Committee Hearing, February 25, 2004

COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE - - - - Room 400, City Hall Philadelphia, Pennsylvania Tuesday, February 25, 2004 10:15 a.m. - - - - RESOLUTION 040076 - Resolution authorizing the Council Committee of the Whole to hold hearings on the findings and recommendations of the Tax Reform Commission's final report, released on November 15, 2003... PRESENT: COUNCIL PRESIDENT ANNA C. VERNA COUNCILMAN FRANK J. DICICCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN JAMES F. KENNEY COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO - - - - 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 I N D E X RESOLUTION 040076 JOSEPH VIGNOLA, PICA............... MARK SCHWEIKER, Phila. Chamber of Commerce....................... 36 CHARLES MCPHERSON, Phila. CFO...... 48 JONATHAN SAIDEL, City Controller... 62 JOHNATHAN STEIN, TRC............... 114 PHILLIP LORD, TAG. ............... 150 ROSEMARIE MCMANAMAN, Northeast Chamber of Commerce............ 155 AL TAUBENBERGER, TRC............... 160 GABBREL BELVILACQUA, Phila. Bar Association.................... 165 EDWARD SCHWARTZ, TRC............... 182 BRETT MANDEL, TRC.................. 186 JOSHUA VINCENT, Study of Economics. 191 FRED MURPHY, Center City Residents. 198 JOSH SEVIN, YIP.................... 206 MADELINE SHIKOMBA.................. 212 DAN SULLIVAN, Henry George School.. 233 3 02/25/04 - WHOLE - RES. 040076

Good morning, everyone. This is the continued public hearing of the Committee of the Whole regarding Resolution No. 040076. Our first witness will be Joseph Vignola from PICA. Good morning.

Good morning, Council President Verna, Members of City Council. My name is Joseph C. Vignola, and I'm the Executive Director of the Pennsylvania Intergovernmental Cooperation Authority, known as PICA. Before I begin my testimony, I'd like to make a personal comment. This is my first time back in Council Chambers since I visited right after the disaster of two years ago. Wow.

It's beautiful, isn't it?

Just wow. That's all. It's great.

Thank you. Thank you very much. 4 02/25/04 - WHOLE - RES. 040076

I am pleased today to testify regarding the findings and recommendations of the Tax Reform Commission. In almost every staff report and white paper issued by PICA, as well as in previous testimony before this Council, we have called for a comprehensive overhaul of the City's tax structure. Although we've always called for reform in such a way as to avoid jeopardizing the immediate fiscal health of Philadelphia, it is all too clear that the lack of any such reform since PICA's inception continues to harm the City's ability to grow. Dwindling population, job loss, and other maladies currently characteristic of Philadelphia can be tied, to some extent, to our present tax structure. When one considers Philadelphia's natural advantages that would normally attract people in businesses, affordable housing, strong higher education opportunities, livability, geographic location, et cetera, it highlights the devastating nature of Philadelphia's tax structure. 5 02/25/04 - WHOLE - RES. 040076 This Council felt strongly enough about the issue to present it to the citizens of Philadelphia, who voted overwhelmingly to create the Tax Reform Commission. Although PICA staff has not examined every finding of the Commission in detail, this proposal represents the most in-depth review of the tax structure to date, including consideration of maintaining the City's fiscal health in line with current spending projections. To not give these proposals serious consideration would be abandoning the City in its time of need. The City consistently finds itself forced to offer tax break incentives like TIFs and KOZs to businesses. However, the City should not be in the position of choosing winners and losers. That is better left to the marketplace. I further believe that the City does not need large amounts of new economic development dollars which will simply continue the spiral of short-term fixes to a solvable structural problem. An improved tax 6 02/25/04 - WHOLE - RES. 040076 environment would create a level competitive playing field for all and allow businesses to flourish in a transparent environment. Philadelphia in the '70s and '80s was a case study for the effects of a negative tax cycle. Taxes were raised to make up for a shortfall and some businesses left. The higher the taxes caused more businesses and individuals to leave, eroding the tax base. The City responded by further raising taxes and the vicious cycle continued. In the '90s, with the help of many partners including PICA, the City began to attempt a positive tax cycle. The City lowered tax rates and the tax base grew. Unfortunately, that version of tax reform is no longer enough. The tax system needs to be changed beyond simply cutting rates. It is time for the next round, and the ball is in this Council's court. PICA would also like to note that comprehensive tax reform is still only one piece of the puzzle. The City needs to eliminate unnecessary regulatory burdens on 7 02/25/04 - WHOLE - RES. 040076 businesses. Government contracting and incentive programs need to be transparent and open to all. Philadelphia needs to be a City that encourages business and individuals based on skill and determination, not on connections or contributions or even the appearance thereof. Without these changes, tax reform can only go so far. PICA will also continue to advocate for controlling government spending. While the national economy has contributed to lower revenues, the City has allocated funds equal to those budgeted. It is the expenditure side of the balance sheet which continues to grow at an unsustainable rate. Any increase in government efficiency can only aid the impact of tax reform. PICA's success throughout its existence has been predicated on a responsible approach to budgeting and forecasting. The strength of the Commission's report is that it makes considered attempts to implement these changes while allowing for the current projected growth in the City's Five-Year Plan.

8 02/25/04 - WHOLE - RES. 040076 Although some gaps remain and some additional expenses will need to be considered with the introduction of the new Five-Year Plan, the Tax Reform Commission's report offers a program for responding to future revenue shortfalls. It would also be somewhat inconsistent to reject these proposals as being too risky when the proposals have a lesser impact on revenues than some of the laws enacted by this Council last year. We believe City revenues are relatively stable, consistent with projections at the current time. However, the long-term outlook remains problematic absent significant initiatives to reverse the steady loss of people and jobs. The City has reached a critical point in time. In this light the only true failure by this Council would be inaction. With that, I conclude my remarks and would be more than happy to take questions.

The Chair recognizes Councilman Goode.

Thank you, Madam 9 02/25/04 - WHOLE - RES. 040076 President. Mr. Vignola, you talk about the negative tax cycle, the '70s and '80s, in a broad brush, not acknowledging that between 1984 and 1987 the unemployment rate in Philadelphia actually was reduced from 9.3 to 6.2 percent and there was a net job gain of about 30,000 jobs. How do you characterize that within this broad brush of a negative tax cycle?

Councilman, that was in the early '80s. In that period I happened to be Controller of the City of Philadelphia. There was a lot of things going on that brought job opportunities to Philadelphia. In fact, in 1988 the Administration put forward what then would be considered a sort of Five-Year Plan. And the Administration at that point wanted, in order to balance its budget, wanted to have an increase in taxes. We're always balancing.

