COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, 9/20/00 10:20 a.m. - - - BILL 000535 - An ordinance authorizing the creation of a loan, or loans, to provide funds for and towards various capital municipal purposes; authorizing the Mayor, City Controller, and City Solicitor, or a majority of them, to sell bonds at public and private negotiated sale; setting forth the capital purposes and the amounts for which the proceeds of the loan, or loans, will be expended. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILWOMAN JANNIE BLACKWELL, Vice Chair COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN DARRELL L. CLARKE COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN W. THACHER LONGSTRETH COUNCILMAN RICHARD T. MARIANO COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 9/20/00 WHOLE COMMITTEE - BILL 000535 I N D E X Folasade Olanipekun, City Treasurer. . . . . . 3 Joyce Wilkerson, Mayor's Chief of Staff. . . . 9 Richard Tustin, Acting Director. . . . . . . . 11 Capital Program Office William Hankowsky, President, PIDC . . . . . . 20 Linda Berkowitz, City Budget Director. . . . . 46 Greg Grillone, Stadium Director. . . . . . . . 57 Paul Rucci, Esq., City Solicitor's Office. . . 113 3 9/20/00 WHOLE COMMITTTEE - BILL 000535 P R O C E E D I N G S
The Committee of the Whole is recessed until a.m. 5 - - - 6
Good morning, 7 everyone. This is the public hearing of the 8 Committee of the Whole. Today, we are considering 9 Bill No. 000535. I would ask Mr. McPherson to 10 please read the title of the bill.
Bill No. 535, an ordinance authorizing the creation of a loan, or loans, to provide funds for and towards various capital municipal purposes; authorizing the Mayor, City Controller, and City Solicitor, or a majority of them, to sell bonds at public and private negotiated sale; setting forth the capital purposes and the amounts for which the proceeds of the loan, or loans, will be expended. (Witnesses come forward.)
Good morning. Kindly identify yourself for the record and proceed with your testimony.
Good morning, members of City Council. My name is Folasade Olanipekun, 4 9/20/00 WHOLE COMMITTTEE - BILL 000535 and I serve as the treasurer of the City of Philadelphia. With me this morning is Linda Berkowitz, Budget Director and other members of the Finance Department. I'm here today to testify in support of Bill No. 535, which was introduced on September 14, 2000. The City currently lacks sufficient authority to issue certain general obligation bonds that are necessary to finance the $162,135,000 local tax supported portion of the proposed Fiscal Year 2001 capital budget. The loan authorization, if approved, would finance capital projects classified for the following purposes and in the following aggregate amounts: 1. Transit, in the amount of $5,262,000. 2. Streets and Sanitation, in the amount of $17,114,000. 3. Municipal Buildings, in the amount of $93,649,000. 4. Parks, Recreation & Museums, in the amount of $25,267,000. And 5. Economic and Community Development in the amount of $20,843,000. 5 9/20/00 WHOLE COMMITTTEE - BILL 000535 Of the $162,135,000 local tax supported portion of the proposed Fiscal Year 2001 capital budget, $40 million was originally designated to make certain repairs to the City-owned Veterans Stadium, as demonstrated in the recently produced Ewing Cole Cherry Brott Engineering report. The City has determined that funding of the $40 million would best accomplished by issuing debt through the Philadelphia Authority for Industrial Development ("PAID"). Funding of this debt through PAID would permit to City to facilitate certain immediate and necessary repairs to the Veterans Stadium. Also, funding through PAID would preserve the City's remaining capacity under its constitutionally set debt limits. There is a potential timing issue with respect to issuing debt through PAID. In the event financing is not facilitated through PAID, the Administration will have to finance the Veterans Stadium's repairs through general obligation debt, as approved by the electorate. As such, this is the reason behind including the original source of the Veterans Stadium financing and the $162,135,000 authorization request. 6 9/20/00 WHOLE COMMITTTEE - BILL 000535 Should City Council approve this Bill 3 No. 000535, a subsequent request will be made to City Council to amend this loan authorization to reduce the original amount of the authorization from $162,135,000 to $122,135,000 and, in effect, extinguish the $40 million that of the originally requested local tax supported portion of the proposed Fiscal Year 2001 capital budget. To do this, the Administration would return to City Council and introduce an ordinance 12 with requesting amendment of this Bill No. 535. Bill No. 535 would have Section 1 reduced by $40 million, Section 2 reduced by $40 million under the category of Municipal School Buildings, and Section 6 reduced by $40 million. Notwithstanding the requests being placed on the ballot and any subsequent approval from the electorate, the amendment would permit the City to issue only $122,135,000 in tax supported general obligation debt. The electorate approved the City's last loan authorization in 1997 in the amount of $121,956,000. State law permits the City to increase its borrowing authority by placing a 7 9/20/00 WHOLE COMMITTTEE - BILL 000535 question for the electorate during an election. To place this loan authorization question on the ballot, the Administration must obtain City Council approval, with such approval being in the form of an ordinance. Passage of such ordinance 7 requires the affirmative vote of at least two-thirds of the members of Council. City Council's approval of this proposed bill would permit the City to place the loan authorization question on the Tuesday, November 7, 2000 General Election Day ballot. The ballot question seeks to obtain electorate approval to increase the City of Philadelphia's indebtedness in the sum of $162,135,000.
