new initiatives, we have dedicated teams of inhouse experts and consultants driving successful implementation, including Guide House and Reinvestment Fund, who both bring significant experience in a number of key areas, including consumer protection. The bill, once amendments are agreed upon and finalized, will enable the city to deploy these funds efficiently and effectively to address housing needs across the city. I want to re-emphasize our shared agreement that we have a housing crisis, which underscores the urgency and importance of passing the legislation now so we can spend these funds as quickly as possible and with the flexibility that entails. We have the capacity to spend these funds quickly and we intend to do so and we can do so without undermining District Councilmembers' decision-making or authority. The Administration recommends adoption of an amended bill. We respectfully request that the committee give the bill, once amendments are agreed upon and finalized, its favorable recommendation and further that the committee recommends that the rules of Council be suspended so as it's the first reading of the bill at the next session of Council. This concludes our testimony and we're happy to answer any questions.
Thank you. Thank you very much for your testimony. For the record, what is the cost of the debt service per year for this borrowing?
So after both borrowings have been done, we estimate the debt service to be, depending on where interest rates wind up, between 65 and 69 million a year after both are issued.
I apologize for that. I'm going to ask you to repeat due to the hard-working men and women of the Philadelphia Fire Department on their way to an emergency. Please repeat.
So after both series of bonds are issued, we estimate that, depending on interest rates, debt service will be somewhere in the range of 65 to 69 million a year.
So 65 to 69 million per year. How much would that cost across the life of this five year plan?
The first year the second issue doesn't come until FY28. So for the first couple years the debt service is about half of what I was saying.
One of the things we looked at is how this fits into our long-term debt structure and what happens to our debt service if you include this, the proposed Rebuild borrowing and proposed GO borrowing. Even with all of those borrowings, our debt service would be lower in 2030 than in '26 and then it continues to decline after that, and that's in large part because of the fall off in our pension obligation bond debt service.
Right. And so -- may you repeat the last portion.
Yeah. So that decrease that we're showing after FY29 is in large part because of our pension obligation bonds that have that balloon payment in FY29.
Right. And so, what is the projected cost for the entire length of the borrowing?
It's about 1.3 billion. A little over 1.3 including principal and interest.
Okay. So $1.3 billion including principal and interest. And then for the record, if you can aggregate out how much is just the interest.
About 500 million, which is typical for all our bond deals. We have interest that we pay.
About 500 million. It's basically a difference between that 1.3 billion that I mentioned and 800 million, so about 500. Did that right my head.
Just for the record. I'm just asking for the record.
And what would it cost per year if the borrowing were at $400 million?
So 400 million is about 33, about half of what we're talking about.
Okay. And then across the five year plan?
Okay. And then for the length of the borrowing?
That we'd have to -- it would probably about half, right. Basically about behalf of that 1.3 billion.
Okay. And so, for the record how would you say a borrowing like this compares to the pension obligation bond from 1999?
Yeah, thank you for asking that. In a couple of ways. The total amount is smaller and this has leveled debt service over time as opposed to a balloon payment like the pension obligation bond did. So there wouldn't be that big hurdle in the future that we see with the pension obligation bond.
So it sort of spreads it out over time instead of a one-time balloon payment like the one we are soon to deal with in the life of this five year plan, correct?
Okay. And then would you say that the market conditions are similar to that time?
I think rates are actually a little lower than they were back then. There's some instability in the market now because of uncertainty, particularly around federal policies but rates are a little lower now.
Okay. And then do you know the percentage now because I think you're doing the taxable bonds, correct? I know we had this conversation early on in the process.
Yep. We are projecting that for the first deal we'd be in the high 5s, and in the second we'd be in the mid-6s.
Sorry. For the first bond issue we're assuming that we'd be in the high 5s in terms of percent. And then for the second bond issuance in the mid-6s.
Okay. So the first bond issuance would be in the high 5s and the second would be in the mid-6s. But you do -- and I know we talked about this before but I have to ask for the record, if there is an opportunity to sort of aggregate out the portion of the borrowing that would be eligible for nontaxable bonds?
And we provided a response on that. I think what you're asking for -- we talked about the programs that were eligible so we can give you the dollar amounts for those programs.
Right. And I know you all submitted the information, but because we are now undertaking the bond authorization relative to the H.O.M.E. proposal, I just think it's important to get on the record and on the transcript for this hearing that we did ask if there was an opportunity to aggregate out sort of the programs between nontaxable bonds and taxable bonds, recognizing that the latter would sort of save you with the interest rates.
