COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Thursday, May 11, 2006 2:15 p.m. - - - PRESENT: COUNCILMAN W. WILSON GOODE, JR., CHAIR COUNCILMAN DARRELL CLARKE COUNCILMAN FRANK DiCICCO COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO RESOLUTION 060276 - Resolution authorizing the Committee on Commerce and Economic Development to hold hearings to receive a programmatic update on the Urban Industry Initiative. - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2
Good afternoon. This hearing is called to order. This is a public hearing of the Commerce and Economic Development Committee on Resolution No. 060276. My name is W. Wilson Goode, Jr., Chair of this Committee. A quorum is not necessary. This is an informational hearing, but several members are already present. To my left is Councilman Frank Rizzo. To my immediate right is Councilman Frank DiCicco. Next to him is Councilwoman Marian Tasco and next to her is Councilwoman Donna Reed Miller. The title of the resolution, authorizing the Committee on Commerce and Economic Development to hold hearings to receive a programmatic update on the Urban Industry Initiative. I ask Mr. Steve Jurash to please approach the witness table. Good afternoon, Mr. Jurash. Would you please state your name for the 3 5/11/06 - COMMERCE - RES. 060276 record.
Thank you. Good afternoon, Mr. Chairman, members of the Committee on Commerce and Economic Development. My name is Stephen Jurash. I'm the Executive Director of the Urban Industry Initiative. I'm here today to testify in response to Resolution No. 060276, a resolution authorizing the Committee on Commerce and Economic Development to hold hearings to receive a programmatic update on the Urban Industry Initiative. First of all, I'd like to thank Chairman Goode and the Committee for this opportunity to tell you the UII story and to memorialize it. I think it's important that these accomplishments be noted and that the UII be recognized as an important economic development function in the City of Philadelphia. 4 5/11/06 - COMMERCE - RES. 060276 I'd also like to thank Stephanie Naidoff and the Commerce Department for their strong support and cooperation in conducting our mission. I've placed a document in the record which gives a complete rendering of both the history and the mission of the UII, but in respect to this Committee's time, I would like to summarize that document with a PowerPoint presentation now. Basically, the Urban Industry Initiative is centered on manufacturing, and I think the question needs to be asked why manufacturing and where are these manufacturers. If you look on the map that's coming up on the screen now, it shows the City of Philadelphia. Superimposed are the Council districts over it. Scattered throughout the City are -- every little dot there represents a manufacturing firm. There's approximately 1,300 firms in the City of Philadelphia and 40,000 employees. 5 5/11/06 - COMMERCE - RES. 060276 There's a manufacturer in virtually every section of the City somewhere. Of course, there's clusters more in some than others, but across the City there's a pretty widespread of manufacturing firms. The next relationship I'd like to look at is the relationship between manufacturing and the neighborhoods. There's always been a symbiotic relationship between our neighborhoods and our manufacturing firms. In fact, entire neighborhoods in the City grew up around manufacturing. Tacony is a very good example. Tacony was created as a workforce for distant saws, a saw manufacturer in the 1800's. So there's always been a symbiotic relationship between the neighborhoods. And, also, there's jobs. I think that's the most important relationship, the relationship between the manufacturing companies and the jobs in the neighborhoods. How much do people really make 6 5/11/06 - COMMERCE - RES. 060276 here? If you take a look at manufacturing compared to the retail or leisure and hospitality trades, you're looking at the salary of about $43,000 a year, which is roughly twice what it is for retail or for leisure and hospitality. We're talking about manufacturing giving our neighborhoods a good living wage. There's a pension here. There's healthcare benefits. There's something that people can retire on. So manufacturing does present that. Also, I want to show its relationship to the City in terms of the City's revenue. Manufacturing has consistently been the third or fourth largest generator of income to the City. The first there is health and social services. The second is government. 5 million in 2005. And I show this because I think that there's a nasty rumor 7 5/11/06 - COMMERCE - RES. 060276 floating around that manufacturing is dead in the City of Philadelphia, and I can assure you it's alive and well. One of the things that concerns me, though, is that manufacturing has not been part of the City's strategic plan. It's not been part of the economic blueprint. It's been missed. And, obviously, you can see it's a significant part of our economy. Some of you were present last November. We had a gathering of CEOs of the ten largest manufacturing companies in the City. Those CEOs presented their story to some Councilmembers at that time, and this graphic was shown.