But my discussion is about 1984 to 1987, a period right after the wage tax was raised from, I think, roughly 10 02/25/04 - WHOLE - RES. 040076 4.3 to 4.96. So in fact there was tremendous job growth after the raising of the wage tax in 1983.

A lot of the job increase was the result of government employment. The naval base saw some government employment. There was expansion in the healthcare industry in Philadelphia. And we lost the naval contracts, the Service Life Extension Program at the Philadelphia Naval Base. We saw contraction in the healthcare industries. As a result of that, in the late '80s and on through the first part of the '90s, '92, '93, there was continued job erosion until the national economy started to come back and we picked it up.

The issue I'm raising is real simple. The broad brush of a negative tax cycle in the '80s and a positive tax cycle in the '90s, it's just that. It is a broad brush, and tax reform is not the answer to economic and job growth. It's a major part of the puzzle, but not the only part of the puzzle. 11 02/25/04 - WHOLE - RES. 040076

I agree with that. But what I'm saying is, we are taking a broad overview. When you look at specifics, there are anomalies to it. But what I'm saying is, is that there are other factors outside of the control of local government, the national economy being one. In the '80s we were the beneficiary of expanded job opportunities in the Philadelphia Naval Base, where employment literally went from 4,000 to 5,000 to 13,000 to 14,000. We're the beneficiary of the healthcare industry that was taking off then with the expansion of jobs, both at the University of Pennsylvania, Temple, Jefferson, on all those medical facilities. We've continued to lose that. In the late '80s we started losing even more manufacturing jobs as that recession began in '88 and '89.

I'm a strong supporter of tax reform because I think we need to be able to take advantage of national job growth that we expect to happen over the next few years, but I just wanted to continue to make the point on the record that a lot of 12 02/25/04 - WHOLE - RES. 040076 this has to do with the national economy, not just local tax policy.

But our local tax structure is one piece of the puzzle.

Thank you. The Chair recognizes Councilman Nutter.

Thank you, Madam President. Mr. Vignola, let me ask you a couple questions from your testimony. On in the second full paragraph you talk about comprehensive tax reform as only one piece of the puzzle. "The City needs to eliminate unnecessary regulatory burdens on businesses. Government contracting and incentive programs need to be transparent and open to all." The next sentence is pretty good too. "Philadelphia needs to be a City that encourages business and individuals based on skill and determination, not on connections or contributions or even the appearance thereof." I know the organization pays very strict attention to our finances, but also 13 02/25/04 - WHOLE - RES. 040076 issues a variety of reports, so if I'm asking either a redundant question or a question I should already know the answer to, I apologize. Has PICA opined, I guess, on unnecessary regulatory burdens on businesses or government contracting and incentive programs and the notion -- and we had some discussion yesterday even about economic inclusiveness of a broader group of businesses. Expand the tax base, which would make it easier for us at a certain level to reduce taxes. Has PICA issued any reports with regard to these kinds of issues?

We have not issued a white paper, but in our annual report on the Five-Year Plan we talk about the need to re-invent government, for want of a better word. We have not done white papers that we've done on other topics.

Is it within your purview, mandate -- I don't want to say capabilities because you guys have tremendous capability over there. Would it be possible 14 02/25/04 - WHOLE - RES. 040076 to get some of that kind of data or information from PICA, as PICA's perspective, on these kinds of issues to help us?

The answer to that is yes. All our reports are on our web site, www.picapa.org. We can point out the references for you and your staff and other Members of City Council to look at.

That would be great. And at the same time the next paragraph, which you go on the other side of the balance sheet and talk about our spending, of which there is usually very little discussion. Have some of the same kinds of either documents or reports been put together on those kinds of issues?

Again, there are several white papers in that regard. But the biggest one, we did one several years ago in regard to economic development. But again, in reviewing our report on the Five-Year Plan, we talk about the spending levels.

All right. So 15 02/25/04 - WHOLE - RES. 040076 the place where we really want to look is probably toward the back end of the Five-Year Plan documents, and that's where we would find all this?

No, sir. There is a, as I said, a www.picapa.org.

You're promoting this heavily.

I sound like someone who should be on TV. It sounds like I should be on the Howard Stern show or something.

You guys have any revenues based on the number of hits on the web site or anything?

No. No. We don't even have a counter for that. But all the reports are there, and our reports are separate and distinct from the Five-Year Plan.

I will check that out. Has the PICA staff had an opportunity to run the numbers from the Tax Reform Commission proposals? I mean, there are 13 separate pieces of legislation, some 16 02/25/04 - WHOLE - RES. 040076 naturally have pretty serious fiscal implications. Has the staff taken a look at the report and matched it up with whatever your current data is? Obviously, we can't know what the upcoming Five-Year Plan is, as we have not received it. But has a financial analysis of the TRC report been done by PICA staff?

No, sir. One of the reasons is that we, as you are, are wanting to see what the Administration is going to incorporate in their new budget and Five-Year Plan. In fact, referring back to last year's report on the Five-Year Plan, we made specific reference to what the Administration would say about the report of the Tax Reform Commission. Although our report was issued in June of last year, we knew that the Tax Reform Commission would be issuing a report that October. In our informal meetings with the City Administration before the end of last Calendar year, we specifically pointed to that line in our Five-Year Plan, and we expected the City to make good on its promise. 17 02/25/04 - WHOLE - RES. 040076

Well, it's possibly impossible to predict. And since none of us have the numbers, your testimony, though, would seem to indicate PICA is basically in favor of the Tax Reform Commission proposals; is that correct?

We're in favor of seriously reforming the tax structure in Philadelphia. To the extent that the Tax Reform Commission is the most aggressive, most encompassing and most recent review of the tax reform structure in Philadelphia, that is a good place to start. And what we're saying is that given the charge by the voters of Philadelphia to the Tax Reform Commission is to look at tax reform while holding harmless the expenditure side. Again, that is, Councilman, saying a lot. You can reform taxes, but you've still got to find a way to cover $3 billion plus in expenditures. That's a daunting task. Given that charge, we feel that what the Tax Reform Commission sent to the Mayor, to the Council, to the citizens of Philadelphia, is a 18 02/25/04 - WHOLE - RES. 040076 good starting point.

I heard what you said, and I hate to cut across you, but don't we all have still a responsibility to question the assumptions on the expenditure side of the house?

I believe we do, but that was not the charge.

I understand that. I know what the charge was.

Yes.

I know what the charge of the Tax Reform Commission was.

I know that, sir. Yes, I think we all have an obligation and PICA has an obligation, and we've told the Administration we're going to be looking at overtime. We're going to be looking at public safety costs. We're looking at what the impacts of the DROP Program are having and how they're going to replace. I had serious discussions when the DROP Program was further implemented, what the Administration should be doing with that. When the Parking Authority 19 02/25/04 - WHOLE - RES. 040076 was an issue, I had serious discussions with the Administration about, well, if you're going to take it back, tell us how you're going to accommodate 4,800 employees. We're trying to have some serious discussions about the expenditure side.