Right. And the trade-off is between that and the flexibility and moving between programs.
Right, understood. But I just wanted to get that on the record. And do you see any potential impact around the cost of the borrowing currently? Any impact, meaning around the bond yields and the percentage rate? Based on your previous answer, I think you said high 5s and then second tranche mid-6.
Yeah. And so, there's always particularly for the second issue uncertainty around interest rates because that's a couple of years out. So whatever happens with interest rates will have an impact on the cost of the bonds.
Thank you. Thank you very, very much for that. And then for the record if you could just state the timeline for the first borrowing and the second borrowing. And then if there are any particular factors that you all will take into consideration prior to the second borrowing.
So the first borrowing we're assuming in this fall and then the second borrowing we're assuming in November '27 so in Fiscal '28. And the timing of bond issue is driven by the pace of spending.
I keep doing that. Sorry. The timing of bond issuance will depend on the pace of spending.
Okay. And then if you -- because you were here, Rob, I just have to ask this. If you could talk about lessons learned from Rebuild because we still have a number of Rebuild projects that have not seen completion. I'm not a District Councilmember full disclosure, but I do care about the work of my District colleagues and all the projects in their districts.
Yeah. There are a number of things that wound up delaying Rebuild. First, there was a lawsuit that challenged the beverage tax. And so, until that lawsuit was settled we didn't know whether we'd have that funding stream so that slowed down the start of the program. And then there was the pandemic, so work stopped during the pandemic. And then because of those multiple delays, spending, I mean, costs went up, inflation went up, and so the cost of projects went up. So one of the big lessons there was is it's important to move things through as quickly as possible and that's what we would do with this program.
Okay. And then lastly, have you all considered around the federal uncertainty and particularly around the tariffs and the impact on sort of the home market and the purchasing of goods and services supplies? Have you considered that as a part of this plan?
Yes. That's part of what we looked at as we looked at production.
Okay. Excellent. All right. Are there any further questions from members of the committee? The Chair recognizes Councilmember Thomas, then Councilmember Ahmad. Councilmember Thomas.
I'm wondering why is the Admin not okay with us just doing the first 400 million now, assessing how that goes and then coming back to the table for the second 400 million?
We want to be able to move as quickly as possible. We see the crisis and we want to move forward.
Based on your testimony right now, I believe you said that the second borrowing would take place in the year 2027?
So help me understand how delaying the second 400 million will slow down the process if you don't plan to borrow it for another two years? You introduced this concept to us in March of this year I believe. And so, if we're able to get -- hypothetically speaking, if we're able to get the first 400 million from the time you introduced this concept to us in March to us taking a vote in June, why is it that you don't have faith that we can't do the second 400 million when we have two years to figure that out and we can also use those two years to maybe iron out any kinks or unanticipated problems that might exist?
It has nothing to do with having faith or not having faith. It's that we see this as one complete plan. We want to get approval for the entire plan soon. So we want to make sure that we have the entire thing like what happened with the NPI project, the total amount was approved upfront. And it happened with Rebuild too. This is the pattern that we've done for these projects. We've approved the total amount --
And both of those didn't go exactly the way planned, right. So we're using examples of things that was significantly less money, that also didn't go well. So I think with the spirit of the Chairwoman's original question as it relates to lessons learned, I believe one lesson learned is that maybe we shouldn't do the whole 800 million at one time.
So I would say one of the lessons learned from Rebuild is that you need to be able to move quickly and Rebuild didn't for a couple of reasons: One, hopefully both that won't recur now which is a lawsuit challenging funding source and a pandemic. So, yes, if things like that happen again, then this could slow the project down. We are going under the assumption that they won't and then we're going to move forward.
But you can see what my energy is as it relates to the recommendation, so that's why I'm offering some resistance because I just don't for a lot of different reasons, and I've said it on the record as well as in private negotiations, I don't understand -- I mean, we now have details. I want to take a moment to commend the Council President as well as the City Controller for putting themselves in a position to offer a little more oversight than what was originally proposed in the concept of this H.O.M.E. Initiative. But I mean, where I sit I just think that based on the testimony that's being provided today as well as the details that has already been sent over to Council, I'm not convinced that this is a good idea. I'm not convinced that 400 million is a good idea, let alone 800 million is a good idea. And there's nothing that you've said in the midst of the questions that I've asked where I feel like you're providing an incredible answer that at least puts me in a position to be able to say that I think that this is a good idea.