This basically represents what ten companies in one year put into the economy of the City of Philadelphia, and I want to point out a couple things that I think are very significant. One is, if you look at the line just above the black line is City wage tax. Ten companies generated over $22 8 5/11/06 - COMMERCE - RES. 060276 million in City wage tax. The line underneath the black line is our payments to vendors within the City of Philadelphia. This is money that's put back into this economy. That number is $211 million in one year. That's a tremendous amount of money put back into the economy. The line underneath that is wages paid to employees after Philadelphia taxes are taken out. That's $349 million available to the economy of Philadelphia. That's an enormous amount just by, again, ten companies. S. 43 in economic activity stimulated. So manufacturing -- it's the highest of any sector in our economy in its ability to create additional stimulated activity. The thing I want to point out 9 5/11/06 - COMMERCE - RES. 060276 from this is that manufacturing is more than just another type of business in the City. It is, in and of itself, an economic sector, and it's important that it be recognized as such, I believe. The next slide is talking about some of the losses that we've incurred in manufacturing companies. In 1970, there were a quarter of a million manufacturing jobs in the City of Philadelphia. Today there are about 40,000. That's a tremendous decline. And I just saw hot off the press from KYW a release about Tasty Baking talking about potentially closing its plant here in Philadelphia. That's very disturbing news. There's 1,100 jobs there alone. Manufacturing is in trouble. And normally the kinds of things we're seeing are not the big companies leaving; it's the little guys. Over 60 percent of our manufacturers are ten employees and less. The impact on the City is represented by this graphic. If you have 10 5/11/06 - COMMERCE - RES. 060276 a company with ten employees and you lose them, the annual loss to the City is about $403,000. Over ten years that loss is represented by about $4 million to the City. A company with 50 employees, if you lose one of them, that's about $2 million in the first year lost to the economy, and in ten years, it's a $20 million loss. These are significant numbers I think that would go a long ways to balancing budgets and helping the City with its important services. So my concern is is that every day we're losing companies that are ten and in size and nobody really seems to 17 notice. 18 The next slide, just to talk a 19 little bit about the Urban Industry 20 Initiative, I think I've kind of explained why manufacturing is important to us. Pugh Charitable Trust started the UII in 1997 with a grant. Pugh was doing work in the neighborhoods, much like NTI is doing today. It was good work. It 11 5/11/06 - COMMERCE - RES. 060276 was work to look to build affordable housing. It was work to help clean up the area. But Pugh looked around and I think they kind of came to the same conclusion that I'm hoping NTI comes to, and, that is, that if we don't have jobs for our neighborhoods, we can do a lot of improvements, but it's not going to go as far as it would if we had jobs. So Pugh looked around, and what they saw was a lot of manufacturing firms embedded in the neighborhoods. So the UII was created to find a way to retain manufacturing jobs in Philadelphia neighborhoods through a comprehensive strategy that strengthens businesses and builds relationships between manufacturers and their communities. One of the things that we do in terms of strategies is help manufacturers to help themselves, and I'll spend a little bit more time on that in a moment. I do want to spend just a couple minutes on this. This is a survey of 12 5/11/06 - COMMERCE - RES. 060276 manufacturers we did in 1997. It will help you understand the dynamic of some of the difficulties we have with manufacturing as an economic sector.
And I want to cover this briefly, because I think it's important. We discovered that firms are extremely isolated. And I always use the example of a company buying its ball bearings, for example, from some place in Ohio when three blocks away is a ball bearing manufacturer. They just aren't even aware that that company is there. The firms have isolated themselves from one another. The businesses feel ignored by the City. They distrust government agencies, which is important because it's hard for agencies like the Commerce Department, who has good programs, to even get in the front door to offer them to the manufacturers. Their problems are not simple. I wish I could tell you that if we threw $2 million at the problem, it would go 13 5/11/06 - COMMERCE - RES. 060276 away, but it's not that simple. Their marketing skills are weak or missing. What we discovered is that the real entrepreneur was probably two or three generations ago. What remains, although technically very competent, have lost their marketing skills. If they lose a market to China or to competition, they don't know how to replace that market. There is a very low ability and willingness to change. They're kind of set in their ways. Firms are aware of problems, but they can't identify the cause or what to do. They know they've got a problem, but they're not sure what it is or what to do about it. As a result of isolation, firms can't measure their current performance or evaluate ideas for improvement. They don't even know what to do next, and that's a significant problem. The top of the next column, the neighborhood is important to these manufacturing companies. It represents a 14 5/11/06 - COMMERCE - RES. 060276 local workforce, its low-cost space, its physical infrastructure and its security. The decline in these factors have led a lot of companies to think about leaving the City. At the time when this was done, one in five companies was contemplating leaving the City of Philadelphia. Many companies are in survival mode. They have little time and few resources for community participation. Management skills vary greatly. Technical skills are strong. And most companies did not have a clearly articulated need. Even when we got in there and we sat them down, they didn't know what they needed. So this information has really helped us shape our strategies in terms of how we're going to reach out to the manufacturers. The thing we decided, and every strategy that I show you is centered on one thing, we need to get them out of the factory. If we can get 15 5/11/06 - COMMERCE - RES. 060276 them out of the factory, we can get them involved in the community. We can get them involved in educational programs. We can help them grow and change. The first strategy that we employed was the creation of urban industrial districts. E. and RCA are the first urban industrial districts created in the Commonwealth of Pennsylvania. An urban industrial district is simply this: A fixed geographic area containing member manufacturing companies working together to improve their environment. Interestingly enough, the environment they're working to improve is the neighborhoods. E. and RCA area. We attracted that for improvements to street lights, facade improvements, buying up properties that were abandoned and greening them. These were all improvements not just to the industrial area but to the neighborhood itself. 16 5/11/06 - COMMERCE - RES. 060276 Again, I think there's really a symbiotic relationship between the manufacturer and their environment, the neighborhood. The next thing that we did was, I created a New Product Development group, which I led for a number of years. That group was designed to help manufacturers innovate. If a company isn't innovating or developing new products, it's probably in some stage of dying. The New Product Development group helped companies learn to do this, to bring new products to market. 5 million in new investment.
