COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON APPROPRIATIONS - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, December 7, 2006, 10 o'clock a.m. - - - Bill 060833 - Transfers in appropriations for FY 07 from Grants Revenue Fund... Bill 060851 - Transfers in appropriations for FY 06 from Grants Revenue Fund, the Director of Finance - Provision for Other Grants to the Housing Trust Fund, the Mayor - OHCD. Bill 060886 - Transfers in appropriations for FY 06 within the General Fund... Bill 060887 - Transfers in appropriations for FY 06 within the Aviation Fund... Bill 060888 - Transfers in appropriations for FY 06 withing the Water Fund... Bill 070899 - Transfers in appropriations for FY 07 within the Community Development Fund... COUNCILMEMBERS PRESENT: Joan Krajewski, Chair Donna Miller Jannie L. Blackwell Juan F. Ramos Carol Ann Campbell Frank Rizzo Darrell L. Clarke Daniel J. Savage W. Wilson Goode, Jr. Marian B. Tasco. Jack Kelly Anna C. Verna - - - V A R A L L O Incorporated Litigation Support Specialists 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 12/7/06 COMMITTEE ON APPROPRIATIONS WITNESS BILL 060886, 887, 888 Dianne Reed, Budget Director............ BILL 060851 Dianne Reed, Budget Director............ Deborah McCullough, OHCD................ BILL 060889 Kevin Hannah, Secretary of Housing...... 9 Sherman Harris, Local 1971.............. 20 10 Anthony (laid-off RDA worker)........... 23 Tracy Penson, Local 1971................ 33 BILL 060833 Dianne Reed, Budget Director............ 46 Charles McPherson, City Council CFO..... 60 Peggy Vanbelle, Deputy Budget Director.. 62 Rick Tustin, Capital Program Office..... 79 Mike McCrea, Recreation Advisory........104 Rob Dubow, PICA.........................110 * * * 3 12/7/06 APPROPRIATIONS - 060886, 87, 88
Thank you. Before we begin, I'd like to acknowledge the Councilpeople. To my left, I have Councilman Rizzo, Councilman Ramos, Councilman Clarke. To my left, we have Councilman Goode and Councilwoman Miller. I believe that we're going to start with Bill 060886. Do we have someone w from the Administration here to testify? (Witness comes forward.)
Councilwoman Krajewski and members of the Appropriations Committee, I'm Dianne Reed, the Budget Director, and I'm here to testify on Bills 060886, 887, and 888. Bill No. 060886 transfers $20.9 million in 31 transfers from unexpended funds in various departments 4 12/7/06 APPROPRIATIONS - 060886, 87, 88 to other departments for purposes of -- to clean up the '06 budget. There are transfers with net changes and 14 5 that only make changes among classes 6 within departments. 7 Of the $20.9 million, the 8 largest amount, 15.4 million, is the 9 Department of Human Services excess 10 appropriating power. And among the 11 major recipient purposes that this money 12 is being transferred to are: 13 5 million for Water Department 14 bills and Department of Public Property; 15 million for Health; 16 3 million for Worker's Comp; 17 costs higher than expected; and 2 million to the First Judicial District, as agreed in a prebudget period memorandum that we have with them. So we ask for Council's favorable consideration of this bill and ask for suspension of the rules today so that this could be put on first reading 5 12/7/06 APPROPRIATIONS - 060886, 87, 88 and final passage. I'm also testifying on 060887, and 888, which transfer money within the Aviation and Water Funds from unused fees to the pension contributions because, as a result of the workforce reduction that we went through, these funds have a larger share of the pension obligation, and so they need to fund their share of that. Would you like me to go on and testify on 060851, or do you want to wait? 'Cause I would like to ask for a suspension of the rules on most bills.
Okay. I also ask for a suspension of the rules for these to be put on first reading today.
Thank you. (Inaudible)... transfer for Public Property for water and sewer costs that were higher than expected? I 6 12/7/06 APPROPRIATIONS - 060886, 87, 88 think the total amount of transfer was about million. Is this higher than 4 issue, or is it just the normal cost of 5 doing business?
This is for the water bill and it just, I think, reflects the rate increase. I think it's primarily rate increase.
Well, what are the total costs of the water and sewer for Public Property for FY 06?
I would have to get that information back to you; I don't have all of that.
Thank you. Are there any questions from members of the committee? Before we continue, I would like to acknowledge that we also have Councilwoman Campbell and we also have 7 12/7/06 APPROPRIATIONS - 060886, 87, 88 Councilman Kelly with us. Oh, I'm sorry, and Councilman Savage as well. Are there any questions? Councilman Rizzo.
You indicated that one of the increases is the Workman's Comp; what was the significance of that? It's how much higher than it should be?
The Workman's Comp cost is about million higher than we anticipated and -- actually, excuse me, million higher than anticipated. And the Risk Management Unit of the Administration is looking into why our Worker's Comp costs are higher. It could be car accidents could be one reason, but we're trying to figure out what that is because it's continuing to be a problem.
One of the things it could be is, there's a report from the Controller today saying that 8 12/7/06 APPROPRIATIONS - 060886, 87, 88 the condition of some of the city's facilities is deplorable and has led to many accidents occurring. Could you provide to the Chair the number of accidents that occurred in our police facilities, and let's see how much that has contributed to this increase.
Could you give me a breakdown for the cost for outside legal counsel, forward me a breakdown for these costs in '06 fiscal year.