Enactment of this bill and the subsequent approval of the November general ballot question by the electorate of the City of Philadelphia would permit the City to implement the Fiscal Year 2001 capital program in a timely manner. Without approval of additional authorization to the City, there could be disruption of the capital program and related City services. In order to have the ballot question placed on the November 7, 2000 General Election 8 9/20/00 WHOLE COMMITTTEE - BILL 000535 Day ballot, it is critical that this bill be enacted by City Council as soon as possible, or no 4 later than October 5, 2000. If the bill is not enacted by this date, the City will be unable to legally advertise it and print the ballot question in time for the November 7, 2000 election. To facilitate the passage of this bill, we respectfully request a suspension of the rules. Finally, I have attached as part of my testimony the proposed ballot question requesting an increase in indebtedness from the electorate of the City of Philadelphia. This concludes my written testimony, and I'm happy to answer any questions you may have at this time.
For the record, would you mind reading what the ballot questions is.
Yes. The ballot question: "Should the City of Philadelphia borrow $162,135,000 for and towards Transit, Streets and Sanitation, Municipal Buildings, Parks, Recreation & Museums, and Economic & 9 9/20/00 WHOLE COMMITTTEE - BILL 000535 Community Development?"
Thank you. Miss Wilkerson, did you want to add anything?
Yes. My name is Joyce Wilkerson. I'm Chief of Staff to the Mayor. Earlier this week, the Administration has passed out to City Council a draft assessment report that analyzes the conditions at the Vets Stadium. What I want to do is make clear that this is simply a planning document. Last spring, Council adopted Bill 82, which anticipates the Administration coming back to City Council with a detailed list of repairs that have been negotiated with the teams in the event there are no new stadiums to be constructed and the City has to undertake the long-term renovation of the Vet. That will be a different submission that is made to City Council. That is not intent of the document that was disseminated to City Council this week. This is simply a planning document. It enables us to think about the kinds of decisions we have to make if we have to undertake the 10 9/20/00 WHOLE COMMITTTEE - BILL 000535 long-term repair. It enables us to think through the kinds of issues we'll encounter if we're in the Vet for a shorter period of time. As I said, we will return to City Council later in the fall once we've had the opportunity to negotiate with the teams the specific repairs that need to be made. If you're interested, I would like to have Rick Tustin come up -- he's from our Capital Program Office -- and give an overview of the kind of repairs that we think will probably need to be made at the Vets Stadium over a long-term period over the next ten years if in fact that is to remain open, and that is what we're seeking authorization for, in the event we don't have actual deals with the stadium.
I think it would be appropriate to hear that testimony now. (Witness comes forward.)
My name is Richard Tustin. 11 9/20/00 WHOLE COMMITTTEE - BILL 000535 I am the Acting Director for the City's Capital Program Office. I've written down some notes as a result of our briefing yesterday. This is not formal testimony per say, but it -- I just wanted to use it as part of my briefing. On July the 10th, we were asked to proceed with the facility assessment of Veterans Stadium. We commissioned the engineering firm of Ewing Cole Cherry Brott to perform the assessment because of their past involvement with the City, the Phillies, and the Eagles on projects at the stadium. In the short time required in order to complete the assessment, the draft report, which was distributed to Council two days is a result of that assessment. Before I present an overview of the report, I'd like to stress the fact that this is a draft document and it's still being reviewed by the teams as well as our office and the Administration. In addition, it should be understood that the cost of the items contained in the report are on an order-of-magnitude basis, which, in some 12 9/20/00 WHOLE COMMITTTEE - BILL 000535 cases, are based on replacement of building systems because they are near the end of their useful life. At this point in time, we'll review this report as a working tool and that the individual construction bid packages will be thoroughly evaluated during the design phase in order to provide only that level of restoration required to keep the facility in a safe and good operating condition through the term of the teams' lease. The report is broken down into the following sections: It includes an introduction and executive summary in the beginning; an architectural and general facilities section; a structural systems section; mechanical systems; electrical systems; fire protection systems; capital requirements, which are the costs estimates on a line-item basis; and schedules. Some of the major renovation work listed in the report includes: removal and replacement of the entire metal roofing down to the structural deck; and selective replacement of steel angles and girders, gutters, capital 13 9/20/00 WHOLE COMMITTTEE - BILL 000535 braiding, and soffet panels; selected restoration of precast concrete panels and columns where cracking and (inaudible) has occurred; re-coating of the waterproof system on the seating (unintelligible) and expansion joints; repairs to (inaudible) and scaling concrete surfaces; replacement of the telescopic seats and railings; replacement of all 700-level fire sand pipe system valves; replacement of all 700-level fire alarm speakers and strobe lights; replacement of the field turf; replacement of selected electrical substations, panel boards, feeders, and emergency generators; replacement of heating boilers and and their associated balance controls and circulating pumps; replacement of selected sections of heating piping on the 500 and 700-levels; selected replacement of the HVAC unit and duct pre-heat coils; addition of ADA toilets on the 300-level; and general repairs to all bathroom toilet partitions, doors, and hardware; replacement or refurbishing of the elevators --
Excuse me, excuse 14 9/20/00 WHOLE COMMITTTEE - BILL 000535 me.
Thank you, Madam Chair. I may have missed the gentleman's opening statement. It is very difficult to either follow what he is talking about or understand the context of what this testimony is about. What is -- what is he talking about?