The next thing that we started was marketing technical assistance, which I gave to companies. There were about 30 companies involved in this. 6 million in increased sales for these companies. This wasn't rocket science. This was 17 5/11/06 - COMMERCE - RES. 060276 helping them price their products. This was helping them learn how to adjust their market, their advertising. This was basic marketing kind of stuff that made a huge impact when it was presented to them. The next area was a loan pool. We started a loan pool out of the Pugh money that was originally given us. We made loans to 46 manufacturers. The loan pool was a micro loan pool. It basically helped with bridge loans and the such. That helped them in new equipment purchases. It helped them acquire new property for expansion. And as a result of the pool, 230 new jobs were created and a spin-off investment of 13 million. The next slide basically shows the remaining strategies. I call them strategies. They're programs that we offer. They're not all currently funded. Our main funding period was from 2000, 2001 and 2002. After that, it's been a bit of a struggle, but these are the 18 5/11/06 - COMMERCE - RES. 060276 programs that we've had success with implementing. The only two that I want to point out, I think, that we haven't discussed are HR technical assistance, human resources. Companies need that desperately, how to find and hire the right people. And dovetailing with that are job training initiatives at the bottom, which Council will be hearing a lot more of in the months to come, because there's a lot of work to be done with the manufactures in job training. So in conclusion here, what has the UII accomplished? How big is the bang for the buck? If we look at it, we're looking at a total jobs created of about 625. 5 million. That's with over 300 companies engaged, again, during that period from 2000, 2001 and 2002. I took over as Executive Director in 2004. When I came here, there was one staff member. Now we've built up to four. But during the time we 19 5/11/06 - COMMERCE - RES. 060276 were able to run all of these programs that were very successful, we did it with five full-time staff members, two part time and an annual budget of about 500,000 a year. I think as economic development agencies go, that's a pretty good bang for the buck. Also, I want to keep in mind that that initial work was done in an area, the lower Northeast, about ten square miles of the City. The future: The future is dependent upon funding, to a large extent, to keep programs going and our ability to get manufacturers out of the factory, as I stated earlier. Right now we're servicing companies Citywide, and I developed a new strategy and launched it last year called the Manufacturing Alliance of Philadelphia. You see that in the lower portion of your screen. Essentially, what that is is, Philadelphia County is the only county in the Commonwealth that doesn't have a 20 5/11/06 - COMMERCE - RES. 060276 manufacturing association, and I think that makes a lot of sense if you understand the dynamics going on here amongst the manufacturers. The Manufacturing Alliance would bring them together for educational seminars, for technical training, for a lot of things that would help unite the links in this chain. In addition, it would help the UII become somewhat self-sustaining through membership dues. So from a strategy standpoint, the Manufacturing Alliance is an important step forward. And, again, that's going to be a Citywide initiative. And this concludes my presentation and my testimony. Once again, I'd like to thank Chairman Goode and members of the Committee for your patience, and I'd be happy to answer any questions the Committee may have.
Actually, I'm going to hold off on questions until we take a few more witnesses' testimony. 21 5/11/06 - COMMERCE - RES. 060276
Is Michael Savage here, Paul Luff and Andi Levin. If you all could come as one panel to the witness table. In any order you'd like, please state your name for the record and proceed with your testimony.
My name is Robert Reithmiller. Would you like me to proceed?
I'm the owner of PTR Baler and Compactor Company, a manufacturer in Port Richmond, and I'm here to read the testimony of my son-in-law, Mike Savage, who is my son-in-law and our Vice-President, who has worked very closely with UII during the last ten years. This is in support of your resolution, and I'll read his testimony now. PTR Baler and Compactor Company, which was formerly called 22 5/11/06 - COMMERCE - RES. 060276 Philadelphia Tramrail, has been manufacturing quality products in the City of Philadelphia since 1907. I'm the third generation and Mike is the fourth generation. We are one of America's largest manufacturers of recycling and waste equipment, and we employ 180 people. We ship our units to all areas of North America, as well as to the United Kingdom, Asia and the Middle East. , which is one of the major initiatives that UII started in the late '90s. E. E. members in 1997, and nearly 70 percent of the manufacturers said that they were considering leaving or had already started searching for a new plant 23 5/11/06 - COMMERCE - RES. 060276 outside the City of Philadelphia. Some of the reasons were the same ones you hear all the time, high taxes, a restrictive business environment, but the point that took us by surprise was that many of the businesses were leaving because of the quality of life issues, like deteriorating infrastructure, nuisance crime, graffiti and an overall disconnect from the City itself. They just felt that no one cared whether they were here or not. E. and took the following actions: They established a five-year strategic plan that addressed the infrastructure issues and created a course to correct them. 5 million in funding through the City, State and private contributions to put the plan into action. E. neighborhood was designated the Commonwealth of Pennsylvania's first Industrial Special Services District. 24 5/11/06 - COMMERCE - RES. E. E. area, which is funded through neighborhood assessments placed on the manufacturers. E. and the fulfillment of the UII mission, which is to retain and attract neighborhood jobs. We stabilized a community and brought enthusiasm and hope to an area which could have easily slipped into the ranks of so many forgotten industrial neighborhoods in our City. E. and the surrounding manufacturers in the area. One of the constant challenges in business is the need to develop and market new products, which are the life blood of any business. The old saying is that if you're not growing, you're dying. That holds true 25 5/11/06 - COMMERCE - RES. 060276 in manufacturing as well as other businesses. Because many of the manufacturing companies lack the experience, knowledge and funding required to implement new products, the UII created the vehicle to overcome these obstacles. The New Products Development Program started by Steve Jurash instructed manufacturers on how to research new products, set design criteria, institute a project management time line and market these new products. In the case of PTR, even though we are larger than many of the local manufacturers, we never had a formal training program on how to approach this development of new products. We participated in the program and have introduced seven new products to our line, and those units have helped to fuel our growth over the last few years. There is a book on the New York Times best sellers list titled "The World 5/11/06 - COMMERCE - RES. " The book chronicles the emergence of China and India and how China especially is coming on like a freight train in terms of manufacturing. S. manufacturing superiority, like technology, research and development. It is critical for us as manufacturers to think outside the box in terms of new products and competitive advantages that we bring to the table. Programs like the UII's New Product Development initiative bring these challenges to the forefront and are groundbreaking in terms of their relevance to today's global economy.
We hope that these personal experiences have shed some light on the success and the innovation that UII has brought to our business and to the City of Philadelphia. It is the kind of program that will help keep Philadelphia's economy on the move while 27 5/11/06 - COMMERCE - RES. 060276 securing high-paying, valuable jobs for its future. And that's the end of Mike's statement. I might add to this that when Mike and my son, Eric, joined our company a little over ten years ago, one of their first thoughts when they came was in looking at our neighborhood, Dad, when are we moving? E. and the improvements in our neighborhood, now they're saying, Dad, how can we expand here? So I think it's been a very good thing for your City.