Thank you. Are there any other questions from members of the committee? (No questions.)
Thank you. Is there anyone else here to 9 12/7/06 APPROPRIATIONS - BILL 060851 testify on the bills?
We have provided testimony in advance from all of the departments who are addressed in the Administration's bills.
Okay, thank you. I believe we will hear testimony on Bill 060851.
Chairwoman Krajewski and members of the Appropriations Committee, I'm Dianne Reed and I'm here to testify on Bill 060851, which transfers money from the Grants Revenue Fund to Class 800 of the Housing Trust Fund, which enables OHCD to use a portion of the proceeds for administrative costs, as permitted under the HUD budget. And we ask for your approval of this transfer -- this is a year-end 10 12/7/06 APPROPRIATIONS - BILL 060851 accounting transfer -- and put it up, please, on first reading today.
Could someone explain to the committee the administrative costs associated with the transfer requests of $1.7 million? What kind of administrative expenditures does this cover?
We have the testimony -- have sent over the testimony from Kevin Hannah from OHCD on this. Let's see if there's anybody in the house who can speak specifically on this.
Well, we received the testimony, but it didn't break anything down on it. (Witness comes forward.)
Please state your name for the record. MS. McCULLOUGH: My name is 11 12/7/06 APPROPRIATIONS - BILL 060851 Deborah McCullough from the Office of Housing and Community Development. I'm sorry. Could you just tell me again what the question is specifically? This is about the Housing Trust Fund transfer, correct?
The costs associated with the transferred amount of $1.7 million. And what are these administrative expenses; what does it cover? MS. McCULLOUGH: Oh, it was personnel costs at the Philadelphia Housing Development Corporation and the Redevelopment Authority for staff that were working on the Housing Trust Fund.
Thank you. Are there any other questions from members of the committee? (No further questions.)
I have a 12 12/7/06 APPROPRIATIONS - BILL 060851 question.
Thank you. Thank you, Madam Chair. I just want some clarity. This transfer deals solely with the Housing Trust Fund, period? MS. McCULLOUGH: Correct.
And it's not related to any other reorganization issues? MS. McCULLOUGH: No. It's just -- it was only Housing Trust Fund costs that needed -- that were expended in one fiscal year that needed to be paid out.
Okay. I just wanted clarity. Thank you. Thank you, Madam Chair.
Thank you. Are there Any other questions? (No further questions.) 13 12/7/06 APPROPRIATIONS, BILL 060899
Thank you very much. Is there anyone else here to testify for or against these bills? (No response.)
I believe we will hear testimony on Bill 9 060899. Is there anyone from the Administration to testify? (No response.)
It's interesting that they testified in court but they have no one here to testify on 889. Could someone answer that for me from the administration.
My name is Kevin Hannah. I thought that there was 14 12/7/06 APPROPRIATIONS, BILL 060899 someone who wanted to speak on 551, the Housing Trust Fund bill.
Well, is there someone else here to testify on 851? (Witness comes forward.)
Yes. Good morning, Councilwoman Krajewski. My name is Kevin Hannah, and I serve as Secretary of Housing for the City of Philadelphia. I'm here today to testify for the Administration on Bill 060889. This bill makes transfers within the Community Development Fund, which is the fund where the Community Development Block Grant is appropriated. Bill 060889 makes transfers from Class 200 to Class 100 and Class 300. The increase in Class 100 -- that is, Personnel -- will allow for an additional 44 positions at OHCD as part 15 12/7/06 APPROPRIATIONS, BILL 060899 of the reorganization of the city's housing agencies. We anticipate that these positions will be filled by laid-off PHDC and RDA employees. In fact, without this legislation, the OHCD will not be able to hire on Monday, December 11th, as planned. The small increase in Class 300 -- that is, Materials and Supplies -- will fund related increased expenses at OHCD to support these additional employees. The increased staff at OHCD is necessary as functions in personnel are migrating from the Redevelopment Authority and the Philadelphia Housing Development Corporation to the Office of Housing and Community Development. In addition, these transfers reconcile OHCD's operating budget with the city's approved Year 32 Consolidated Plan, its funding application to HUD. The Consolidated Plan was 16 12/7/06 APPROPRIATIONS, BILL 060899 adopted by City Council in June, with funding levels for responsibility at OHCD. This transfer ordinance is consistent with Consolidated Plan that Council approved earlier this year. Because of the urgency of this matter, I respectfully request that bill 9 be voted out of committee with a request to suspend the rules of Council so that first reading may take place at today's session. I'll be happy to answer whatever questions the committee may have. Thank you for this opportunity to present this testimony.
Thank you very much. A question from Councilwoman Blackwell?
Thank you. Thank you, Madam Chair. This morning, I rise with regard to Bill No. 060889. As all of you know, we've been meeting. I had 17 12/7/06 APPROPRIATIONS, BILL 060899 meetings as late as this morning with regard to some of the City workers. I met with the Administration yesterday with regard to this transfer. Having said that, the people in this room, the majority of whom fill the chambers, are concerned that if we pass this bill, the housing award will be submitted without their issues being resolved. I'm, therefore, asking this committee if you would consider holding it up and having more clarity with regard to City workers, the whole housing reorganization piece, and where we stand. (Applause.)