When the budget and Five-Year Plan come in, will PICA be in a position shortly after that -- because in City Council we'll certainly be in this position. I believe we do have to take some action, but it should be a reasonable action based on the real numbers. Will PICA issue its opinion with regard to the impact of the proposals of the Tax Reform Commission as it relates to the then just introduced budget for FY '05 and the Five-Year Plan that goes with it, and subsequently be able to tell us then its view on the Tax Reform Commission report as it relates to a live budget and Five-Year Plan that we'll have in March?

Only to the extent of the recommendations that are included in the 20 02/25/04 - WHOLE - RES. 040076 Five-Year Plan. We would not --

I'm asking a different question.

But we would not take the Tax Reform Commission's proposals, although that is pending legislation, and then say, well, given this expenditure side of the Five-Year Plan, if you adopted these revenues, this is what it should be or this is what is possible. Because our charge in reviewing the Five-Year Plan is to review a Five-Year Plan that's been proposed by the Mayor and adopted by this Council to make sure that the revenues and expenditures match.

I understand that. And I have read the PICA statute. I think what I'm asking you now is, within the confines of the statute -- and then there's always, you know, you can have a thin line. You can have a broad line. The question is how much chalk do you get on your shoe? Given your overall charge and responsibility to this City, what I'm asking is if PICA would -- not whether you're 21 02/25/04 - WHOLE - RES. 040076 statutorily required -- if we get a budget on March 18th, would you take that budget and Five-Year Plan, take the Tax Reform Commission numbers, have your own independent analysis of what would happen to the budget and Five-Year Plan if we adopted the recommendations of the Tax Reform Commission and then tell us whether you think that budget still works, and does it allow us to run this City government in the way that we anticipate? I mean, someone has to come -- because we'll have to make that decision. And then obviously because of your charge you get the right to judge what we've done. What I'm asking is a front-loaded process where everyone is in the boat at the same time, looking at the same data and information and someone to come to that table and say, This plan can work based on what's been laid out, or it could work, but you need to make certain adjustments if you don't change anything else.

We are reviewing and confirming the process. To that extent, no, we wouldn't do what you are suggesting. In 22 02/25/04 - WHOLE - RES. 040076 the context, if there was a working group among the various parties, the parties being the Administration, City Council, and if PICA was asked to include in it to give its opinion on the revenue estimate side of it, yes, we would participate in that group. But we would not voluntarily advocate for one tax reform structure over another.

I understand that. But I'm not asking you to be an advocate. What I'm asking you to be is the third-party oversight entity that you are, but to give us the good information at the beginning of the process, as opposed to us possibly taking steps that may or may not be in the best interest of the City and then learning about it in July.

We try to do that along the process. One reason for my remarks saying that in reviewing the revenue estimates -- and these are revenue estimates that not only appeared in last year's Five-Year Plan, but the revenue estimates that the City is currently formulating. We believe those 23 02/25/04 - WHOLE - RES. 040076 revenue estimates, without looking into the individuals and what part of tax reform is there. But again, it's the nature the oversight. So we wouldn't answer a hypothetical. But if you asked us would we participate, the answer to that is yes.

Okay. Thank you. Two last questions. The first is --

Councilman, may I say that is because of my philosophy that I brought with me, is that I believe when I was a Member of this Council and PICA was in existence, that PICA shouldn't dictate how we raise revenues and how we spend. What PICA should do is to make sure that the revenues that are to be raised are reasonable and that the expenditures meet the mandated function. You are the elected officials to make those elected judgments. If it turned out you were saying that if you pass this widget tax it was going to raise a billion dollars, therefore we could do away with the wage tax; if we believed that was unreasonable, we would come 24 02/25/04 - WHOLE - RES. 040076 out and say that during the public hearings.

Okay. PICA has issued some reports or expressed some concern in the way that you express your concern in recent times about the level of debt obligations by the City; is that correct?

Yes. In the Five-Year Plan, yes, sir.

What are those concerns?

That as a percentage of the budget debt levels have been increasing. There was a trend in the late '90s, early 2000 where debt payments as a percentage had been going down. Recent debt has been on an increasing percentage, and that is despite the lower interest rates. So more of our operating budget is used to go to the sinking fund payoff debt service.

Is there a standard within the industry or by -- what is it, Government Finance Officers Association?

Yes. GFOA and all of that. 25 02/25/04 - WHOLE - RES. 040076

Is there either a range or a level beyond which a major metropolitan city like ours should not exceed in good government practice?

The ranges would be more directed towards the rating agencies and the way the rating agencies would rate you. But suffice it to say that a downward trend is more preferable than an upward trend that we see, and that a range that -- obviously, if you can have 10 percent of your budget or less devoted to long-term or short-term debt would be preferable. But in certain circumstances percent could be preferable. 16

You were an 17 economist in another life, weren't you? 18

No. I went to Wharton 19 School like you did. 20

Same thing. You left yourself plenty of room. Last question. To the best of your knowledge and information, what do you estimate the deficit of the City to be, either presently or 02/25/04 - WHOLE - RES. 040076 projected to the end of the year?

Again, a structural deficit?

Yes.

Forty-some-odd million. It's within the carry-over. There will not be a deficit, but you're talking about the structural deficit whereby we eat into our surplus. Ninety-one million dollars was what was projected -- wasn't $91 million projected for this year? And they're now talking about $5 million.

Five million dollar what?

Surplus.

There was a news account a few weeks back or a month or so back that the City was anticipating -- this looks like November or December -- $144 million deficit.

One hundred forty-one million dollars to make up for next year. Again, are they spending more money than 27 02/25/04 - WHOLE - RES. 040076 they're taking in? Yes. Have we consistently talked about doing away with structural deficits? Yes. To the extent that there is a structural deficit, what my staff is telling me now is that the structural deficit will exist to the tune of around $85 million this year, which will eat into the surplus left over from last fiscal year, which surplus has been certified to be $91 million.

Where does the $144 million deficit number come from?

Well, you've got to ask the Administration. The Controller issued a report just last week that said that's not correct either.

All right. Thank you, Madam President.

Thank you. The Chair recognizes Councilman Rizzo.

Thank you, Madam Chair. Good morning, Mr. Vignola.

Good morning, 28 02/25/04 - WHOLE - RES. 040076 Councilman.

I want to ask what PICA's involvement would be -- and I'm going to describe a situation without being very specific. If PICA identified the fact that the City Administration was spending in excess of $5 million a year on providing a specific service that is not the City's responsibility, what would you do, especially if it were a service that maybe the state or the federal government should be providing the City of Philadelphia? If you identified the fact that there was no move or effort to get the state or the federal government to pay for that specific service, what would PICA's involvement be if you identified that?