So I'd say that the rationale is this is an entire program, much like we've done with earlier programs. We approve the whole amount upfront. There is a housing crisis in Philadelphia. I think everyone agrees with that. We are proposing ways to attack that crisis and the large majority of the programs that are in this proposed program exist already. So we have the ability to spend and to get these dollars out the door quickly.
There's an education crisis in the city of Philadelphia as well. You all used that and talked about it a little bit earlier. There's a poverty crisis in the city of Philadelphia as well. I just looked at Councilmember Young. He talks all the time about the fact that there's a gun violence crisis in the city of Philadelphia as well. I'm sure someone else will talk about a SEPTA crisis and so many other crises that exist in the city of Philadelphia. I don't see us pouring a billion dollars into those crises. So since we're pouring a billion dollars into this particular crisis, that's what you're proposing, you're going to see a certain level of scrutiny because there's a lot of us who on a consistent basis hear from constituents who talk about a lot of other things that's not just housing. So with that being said, I just wanted to put that information on the record because I'm very concerned and I'm hoping that the Admin is open to a dialogue around possibly approving a part of it now because you have folks like me who's skeptical about the entire concept. So the idea of jumping off the bridge and going straight into the water with 800 million I think it creates a lot of fiscal questions, especially considering, again I'll reference what the Chairwoman said, as it relates to uncertainty around decisions coming out of D.C., also considering previous issues that we've seen when we've done this level of borrowing.
And let me just address them here. You talked about some of the other crises for education. For example, we put $280 million a year in contributions to the school district above the amount that they get from our taxes so that's --
-- I mean, since you want to go there how much more have we increased in spending in year-round school?
How much more have you increased in spending in year-round school?
Right. So when you look at the increase in spending along with the increase of inflation as well as the overall crisis that we're dealing with our facilities, that's a $6 billion crisis. We appreciate the fact that we put a few more pennies in the public education, but we haven't done nothing significantly to put a dip in the facilities crisis as well as the fact that we have to consider that we have contract negotiations coming up next year. So I just wanted to put my information on the record, but I have more than enough energy to be prepared to go back and forth with you on any fiscal issue that you want to discuss today because I fundamentally disagree with H.O.M.E. And I don't know if there's anything that you can say to convince me right now that this is the direction that the City of Philadelphia needs to go in as far as investing a billion dollars.
I think the only point I was trying to make is that for those other issues you talked about we have substantial investments. It's not like there are not investments in those items.
That was my point. I vote and I read. I know we have investments in those issues. I was using those as examples to communicate social ills that we have in the city of Philadelphia. And I personally -- thank you, Madam Chair.
Thank you. Thank you very much, Councilmember Thomas. I wanted to know very quickly, then I'm going to pass it to Councilmember Ahmad, what are we currently spending on housing per year?
So to the Housing Trust Fund, it's around $30 million a year and sent over from the General Fund. There are some pots in the General Fund that add on to that and then there are debt service on the NPI bond issues.
Right. So debt service on NPI. And how much is that per year?
NPI is at 28 million a year, and then we're kind of winding down the NTI issue that's still at million a year. 5
NTI. We're 9 kind of towards the end of that and 10 it's about 16 million a year. 11
I'm just saying this for the record so people understand the difference. If you could go back to, and you were here so we thank you for your historical knowledge and context, specifically around NPI from last term, if you could talk about the original allocation for NPI, the original ask, and then how NPI was set up year over year. Just walk us through that process.
The original ask was 400, yep. And it was set up as doing multiple bond issues as cash flow requirements required.
Repeat that. I don't know why but the last part you can't hear.
Yeah, I guess I trail off. So it was a $400 million authorization with multiple bond issues and the timing issues depended on when cash was needed.
Right. But originally was it supposed to be 150 million a year? CITY TREASURER DUNN: Good afternoon. Jackie Dunn, City Treasurer. The first two borrowings for NPI were perhaps 100 million each and the third borrowing was 150 million. So there's 50 million remaining in that 400 million authorization that has not been issued. But the plan was to do even increment borrowing, you know, over time as Rob has mentioned.