The reason we're providing this testimony is just to provide some background information that underpins our requests to, you know, to seek funding for the renovation of the Vet. It's more an informational item. We understand that we will have to return to City Council with a specific list of repairs, having negotiated that with the teams, but there has been a lot of interest generated about what's going on at the Vet, what needs to be done, and we just wanted to give some kind of 15 9/20/00 WHOLE COMMITTTEE - BILL 000535 overview of that. In the coming weeks, as I said, we'll be negotiating specifically and hope to return to Council with something more specific.
No, I understand that. I mean, as he was reading through whatever it is that he's reading through, which I don't have a copy of, it sounded like he was reading from, you know, one of the exhibits in the report. I didn't understand what the point was.
I think what he has pulled out of the report -- what I have asked him to do is to extract from the report the highlights of it that begin to identify in a descriptive way the kinds of repairs that will need to be made at the Vets Stadium. These are some of the items that will be funded out of both the first part and second part of the financing that ultimately will have to be put in the place in the event the City undertakes to renovate the Vet and keep the property operational for the next ten years.
When you talk about the first part and second part, it's with the anticipation of 40 now -- 16 9/20/00 WHOLE COMMITTTEE - BILL 000535
Councilman Kenney, did you want to be recognized?
Madam Chair, I have questions when the testimony is completed.
Again, it should be noted that the costs outlined in the report were based on the need to operate the facility for at least ten more years, or through the term of our lease, the present lease. The construction schedule shown in the report is based on the work being completed without interference to the team game schedules. Within the last week, we've asked our design firm, Ewing Cole Cherry Brott, to reevaluate the costs based on a five-year period and to identify those items which require immediate attention. This information was 17 9/20/00 WHOLE COMMITTTEE - BILL 000535 distributed yesterday at Council's briefing. Lastly, I think it's important to stress the importance of ongoing maintenance at the facility. It is recommended that a minimum of $1.6 million be set aside so that the kind of deterioration and repairs that we see now will not repeat themselves in the future. Thank you very much.
Thank you. Councilwoman Tasco, did you want to be recognized?
Okay. Can we have the City Treasurer come back to the witness table, please. (City Treasurer returns to witness table.)
Can you tell us what the City's current debt-incurring capacity is?
Currently, the remaining available capacity is $342 million.
What will the remaining balance be if the voters approve the 18 9/20/00 WHOLE COMMITTTEE - BILL 000535 proposed ballot question?
In your testimony, you indicate that the Administration will ultimately use PAID to finance Veterans Stadium repairs. Why are you including the $40 million in the proposed ballot question?
In the event that the Administration is unable to secure financing through PAID, we would still need to perform the repairs and improvements to the Veterans Stadium notwithstanding. And we don't want -- the Administration does not want to be in the position whereby it removes -- or does not include the $40 million, is unable to secure financing through PAID, and then has in effect an inability to fund the repairs and improvements to the Veterans Stadium.
For the record, can you tell us what the deadline is for the adoption of the PAID Vets Stadium ordinances? And when do you anticipate submission of the PAID Vets Stadium ordinances to City Council?
Madam President? 19 9/20/00 WHOLE COMMITTTEE - BILL 000535
If I might answer that. We would seek to introduce that legislation later this spring and have it -- I'm sorry, later this fall, in order to have it adopted finally before November 30th. It would be at that time that we would be returning to City Council with something more itemized that identifies -- you know, having resulted from the negotiations with the team, spelling out specifically the kind of repairs that had to be made, and there would be costs associated with them.
The Administration requested that City Council approve legislation that requires the City to undertake additional financial commitments of approximately $103 million if new stadium financing ordinances are not approved by November 30th. Do we have any guarantees that the Eagles will use the practice facility in the event we do not proceed with the new stadiums? 20 9/20/00 WHOLE COMMITTTEE - BILL 000535
I'm going to ask Bill 3 Hankowsky to come up and address that question.
Madam President, I'm Bill Hankowsky, President of the Philadelphia Industrial Development Corporation. I think, as you might recall, in the spring, this issue was discussed at some length, both in these chambers and in other venues. The final decision that's, I think, embodied in the legislation was that should we need to exercise our obligation to buy it, that PAID would buy it. There's a lease in place between PAID and the Eagles, which currently allows them to construct on the site, as they are. That lease provides for them one of two eventualities: Either the Eagles could elect to negotiate with the City a new lease, because, as you recall, there was concerns about what would the rent be, who might have the naming rights, there were a bunch of issues that people weren't comfortable agreeing to in the spring. So we would need to negotiate a new lease that could 21 9/20/00 WHOLE COMMITTTEE - BILL 000535 provide for the, quote, long-term occupancy of that facility by the Eagles, and it would have to be agreed to, obviously, by the Eagles requires by the City and requires, I believe, by resolution, though it might be by ordinance, I'm -- that I'm not exactly sure of. Then it would come back to this chamber for approval. In the eventuality that that did not occur, that we were not able to do that, then the Eagles could remain there, I believe, for 12 months -- I'm doing this slightly by recollection, 13 I think I'm right, for 18 months -- and then could 14 leave under the terms of the current lease. 15
Can anyone up 16 there tell us what is the Administration's 17 position on new stadiums once the November 30th 18 deadline has come and gone and the City is then required to spend $103 million?
The City is committed to developing or to pursuing the development of two new stadiums. As you know, there are no 23 current negotiations ongoing. The Administration is focused on concluding the contact negotiations with the Federation of Teachers. We also have an 22 9/20/00 WHOLE COMMITTTEE - BILL 000535 arbitration outstanding with our firefighters. Until the negotiations with the PFT in particular is concluded, we're not going to be entering into -- or continuing on with the negotiations with the teams. It's our expectation that we are -- our goal to have successful negotiations concluded with the teams. It's our goal to meet in some capacity the November 30th deadline with the teams.