Councilman, I don't like to answer hypotheticals. But I will give you the answer. I will repeat what I was saying to Councilman Nutter, in that PICA does not want to substitute on a line by line basis its judgment for the judgment of the people who have been elected. Our concern is more of 29 02/25/04 - WHOLE - RES. 040076 a whole view, and that if there are revenues available and the revenues have been lawfully appropriated, and there are expenditures to be expensed against those revenues, and if it has been the decision of the elected officials of the City that this is their priority, as long as the revenues and expenditure numbers balance, then that's their decision. And the ultimate change is by the voters of Philadelphia, not by an appointed authority or agency.

I don't know how a voter of Philadelphia mid-term can effect a change in something that if you identified the fact that -- and from your experience and your staff's experience -- that money is being spent inappropriately, especially money that is being spent when the state or the federal government has a responsibility to provide a service, I don't understand PICA's role then. I don't really understand what you were charged to do. It doesn't sound like --

Councilman -- I didn't mean to interrupt. I'm sorry, sir. But there 30 02/25/04 - WHOLE - RES. 040076 is a Supreme Court ruling that says the State is responsible for funding the court system of the Commonwealth of Pennsylvania. So the City is spending $110 million this year to fund the First Judicial District, despite the fact that there's a Supreme Court ruling that says there is this requirement. PICA opined about that several years ago when then Mayor Rendell refused to fund the court system. And PICA told the then Mayor of Philadelphia that the Five-Year Plan may not be approved. There was a mechanism that went into place called the Mandamus Action filed by the courts against the City in which the City joined the State that allowed PICA to approve the Five-Year Plan. One could argue hypothetically that no Five-Year Plan should be approved that has a court expenditure in there, because that is something the State has to do. But the courts haven't acted on it. That's that gray area that we get into. But as an elected official you have an obligation to fund a mandated function. That's first. Once you fund your 31 02/25/04 - WHOLE - RES. 040076 mandated functions, according to the PICA statute, if you decide that you want to spend it on widgets, although I may disagree as a voter, as an official of PICA, as a citizen of Philadelphia, I voted in the last election and I voted for people who I believe would make a good decision. Well, next time I may take that into consideration and not vote for those people because they didn't make a good decision because they didn't vote the way I thought they should vote on this widget bill.

I'm not talking about widgets.

I understand that, sir. I'm not trying to make light of it. In its reiterations during the legislative process, PICA was not ultimately created to have that type of legislative oversight and veto. And there were iterations of the bill 21 prior to the bill that was adopted in June of 1991 that gave PICA line item authority. The General Assembly did not do that. In New York, the Oversight Board had that. When Congress created the oversight for Washington, 32 02/25/04 - WHOLE - RES. 040076 Washington's board had that authority. The General Assembly did not see fit to give PICA that authority.

Have you ever asked for that? Have you ever lobbied any of the State?

No. Because I believe the system that we have in place allows you as elected official to do your job with our oversight.

You don't think that PICA could more effective if you had that oversight? You don't believe that you could contribute more and have a better impact? You just told me that you can't do what I described. Why don't you do something to get the power so you can help us?

Because we are not elected. I believe it's up to elected officials.

Excuse me. You're telling me that you don't have the power. You've never asked. Do you want it or don't you? 33 02/25/04 - WHOLE - RES. 040076

No, I don't want it.

Why don't you want it?

Because we are an appointed board. That power should be with elected officials. That's what I exercise my vote for.

How much do we spend of taxpayers' money on PICA?

Zero.

Where does the money come from in your salaries?

Investments. None of the PICA tax has ever been used to pay the day-to-day expenses of PICA.

No disrespect, but if you have no fire power to do any of the things that Councilman Nutter or I described, I don't really know what PICA is all about. Maybe I need to learn more about what exactly your responsibility is. But I can tell you, if you don't have input over the scenario that I described or have any input, then I don't know what PICA is used for. 34 02/25/04 - WHOLE - RES. 040076

Your scenario, Councilman, was there's $5 million that the City shouldn't spend, that the state or federal government should pick up. And all I'm suggesting, Councilman, is that an elected official, an elected body in the City of Philadelphia gave the appropriate authority for the City of Philadelphia to spend that money. If that $5 million was in excess of the budget expenditures, if it was in excess of the revenue expenditures, then PICA has the authority to clamp down on it. But if it's the setting of priorities in a $3.3 billion budget, that's what I elect my elected officials to do. I as a citizen -- forget me at PICA. I as a citizen don't want an appointed staff or appointed board to tell my elected officials what to do or not to do. That's not what I think my vote counted for. I want to hold my elected official's feet to the fire and make the right decisions.

How does it work in New York? You tell me that PICA has that 35 02/25/04 - WHOLE - RES. 040076 authority. How does it work there?

When New York had the Oversight Board, its situation was different and they did have contract and budget line authority. That has not occurred in the last years. But I'm saying when you look at 8 models, when you look at models in which PICA 9 was based, PICA legislation had that taken 10 out. 11 When the Congress of the United 12 States created the District of Columbia 13 Oversight Board, which by the way is no longer 14 in existence, they wanted to give because of 15 what they perceived to be the political situation in Washington, D.C., the Oversight Board adopted the New York model.

Thank you. Thank you, Madam Chair.

You're welcome. Are there any other questions of Mr. Vignola? (No response.)

Thank you 36 02/25/04 - WHOLE - RES. 040076 very much. I appreciate your coming in to testify. Our next witness is the Honorable Mark Schweiker representing the Greater Philadelphia Chamber of Commerce. Good morning and welcome.