Meaning, because I thought that it would be 100 million per year. CITY TREASURER DUNN: Correct. The first two issuances were, as you stated, 100 million. And I think they're around 18 months apart. And then the third, there was a decision to increase because of the need that those programs had to shift some of what would normally have been in the fourth borrowing earlier into the third year. So it was a $150 million borrowing.
Okay. Great. Thank you. The Chair now recognizes Councilmember Ahmad. And if you could just state for the record how much we are expending per year. CITY TREASURER DUNN: On the NPI programs?
You could just state for the record NTI, NPI and then Rebuild. CITY TREASURER DUNN: The question is regarding the debt service?
Mm-hmm, for each one for each year. So NTI, NPI and then Rebuild. CITY TREASURER DUNN: Sure. For NTI, the Transformation Initiative the current fiscal year is 16.4 million in annual debt service.
Hold on one second because I'm trying to take notes. NTI current per year for debt service is 68,000,000? CITY TREASURER DUNN: 16, 1-6.
1-6. Okay. 16 million. CITY TREASURER DUNN: See, we found some savings right there.
Oh, there's savings right there. All right. So NTI currently for the life of this proposed five year plan debt service amount is million per year? CITY TREASURER DUNN: About 16.5 million across the five year plan annually, yes.
Okay. And then NPI? 8 CITY TREASURER DUNN: 9 NPI for the next three fiscal years 10 are around 28 million annually and 11 unless additional bonds are issued, 12 that amount -- is that the Housing 13 Trust Fund adjustment that last two 14 years? 15
So a small 16 portion of that debt service for NPI is paid out of the Housing Trust Fund, but the remainder is paid out the General Fund. CITY TREASURER DUNN: Okay. So that annual debt service is around 28 million for the NPI borrowings that have occurred to date. That does not include estimated debt service from the fourth NPI amount that hasn't been borrowed yet.
Which is the 50 million? CITY TREASURER DUNN: Correct.
Okay. And may you please repeat those numbers again. CITY TREASURER DUNN: For NTI, the Neighborhood Transformation Initiative, is about and a half, 16.5 annually. And 16 NPI for the three issuances to date is around $28 million annually. And for the three NPI borrowings that have occurred and for the Rebuild program, the annual debt service is around 14.5 million annually for the two Rebuild borrowings that have occurred to date.
Okay. And so, if you could also state now NTI, NPI and Rebuild the spending per year for each of those programs.
So we would have to get back to you on the NTI. I think that predates, maybe even predates somewhat Rob's time at the City, so we'd have to get back to you on that.
Well, Rob was here which is why I'm continuing to ask these questions. The historical knowledge and context is important. So let me move to NPI then. NPI, how much is spent per year? CITY TREASURER DUNN: I don't have it broken out per year, but for the two issuances that -- sorry, for the three issuances that we've completed so that would be million, they've spent 90 million of the first 100, 78 million of the second 100 and about million of the third issuance 5 which was 150 million. And those 6 numbers are from April. So it 7 would be a little higher now that 8 we're in early June. But those are 9 dollars actually that have gone out 10 the door from the Trust to the 11 vendors or contractors and agencies 12 that are part of the NPI program. 13 The NPI programmatic 14 teams have commitments for a number 15 of the dollars that haven't gone out the door yet. So there are things that are in process that have not come across our desk.
Right. And then for Rebuild, how much was the spend per year?
So Rebuild, the first issuance we spent about $90 million and that did take, you know, as we've all talked about there are those delays that took about five years, about four and a half years to spend that first 90 million. The second bond issue we spent just over 60 million in 8 months. So it has ramped up quite 9 a bit once they got over the those, 10 external factors we talked about 11 and then some of the teething issues of standing up a new program.
Sure. And I ask that question because based on the question from earlier, Rob, you stated that the second tranche issuance for the H.O.M.E. bond authorization would be November 2027 which will be Fiscal Year '28. We're now looking at FY --
We're now looking at FY26. And I ask that because each of those numbers that I've heard even though the bond issuance for each of those programs give or take let's just say 400 million for NPI and 400 for NTI and the dollars allocated for Rebuild, at no point as a city were we able to spend $400 million in two fiscal years. So my question to you is listening to all the numbers that you all have provided, the debt service that we've had to continue to pay on each of these initiatives, and for each of the issuances noting that we have never spent $200 million in one year for any of these programs that's over the historical life of the city, why is there a rush on borrowing $800 million right away?