Thank you, Madam Chair. Ms. Wilkerson, in the five-year plan that was presented by the Mayor and passed by Council on January 25th -- presented by the Mayor on January 25th, on , under "Economic Development," the last sentence reads: "The City intends to use revenues from the proposed increase in the rental car tax to either fund the acquisition of the practice facility and some of the repairs to Veterans Stadium, or for debt service related to the possible construction of 23 9/20/00 WHOLE COMMITTTEE - BILL 000535 new stadiums. This agreement ensures the Eagles' continued presence in Philadelphia without adversely affecting the City's General Fund." On June 12th and June 13th, two letters were sent to the Mayor, one from Hank Salvatore and Joe Loper, the Majority Leader of the Senate, and one from Matt Ryan, the Speaker of the House, and John Perzel, the Majority Leader of the House of Representatives. The Salvatore letter reads in the first paragraph, "This tax" (talking about the rental car tax) "was authorized to help the City of Philadelphia to build new stadiums and for no 15 other purpose." The Ryan-Perzel letter reads in part, "This letter is to remind all concerned that the General Assembly authorized this tax at the explicit request of the City of Philadelphia, the Philadelphia Phillies, and the Philadelphia Eagles, with the understanding that the proceeds would be used for new stadiums. Any intent now to divert these revenues to other purposes, including the reconstruction of Veterans Stadium or the buy-back of the Eagles practice facility, would, 24 9/20/00 WHOLE COMMITTTEE - BILL 000535 in our view, constitute a breach of faith and could result in the repeal of the tax." Has there been any indication or plan on the part of the Administration to use car rental tax monies to do renovations to the Vet and/or to purchase back the Eagles practice facility in light of the fact that the November 30th deadline might not be met, and we would be statutorily required to do both things, both buy back the practice facility and begin to spend $80 million for Veterans Stadium? Is there any concern -- first of all, is there any plan to use the car rental tax for that purpose and is there any concern about its repeal?.
There is no plan to use the proceeds of the rental car tax for the renovation of the Vet -- I know of no specific. I believe that there is nothing that constrains the use of the rental tax proceeds for things other than the construction of the new stadiums, although I'd have to get the City Solicitor's opinion on that. It is our plan to construct new 25 9/20/00 WHOLE COMMITTTEE - BILL 000535 stadiums and we -- it's our intention to use the rental car proceeds in connection with that transaction. I can, you know, get specific opinions from the City Solicitor. I don't have that detailed information right now.
I can't understand the answer totally. Is there a plan to potentially purchase the Eagles -- the remaining value of the Eagles practice facility post November 30th by using any of the proceeds of the car rental tax?
I think, Councilman, as you recall, in the spring, material was prepared and -- hope I'm doing this right -- and transmitted to Council, City Council. There were, in fact, briefing books that were done where we did look at the value of the car rental tax and showed Council that that tax could cover the debt service that we would then incur should we buy the facility for the $23 million. It also looked at how much of this, again, potential up to $80 million number could get covered to provide Council with that information. So that -- and, again, I'm not an 9/20/00 WHOLE COMMITTTEE - BILL 000535 attorney either, so I would again defer to, as Miss Wilkerson said. But I believe that legislation provided that the rental car tax could be dedicated to any capital project; It doesn't use the word "stadium." I appreciate that the spirit of it at the time in the legislature was a tool to enable us to build new stadiums, I don't dispute that. But the mechanics are there, and, as has been stated, I mean, obviously, the intent is to build new stadiums and use it for that.
But we did analyze what would it mean if we had to use it for this default scenario.
Well, the default scenario is clearly opposed by four prominent members of the State Senate and the State House, who have clearly indicated that they would repeal the tax in the event that any effort is made to divert that money than for any other purpose other than the construction of two new sports facilities. I mean, so there is some -- there's 27 9/20/00 WHOLE COMMITTTEE - BILL 000535 been some planning, according to your testimony, in the doomsday scenario, that we use some of the proceeds to defray the cost of the re-purchase of the practice facility. There's at least been some planning or thought to it.
Yeah. But, again, only for clarity and to be responsive, that planning was aired publicly in this forum, in this Council chamber, when we presented that scenario in the spring. I'm not saying that anybody -- we simply said, That's an alternative, here's how it could look. We have gone no further in --
-- that it was not expanded upon publicly. What I'm saying is, in light of the fact that these letters from June indicate very clear that that revenue stream or source will not be available in the event we try to divert it for any other purpose other than to construct new sports facilities, what does that do to the impact of the General Fund on the potential purchase of the practice facility and the 28 9/20/00 WHOLE COMMITTTEE - BILL 000535 $80 million that needs to be put into the Vet, at least $80 million, what does that -- how does that impact the General Fund if there was some plan to utilize a portion of the rental tax or all of it to defer those costs?
I am not familiar with those letters. I do not know whether or not the tax can be appropriately spent, whether or not the tax is repealed becomes a political issue. We'll develop alternative scenarios; I don't have those available right now. But, clearly, we have an obligation to fund the repairs of the Vet. It will either be done out of the bond proceeds from the GO issue or through PAID, in which case we would have to pledge, you know, a source of revenue if the rental car tax is not available, you know, or if, you know, we wouldn't be using that and would have to find --
But there is a -- there's a potential impact on the General Fund: In the worst-case scenario, re-purchase of the practice facility and repairs to the Vet in lieu of this, I guess, threat or promise or both of the 29 9/20/00 WHOLE COMMITTTEE - BILL 000535 repeal of the car rental tax.