Thank you, Madam President. I appreciate the opportunity to visit for a few moments and offer some commentary. Good morning, Members of City Council's Committee of the Whole. For the record I'm Mark Schweiker, President and CEO of the Greater Philadelphia Chamber of Commerce. My foremost reason for being here today is to reiterate the position of the business community on the need for continued tax reform which benefits the City and indirectly the region. This is by no means my first pitch for tax reform, nor for that matter the Chamber's first pitch for tax reform. As you likely know, the Chamber testified in favor of the Home Rule Charter change that created the 37 02/25/04 - WHOLE - RES. 040076 Commission. And once the Commission was in place we testified before the Tax Reform Commission in May and again in October of 2003. I will briefly review the points presented by Roger Bullo (ph), President and CEO of the CDI Corporation before this Council yesterday as part of the opening panel. I might add that Roger is a member of the CEO Council for Growth. " This is and will be a $16 million four-year initiative to market the greater Philadelphia region nationally as well as globally to successful businesses and ambitious entrepreneurs. A major component in the success of this effort is and will be the tax climate we can offer them. I'm asking you to help me do my job. You can set the tax rates that will 38 02/25/04 - WHOLE - RES. 040076 either drive people away or encourage them to come and stay and do business in Philadelphia. To this end, tax reform is critical. , and I might add, major universities, 83 in total, transportation networks, industries and growth segments of the national economy and quality of life. I want to acknowledge the fine work of the members of the Tax Reform Commission 15 for their relentless effort, dedication and hours of meetings and research to develop a plan that, as we all know, was adopted almost unanimously. This diverse group was able to hunker down and over the long, hot summer ultimately present a plan that I believe, and many of our members, if not all of them believe, is fiscally responsible. In fact, the Commission received such glowing accolades that the Greater Philadelphia Chamber of Commerce has been 39 02/25/04 - WHOLE - RES. 040076 working with the General Assembly in Harrisburg in modeling a state Tax Reform Commission after the Philadelphia model, and we were pleased that Governor Rendell made mention of this in his recent budget address. I would also like to acknowledge and thank Mayor Street for recognizing the Commission's work when on December 18, 2003, he instructed each and every one of his transition committees as part of the Philadelphia 21st Century Review Forum to carefully review these recommendations. As a member of one of these groups, the Regional Cooperation Committee, I've heard time and again the cry to make our City more competitive with our neighboring borders to help market the City and region to the tourism industry and to expand the Pennsylvania Convention Center so that we can get a bigger piece of the economic and consumer spending pie. May I suggest that the best way to do this is to make this City a more business friendly town in which to live and work and, yes, prosper. 40 02/25/04 - WHOLE - RES. 040076 The Greater Philadelphia Chamber of Commerce, the voice of the business community, felt so strongly about the Tax Reform Commission's recommendations that we had our CEO Council for Growth send a letter to the Mayor and every Member of City Council endorsing this plan. And I personally thought it important enough to hand deliver the letters to City Council so that I might have the opportunity to present our views in person. Having said this, we do not operate in a vacuum. We realize that many public, governmental and political factors must come together for things to work out and to work out financially.

We are optimistic that City residents will be able to enjoy additional tax relief from the State as a direct result of new gaming revenues. However, I would caution and encourage that State action be an addition to City tax relief, and not in place of it. In times when company poaching has become fashionable for some, I'm of the mind that stealing companies from one another 41 02/25/04 - WHOLE - RES. 040076 really doesn't get us anywhere. We're in the economic fight of our lives, and if we are to win we must be competitive. One only fails if you give up, and we don't plan to do that. In closing, let me thank you for the opportunity to comment. I certainly look forward to seeing you all at the Chamber's business luncheon where we'll feature the Mayor on March 5th, and also the annual salute to the City Council in the month of March, on March 25. Thank you, President Verna.

Thank you very much. The Chair recognizes Councilman Goode.

Thank you, Madam President. Good morning, Governor.

Good morning.

You mentioned in your testimony that state action should be in addition to City tax relief, and I note that within the Commission's proposals, there are 42 02/25/04 - WHOLE - RES. 040076 actually two proposals regarding the wage tax; one that includes state aid and one that does not. Are you suggesting that the Commission's proposals be accepted in entirety?

Well, as it relates to the State, we certainly know that there's a proposed half a point wage tax reduction for the City and those who work here as a result of the gaming legislation being enacted. We like that prospect. And we're attracted to the idea that you have the half point wage tax reduction. It represents a big talking point when you're trying to lure in companies and keep companies here. It makes the City more affordable. That interests us greatly. And so with that appeal and that prospect, Councilman Goode, it was my intention today to drive home the point that, let's not see that as the only action that we should bring about, that we want the State and the Legislature to carry through, but ideally the City government, with support from people like yourself and others, ought to be taking seriously the work of the Tax Reform 43 02/25/04 - WHOLE - RES. 040076 Commission. And I think based on the mathematical assumptions that are the basis for the Tax Reform Commission's game plan, it can be done over a series of years. So in sum, let's get the gaming legislation in place, lower the wage tax and let's offer more tax relief. It's not just wage tax, as you know. It's BPT, the gross receipts tax and on and on and on.

That's actually my follow-up question. If in fact from gaming revenue offered by the State we were able to do something more dramatic than is contained in the Reform Commission's proposals, would you be in favor of actually more dramatically reducing the business privilege tax?

I certainly don't think if we get the wage tax reduction as a result of gaming that we ought to stop there. We being you good folks who are Members of the Council. I'm not sure I understand your point here.

The question is, to the extent that the proposals work together 44 02/25/04 - WHOLE - RES. 040076 and they anticipate, even though it's two different proposals, one with and one without state aid, if in fact we get enough State revenue to more dramatically reduce the wage tax, doesn't that free up what City action might have been taken on our own with regard to the wage tax, and couldn't we also apply that to further business privilege tax reductions?

Let me put myself in the shoes of a would-be entrepreneur or a chief financial officer of a company who is looking at the affordability of doing business in the City. I think they would be very encouraged if they saw this Council, in tandem with the Mayor, work to improve the tax model and make it more affordable, whatever the pinch point, whether it's the gross receipts or the BPT. The general picture when it comes to comparing the cost of doing business in Philadelphia to other urban locales is not an attractive and competitive one. I can only tell you it's a very tough sell at times. And 45 02/25/04 - WHOLE - RES. 040076 not that we do it every day, but as you can imagine, with 6,000 member businesses and trying to tout the appeal of the City and the region, you're not going to get real far when you say -- rhetorically, what do you say; "Come to Philadelphia, it's got the highest wage tax in the land"? It doesn't work, my friend.

Last question.

Same goes for the BPT. The path is in there to eliminate it in 10 years. I think when you take a look at the math -- and I realize there are other elements to creating the balance of which Joe Vignola spoke -- it's there. The possibility exists. The question now is, is the will legislatively there for it to be put in place.

Last question with regard to the 10-year elimination of the business privilege tax. Currently, there are gradual reductions in both the gross receipts portion and the net income portion over the 10 years. What would you think about the proposal to 46 02/25/04 - WHOLE - RES. 040076 eliminate the gross receipts first over the first five years and then eliminate the net income over the second five years?

I'd have to take a look at the math. We have not run those kinds of numbers. You're looking at someone who represents 6,000 member businesses, half of whom, by the way, are outside of the City. It's a regional chamber. Half are within the City. We'd certainly put the question to them. But generally speaking, we were hungry for a march to making the City more affordable. I've been through this. I had the responsibility as Governor in a very tough environment with the downturn to balance a budget. Let me say very respectfully that I'm sympathetic to the leadership and mathematical challenges that you face here. It ain't easy. I know that. But the reality is by any account we are hemorrhaging residents and jobs. It is not an encouraging picture. So to speak, the business community is on the side of making us more attractive and 47 02/25/04 - WHOLE - RES. 040076 outstanding. It's not about being confrontational. So our outlook and our hunger has to do with what we do to see to it that our residents have jobs and paychecks. In my estimation, if the Tax Reform Commission's work is about anything, it's about creating the competitive circumstances to provide jobs and furnish paychecks to your residents. It's not only about what's good for the corporate citizen or the small business. That is what's at stake here. Does anyone question the assessment that it looks like for the first time in many, many years there is a document around which we can rally? With some incisive and gutsy work by the Council, along with the Mayor, we could put this City on a path to economic ascension again, with outcomes that everyday residents recognize, jobs and paychecks.