But you understand what I'm saying. The question is you want to borrow 400 million now.
You want to come back in November '27, FY28 for an additional 400 million.
But there's never been a time -- and let me stop there. You also want to do the debt service allocation in the life of this five year plan that we're slated to approve currently for both of the borrowings, so that's why I'm bringing it up. No, you don't want to borrow 800 now. But you want to do 400 now, 400 November '27 which will be FY28. We would have to include the debt service allocation in the life of this five year plan. As a result of that, whether you borrow or not that allocation will be made. And so, thinking about the debt service amounts that we've paid in addition to each of the issuances and how much has been able to be spent over all of these programs, would you think it would be more fiscally prudent of us to start with the first 400 and then after program evaluation and determination, come back to evaluate how much we were able to do and then make a determination from there?
Yeah. No, I think in terms of being fiscally responsible the bond issue will happen if we spent money. So I think in terms of being fiscally responsible the authorization allows us to move forward. I don't think that it's bad fiscal policy to approve the total amount of the funding upfront. Again, the spending -- the second borrowing will depend on the pattern of spend. And we are doing a number of things to --
I apologize for the interruption, but you said the second bond amount will be determined by the amount that you spend.
And so, is there a commitment to state that if you're not able to spend the $400 million in the first two years prior to coming back to us in November of '27 and FY28, that you would not then come back for that same amount?
So our plan is to spend all this money, spend it quickly and be ready to borrow. Again, if we have not spent the money, right, we would not come back and look to borrow again. If we still have money, we're not going to borrow before we need it.
But the key here though is that the debt service allocation will have already been done in this five year plan, right?
But the debt service payments will be tied to what we actually borrow. So if we wound up borrowing a different time, our debt service will look different going forward. It's like everything else in our five year plan. It's based on assumptions and those will -- they can change over time. They can look different in future plans.
But the money will still be set aside for that particular use, correct?
So it is projected in this plan that that's how money would be used, that's right. But that doesn't mean that if we change when we borrow that, that debt service projection won't change. It will change if we change that projection.
Okay. I'll hold there. The Chair now recognizes Councilmember Ahmad.
Thank you, Madam Chair. A bold plan and I know we have to be bold. However, that bold plan I don't see it reflected in the growth that has been projected which you say is 0. It doesn't jive how we can be expected to invest all this and get all this activity and then yet have no 9 growth.
Yeah, we don't project no growth. we project relatively slow growth because of all the other things that are going on in the economy. One of the responses that we sent to the questions from Council was the projection of how many jobs we thought would be created here. I think it was in the 30,000 range. So there's a definite projection of jobs created.
I mean, if you're going to be bold, we have to be bold all the way across because that gives confidence to people, investors, to look at what our own projections are. And if we can on one hand ask for all this money and then the other hand say, oh, we're going to be mealy mouthed about this, just as a city who's looking to grow and get investors and people to come here, we have to have a consistent picture and saying that we're going to be very, minimal in projection here but asking for all this here, really we need to have an adjustment there, because we really need to look at what we're projecting to the -- the hope factor is really important in how we can attract more people to invest in our city, to move to our city. So that's one point. Two is could you just explain -- these are revenue bonds, not general obligation bonds, right, which revenue bonds are more risky. Can you explain what are we getting -- to do this as a revenue bond, what are we seeing is sure shock to be able to pay down this bond? Could you explain why we're going this way versus that?
So revenue bonds, really this case it means it's being issued by an authority, in this case the RDA, because the H.O.M.E. Initiative is consistent with the RDA's overall mission, so that's why we're issuing through the RDA. So that makes it a revenue bond since it's not being issued by the City directly. But through this process, we'll be committing to paying the debt service from all of our revenues so it is as secure for investors as a general obligation bond. And that's how the rating agency rate it. They rate it the same because it has the same security.
What are we using as the asset to say we're going to be able to pay down, you know, do the debt service as opposed to having GO bond?
We're on the hook is what I'm trying to establish. Very much so.
Yeah. Okay. Just understanding my colleagues' concerns about how much on the hook are we, so the lack of alignment of growth projection and then yet we are going to be obligated for so much, it's probably why is the growth projection doesn't look as robust as it could because we are feeling risk, you know, risk averse here?