That's right. If those revenues aren't available, you know, of course, we have to find other revenues, and the most likely source would be (unintelligible) out of current revenues in the General Fund.
Let me ask you a question about the renovations to the Vet as it relates to the Cole Ewing study and this $80 million that may, as of November 30th approaches, be required for us to spend.
I understand that the $80 million is really a kind of a spit in the ocean to the concern and the problems that are related to Veterans Stadium and its infrastructure and esthetics and other problems. What do you think, or has there been any analysis as to what it would cost to maintain and improve and continue to maintain the Vet after the $80 million is expended over the course of the 10-year life expansion, which is what is estimated to be, after the 80, it's estimated that 10 years more of life is there at the Vets Stadium? What 30 9/20/00 WHOLE COMMITTTEE - BILL 000535 additional cost, besides the 80, would be incurred on an annual basis, and what would the aggregate cost of the 10-year period be, $80 million, plus what's necessary over the next years to keep 6 the facility safe and clean and attractive, 7 relatively attractive? 8 I mean, it's just not the $80 million; 9 am I correct. 10
Well, that's right. I mean, it has been recommended that we spend approximately $16 million in preventative maintenance on the building, once we've made the investment of $80 million, in order not to have the building deteriorate the same way it's deteriorated currently. I think your question had a second set of -- you know, a second set of questions: What would it take to bring the amenity level of that stadium up to a higher level if we were to use it beyond a 10-year period anticipated in the current lease? I don't have the amenity level questions. I know there have been previous reports that evaluated the feasibility of staying in the Vet and using that as the professional team 31 9/20/00 WHOLE COMMITTTEE - BILL 000535 facility moving forward. I don't have those numbers right now; I can make them available.
With the lack of those numbers, I do admit -- I do ask, is it safe to say that after the $80 million in the doomsday -- the worst-case scenario, the $80 million is appropriated and put into the Vet, another $60 million would be required to keep it at a minium standard over the course of 10 years, is that $140 million over 10 years?
No. I think what the recommendation in the Cole Ewing is $16 million, not $60 million.
That's right. It's approximately $1.6 million annually of preventive maintenance.
So that would be 90 -- 90-something -- $100 million over 10 years, as opposed to -- it's really not $80 million, it's actually more than $80 million.
If we move towards the 10-year extension of the life of the Vet, it's 32 9/20/00 WHOLE COMMITTTEE - BILL 000535 not simply the $80 million agreed to.
There is an additional sum of money that's going to be needed to be put into that building over the next decade in order to keep it minimally safe.
And could it be -- would it be possible to obtain that number? And will there be other things that the teams, I expect, will be asking for?
One of the things that we'll be coming back with before the end of November is the detailed breakdown. The report provides a fairly comprehensive assessment of the conditions in the building. It is not the result of negotiations with the teams, the kind of negotiations that are anticipated in the -- in Bill 82. And when we come back in November, there will be that fuller description of exactly, you would, what would have to happen if there are any additional amenities and what they might be, what the specific costs are, and we will have a better idea of what the associated preventive maintenance 33 9/20/00 WHOLE COMMITTTEE - BILL 000535 costs might be.
I know I've gone long, but just one final question. I understand the Administration's position vis-a-vis the teachers' contract and the firefighters' arbitration that's outstanding. Though that crunch time with those two issues just really happened recently, what was the reason why there was no discussions from January, February, March, April, May into the -- at least during the course of the summer, absolutely no discussion, as far as I understand, unless I am misinformed, with the teams and PIDC or the Administration relative to new stadium locations and infrastructure?
I'll be able to partially respond. Just for the record, there were a series of discussions. As you recall, when the Mayor announced the site selection, he simultaneously appointed a negotiating committee of public and private -- private citizens and public officials, and there were a series of 34 9/20/00 WHOLE COMMITTTEE - BILL 000535 discussions with the teams that ran through July -- I'd have to check exactly when, but I do know we had conversations after the 4th. And then to the degree we were unable to make further progress at that point and, I guess, the beginning at that point of -- we also had just some raw scheduling issues. I think, if you recall, we had a Republican Convention and then we had the Democratic Convention, so we actually had people not around a lot. But notwithstanding that, the decision was made to simply suspend those further discussions and focus on the teacher contract. But I just want to -- for the record, there were a series of discussions and dialogues and fairly intense discussions that ran through at least, I'd say, roughly mid-July something.
That means your position is that the RNC and the DNC --
I'm simply saying we about got to that date, and then in addition to people just not being around, so there was sort of 35 9/20/00 WHOLE COMMITTTEE - BILL 000535 a natural break. And at the time that you might have naturally come back to the table, the decision was made, Let's not come back to the table. That's all I'm saying. I just want to give a kind of chronological --
It's been rumored that -- and it's only a rumor -- that the committee established by the Mayor to discuss the -- examine the feasibility of 12th and Vine, as reported back sometime during the midsummer, that, in fact, 12th and Vine is not feasible and probably cannot work. Are you aware of any of those type the reports or meetings or discussions with the Administration?