Yes. I'm Paul Luff, former Chief Operating Officer of Active Radiator Supply Company in Port Richmond. Good afternoon, Mr. Chairman, members of the Committee. My name is Paul Luff, and I'm here today to testify in response to 28 5/11/06 - COMMERCE - RES. 060276 060276, resolution authorizing the Economic Development Committee to hold hearings receiving a programmatic update on the UII. Active Radiator is a manufacturer of truck and industrial heat exchangers and radiators. It's been in the City of Philadelphia since it began in 1987. The owner, Martin P. , started this company of one with an idea, the idea to become a premium manufacturer of radiators and components to the heat exchanger wholesale market. The company has been very successful and has grown to include offices and warehouses in nine states, two manufacturing facilities in Philadelphia and one in Detroit. Active Radiator today employs 190 people and sells in all 50 states and several foreign countries. We welcome the opportunity to speak today to identify the contributions that Active Radiator has had because of 29 5/11/06 - COMMERCE - RES. 060276 the UII. In mid 2002, Active had one building in Philadelphia and only about 70 employees. Today there are two buildings and the company employs almost 150 people within the City itself. E. E. organization. Active was growing and needed help. , Active was able to connect with UII support for the development of a comprehensive employee and human resources program. The HR specialist in the UII helped us to develop a blueprint for the future and a great start to the growth at Active. At the same time, Active was in need of a new facility. We had just 30 5/11/06 - COMMERCE - RES. 060276 purchased the assets of two other companies, one in Pittsburgh and one down in Alabama, and needed to find them a home. Well, this was a critical juncture for Active and, as it turns out, the City of Philadelphia. We searched for several months in the Port Richmond area, and I have to say, we searched hard outside the City as well, because at this time, there was a true debate between Mr. Newell and myself as to the value, if any, that the City could bring. His dad started his radiator shop in Port Richmond and then his business grew out of that into a manufacturing business. He was born in the City. He still lives in the City. All of his kids go to City schools, and he's very strongly tied to the City itself. So we looked hard at that decision, but there were competing forces, including tax incentives from people outside for the company and for employees, but Active chose to stay in 31 5/11/06 - COMMERCE - RES. 060276 the City. E. becoming a larger force in the Port Richmond area. E. is. Things started looking different. We started getting improvements, and people started caring. Philadelphia still offers a good workforce for the manufacturing experience, and UII was willing to support Active while working with the City and State infrastructure to complete our expansion. We were fortunate and found a facility right down the street. Another company happened to decide that they were going to move to Bucks County and they sold their business. They had at one time a very large workforce there that had dwindled to about 30. They sold us the building. We moved in. Currently, there's over 70 employees in that factory now for Active Radiator. We are now one of the largest 32 5/11/06 - COMMERCE - RES. E. district and continue to grow. So UII did help us find what we needed. They became a conduit to facilitate Active's link to many local organizations. I have to say, when I first started looking at various things to go find and do, various places to go get help, it was amazing. It was hard to find the right places, but the UII became that conduit for us to be able to find services. It connected us to PIDC for funding for that equipment. It supported our requests and subsequent approval by the State for purchase of our new facility.
It contributed an equipment loan, as Steve mentioned earlier, to help us fund part of that acquisition. It introduced us to PWDC, an unknown to us, that helped us with a number of job creations. They brought in some consultants that helped us do an entire job evaluation program that then resulted in another 25 jobs that were created at 33 5/11/06 - COMMERCE - RES. 060276 Active Radiator. Supporting in our growth through a UII-sponsored supervisory training program. Steve mentioned that there were an awful lot of things that were done in 2001, 2002. This was a 2002 program to help us with training our supervisors to be better supervisors, to be better with the employees. That was done at the DVIRC up in the Northeast. They accessed resources for us in many parts of City government, led the human resources development program that I already identified and connected us to the proper people when we needed to. E. moving forward towards the next year's growth as we're starting our next five years. Basically, UII got things done, and they knew where to go to get that help. They helped the City save 70 jobs from leaving, and now the City has 150 people to contribute each week to those tax roles. 34 5/11/06 - COMMERCE - RES. 060276 Active is largely a neighborhood company. A significant percentage of the people that work at Active live in the surrounding three zip codes. It's all part of the same district. This has driven a larger local infrastructure of homeowners, repair people, grocers and other merchants. And it's a widely known fact that for every dollar of payroll contributed in the area, that dollar again gets used seven times in that surrounding community. We at Active are in full support of the UII. They have been a strong voice for manufacturing, not just the Coca-Cola's of the City, but for us smaller enterprises that need help to survive. We strongly recognize UII's contribution and recommend that City Council establish them as a strong, permanently funded portion of the City's budget. The Urban Industry Initiative makes money for Philadelphia. We're 35 5/11/06 - COMMERCE - RES. 060276 living proof. Thank you.