Thank you, Governor. Thank you, Madam President.

Thank you. The Chair recognizes Councilman 48 02/25/04 - WHOLE - RES. 040076 Rizzo.

Madam President, my question isn't for the Governor. But I would appreciate some clarification, and I'm going to call on our Council's Chief Financial Officer to explain for the record the funding of PICA. Because I believe that Mr. Vignola did not clearly explain when he said that there is no taxpayers' money that PICA receives. I'll let the Chief Financial Officer explain exactly where the funding comes from PICA. Mr. McPherson.

My name is Charles McPherson, Chief Financial Officer for City Council. When PICA was created, they needed a steady source of income in order to pay the debt service on the bonds. What ended up happening was, is that the City, for residents only, reduced the residents only portion of the wage tax by one-and-a-half percent. That one-and-a-half percent then became the PICA tax, which went directly to PICA. The City 49 02/25/04 - WHOLE - RES. 040076 would collect it, pay it over to PICA so that the bond holders would have a steady source of income in order to pay the debt service on the bonds. That income and the interest earnings on that income would cover both the debt service and PICA's operating expenses. Any income that was left over after those payments were made for debt service and operating expenses are paid back to the City of Philadelphia and to the General Fund.

What is the State's participation?

Zero.

Thank you, Mr. McPherson.

Any further questions?

No. Thank you, Madam Chair.

Thank you. Councilman Nutter.

Thank you, Madam President. Governor Schweiker, let me say a 50 02/25/04 - WHOLE - RES. 040076 couple things. One, I appreciate your testimony and your presence here today. I did receive a copy of the letter that was signed by many members of the CEO Council for Growth, and I want to commend you and Denise Early, who's at the table, and I know Joe Mahoney has been working very hard as well to have a coordinated approach by the business community in this effort, quite similar to the coordinated effort the last time we had a big public discussion about taxes here in the City. Can you give us a sense of, I guess, the present mood or climate within the business community? You certainly touched on it in your testimony, but there are many, many discussions going on throughout the City about a variety of tax-related issues, proposals, ideas, this business coming, this business going, X moving to this location, Y moving to another location, a little bit of a shuffling of the deck issue. It strikes me that we have our tax 51 02/25/04 - WHOLE - RES. 040076 structure problem and then we have a business attraction, business retention, tax incentive issue that we continue to grapple with, which is often either deal driven, personality driven or crisis driven, as opposed to public policy driven. I know I've covered a number of areas with this, but tell us, where are business people these days and what goes on?

I will do my best to briefly answer your questions because I know you have other officials ready to comment. I can tell you for tax reform the fervor can be no higher. I think if we were to give the truth serum to business operators in this City, large and small, this room could not handle the volume of that cry for tax reform in making the City more affordable. They're busy folks. They're trying to make ends meet, employ people, and they can't come here. But if they were here, I believe that's what you would hear as it relates tax reform. I know of what you speak, whether it's KOIZs to TIFs to whatever acronym you want to invoke. I don't think we need to 52 02/25/04 - WHOLE - RES. 040076 delve into and break down the financial concepts at work there. See them all as Enrons. When you have a difficult and surely lacking competitive tax model, you're going to get those kind of moots. That's what's at work. I don't think there's any economic magic that's hard to understand. The cost for doing business in the City is intimidatingly high compared to other locales. It's not just what we're espousing. And I know I'm speaking to the choir when I look at the folks assembled here. But as we all know, the choir on the weekend has to sing the loudest. Together we wish to add some harmonious singing and say, we've got to make ourselves more affordable. And so, Councilman Nutter, for the moment avoiding specific discussion about specifics techniques, I believe they all amount to what is done when you're trying to entice businesses here. It pains me to have to reference a Triple A's decision to move just a few miles to the south in Wilmington. And all those 53 02/25/04 - WHOLE - RES. 040076 Philadelphians now, and probably some who live outside the City, will be spending their lunch dollars not in the City when the time comes. Now, listen, it was a tough one against which to compete. That City and state put more into one deal than the City has in its stimulus budget for the deals it does all year. So there's about four-and-a-half million dollars in the stimulus account. They put seven-and-a-half million dollars in to make that deal go. And, you know, the net effect is we lost jobs. But having said that, I do want to compliment the Commerce Department and Paul Levy of the Center City District and Peter Longstreth because the reality is, we're batting close to a thousand, to use a baseball reference, when it comes to holding onto our companies. We lost a few jobs at Anderson, but they closed all across the country. We lost a few jobs in Asset Management that went out to Conshohocken. And as you know, the Triple A probably was the most infamous and negative outcome. But generally, they've done 54 02/25/04 - WHOLE - RES. 040076 the right outreach work and the retention job is being done solidly. So I guess it's a way of saying, Councilman Nutter, it's been a mixed bag. The fact that they stayed despite some of the intimidating costs says something about their love and passion and interest in the City's economic welfare.

Well, it is at times very difficult to operate here, and we do commend many of the businesses. I wanted to raise one last issue with you. It came up yesterday. Your counterpart at the African American Chamber of Commerce, Mr. Crawley, testified certainly in favor of tax reform. But he added an additional component to his testimony, which was discussion -- and we had some conversation about the economic inclusiveness issue, and I guess a broadening of something that the government has tried to do, which is certainly promote Philadelphia-based businesses doing business with the City. Some think it is in some way 55 02/25/04 - WHOLE - RES. 040076 that I can't completely figure out is a disincentive to outside businesses to be here. When this was promoted, actually, I think it was an incentive to be in Philadelphia because, you know, you'd have a slightly advantaged shot, again given the financial challenges that businesses often face being Philadelphia-based as opposed to even our surrounding counties. But putting that argument aside, could you comment for us to some extent on the economic inclusiveness issue. The point was if you broaden the base of companies growing and functioning in the City, it makes it a little easier for us who have this ultimate responsibility with regard to taxes and tax rates to push tax reform because you have a broader and healthier base. The discussion I think went on the level of, shouldn't we at least promote business in our region --

Well, kind of a favorite national concept.