I think it would be totally inappropriate, for myself at least, on behalf of that committee, to, you know, to characterize their sort of private discussions. I think it's fair to say and I think, as you know, Bill Rouse, who chaired that committee, at the point where we presented the cost of the site -- again, I'm losing track or chronology, but there we -- they went public with 36 9/20/00 WHOLE COMMITTTEE - BILL 000535 the costs and the fact that we had done a lot of technical analysis, you know, did say it was a viable a site, it's a site that could work. I think it is no surprise to people that the fundamental questions deal with financing.
You're welcome. The Chair recognizes Councilman Nutter.
Thank you, Madam Chair. I'd like to go back to the testimony with a couple questions. I have just a few hundred questions this morning, but I'd like to talk about the testimony first. On the first page, we are to assume that the $40 million for Veterans Stadium is Item No. 3, listed as "Municipal Buildings," $93,649,000, that's where the Veterans Stadium $40 million is?
And was there any 37 9/20/00 WHOLE COMMITTTEE - BILL 000535 particular reason that the Veterans Stadium specifically was not mentioned, that it was just kind of lumped in the general category of "Municipal Buildings," like a rec center or a library or a police station or fire station, something like that?
Historically, when we posit a question to the electorate, we don't provide a breakdown specifically as to line items for each of the buildings that are owned by the City. So when we say "municipal buildings," the Veterans Stadium is considered a municipal building since it is owned by the City of Philadelphia.
I understand. In previous questions, are you aware that we put upwards of $40 million in any municipal building at one time?
Okay. Are you aware as to whether or not in any previous ballot question upwards of percent of the borrowing 25 was going toward one particular item? 38 9/20/00 WHOLE COMMITTTEE - BILL 000535
I haven't had a chance to look at it, Councilman Nutter, so I couldn't answer that question. As to whether or not --
Oh, yeah, 40 million 12 is about 25 percent, but I don't know if 40 -- if 13 that was in -- comparable in prior ballot 14 questions. 15
Okay. On , 16 there's a sentence about which I have two 17 questions. It reads: "Although the City has 18 determined that funding of the $40 million would 19 be best accomplished by issuing debt through the 20 Pennsylvania Authority -- Philadelphia Authority 21 for Industrial Development ("PAID"), because it 22 will permit the City to preserve the City's 23 remaining capacity under it's constitutionally set 24 debt limit, there is a potential timing issue with 25 respect to issuing debt through PAID." 39 9/20/00 WHOLE COMMITTTEE - BILL 000535
My first question is, when was it determined by the City that this was the best route to go?
My understanding is that back in the spring, there was a general sense that this ought to be financed through PAID. There are questions about whether or not it can be accomplished through PAID. We didn't want to take any chance, and so we're asking that it be included in this authorization while we also put together the PAID financing strategy.
My recollection from the spring was that maybe it could be done, maybe it should be done, we could kind of take a look at it and see what was going on. I think that was back in early March. Have we learned anything from that time to this time as to whether or not it can be done? And what are the outstanding questions on that particular issue?
There has been some discussions about the structure of the PAID financing, and we've sort of -- the Administration 40 9/20/00 WHOLE COMMITTTEE - BILL 000535 has kind of come to an idea of how this would be facilitated. And so we believe that we can do this through the PAID financing. If you want, we could go into details about it, but it's very preliminary in terms of the structure of the financing. And I'm not sure if I've answered your question.
Have the outstanding questions been resolved? Is there a doubt in your mind as to whether, from a legal standpoint, this can be done?
We think that it can be done through PAID. We're trying to put together the transaction. Now -- the questions outstanding now tend to be tax kinds of questions, whether or not it can be a tax-exempt or a taxable issue. But we are -- you know, we're not positive yet, but we think it probably can be done through PAID. Until we're certain and have that in place, we want to continue on with this financing strategy. If there is no specific provision for 41 9/20/00 WHOLE COMMITTTEE - BILL 000535 renovating the Vet, the City still has a legal obligation to maintain the facility. And if one of these two mechanisms is not in place, then our default position is to finance it through the General Fund, the operating budget, and we don't have that capacity. And this may seem overly cautious, but it's a decision that was taken. In fact, if the PAID strategy is put into place, as Olanipekun has testified, we'll rescind the authority for this specific authorization and actually do the financing through PAID.
Let's go back for a second. The tax issue, is this a function of some concerns about the '86 tax code, either changes or the nature of our relationship with the teams? It's a public facility primarily used by private entities, and that raises some tax questions about whether it's a taxable or nontaxable?
That's right. I mean, they're just structuring questions. It's our understanding that the laws have changed since the time that, you know, it was constructed initially, and so it's those kinds of issues that we're 42 9/20/00 WHOLE COMMITTTEE - BILL 000535 taking a look at. There have apparently been a number of revenue rulings and other things that changed the permissible uses particularly in connection with stadium construction. And so, you know, we're revisiting a lot of those issues as we moved forward.
And there are a couple of outstanding issues that you have not resolved.
But you also anticipate that you're going to send us legislation still this fall to essentially reverse out this authorization should this happen?
Okay. So now the second part of the sentence is, there is a potential timing issue with respect to issuing 43 9/20/00 WHOLE COMMITTTEE - BILL 000535 debt through PAID. What is the timing issue?
If the legal analysis results that we're unable to facilitate this transaction to PAID, since we have not completed the analysis, we would have to finance the repairs to the Veterans Stadium through some vehicle. And in this instance, it would be through the authorization. As I stated earlier, the Administration does not want to be in a position where it determines that it is unable to finance the repair fundings through PAID, does not have the authorization to do it through the electoral approval, and then is in addition where it is not sure where it can get the funding so --
I mean, I think your question is if we had done the analysis sooner, would we in the position of having to pursue both strategies? (Unintelligible, parties all talking at same time.)