Good afternoon, Mr. Chairman and members of the Committee on Commerce and Economic Development. My name is Andi Levin. I am the President and owner of Penn Scale Manufacturing Company. I am here today to inform Council of the impact that the Urban Industry Initiative has had on small businesses in Philadelphia and, in particular, my company, Penn Scale Manufacturing Company. Penn Scale has been in business since 1923 and has always been located in Philadelphia, first on the 1000 block of Front Street and since 1946 at its present location on Berks Street between Front and Second Streets. In 1999, I became the President and owner and the third generation in my 36 5/11/06 - COMMERCE - RES. 060276 family to run Penn Scale. Due to the influx of inexpensive imported scales, Penn Scale had fallen on hard times. Having spent the last 30 years as a teacher and supervisor of special education in the School District of Philadelphia, with no business background at all, I recognized that I needed help. The physical plant was a disaster. It needed new windows and doors, general electrical wiring and the installation of three-phase power, a new roof, machinery repairs and replacements, and that was just the beginning. We needed a business plan in order to obtain a loan and to have a direction with which we would move our business forward. We needed money to finance the improvements. We needed help to improve our manufacturing techniques in order to bring us to a point that we could be competitive in the marketplace. It was at that point that we had the good fortune to encounter the 37 5/11/06 - COMMERCE - RES. 060276 UII. The UII stepped up to the plate and provided us or directed us to agencies that helped with hands-on experts. Through loan officers, we were able to secure low-interest loans that provided us with the money to repair and secure our building and to update our machinery. Through economic experts, we were able to draw up a business plan. Through manufacturing experts, we learned the principles of lean manufacturing and how to create an efficient and safe working environment for our employees. Through human resource experts, we developed a handbook which protects both our employees and us. Through marketing experts, we were able to formulate a plan to begin to reclaim our market share. A prime example of the assistance we received from the UII would be our participation in the New Product Development Program. This forum allowed for roundtable discussions between manufacturers who wanted to introduce new 38 5/11/06 - COMMERCE - RES. 060276 products to their existing product lines. The group shared information on the problems we all encountered and made suggestions as to how to overcome the obstacles we all faced. It provided guidelines by which we could monitor our product development in a quantitative fashion. For us, it led to the development of our Heirloom Scale. This was an old product that we wanted to take into a new market, being upscale home kitchens. I am happy to report that our scale was recently featured in the Neiman-Marcus catalogue. We also developed a Plastic Baker's Scoop, which we are now producing for an international marketplace. We are still a small manufacturer, employing a workforce of six. However, we are growing and expanding in new directions. Utilizing the advice provided to us by the UII, we have redesigned our website, purchased a 39 5/11/06 - COMMERCE - RES. 060276 small business that complements ours, and have become a distributor for digital scales, making us a full-service scale company. The UII provides us with a resource that we can depend upon for a multitude of needs. Without the help of the UII, I am sure that we would not have been able to overcome the challenges that we faced. As a result of the assistance which the UII provided us, we have kept six neighborhood residents employed and contributing taxes to the City and kept a 12,000-square-foot building from becoming vacant.
Perhaps more than anything else, the UII has provided us with the confidence to continue to grow our company and the knowledge that they will support us as we move forward in this endeavor. Thank you for your time.
Thank you. Any questions from members of 40 5/11/06 - COMMERCE - RES. 060276 the Committee for this panel? Councilman Rizzo.
Thank you very much. One of the things that I heard from the gentleman, and I've heard it over and over, that the company around the corner needed ball bearings and they didn't know they were around the corner. I mean, that's hard for me to believe, but I believe it. What can we do to improve like -- I'm sure the City of Philadelphia buys heat exchangers, radiators. I'm sure that there's a lot of business right here in our backyard. Is it price? What's the issue that more of our local manufacturers aren't getting business right here from our Sunoco's and our other large corporations? Can you comment on that?
Come to the table, please, and identify yourself for 41 5/11/06 - COMMERCE - RES. 060276 the stenographer.
Hi. It's Steve Jurash, Executive Director, Urban Industry Initiative. I've sort of equated it, Councilman, to hurting cats. The manufacturers are so scattered and so isolated one from another, that the best way to accomplish what you're talking about is to institute programs like business card exchanges, where they come out and they meet each other. That's something that was very foreign to them. They weren't used to doing that. They haven't done that probably 80 years. When I had April 1st last year the CEOs of the largest companies come together into one room, that was the first time in over 80 years that that had happened. Most of them did not know each other. They've just drifted apart. We've tried to do a number of things to correct that. As I said, business card exchanges. We created a 42 5/11/06 - COMMERCE - RES. 060276 website where a manufacturer now is able to go if he's looking for ball bearings and put in the word "ball bearing" and get a return on all the Philadelphia companies that manufacture ball bearings. So we've tried to get this out, but it's a process. It takes time.
My mind is just racing, thinking that there's so many ways that we could come up with a program that's like shop-at-home or make sure that we give our own industry, our own manufacturing, a shot at it, not just say, Well, they can't be competitive because they're small, and they go to the big guy. But I just can't imagine even our local Chamber not wanting to be helpful. Because maybe not everyone is in the size that can become part of an expensive chamber of commerce, but you would think that they'd want to maybe help in some way to get them to that point where they can become affiliated with it. 43 5/11/06 - COMMERCE - RES. 060276 So I think that one of the things we really have to do is start talking up and knowing what we do and what we do in our own backyard. It amazes me sometimes when -- like I went to school with his brother and I didn't realize that we had a company that's known throughout the world right here in the City of Philadelphia, and the radiator company and the other manufacturers that are here. I mean, I have a person that I know that even though -- is that one of the other requirements, it has to be in this corridor to become a member? Like there's a company called Burton Imaging, I think it is. I don't think he's in your district, is he, Councilman? COUNCILMAN DiCICCO: Everybody is in my district. P.R.I.D.E. is in my district.
The problems he handles in his district are -- I mean, 44 5/11/06 - COMMERCE - RES. 060276 there's a company right here in Philadelphia that wraps all these buses all over the United States and they're right here, and nobody knows it. So the answer to the question, is geographics a part of being in this organization, to be in a geographic area?
We're responsive to every manufacturer in the City of Philadelphia, but you're exactly right. They're off the radar scope from each other and from the City. One of the things we fight for is a company in the City that manufacturers lighting. Right across the street from them -- it's called Simkar -- the School District is building a new school. They weren't even specced for the lighting that they manufacture. These are the kinds of things that we have to combat, and the way to do it, Councilman, frankly, the UII is a voice for manufacturers. Manufacturers have sat still and have not had a solid 45 5/11/06 - COMMERCE - RES. 060276 voice. We're trying to bring that voice to City government and to help this from happening again.
Well, here's a perfect example, and I'll end. Here's that company I just talked about that does the bus wraps, Burton. They wrap buses for New York transportation. They wrap buses for Chicago, all the buses in Florida, but none for SEPTA. Something wrong with that?