Right. Kind of 56 02/25/04 - WHOLE - RES. 040076 a region first sense of things and region first partnerships. Obviously, to the extent that Philadelphia-based businesses can do well, that's certainly good for the City and I think it is good for the region. But in your capacity representing members inside and out, at least the next move is, if you can't do with the Philadelphia-based bills, I think we should explore why then we at least check out the other four counties? What are we doing on that front and how do we make more concrete steps, whether it's a large business or small business, regardless of what people look like or came from? What kind of steps do you think the Chamber could take in that regard?

It's a Chamber for all people, regardless of what the people look like or how they dress. I think whether it's our 6,000 member businesses to the many leadership committees, I think they are emblematic of that commitment and instinct. I would say when it comes to -- I'm assuming your question has to do with, can area businesses have an 57 02/25/04 - WHOLE - RES. 040076 opportunity to do more business with the City or with each other and how we aid and abet that outcome. I believe -- and I don't have any empirical data -- I believe, Councilman Nutter, that the inclination to do just that already exists. It may not be a stated policy. But I believe that is the leaning of most of our members. Now, I think when it comes to larger companies it's easier to demonstrate that because of a variety of reasons, you know, federal and state government expectations. They track that kind of stuff. When it comes to economic inclusion and working intentionally to create arrangements with, as an example, minority-run firms, it's an everyday habit. They are hungry to do that and hungry to do it well. So while it may not be a concrete policy, I believe the instinct is there to do it and to emphasize it. I can tell you the Chamber -- and I'll finish up -- we some time soon are going to have -- and this is to the heart of your question, how we make it easier for small 58 02/25/04 - WHOLE - RES. 040076 businesses who want to get larger and who want to do business with larger firms, how they can ink these arrangements. We're going to put together -- we're in the conceptual stage now -- what I call a procurement summit. How do you procure these relationships? How do you get into that business? How do you grow it if you're already doing it? Bruce Crawley is aware of this interest. We're going to program that. It may take a year because we want to do it right. One module within this endeavor will be particularly for minority businesses, whether it's women or whatever it may be, and help them along and get them the connections and the comprehension of what it takes to put together such arrangements. I think that will go a long way. And we believe -- when I say we, 6,000 member businesses, many of whom do business in the City, want it to go well. I just would add one caveat, though. This is a global marketplace now, man. When it comes to internet relationships and doing business to just-in-time processes on 59 02/25/04 - WHOLE - RES. 040076 acquiring goods and services, we should all realize it is just as easy to do business with a firm that is in West Philadelphia as it is to do business with a firm in the western part of this country. It's just no great shakes anymore. It really comes down to price and the capacity and the ability of the people who do the work. So you've got to pass the test on those counts as well. Nevertheless, we don't look the other way on offshore out-sourcing as an example. They're jobs that belong to our residents and we're eager for those to be preserved. But it's really a competitiveness challenge, and that is a note worth striking here as we finish up.

Thank you, Madam President.

The Chair again recognizes Councilman Rizzo.

Thank you. Governor, it's interesting you brought that up. I just had an experience and I was taken back a bit. Maybe it's been going 60 02/25/04 - WHOLE - RES. 040076 on a lot longer than I'm aware of, the number of companies that customer service has gone outside of the country. I called American Express just recently, and I got a representative in Costa Rica. I called an insurance company and got a representative in the country of India. I don't know what we can do about that. Is there anything?

Well, that may be another meeting, but I will quickly say that there are steps and commitments that can be considered to guarantee our competitiveness so such back-office-type jobs are preserved. It's all not about going to other countries, I will tell you. Granted, that's often the most reported right now. And I know Time Magazine has it on its cover page. Dell Computers, as an example, when it comes to very sophisticated high-end IT-type applications, their customer base has told them, we want instant access, and it ought to be right here in the US, and they moved theirs back. 61 02/25/04 - WHOLE - RES. 040076 So it's a bit of a mixed picture right now. I don't think we have a total picture, a clear picture in hand. So I think we have to find out in what niche as a country and as a region, what niches can we fill and be expert at it, given the skill sense of our residents in the City and region. We count those and we hold onto those jobs. I'm not sure you can totally stem the tide because it's a global marketplace. I've been in India and I know of what you speak. I've been in Bangalore, which is the silicon valley of India, and you would be shocked at their expert ways. Just the sheer number of people who will work for four bucks an hour to do this kind of work, and they'll go hours a day if they have to. 19 We've got to out-work them. That's what it 20 comes down to.

Thank you, Governor. Thank you, Madam Chair.

Thank you. Are there any other questions of the 62 02/25/04 - WHOLE - RES. 040076 Governor? (No response.)

Our next witness is our City Controller, Jonathan Saidel, who has been pacing the floor like an expectant father. I don't know whether it's because he's nervous to testify or whether it's because he's just so impatient. I believe everyone has copies of Mr. Saidel's testimony.

Jonathan Saidel, S-A-I-D-E-L, Controller of the greatest City in the world, the City of Philadelphia. Let me state for the record, Madam President, how beautiful the Chambers are. I haven't had the opportunity to be here until today. It looks great, and may you all serve many years in the capacities you hold within this Chamber.

Thank you.

I didn't get the bill 23 yet, but it looks like real wood too, Frank. You have my testimony. I would rather just talk to everyone here as friends 63 02/25/04 - WHOLE - RES. 040076 and colleagues and as fellow Philadelphians. I'm quite distracted by the attendance in this Chamber. I have great reverence for this Chamber and Members of Council, and I believe the issue of tax reform is one of the major issues confronting us in the City of Philadelphia. As elected officials, we have a responsibility to listen at any opportunity to divergent opinions beyond ourselves so that we can be the best informed elected officials we can be to make the best decisions for not only ourselves and the Councilmanic districts, but Council At-Large. And as Council representing the one I have from the people, and myself being a City-wide official, and the Mayor, we have I think that ongoing responsibility to listen to a variety of people that have been given a charge to look at a variety of complex issues. I was not in favor of the Tax Reform Commission being created when it was initially proposed by Councilman Nutter, though I applaud him now for that initiative. I've always felt that blue ribbon panels and 64 02/25/04 - WHOLE - RES. 040076 commissions were in many ways an aggregation of the responsibility of duly elected officials to live up to their responsibilities and make the difficult decisions. The fact that the Commission was empowered to look at ways of reducing taxes, but not to specifically look at reductions of expenses, I thought was a fault. The fact that the Commission's report was to come out after the general election I felt was political in nature and did not serve the people of Philadelphia. That being said, I think that the report and recommendations that were put forward by this wide variety and diverse group that was called the Tax Reform Commission should be applauded. It was passed by the people of Philadelphia I think by over 80 percent. We spent $500,000 of the taxpayers' money to create the Commission and pay for its staff. I think the work that they did is a valuable part of the property of this City and something that needs to be discussed by all of us as we move forward to try to save 65 02/25/04 - WHOLE - RES. 040076 Philadelphia and continue to make it the place where people want to live, work and play. I applaud Councilwoman Tasco for passing the resolution up for these two days of hearings. I thank Councilman Nutter for putting the bills in that represent the different topics of the Tax Reform Commission so there can be movement in the Finance Committee to see what bills and what compromises of bills can come forth so we can look at the antiquated taxing methods that we tax people in Philadelphia, and one of the reasons why people stay away here. I thank Councilman Kenney and Councilman DiCicco for being here. It's easy to do this because there aren't that many here. I thank Councilman Goode, who's always been a profile of courage when it comes to the business privilege tax, for being here. And of course Councilwoman Blondell Reynolds Brown, who I happened to endorse the year that she didn't win. 66 02/25/04 - WHOLE - RES. 040076 And of course you, Madam President, for your leadership all these many years and your future leadership here in Council. These two days are supposed to be days upon which Members of Council can listen. To listen to Governor Schweiker. To listen to members of the Tax Reform Commission as to the reason why they came up with the ideas that they did. The true battle ground will be in front of the Finance Committee, as it was reported out whenever those hearings are. And I would respectfully request that those hearings in the Finance Committee be held not right before the end of our fiscal period, but during the entire mix as we begin to look at the Mayor's state of the City address and his proposed budget and his Five-Year Plan as it is submitted after his state of the City address.