Yes, I think that had we tracked it on a different time schedule, that we would not be trying to ride both horses 44 9/20/00 WHOLE COMMITTTEE - BILL 000535 currently. We're in a position now where we have -- you know, we're trying -- until we complete the PAID analysis and transaction, we don't want to be in a position of not having any funding available in order to do the renovations.
Let's talk about the bond side of this transaction, which for some reason, you end up not (inaudible). If the transaction is approved, when would you expect to be in the financial markets and when would you have actual cash for the 2001 capital budget? Not just for Veterans Stadium, but for all of it.
Okay. Well, first of all, once we get approval from the electorate, which we hope would be on November 7th, it is then certified. Arguably, we could be in the market as early as January of 2001, February of 2001, to float the bonds. This is for the total --
We could arguably finance or float the bonds in January or February of 2001. It's the earliest we could probably 45 9/20/00 WHOLE COMMITTTEE - BILL 000535 float these bonds.
Oh, yeah. Once -- I mean, you could do it in six weeks and have the cash in hand. And in the event if it's delayed, it's not an issue in terms of a cash flow problem. The tax laws allow you to put up money in advance of a perspective bond financing and then reimburse yourself from the proceeds of the bonds, but we anticipate going to market in January.
But the one thing that has unfortunately resulted in, we don't have the 2001 capital budget dollars at this point in time; and, therefore, any of projects that are in the capital budget for 2001, I'm pretty much assuming nothing is going on with those projects because generally, the departments don't start working on projects, even design activities, unless they know they have the money; is that correct? I mean, we're -- I mean, you're -- you won't have 2001 capital dollars until March. It will be three months before the end of the fiscal 46 9/20/00 WHOLE COMMITTTEE - BILL 000535 year at that point. (Witness comes forward.)
I'm Linda Berkowitz, City Budget Director. Most of the new projects -- there are approximately 200 new projects in the 2001 capital budget. I think it's safe to say that those are on hold. There are approximately 75 projects in the 2001 capital budget that are continuation projects. And there is still money in prior-year capital budgets that are supporting those projects. In addition, we moved forward, on a very limited extent, with a small handful of 2001 projects that were considered critical because of the timing -- primarily street repaving, because of the sensitivity to the weather and to the seasons. But it is safe to say that without the 2001 loan authorization, we, in essence, will have placed almost 200 capital projects in advance.
Do you anticipate during the 2002 borrowing in the spring or in the fall of next year?
Typically the City 47 9/20/00 WHOLE COMMITTTEE - BILL 000535 goes out into the market every other year. The last time we floated bonds, GO bonds, was in 1998. So after the 2001 bond financing, we probably won't go back into the market for another two years, eighteen months to two years.
Especially with the seriously declining debt capacity.
What does the -- if you go this route and you have dollars in hand in March, what does that to the schedule of construction laid out in the report that we received? What's the earliest you'd be able to start any renovations to Veterans Stadium, whether there's a three-year life extension, a five-year life extension, or if we're going for the whole --
We don't have a detailed schedule. When we come back, you know, in November we'll have that worked out in some detail.
Mr. Hankowsky, you, in response to a question earlier, if you've had any moment to search your memory, could you bring us up to date a little bit on the current stadium 48 9/20/00 WHOLE COMMITTTEE - BILL 000535 situation? I think you were asked a little while ago about negotiations, or the lack thereof. Do you have any specific recollection as to -- the defining moment, I guess, back in the spring, I think the Mayor had an address on citywide television kind of announcing that things were being brought back together. Was that in June?
Yeah. I will apologize for not -- I didn't bring a chronology, so I'm not exact -- I'd have to check the dates. But, yes, I believe it was June that we announced the cost related to the site scenario that had been recommended, which is 12th and Vine and the T warehouse combination. And after that public announcement, there were further discussions with the teams. My best recollection is it kind of ran for several more weeks, but I'd have to sort of just check my calendar. And then, in effect, further discussion ceased -- again, my best recollection is kind of mind-July, but I might be off --
And why was that again? 49 9/20/00 WHOLE COMMITTTEE - BILL 000535
I think both -- we continued to -- well, obviously, we had not brought the negotiations to closure, we wanted to bring them to closure between the parties. And a decision was made that we should stop at that point and -- and we did.
I think there was a feeling, as had been mentioned earlier, that the Administration wanted to move on to some other issues and wanted to hold off on further discussions about stadiums. That's as probably as responsive as I can be.
I mean, were your activities or meetings in some way, shape, or form distracting to whatever else was going on in the government or in the City? Were you drawing away resources or bodies or people? I mean --
It's the judgment of the Administration -- the negotiation of the PFT contract is of paramount importance, and it's the 50 9/20/00 WHOLE COMMITTTEE - BILL 000535 judgment of the Administration that that dialogue can't happen, that you can't focus the negotiations if you also have the stadium issue actively moving. It becomes a question of kids versus stadiums, and you don't end up getting the kind of focussed movement that need on either issue in that kind of situation. We have -- we have fundamental reforms we're seeking to accomplish in the PFT negotiations.