No. The growth projection has to do with really what's going on in the national economy. And let me take a step back. Our growth projections come from an outside econometric firm. We work with who looks at what's happening not only nationally but globally. They then join us at a meeting at the Federal Reserve here where we talk to other economists who say it could be great things going on in the city, but if the national economy is going to be going through really hard times, you're still going to have a really big impact on our growth. So for example, higher tariffs mean that there is less economic activity, that affects us. And so, things like this initiative will help offset that kind of impact, but they don't mean that if there's a nationwide economic slowdown that we're going to see multiples of growth of what the nation is seeing.
So that just brings me right back to the risk we are taking, right. So we are understanding our volatile national landscape. We are asking to go on the hook for 400 million with another 400 million in very short time. And yet we can't have -- and we don't know what those revenue projections are going to be because we're iffy about that. So is this the right time to do, even though we want to be bold, if all these other parameters are not matching up? How is it that we are being asked to sign off on 800 million?
So we have revenue projections in our plan that take into account that uncertainty and we have a plan that is balanced assuming the debt service on this bond issue. And actually, when we get past the years of our five year plan, our debt service goes down in large part because of what's happening with those pension obligation bonds. So, yes, I do think this is an appropriate time.
I choose to disagree. Thank you very much. Are you -- oh, Madam Chair is here. Okay.
Thank you very much, Councilmember Ahmad. Are there any additional questions for these witnesses? The Chair now recognizes Councilmember Thomas.
I don't have any of these questions planned, but I'm just listening to the testimony. I think Councilmember Ahmad made a good point. She talked about the budget has projected job growth of 0, but we're being asked to fund a program that creates how many jobs, 30,000. Help us understand that. How do we have a budget with a projected job growth of 0, but we're looking at passing a budget that's supposed to create 30,000?
So the budget and five year plan don't project 0. They project small growth. But at a time when you're seeing that kind of growth from the national economy, that's a good time to do stuff locally that will help generate jobs.
I don't know if that answered the question, but okay. So 30,000 jobs over the next year or so is considered small growth. That's not big growth. That's just what we're doing, right? That doesn't include the rest of the private sector.
So we're also here at the same time that we're looking at the federal government cutting funding for our three or four biggest areas of wage tax, right, education, medicine, government. They combine for about a billion dollars in taxes. So our other parts of our economy are probably going to see declines because of that and we've already started to see that with educational institutions doing layoffs or hiring freeze. So, yeah, overall we're not going to see the kind of growth we would like if that's happening. And that's why you see the projections you see in our plan, but it's also why it's important for us to make investments.
I think you make some great points. So I'm wondering why are we getting rid of the $100,000 BIRT exemption knowing those things exist with no 15 significant investment in no 16 industries at all and no relief for small businesses on the net income portion side. I think you're absolutely right. I agree with everything you said. So help me understand those decisions if that's your thinking right now.
So the exemption, we like the exemption. We would rather keep it. It is going away because of legal challenge and the risk we think that challenge presents. We are proposing to invest $30 million in small businesses through Commerce, through both grants and assistance with tax preparation. We also are including in our proposed plan over $200 million in tax cuts, so we have a large investment in taxes and we have an investment in grants to our businesses.
Interesting. Okay. Doesn't necessarily again address my question, right, but I hear you with your response. You talked about the $30 million Commerce program. Since you brought that up, how much of that 30 million will go to businesses and how much is for staff?
So I think it's probably about 29 million that goes to businesses.
29 million goes to businesses and 1 million will be for staff to be able to disburse the revenue?
Well, to administer it so that we can make the application process simple and get the grants out quickly. Because one of the things that we've heard that frustrates people is we have these programs, we don't administer them well, they're overly complicated. It takes a while to get grants out.
So looking at it from an economic lens thinking about how many businesses will be impacted by the exemption going away, what made 29 million a sweet number? How many businesses are going to be impacted by the exemption going away to the point whereas though you calculated that 29 million would be the appropriate number to offset the situation?
That's roughly the gain in revenue from the exemption going away. So we wanted to take all the revenue we're getting from the exemption going away and putting it into this program.
So you said you anticipate an extra 29 million in revenue that businesses are going to have to pay because the exemption is going away.
We did a calculation of businesses that had revenue of 100,000 or less --
And did you consider the creative economy, like people who might be a sole proprietor, people who might be a 1099 employee?
To Councilmember Thomas' point regarding the fund, I think it will be helpful if you could provide just a breakdown based on the information that you all have already shared with us for the record of what the allocation would be for that fund?