And unfortunately, Madam Chair, we have people in this room -- some will be laid off tomorrow, some were laid off, some were told that their benefits are in danger, some were that told their positions were being done away with, and 18 12/7/06 APPROPRIATIONS, BILL 060899 we have copies of positions that were advertised as late as yesterday, with positions from where people were laid off. There are many issues regarding the whole housing reorganization plan. As Council will, see we're also introducing a resolution this morning with regard to the Vacant Property Review Committee that Council created December 14, 1973, to make sure that's protected. So my point is, there are more questions that are raised, additional questions raised, than are answered. And we hope that this committee would consider continuing the hearing -- we could do it to a day certain -- to try to force more communication on all sides involved so that maybe we can get this resolved. (Applause.)
Thank you. 19 12/7/06 APPROPRIATIONS, BILL 060899
Thank you. I do believe the consensus here is that, let's hear the testimony and then we'll make our decision, okay?
Thank you. Are there any other questions from members of the committee? Councilman Rizzo? (No questions from Councilman Rizzo.)
Is there anyone else in the Administration or someone to testify for or against this bill? (Witness comes forward.) 20 12/7/06 APPROPRIATIONS, BILL 060899
Yes, sir. Good morning. Please state your name for the record.
Good morning my name is Sherman Harris. I'm the Assistant to Pete Matthews, President of District Council 33. I'm here on behalf of Local 1971, along with a few of our board members and in the absence of our president, who's out ill. First of all, we would like to thank Chairwoman Krajewski for allowing us to speak and to the entire committee for hearing us. As the committee is aware, Local 1971 is engaged in a hard-fought fight with PHCD, OHCD, and the RDA concerning contract talks as well as this administration's current housing and reorganization plan. During the (indiscernible) of these talks and negotiations, Local 1971 has only asked that they be treated fairly. This has not happened. This 21 12/7/06 APPROPRIATIONS, BILL 060899 administration has shown total disregard for the loyal dedicated members. Local 1971 has close to 70 union members that have been laid off; some of them have been laid off numerous times. We have members who, in spite of years of record service, are now either unemployed or are facing unemployment. This certainly is not in line with the Administration's commitment that no 12 member of Local 1971 will be displaced during this reorganization. Local 1971's contract talks have been held hostage by the Administration's determined union-busting plan for reorganization. This plan, no 18 matter how you look at it, how you dice it, is union-busting on all sides. We have union positions that are being dissolved in one department only to reappear in a reorganized department as exempt positions, meaning that union members can't apply for them. Members who have done these 22 12/7/06 APPROPRIATIONS, BILL 060899 jobs for over 30 years now have to apply for newly-created exempt positions as new hires. Those going from RDA to OHCD and PHDC in bargaining-unit positions will lose seniority as well their current level of benefits. In conclusion, Local 1971 is not supportive of the current reorganization plan that's on the table. We're asking that before any funds are transferred that this committee, as well as the Council as a whole, would direct this administration to, first of all, live up to their commitment that no 16 employee would be displaced. In addition, we ask that you direct this administration into earnest contract negotiations. We've been working without a contract for years, and we can't get earnest negotiations going on because they hold this reorganization plan as the key. Local 1971 has made -- we want a concerted effort to return displaced 23 12/7/06 APPROPRIATIONS, BILL 060899 employees to employment status, as promised. We are asking you: Please, do not suspend the rules of Council to move this to first reading until we can address these issues in writing. And we don't trust the word of this administration. This administration has continually danced around. We're just looking for fair treatment in this process, and we're not getting it, and we ask that we would get this in our process. ) and Anthony (indiscernible) who is (indiscernible) lay-off. Anthony wants to speak. ANTHONY: Thank you, Councilmembers, for giving me this opportunity to speak to you. I'm actually the face of a layoff. I actually am laid off at this time. I have no employment. I heard Mr. Hannah say that if you give them the money, they're going to 24 12/7/06 APPROPRIATIONS, BILL 060899 hire 44 employees from PHDC and RDA. Well, I'm here to tell you: that is not going to happen. Let me give you an example. I work for the IS Department in the RDA. They put up jobs for the IS Department. I did not receive a letter, a notice, or anything about it. The closing date is, my understanding, was November the 24th, which was right after Thanksgiving. Of course, I was at my family's house at that time, but I was not notified in any shape or form about these job opportunities.
And I have talked to Miss Califano herself about some of the methods that they use to move out employees who have been here quite some time -- some 30 years, 35 -- and the only response I get from her when I said, Well, they're giving a test that nobody even knows about, to go into a lower position, that they can do. Some of them have qualified for it. 25 12/7/06 APPROPRIATIONS, BILL 060899 But they have to take a test that no one knows what the answers are to, or did you pass or fail. The union doesn't know, and so we have to depend on the management that we cannot trust. I would like to read something to you here that maybe I'm -- it could be correct or not. I have a copy of this, and this came from OHCD, I guess from the their Public Information Office, Emily Rohm, and it's dated November 13, 2006, and it says (reading): The layoff process was delayed starting last summer, when Street decided to review it. That means the savings that should have been achieved beginning July 1st are not in place, but the City is also helping displaced housing workers find new jobs. We are in the process of hiring someone who will act as an employment specialist, and after all of the dust settles, we have 20 former employees who will be helping. The City has taken extraordinary steps to help the 12/7/06 APPROPRIATIONS, BILL 060899 people who have been laid off. Okay, I'm one of those people who have been laid off, and I haven't even been contacted except for once, just prior to this hearing so that they could come in here to say that we are trying to do something. Okay, I got a letter last Saturday about some meeting that was supposed to be on Monday about how to write a resume. They have taken no steps whatsoever to help the individuals who have been there for 30 years or more. It appears to me that if you already had someone to lay off, you could start helping them right then and there if you intend to help them. And not only that, but my position, which is a union position, if I had the opportunity to go to OHCD, it would be a non-union position, and that's happening to a number of positions that are unionized. And I feel that it's just 27 12/7/06 APPROPRIATIONS, BILL 060899 unjust in what they've been doing, and this plan is not working. In fact, I do not believe they have a plan. I understand what they put out, but they do not have a plan. It is not working. You don't all of a sudden start doing something when you're just about the -- your administration is over, at the last minute, without any careful planning. P. MIS does not work. It is not working, and you can ask the workers who are there. Okay, but at this point, all I'd like to say is that I'm one of the laid-off employees. I have not heard really from anyone from Mr. Hannah's office or anyone else at this time. And I'd like to thank you for 28 12/7/06 APPROPRIATIONS, BILL 060899 this giving this opportunity to speak you.