I will say through this P.R.I.D.E. organization, with the group getting together in the last ten years, we have found new suppliers right in our own neighborhood who were so small we didn't know about them, and that has helped them and it's helped us, too. So it has been a good thing that way, too.
Well, thank you. I learned a lot today. COUNCILMAN DiCICCO: And 46 5/11/06 - COMMERCE - RES. 060276 P.R.I.D.E. is where?
Port Richmond. COUNCILMAN DiCICCO: And whose district is that?
Everybody is in your district. COUNCILMAN DiCICCO: It's been a long day. I wanted to prove my point to Councilman Rizzo.
Councilman DiCicco. COUNCILMAN DiCICCO: Thank you. Good afternoon, everyone, and thank you for your testimony. Mr. Jurash, when we met in November, I believe it was, in the Caucus Room with some of the CEOs and other folks from the business community, one of 47 5/11/06 - COMMERCE - RES. 060276 the issues that was of concern to the companies was the lack of being able to attract the job pool, the job pool. Let me rephrase it that way. The job pool was rather thin. Many of the kids coming out of our schools were not proficient enough to even pass some of the entry-level positions in the various companies. And I don't know if we've had a conversation since then. I've been getting some of your e-mails, but I think we were trying to do some linkage between your organization and the School District. Has that occurred? I think it did, but I just want to double-check to make sure I didn't drop the ball anywhere.
It actually hasn't yet, Councilman. I'm working on putting that group together. That's exactly right. That's the issue that -- COUNCILMAN DiCICCO: Could you explain -- because I'm not sure if any of the other Council folks that are here 48 5/11/06 - COMMERCE - RES. 060276 were at that briefing -- a little bit, briefly explain what the problem seems to be.
As I've talked to manufacturers across the City, they want to hire people, and Philadelphia represents a tremendous labor force available to them. And time and time again I'll have a company president or owner say to me, I just want somebody that can read a tape measure. That goes from the minor side to the major side. The major side is, PTR Baler and Compactor right know, we're scrambling to find them about welders. They're 17 desperately in need of welders. Their 18 company is growing. We also need 19 machinists. 20 The problem is is that the public workforce system is very good at finding receptionists or bookkeepers or word processing people. It's not very good at finding welders or developing welders or developing machinists. So 49 5/11/06 - COMMERCE - RES. 060276 we're looking to put a working group together, which would involve members of Council, members from the manufacturing company, members from Philadelphia Workforce Development Corporation, the WIB Board, the Philadelphia School District. If we can create a partnership where we can start to share ideas on a good way to get through this -- I don't think this is an insurmountable problem. I just think it's an oversight, much like my ball bearing guy three blocks away not getting the business. It's just a matter of bringing the right people together and getting the job done. COUNCILMAN DiCICCO: Thank you. And, again, I was aware of that. I just was not sure if any of my colleagues up here were at that meeting and I wanted them to hear a little bit about what the issue is and how we are in that process, because I think Mr. Hazzouri is here from Sunoco. I think they have a pilot program down in South Philadelphia at the 50 5/11/06 - COMMERCE - RES. 060276 Bok School and they're working in that area to try to develop some of these young folks who are in the schools. Because not everybody is going to be a doctor and a lawyer. We all understand that, and I just personally think that we need more trade schools in the City to fill those job opportunities. Because I remember as a young man -- I still could remember that -- many years ago that there were more trade schools, and not everybody who was proficient in academics or was pursuing a college career had an alternative, had a choice to get into a trade. But for some reason along the way, for whatever reason, people thought that being in a trade was not a good job, it didn't pay well. But contrary to that, they are good-paying jobs and you can have a future. So if you need us, I can speak on the Chairman's behalf and my colleague, to do anything we can with the School District to move that process 51 5/11/06 - COMMERCE - RES. 060276 along, please let the Chairperson know and we'll be certainly more than willing to help you out.
Good afternoon, gentlemen. Mr. Jurash, I need to underscore the remarks shared by Councilman Frank DiCicco. Let me first say that you're for sure on the right track when you mentioned the partners that you have coming to the table. It is a surmountable problem and it has been done before, where an opportunity came to the City and there was a void of folks for that industry and the City put training programs in place and got young people in the pipeline so that they would have jobs, and, namely, it was the Convention Center where the Philadelphia 52 5/11/06 - COMMERCE - RES. 060276 OIC came on board as the partner to actually set up a hospitality institute and train young people who opt not to become lawyers, doctors and Indian chiefs, but have a real well-paying job in the hospitality industry, and it's still happening today. So there is precedent. There are models where it can work, and you have the appropriate partners at the table. I will only suggest that you consider reaching out to -- and I'd be more than willing to help facilitate that -- to the leadership of Philadelphia OIC, which tries to stay ahead of opportunities or challenges where they need persons of a particular skill set. They like to be at the table to set up the institute and then work with you in getting young people in the pipeline to meet the job opportunities that you just mentioned. And, secondly, to underscore Councilman Frank DiCicco's comment, we're 53 5/11/06 - COMMERCE - RES. 060276 ready, willing and able to assist you in any way we can with the School District, Workforce Development Corporation or anyone else who care enough like you do to, A, not leave the City, but, B, are willing to get young people in the pipeline so that they can work and have well-paying jobs. Thank you for your testimony.