I understand that, but the stadium activities, I'm assuming, were being conducted -- I mean, I don't know where they ever met. I mean, I know where the PFT and the Administration are meeting about the schools. I think they're right over at the Franklin Plaza. I mean, they may have been meeting at Bill's house, for all I know. I mean --
What I can report to you is that the assessment was made that we could not successfully move forward in the PFT negotiations if the environment was so clouded with conversations about the stadiums that the financial issues involving the schools become more difficult when the public perception is that 51 9/20/00 WHOLE COMMITTTEE - BILL 000535 you're devoting major City resources to fund the stadiums. It's virtually impossible to keep those issues distinct in a way that people understand, although they are fundamentally different. And it's for those reasons that the decision was made to focus on trying to secure the PFT contract in order to keep the schools open so that the kids can get their education. It was a judgment call that was made by the Administration in balancing two competing concerns.
And as you follow that through, I mean the next nature question is, there would be no restart on negotiations --
Settled, or whatever kind of conclusion. As you know, you know, there are alternative scenarios that might come up.
Councilman, 52 9/20/00 WHOLE COMMITTTEE - BILL 000535 if I may.
I would just like the record to be very clear. Can you tell us what happens if we don't meet that November 30th deadline?
The November -- if we don't meet the November 30th deadline, I believe that the City is obligated to undertake, you know, the repairs, the ten years worth of repairs at the Vet. And, you know, there are other -- you know, the practice facility consequences are attached.
I didn't mean to interrupt you, but I just think that the record has to be clear.
Mr. Hankowsky, is -- based on your knowledge and information, is 12th and Vine no longer viable as a site?
You waited a long time to get to that one. 53 9/20/00 WHOLE COMMITTTEE - BILL 000535
I don't think -- I think there's a series of responses to that question,'Cause it has various aspects of is it viable. It is absolutely technically viable. I mean, we have absolutely determined that there -- it is feasible to assemble a site, deal with the various utility issues -- I mean, some issues, as you know, have been a source of prior discussion -- utility issues, traffic issues, et cetera. We believe it is a site that could viable be developed and a baseball stadium construct and that that can technically work. It can work physically and technically. We believe we have a fairly good handle on the costs associated with doing that, including, as you recall, when the Mayor made those public, we included a fairly decent contingency so that to the degree -- with the data we had, we hadn't thought of everything that we would be covered. And so I think we've thought that through, again, with as much knowledge as you can get before you actually get on the site. 54 9/20/00 WHOLE COMMITTTEE - BILL 000535 And I think that the real fundamental question is whether there is a business transaction that could be negotiated between the public and the teams that is economically reasonable for the various parties at that site. And to date, we have, as I -- as I've said earlier, we have been unable to reach that closure. I would like -- those are the facts. Now, how you --
How you want to characterize that is -- I mean, will we be able to do it when we recommence negotiations? We will have to see.
To the best of your knowledge, has any determination been made by the negotiating team, both the private and public components of the negotiating team, as to the likelihood of the viability of a business transaction taking place that will result in a baseball ball park at 12th and Vine?
There have been scenarios developed that would allow that to 55 9/20/00 WHOLE COMMITTTEE - BILL 000535 occur, allow a stadium to be developed there, that in different instances, either one side or the other felt were not acceptable. And so I guess you can say we thought we had a solution that the teams didn't find acceptable, or solutions, different scenarios. And it's a business negotiation. I think you can't quite -- I mean, you're making a judgment about the other parties' capacity to move, I guess, you know.
So I don't -- I wouldn't -- I'm -- I'm here this morning on behalf of that committee, I would not want to characterize that they've reached some, you know, ultimate conclusion, other than we have been unable to do it to date. They may have reached individual conclusions, I don't -- but I just won't -- you know, in a kind of a formal sense, it's not like they made a formal conclusion that this is done. We stopped.
I understand. Madam President, you've been 56 9/20/00 WHOLE COMMITTTEE - BILL 000535 tremendously generous, and I will -- some of our colleagues might have a few questions.
And we can have a second go-around. Thank you. The Chair recognizes Councilwoman Krajewski.
Thank you. According to , some items have been excluded from this report, including tenant improvements and the trash management and disposal system. Can you explain to me what is "tenant improvements," what is meant by that?
I'd like to have Rick Tustin come back and respond to that. (Mr. Tustin returns to witness table.)
I believe the -- that items refers to the comments from the teams themselves as a result of their review of the reports. Once they review the report that we've given them, the draft report, I'm sure they're going to come back to us with tenant improvements, 57 9/20/00 WHOLE COMMITTTEE - BILL 000535 or things that they as tenants would like to see over and above maybe what we've outlined in the draft report we have. So I think that's what's referred to as "tenant improvements."
Well, in light of the recent Daily News articles regarding the state of the Vets trash and concession stands, who is responsible? If it is the vendor, what course of action does the City take if these violations aren't corrected?
I'll ask Greg Grillone to come up. He's responsible for the actual maintenance of the Vet, and that is, to some extent, a maintenance issue. (Greg Grillone comes forward.)
I'm sorry. You have to identify yourself for the record.
I'm sorry. Greg Grillone, I'm the Stadium Director for the City of Philadelphia. 58 9/20/00 WHOLE COMMITTTEE - BILL 000535 The overwhelming majority of the items that were listed in the article in the Daily News were items that are the responsibility of the food and beverage concessionaire in terms of cleanliness, in terms of complying with health code violations and things of that matter. As far as the actual removal of the trash from the building, that's the City's responsibility. And we do that.
Just a minute. Are the Phillies and Eagles responsible for any maintenance, costs, or capital improvements?