In closing, we just want to reiterate the position of District Council 1971: When you take a union job and dissolve it and create a new office that has the same exact job, taking the person who's been working the job for 25, 30 years and tell 'em, "You're no longer in a bargaining position, and you're no longer qualified for that job," that's union-busting any way you look at it. (Applause.)
And the positions that have been filled in the bargaining positions, the person starting in the bargaining position now has to start at the bottom of the pay scale, and the person that's been hired in the exempt position starts at the top of the pay scale. Union-busting again. This is not right, this is not what the was commitment we received from 29 12/7/06 APPROPRIATIONS, BILL 060899 the Mayor or this administration. I know the issue is bargaining, but we've had problems bargaining with this administration. Their attitude toward the workers and the members is terrible. We ask that the committee consider this before transferring any funds. Before the funds are transferred, they should be instructed to correct these problems, to work with us to resolve these issues. They're in the benefit of all involved -- the Administration as well as union.
Just a minute. Councilman Clarke then Councilwoman Blackwell.
Thank you, Madam Chair. Thank you. I just want to get some clarity. Mr. Harris, you can answer. Transition agreement, can you 30 12/7/06 APPROPRIATIONS, BILL 060899 explain that to me?
I personally cannot. I know it's on the table; I haven't seen it, and I don't know if you've seen it. I know there's a letter that's a part of their bargaining process. I don't know if they've --
Well, let me tell you what I've been told, 'cause I've had some -- just a couple of issues with some of them, and this is one 'em. My understanding is that the transition agreement needs to be entered into between the Administration and the union to ensure that the pay grade is maintained for all individuals that are transferred from department to department. Are you familiar with that?
I'm not sure of the working, but at this point -- from what I've heard, it sounds familiar, but I can't correctly say it's true.
We're being 31 12/7/06 APPROPRIATIONS, BILL 060899 toll that under the current proposal, the individuals who would be transferred, based on the assumption that this ordinance will pass to make the money available in the newly created department, those individuals will not be at their current pay scale because there's not a transition agreement.
All right. Let me say this. Veronica's not here so I can't speak for her. If that's true, that's good. But from what I've heard -- I haven't seen this, but from what I've heard, it's not true. I will guarantee there's a meeting tonight with this local that this transition letter is introducing, and we will get back to you on that.
So if there could be an appropriate transition agreement --
-- and the 32 12/7/06 APPROPRIATIONS, BILL 060899 individuals that are going to the newly created department are paid at the same scale --
Okay, that's one issue. The second issue. With respects to -- I did not know that. Does OHCD currently have any union employees?
So why would the individuals who were transferred from, say, RDA or PHDC, that would go to the newly created OH -- whatever -- I forget the term that's used -- why would they not be allowed to be in that union? 33 12/7/06 APPROPRIATIONS, BILL 060899
My name is Tracy Penson. Because of the table of organization, certain positions are not held at OHCD that's held at the Redevelopment Authority, so they can't go at that same paid rate.
Some jobs. So, for instance, the Redevelopment Authority has land-acquisition specialists. The OHCD does not.
The position -- all right, so -- all right, 'cause this is very confusing to some respect, and I'm sure it is to you.
It is. It's very confusing. 34 12/7/06 APPROPRIATIONS, BILL 060899
The land- acquisition specialist -- and I'm assuming that maybe some of these questions can maybe be answered by the Housing people.
Currently, Land Acquisition is housed in the Redevelopment Authority; am I correct?
Is that one of the departments that's being transferred to OH --
And you're saying that because right now, there's no particular title in the OH so that there will not be a union position.
Yes. For instance, we have a Real Estate Specialist III that's been laid off. They only have a Real Estate Specialist II opening at the Department of Housing, 35 12/7/06 APPROPRIATIONS, BILL 060899 so it is a pay decrease.
But is there anything that prohibits that position from being unionized?
From our side, no. 7 You would have to talk to the Administration about that.
That's one of the issues we have here. They've been making these positions exempt when they were always union positions.
All right. So if they transfer of the employee to this newly created organization and title, that position can be unionized; and based on the transition agreement, the pay rate will stay the same of that individual that was transferred. Is that something that's acceptable?
All right. And the other issue is -- what's the other key point?
Those who are laid off that are out of work that need to be brought back. And also, if you have -- basically, it comes to the same thing. They're eliminating union jobs in the transfer. We're saying just what you're saying: Bring the union jobs back. That resolves a whole lot of the issues. And the pay scale should be the same. Don't start my union members at the bottom of the scale and start non-union members at the top of the scale. That's unfair.