Thank you, Councilwoman. If I may just add something along those lines. It's interesting you say, Councilman DiCicco, about not everybody is going to go to college. I think a lot of this problem is kind of how you couch it. One of the things we were successful in getting done was getting the Community College of Philadelphia to offer a two-year program in manufacturing called Applied Technologies. That sounds a lot better than some of the names I've heard go to some of the technical training programs. That makes a difference. And 54 5/11/06 - COMMERCE - RES. 060276 we're also looking at Drexel to do the same. The other thing is that it also starts very young. We did a pilot program again in Port Richmond where we went into some of the grade schools, and then we started hooking up the five and six and seven-year-olds -- not quite that young; seven and eight-year-olds, nine-year-olds and taking them on tours through the manufacturing facilities, so they got to see that behind those mysterious walls in their neighborhood is something real and vibrant going on. At the end of it, they did a mural, and the kids were stunned by the welders and the sparks coming off, and I would venture to say that those kids will never forget that experience. They'll know there's something of value going on in their neighborhood. Programs like this need to be continued. This is what I mean when I say that Philadelphia is the last best -- 55 5/11/06 - COMMERCE - RES. 060276 the UII and the manufacturing is the last best chance for our neighborhoods. I think we can put our neighborhoods solidly to work again. COUNCILMAN DiCICCO: Thank you, Mr. Chairman. Are you familiar with an organization known as ACE? It stands for the Architecture Construction and Engineering industry?
No, Councilman, I'm not. COUNCILMAN DiCICCO: I wasn't up until actually a few weeks ago. Yesterday I was given an award by this association. It's a non-profit organization that is national. They're in about 77 cities, and what they've done is, they've created a mentoring program for young students in high school, high school students, who may have an interest in any portion of the construction industry, be it architectural, be it the actual construction end of it, 56 5/11/06 - COMMERCE - RES. 060276 engineering, et cetera, and they have a scholarship program. And I'm not suggesting that's something that you on your own could do in Philadelphia, but the manufacturers' association throughout this country, if they don't have something like that, this might be something as well. It introduces young people into the field of construction. And there are about schools in the City of 13 Philadelphia who have this mentoring 14 program, where architects will go into a school, engineers will go into a school and work with students, and then they compete. If they're interested in that field, they compete for different things, and eventually they may be awarded a scholarship. But it really is training, on-site training, if you will, with people from the industry who are mentoring. It's the simplest way. They are mentors in the schools. And what 57 5/11/06 - COMMERCE - RES. 060276 they're doing is creating a pool of employees, future employees. My understanding from the conversations yesterday, the construction industry, in all its facets, will be about two million people short in the next five years of where they need to be to be competitive. And you can't offshore those jobs. I mean, that's stuff you just can't offshore. It's got to be built here. So just a thought, and if there's any interest, I can direct you to some of the folks at the Philadelphia region who are part of ACE. It might be something to think about.
Are there any other questions specifically for Mr. Savage, Mr. Luff or Ms. Levin? (No response.)
Thank you again for your testimony. We sincerely 58 5/11/06 - COMMERCE - RES. 060276 thank you for staying in Philadelphia. Mr. Jurash, I have a few questions for you.
In 1997 when Pugh did its grant, how much was it for and for how many years?
Three-year grant for $3 million. At that point, UII was located, housed where?
So when the grant ran out in 2000, what was the status of the organization?
We weren't sure where our next dollar was going to come from, and PIDC really kind of felt that our mission was incompatible with theirs, so we were in limbo for quite a while. At that time, then Commerce Director Jim Cuorato stepped forward and felt that the 59 5/11/06 - COMMERCE - RES. 060276 program was too valuable to let it die at that point and brought it over to the Commerce Department and gave us a home.
During the years of 1997, '98 and '99, was there any funding other than the Pugh funding?
There was some funding. We received money from the State, from DCED. We received money from First Union Foundation, William Penn Foundation. It's been kind of catch as catch can in terms of trying to find enough consistent funding to keep us going.
And you mention now at your recent height you had five full-time employees and two part-time employees?
And a budget of 500,000. What's the source of that $500,000?
At that time, that was 2000, 2001 and 2002. So that was 60 5/11/06 - COMMERCE - RES. 060276 still at the height of the Pugh money. So that's where we were drawing that from.
There was still Pugh money available beyond the three years?
What's the relationship between the Manufacturing Alliance and UII? Are they separate and distinct organizations?
The Manufacturing Alliance is really a project of the Urban Industry Initiative. Its legal standing is not really yet established, but it will probably be a subsidiary of sorts of the UII.
And do you think that a membership organization will actually work as a fundraising strategy or do you believe that UII needs to exist as it's currently structured?
The success of the Manufacturing Alliance is problematic, 61 5/11/06 - COMMERCE - RES. 060276 and I'll say the reason for that is this: It's going to depend on whether we can convince manufacturing to believe in themselves. If they believe in themselves enough to feel that there's value in joining an association and if we can do that, I think the Manufacturing Association can be very successful. What I would hope to achieve from it, again, are two strategies. One is, it becomes another mechanism to involve manufacturing in its own future. Also, from a self-sustaining standpoint, from that organization if we can cover our administrative costs, then I can protect my core administrative functions financially. And it's my hope that we can do that through that mechanism.
What is your relationship with the Greater Philadelphia Chamber of Commerce?
I'm certainly aware of the Chamber. We don't have a formal relationship. I know that from a 62 5/11/06 - COMMERCE - RES. 060276 manufacturing standpoint, less than ten percent of the Chamber's membership are manufacturers. It just doesn't seem to be something that they've -- manufacturing has been interested in joining. But, then again, I'll say they're not great joiners in general. So I'm hoping that the Manufacturing Association of Philadelphia will be something that will be so specific to their needs, that they'll see the value in participating in it.
My last question was, how many members of the Chamber were manufacturers. You answered that. When Cuorato brought UII to the Commerce Department, aside from housing it there, was there any funding that came from the City?
Was there any talk of funding from the City at that point? 63 5/11/06 - COMMERCE - RES. 060276
Has there ever been a direct conversation with the City about funding UII?
Yes. Very recently, about two months ago, we ran into a scare again and almost shut down. At that point, Stephanie Naidoff stepped up and provided us with $100,000, which is the first time since our inception that the City has actually put money into the program.
And the source of that funding, do you know what the source of that funding was?
In your outlook over the next year or so, what would you anticipate your budget being in terms of what you expect it to be and what you would like it to be?