So the union issue, the pay-scale issue, and 37 12/7/06 APPROPRIATIONS, BILL 060899 essentially the individuals that are laid off or are projected to be laid off and then maybe -- may end up being laid off regardless of whether or not all of those positions are filled.
Is it the position of the union -- and I'm being told that at the end of the day, there will be about 10 between -- 10 and 12, individuals that may not have slots 13 in the newly created agency or one of the other agencies. If those individuals will be offered opportunities within government generally, not just Housing, but in any other part of government, is that something that's --
Well, yeah, and I'm saying whole is relative. Some people might not --
Some people, if 38 12/7/06 APPROPRIATIONS, BILL 060899 they were accepted at other housing agencies, other City agencies, they just want to be made whole. As of today, they have not heard anything from the Administration as far as any job opportunities.
May I say this, sir? In reference to your question, we do understand that maybe we'll lose a few jobs. Of course, we would love to have them placed anywhere, 'cause we don't want nobody unemployed. But we also believe that this has to be reached through fair collective bargaining, and that's not happening. We cannot get fair collective bargaining because they're holding the reorganization over our heads and are saying, "If you don't sign our letters on this, we won't talk to you about that." That has to stop. Bargaining has to go on, and these issues can be 39 12/7/06 APPROPRIATIONS, BILL 060899 resolved. And we are fair, we are sensible. We know that government is changing and downsizing, but you have to be fair and don't just say, Well, I'm going to drop everybody and, like it or not, that's what you have to do. Let's talk this over, let's minimize the impact together as a partnership and resolve these issues. Somebody's going to be lost in the shuffle; we understand that.
Thank you very much, Madam Chair. And my questions are -- and we'll agree to those that Councilman Clarke just raised. For example, I met with one 40 12/7/06 APPROPRIATIONS, BILL 060899 young lady whose salary was cut by $16,000. I met with people today, one of -- we're talking about a network administrator who would be cut to a land administrator, who would have to do three times more work but get less of a salary. So those are the issues we talk about. What I have here today is -- we have a person who's a Real Estate Specialist who's being asked to become a receptionist, from a Real Estate Specialist to a receptionist. Now, all jobs are good. We have a person here who was vice president of the union -- I don't mean to embarrass him, because, you know, after a while, these union people were told they have to sign out, and they were harassed for coming to Council every week -- who was forced to retire or lose out. And now after he was forced to retire about a month ago, I have in 41 12/7/06 APPROPRIATIONS, BILL 060899 front of me his title, and this is a degreed person; we're not talking about people who are not qualified. These are people who have worked for our city years and years. Chief financial officer. He was laid off, and now they posted it yesterday. It's not fair, it's not right, and people should be given -- people -- this Council cannot support union-busting, and certainly this Council cannot support people being told -- people who live and work in our city, that after all their years of service, they can be cut back, be made to do three and four times the work they did before for less money. That's not right. That's not right, Madam Chair, and that's why I am asking that we hold up this legislation and force some real negotiations. It's complicated because of the fact that you have OHCD that they were talking about making OHMP; there's some 42 12/7/06 APPROPRIATIONS, BILL 060899 question about letters going out with both titles. And then you have Redevelopment Authority, you have Vacant Property Review Committee, and you have Philadelphia Housing Development Corporation. And with the unions involved in various aspects and not various aspects, it's all been manipulated against the workers. It's not fair. We know we have four agencies, but we know we have to treat people fairly; it's what we stand for. These are our neighbors, these are our voters, these are people who have sacrificed 36 and 38 years to work in the City, and I would hope that we can make sure that they're given fairness when it comes to their futures. It's not fair for them to have to come here every week and beg and look, and you could see this is a holiday for them coming too. And you can see the pleading and longing in their eyes and looking to us for some 43 12/7/06 APPROPRIATIONS, BILL 060899 hope to make sure that they get treated fairly. It's just not fair, Madam Chair. (Applause.)
Councilwoman, as I have stated, I would prefer that we hear all of the testimony today, and we can vote this bill out but hold it up until we can come to some agreement. That way, you're not bringing them back and forth and --
Well, Madam Chair, we trust you. If you say it will be held up until some result happens, then we trust that that will happen.
Are there any other questions from members of the committee? (No further questions.) 44 12/7/06 APPROPRIATIONS, BILL 060899 (Witnesses leave witness table.)
I'm sorry. Please come back. I forgot Councilman Kelly. You should be over here.
I know, but there wasn't enough seats. Thank you, Madam Chair. I just have a question. The transfer agreement that Councilman Clarke mentioned or alluded to, is anything of that in writing by the Administration? Is there anything that's written about a transfer agreement?
I'm not sure, but what we're willing to do in this whole process is to report back to Council. I will get the letter and I will find out and I will report back to you. I'm not sure myself. Veronica 45 12/7/06 APPROPRIATIONS, BILL 060899 is sick, and she's been talking with the Administration; I can't speak for her.
All right. The only thing I would like to mention is that in this Council, I know that Councilwoman Blackwell has been speaking on this issue for many, many months. It seems like every week she, makes a very eloquent speech in here, in these chambers. And I don't think it's too much to ask for, for our committee, Madam Chair, if you would hold it up until this issue is resolved. (Applause.)
Thank you. Are there any other questions from members of the committee? (No further questions.)
Is there anyone here to testify for or against this bill? (No response.) 46 12/7/06 APPROPRIATIONS - BILL 060833
Then we'll go into Bill 060833. (Witness comes forward.)
Good morning again. Please state your name for the record.
I'm Dianne Reed, Budget Director for the City of Philadelphia, and I'm here this morning to testify only on Bill 060833. Bill 060833 makes a Fiscal 07 budget appropriation transfer from the Grants Revenue Fund to the General Fund to provide $3 million as a payment to other funds. While the Administration agrees that capital improvements and aggressive maintenance improvements are needed in police and fire facilities in the City, the Administration does not support Bill 22 060833. The Administration does not support the bill because the Fiscal 07 to 11 Five-Year Fiscal Plan cannot 47 12/7/06 APPROPRIATIONS - BILL 060833 afford a $30 million unbudgeted payment to other funds for several reasons. The Fiscal 07 to Five-Year 5 Plan, as approved by PICA June 2006, was 6 balanced on the basis of the Fiscal 06 7 $201 million surplus. For the last 8 three years, PICA has required the City 9 to provide a $45 million cushion in 10 Fiscal 09 and every year thereafter in 11 case PGW does not repay the Fiscal 01 loan it received from the City of $45 million. The '06 fund balance in the PICA-approved plan, the 201 million, was required to achieve that goal. While the Fiscal '06 fund balance was final $53 million higher than anticipated in the PICA-approved plan, as a recent report by PICA claims, happy days are not here again. The first quarter of Fiscal 07 is showing us strains of higher costs in several areas. Criminal justice and social services costs are climbing particularly as a result of higher 48 12/7/06 APPROPRIATIONS - BILL 060833 prison censuses in prisons and in homeless shelters. Also looming are higher benefits costs for uniformed and non-uniformed workers than were assumed in the plan as well as fiscal non-contract negotiations for wage increases also not assumed in the plan after Fiscal 08. The city's criminal justice costs are expected to continue to increase substantially in Fiscal 07 as they did in '06. Together Police, Prisons, the Sheriff's Office, the District Attorney's Office, and the Defenders Association costs are projected to exceed planned spending by 14 million in 07 based on first-quarter results. Much of the overage is due to the growth in Philadelphia Prison System's inmate census. The plan assumed containment of the census at 8500 inmates, but the census persists in 49 12/7/06 APPROPRIATIONS - BILL 060833 the 8800 range at a time of year when the population has customarily abated. The growth in the prison population has forced the City to seek housing by contracting with other county governments and with private providers for additional inmate space. These new contracts alone total not only $50 million over five years. Including adequate costs for food, health care, personnel, and overtime not total Prisons' expenses not assumed in the improved plan rise to nearly $100 million. The Administration, working in collaboration with our criminal justice partners, has developed strategies to reverse this trend. However, they have not yet yielded results. The Office of Supported Housing, serving The City's increasing homeless population, will require at least $35 million in additional resources in the plan. 50 12/7/06 APPROPRIATIONS - BILL 060833 Rapid increases in the cost of health and welfare benefits are expected to continue over the next five years. The FY 07 to Five-Year Financial Plan 6 projects that health-care costs will 7 grow no higher than 9 percent per year. 8 Unfortunately, the plan's 9 projections may be too optimistic. The 10 City has lost initial appeals and 11 arbitration awards for both police and firefighters, which grant increases higher in the city's growth assumptions. These have been appealed further by the Administration. Meanwhile, the Administration is currently in negotiation with District Councils 43 and 47 for benefits reopeners. Unsuccessful outcome in these appeals and negotiations could add an additional $100 million in retroactive and future benefits costs above funded levels.
In addition to health and welfare costs, the city's pension costs 51 12/7/06 APPROPRIATIONS - BILL 060833 continue to rise at a rapid pace. Pension costs have gone up for a number of reasons -- lagging economic performance, poor stock-market returns, record low interest rates, and because employees can end retirement status earlier and live longer. By Fiscal 09, fiscal costs are projected to equal over percent of 11 the city's budget. As recently as 12 Fiscal 01, they were less than 7 percent of the budget. Clearly, the increase in pension costs is squeezing out other parts of the City budget. Not only is the additional Fiscal 06 $53 million in fund balance needed to offset these significant cost increases, the Fiscal 12 plan, which we are now working on to put together, is further at risk and may require budget cuts, delays in tax reductions, or tax increases to achieve PICA's $45 million fund balance goal. As a result, a $30 million 52 12/7/06 APPROPRIATIONS - BILL 060833 unbudgeted Fiscal 07 payment to other funds may well precipitate an unplanned round of layoffs in Fiscal 07 in order to make sure the plan balances. And as a result, the Administration does not support Bill 060833. This concludes my testimony. I'd be happy to answer any questions you may have.
Thank you very much. I would like to call on a colleague, Councilwoman Tasco, to give us a brief overall of this bill to explain to our colleagues who are on this committee.