Again, serving manufacturing Citywide, to return us to 64 5/11/06 - COMMERCE - RES. 060276 full strength and provide all of the programs that we were providing before would require a budget of about 725,000 a year. I'm hoping this year to achieve a number of about 500,000, which will roughly bring us to about three-quarters strength.
Again, thank you for your testimony. I'm sure you don't mind if we engage the Commerce Department on the issue of funding of UII.
Thank you. If you could just remain for other questions that may come up, I need to call one more witness. Vince Dougherty. Good afternoon, Mr. Dougherty.
Please state your name for the record and proceed with your testimony. 65 5/11/06 - COMMERCE - RES. 060276
My name is Vincent Dougherty and I'm the Assistant Director of Commerce for the City of Philadelphia and the Acting Director of the Mayor's Business Action Team. Good afternoon, Mr. Chairman and members of the Committee. I'm here to testify in response to Resolution 10 060276, a resolution authorizing the Committee on Commerce and Economic Development to hold hearings to receive a programmatic update on the Urban Industry Initiative. As most of you know, the Commerce Department has had a long and active relationship with many of the City's manufacturing companies. Over the past years, much of our assistance was 20 funded through the Enterprise Zone Program, a State-sponsored program created in the early 1980s to stop the massive exodus of manufacturers and jobs from the State that had been occurring since the 1960s. In the longer run, the 66 5/11/06 - COMMERCE - RES. 060276 goal of the program was to stabilize and then grow that manufacturing sector. The State Enterprise Zone offered a limited amount of benefits, among them being low-interest financing and tax credits to manufacturers and industrial businesses to support investment in new businesses, upgrades of existing buildings and the purchase of modern efficient equipment. In addition, the State gave the City of Philadelphia a basic grant of $110,000 for each of the four designated enterprise zones. This grant was used to fund enterprise zone managers for each zone, fund the security rebate program, support summer clean-up programs and support the operations of business associations in the zones. In the mid 1990s, the State shifted its focus to high tech businesses. As a result, the basic grant was reduced to $50,000 per zone, or $200,000 for the entire City. Needless 67 5/11/06 - COMMERCE - RES. 060276 to say, a 55 percent budget cut had a dramatic effect on our ability to serve the manufacturing community. Further exacerbating the situation, the State elected to graduate existing zones from the program. With the reduction of zones came the reduction in basic grants, which, of course, led to fewer services and programs to support Philadelphia's manufacturers. The program has already been phased out in the Port of Philadelphia, West Parkside and American Street industrial communities. The last of our enterprise zones, Hunting Park West, will graduate on June 30th of this year, bringing the program to an end. Although the Enterprise Zone Program is about to expire in Philadelphia, the Commerce Department has certainly not abandoned the manufacturing sector. The Department has been a staunch supporter of the UII and its efforts on behalf of the manufacturers. 68 5/11/06 - COMMERCE - RES. 060276 In fact, UII is housed in Commerce, where it benefits from significant in-kind services from the Department. Further, senior management and staff have been active partners with UII as Board members and as partners on the day-to-day efforts to assist manufacturing businesses both individually and as business sector. The Commerce Department is committed to working closely with UII going forward. Whether it is business services provided through the Mayor's Business Action Team or technical assistance to business associations funded through the Commerce Department, we remain fully supportive of the critical mission of UII. As you have heard, UII's efforts are having a real effect on real businesses in our communities. The Commerce Department is proud to be a part of that effort. This concludes my prepared testimony, and I would be happy to answer any questions that you may have. 69 5/11/06 - COMMERCE - RES. 060276
Thank you for your testimony, Mr. Dougherty. Are you aware that I was not contacted by you or the Commerce Department about you providing testimony?
I actually had your testimony e-mailed to me from the Mayor's office and was surprised by it. I'm not quite sure why the Commerce Department would be testifying.
I apologize if there's a procedural error. I certainly meant no disrespect to you, that's for sure, Councilman.
The issue was twofold. One, that I was just taken by surprise that you would be testifying, and then not sure of why you were testifying.
And still not sure of why you're testifying. 70 5/11/06 - COMMERCE - RES. 060276
Well, we just want to make our statement that we are in support of UII. Steve Jurash had asked us to testify. Again, we are partners with UII and are supportive, as I suggested, and work very closely with them and just wanted to make sure this Committee understood that we are committed to this program.
Do you believe it's something the Commerce Department should be investing in financially?
I can't make that commitment, but I believe we should be committed to it. And, again, to the extent we can financially support them, we should be doing so. I think they ought to have been talking to Steve and be, in part, Stephanie Naidoff's 71 5/11/06 - COMMERCE - RES. 060276 representative on UII's Board. I think the ultimate plan is for UII to become self-sufficient, and we've tried to bridge that to help them get there.
I understand that. Interesting enough, we are still in the midst of budget negotiations, and as it stands, the Council amendments to the budget, which I voted against as a sole vote, actually took all $6 million in economic stimulus dollars out of that budget. I believe that several members here today were probably sold on the success of the UII program and the bang for the buck. I think that as we continue budget negotiation -- and I'm sure Councilman DiCicco can be very helpful in this -- that some of that money would be restored and it's more likely to be restored if we know where it's going.
Okay. I can relay that back to the Commerce Director. I can't specifically address it, but, 72 5/11/06 - COMMERCE - RES. 060276 again, I will bring that back to Stephanie Naidoff.
That was a comment. It wasn't a question. But thank you for your testimony. I ask Councilman DiCicco if he has other questions. COUNCILMAN DiCICCO: No. 10
Thank you all for coming and testifying. This hearing will be recessed to the call of the Chair. We do intend to potentially bring the Commerce Department back and/or UII back for a further update. Thank you.
Thank you, Councilman. (Committee on Commerce and Economic Development adjourned at 3:20 p.m.) - - - 73 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on May 11, 2006, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)