You know, Councilwoman and members of the committee, you saw the paper this morning where the Controller cited the conditions of the police facilities where our policemen have to work. When we were talking about the $150 million, I raised the issue about 53 12/7/06 APPROPRIATIONS - BILL 060833 the infrastructure -- the city's own infrastructure. The lack of money appropriated for the Recreation Department, we don't have the 2007 budget approved for that yet. We talk about the fire stations and how I visited the fire stations, and they have serious needs of repairs -- not improvements, just maintenance -- and as well as the Fire Departments. So I -- the annual report came in. It's called the Quarterly City Manager's Report, and the City has counted on a $201 million surplus. They got a $257 million fund balance. And of that, I put in a bill 18 asking that we take $30 million of surplus to appropriate to $10 million for the Recreation Department, 10 million for the Fire Department, and 10 million for the Police Department so that those facilities can get some attention and provide a safe environment for our employees, the policemen, the 54 12/7/06 APPROPRIATIONS - BILL 060833 firemen, and for improvement to our recreation centers. And so that is why I am asking this committee to give that serious consideration, because this is money that they did not expect; the money is from increasing business-privilege taxes, the wage taxes and transfer realty taxes. Those taxes were up. And the 57 million is not a part of the Five-Year Plan, okay? The $201 million is part of the surplus fund balance that they wanted -- they had reported to us that they were going to have. That's in the Five-Year Plan. So this is what I originally asked for. I have a question I'd like to ask Miss -- the budget chair. What I would like you to do is tell me, in the adopted budget that we passed last spring, the balance, fund balance was $140 million. The adopted budget was $140 million, okay? Right here in this little book right here. 55 12/7/06 APPROPRIATIONS - BILL 060833 But when you -- when we got the report from PICA, the fund balance was 201. Now, if you change the difference in the fund balance of the budget balance, the adopted budget, the adopted budget we passed was $140 million. There is a difference in the fund balance of 140 that you told us we would have and the fund balance in the PICA report. You report one balance for the City, for our adopted budget, which was $140 million; and in the report just sent to us by PICA, it's $201 million. Aren't you supposed to tell us that there's a change, and why weren't we notified?
Councilwoman, the fund balance from Fiscal 06 was $183.6 million. If you look at your budgeting brief, the most recent budgeting brief as passed by the Council on the 25th, that amount is 183. 56 12/7/06 APPROPRIATIONS - BILL 060833 The 140 amount is just kind of in an accounting category that we're kind of eliminating from our presentation of the Quarterly City Manager Report in the future.
I'm looking at the Quarterly City Manager's Report where, in fiscal year 2007, the adopted budget has a year-end fund balance of $140,541,000.
You may be looking at the Fiscal 07 category. The Fiscal 06 is 183,660,000.
The Quarterly City Manager's Report that I have with me is the most recent one; I don't have the other one with me. 57 12/7/06 APPROPRIATIONS - BILL 060833 But I -- I can tell you about why the fund balance went up to 2001 in the PICA-approved plan.
But weren't you supposed to tell us if there was any adjustment?
No, but -- no, it's not. It's shown in the Five-Year Plan submitted by the PICA Board of 166 million estimated fund balance at the end of the year, and what we reported was $140 million in the quarterly report that you just issued.
The quarterly report that we just issued shows the '06 fund balance of 254.5 million.
Yeah. Okay. Well, you're comparing the '07 fund balance. You're comparing the 140 to 156. I thought you were talking about the '06 58 12/7/06 APPROPRIATIONS - BILL 060833 fund balance.
In the Fiscal Year 2007, the adopted budget was $140 million, and that's what you just gave us in your quarterly report. The report received from PICA shows an estimated fund balance of 166,056,000. You did not -- did you come back and tell us that the fund balance estimated budget had changed?
I thought you were asking me about the Fiscal 06 fund balance. You asked me about the 201 million.
We'll come back to that, but I want to ask you about this.
My question is: Why is it that the adopted budget had a fund balance of $140,541,000, and in the report for PICA, you have a fund balance of 59 12/7/06 APPROPRIATIONS - BILL 060833 $166 million? And how do they differ?
The fund balance for 2007 was increased as a result of the fact that our -- some of our taxes have come in more strongly than we anticipated at the end of the year.
Did you issue a report to City Council to let us know that?
Yes, we did. You got the Budget in Brief, I believe, the revised Budget in Brief. And you also have the revised PICA-approved Five-Year Plan, which contains this information.
How do you change it without coming back to Council to let us know?
Well, the plan -- what we're giving you is the most current estimate of what the fund balance will be. That keeps changing as we get new information about revenue and expenditures. 60 12/7/06 APPROPRIATIONS - BILL 060833
So that, you know, for the current Quarterly City Manager's Report, the '07 fund balance is 198. So it just keeps changing as we get information on revenues, especially when we do or do not hire people at the rate that was contained in the Mayor's January budget proposal.
Could I ask our budget finance technical staff, Madam Chair, to clarify the questions for me, please, since he's the finance guy. Call Charlie as a witness. (Witness comes forward.) MR. McPHERSON: I'm Charles McPherson, Chief Financial Officer for City Council. The issue is that in the Quarterly Manager's Report that was for September, it shows an adopted budget with a fund balance of 140 million for '07. The first year of the Five-Year 61 12/7/06 APPROPRIATIONS - BILL 060833 Plan, I was always under the assumption, needed to agree with the Council-adopted budget. The Five-Year Plan for '07 is projecting a fund balance of 166 million, which is approximately million higher than the adopted 9 budget that we did. 10 And the issue becomes -- I'm 11 not aware of any formal notification or 12 how the first year of the plan can 13 differ with the budget that we adopted, 14 based on the appropriations side as well 15 as on the fund balance side. 16 And so if that could get 17 clarified. 18
The Quarterly City 19 Manager's Report reflects our current 20 information. 21 MR. McPHERSON: It says 22 "Adopted Budget" on the heading. The 23 adopted budget is the adopted budget. 24 You're comparing this 140 to the 166, 25 which is the adopted PICA report, which 62 12/7/06 APPROPRIATIONS - BILL 060833 at that point in time, you did not year-end revenues because it was approved by PICA July 5th. And I don't believe Council got copies of it until about three, four weeks ago. (Witness comes forward.)
Good morning. I'm Peggy Vanbelle, Deputy Budget Director. I think the issue is, Council adopted the FY 07 budget. The budget we adopted, you adopted, assumed a fund balance of 140 million. When we met with PICA concerning the Five-Year Plan that had that adopted budget as its first year, they had some concerns about some of our revenue estimates and some of our expense items. And so in negotiations with PICA, we revised some of our revenue estimates and expenses in order to accommodate their concerns, and that led 63 12/7/06 APPROPRIATIONS - BILL 060833 to a revised projection of $156 million FY 07 fund balance. But the adopted budget remains 140 million, and we consider this to be what we call "technical modifications" to the plan. MR. McPHERSON: And the Law Department concurs? 'Cause I thought that the first year of the Five-Year Plan had to agree with the budget as adopted by City Council. So, in essence, the Administration can then change with PICA the budget as it was adopted by City Council without having to come back to City Council.
No, we did not change the adopted budget; the adopted budget remains the same. We make technical modifications post-adoption that resulted in a revised projection. MR. McPHERSON: And the Law Department is satisfied that the -- what 64 12/7/06 APPROPRIATIONS - BILL 060833 PICA adopts does not have to agree with what Council adopted?
Then I think we ought to get the Law Department, then.
Could someone from the Law Department come and let us know if they changed their position on the plan -- on the first year of the Five-Year Plan agreeing with the adopted budget.
Let me just ask you -- I want to ask you a question. You talked about the -- you do not support the $30 million because the Five-Year Plan cannot support a 30 million unbudgeted payment to other funds for several reasons, but the $30 million is not part of the Five-Year Plan. 65 12/7/06 APPROPRIATIONS - BILL 060833
If we were to add that expense to the plan, we would un-budget the plan beyond the degree that we're looking at now, which includes $100 million in unplanned costs for Prisons and homeless census above what we anticipated. We were hoping that through several options that the criminal justice partners are working on to try to contain the prison census at about 8500; it's been running at 8900, and is down around just over 8800 at this point. And that is very expensive. The Prisons Commissioner has scrambling around, finding out-of-county housing because, as you know, there's a lawsuit about this, and we were hoping to save some money on health-care costs we're working on that.
We also have funded a higher level of spending for the 66 12/7/06 APPROPRIATIONS - BILL 060833 Sheriff's Department to bring prisoners to the court's building so that there is no reason based on prisoner availability to cause trials to be continued. And the FJD is trying to discharge a backlog of about 7700 felony cases. They've managed to work through 700 as a result of that, but we're spending a great deal of money on Sheriff's overtime to ensure that, and that's another thing that we need to work on. We're working on all kinds of things. We funded a couple of extra paralegals over at the Defenders Association because they thought they could increase the number of petitions for early release. There for just a tremendous number of people who are in the prison system for pretrial reasons. And we are, all of us, working -- D.A, Defenders Association, First Judicial District. We are all working together to try to explore options to 67 12/7/06 APPROPRIATIONS - BILL 060833 contain this cost because it is really eating the budget.
Well, suppose you hadn't gotten the extra $57 million; wouldn't you still have these same problems? And what would you do about them?
Yes, we would. We would be looking at some severe freezes and do layoffs again.
Because the budget is really tight at this point 'cause we've already gone through freezes and layoffs, as you know, so that we -- (Indiscernible; parties talking over each other.)
But you're assuming that the surplus will be ongoing because the costs and expenses you're talking about are recurring and will continue to occur, and you need a definite funding for those costs. This is an unplanned surplus. 68 12/7/06 APPROPRIATIONS - BILL 060833 You hit the lottery you have. (Indiscernible; parties talking over each other.)
We have already consumed that $53 million more than we expected. At the moment, I'm looking at a Fiscal plan that is not balanced so 9 that we have to take -- 10
Well, why 11 -- (Indiscernible; parties talking over each other.)
-- actions in order to bring that plan in, 'cause the only year that really counts is Fiscal 11. Fiscal 06 balances Fiscal 11. It all is a plan that has to work together.
Well, you had a plan, but you got a $57 million surplus over what you had planned for. You had calculated those costs in your budget, and you projected a $201 million surplus of fund balance. And then you got $57 million. 69 12/7/06 APPROPRIATIONS - BILL 060833 Why is the Administration so opposed to providing money to the Fire Department, the Police Department, and the Recreation Department? Why are they opposed to that?
Councilwoman, our Fiscal fund balance was going to be 9 63 million, because we have agreed with 10 PICA, and part of the agreement that the 11 Deputy Budget Director spoke to has to do with ensuring that the City has a cushion in case, for some reason, PGW does not repay its $45 million loan. We have to have that level of fund balance. Because of these runaway costs, we are in danger of not having that fund balance. (Indiscernible; parties talking over each other.)
You calculated the 45 million in your 201 fund balance when you did your budget. 70 12/7/06 APPROPRIATIONS - BILL 060833 That's in there.
It's in the 201 fund balance. I'm talking about the -- (Indiscernible; parties talking over each other.)
I have a question for Councilwoman Tasco. Where within the bill before the Appropriations Committee does it say that this money is going towards Police and Fire and Recreation?
The money would go to the -- there are two other bills that are in Finance that would -- (Indiscernible; parties talking over each other.)