I say that the operational deficit for the City is different than the Mayor says. I don't know what PICA says, but the reality is that we all know that we have an operational deficit. We all know that people 67 02/25/04 - WHOLE - RES. 040076 are leaving Philadelphia. We all know that businesses are not coming here and businesses are leaving the City. We all know that. Regardless of our attitudes towards other individuals in elected office or other individuals in elected office at another floor in this building or across the street at the municipal services building, we all understand that Philadelphia has problems. We all understand that. It is therefore our responsibility to come together and fix those problems as best we can. I think the Tax Reform Commission's recommendations are certainly, at a minimum, a beginning. We should open up the budget of the City of Philadelphia, we should look at every operational department, every way that this City spends money, and look at it in an open and transparent way, all of this collectively, to see where we can cut, where we can cross-train, where we can create opportunities, where we can have the state and federal government pick up expenditures that they should be paying for, such as I-95 and 68 02/25/04 - WHOLE - RES. 040076 the Expressway and the fact that we don't have any state parks in Philadelphia. There's a variety of things we can do. And as we look at that situation and then create an economic development formula for the entire City, we then should incorporate the recommendations of the Tax Reform Commission, which includes the reduction of the business privilege tax, which includes increasing the real estate tax to where the percentage of land value tax becomes 50 percent over 10 years, where we can begin to set up an overall program to save Philadelphia. Most of us here this room -- and I dare say all of us here in this room -- were born here. We raised a family here, and we will die here. We all know that there is a problem. The end of this day will not mean the end of not looking for better ways to streamline our government, create an effective taxing system that will not impede people from living here, that will not impede businesses from coming here, and I think create an opportunity. And none of that should be done 69 02/25/04 - WHOLE - RES. 040076 with any type of ulterior motive, except for the motive that at the end of day the offices that we hold are merely temporary. But the value that we have of being Philadelphians and the fact that we live here is paramount to our responsibility to make the fundamental changes that have to be made for the City of Philadelphia to have a future. Many of the programs and many of the bills that have been put forth by Councilman Nutter as part of the overall package don't cost any money. The fact that you want to have taxes being paid on estimated payments four times a year doesn't cost us a dime. The consumer advocate within the Board of Revision of Taxes doesn't cost us any money. We can then, I think, look at the Tax Reform Commission and say collectively what we can all agree on, pass those pieces of legislation and then begin a transparent and open discussion, because I'm sure there are some people that would like to reduce business privilege taxes or would like to extend out the wage tax reductions because of the fact 70 02/25/04 - WHOLE - RES. 040076 that we're anticipating $135 million from Governor Rendell's slot program to reduce the wage taxes dollar for dollar. There's a variety of things that we can look at. But we ought to look at it as a government, as a government, and look and just completely continue to redefine who we are.

Look at our budget, streamline it where we can, make changes where we can, and then incorporate all the different programs that we can in a comprehensive and systematic way from today forward so that we don't end up having a hearing on these bills, and some time before the end of the fiscal year where someone will say, well, we can't do any of theses things because it's already too late in the day. Or we can't change the budget because it's already been passed and totaled with some minor modifications. We know there's a problem. We know that people aren't coming here who need to come here. We know businesses are leaving. We know we need to attract businesses. We need to keep the systems of higher education and the wonderful 71 02/25/04 - WHOLE - RES. 040076 output that they have of young people that are intelligent and hard working from leaving Philadelphia. These are the challenges that we have. Again, I want to thank Councilwoman Tasco for having these hearings. I want to thank Councilman Nutter for putting those bills forward so we can have those hearings in Finance. But in the end we can argue all day as to whether my numbers are right in relationship to the Mayor's numbers as to what the operational deficit is. But you can drown in two inches of water as much as you can drown in 10 feet of water. What we need to do, I believe, as a government is to move forward in a comprehensive way and take advantage of the tremendously hard work that the Tax Reform Commission did. From the wide diversity of groups it was passed 14 to one within the organization. Take what they have, use it as a nucleus. Look at our budget and consistently work, all of us collectively, to make things better as you move forward in this fiscal year and for years forward. 72 02/25/04 - WHOLE - RES. 040076 I appreciate the time for being here with those few that are here. And thank you for the opportunity of allowing me to speak today. Again, as you know, Councilwoman Verna, I did not anticipate coming here to speak. It is an informational two days, but I was concerned about what I saw yesterday, and I wanted to personally thank all of the Council people for being here for the last two days and for showing the people of Philadelphia that they're concerned about their future and are willing to listen and learn. I've always believed as an elected official I don't have all the answers to all the questions. One of the key items of being a true elected official is to understand that you don't even have all the right questions in order to get all the right answers. So the fact that we're all here listening to the members of the Commission and a variety of people that are affected by this, I just want to thank you. 73 02/25/04 - WHOLE - RES. 040076 Thank you, Madam President.

You're welcome. (Applause.)

Mr. Saidel, can you share with us what you see as the present deficit?

My difference between the Mayor's, to be very simplistic about it, is that what we forecast higher revenue projections for the next number of months than the Mayor does and less of a number of expenditures. The operational deficit may be around $70 million, which will leave a $47 million surplus. The Mayor, I think, is now at $114 million and counting. He was at $144 million, but I understand a quarterly report came out which says he's down at $114 million. The problem is if the operational deficit is just strictly braced upon changes in expenditures, those expenditures are controlled by the second floor, and I would hope that the Administration -- and I don't 74 02/25/04 - WHOLE - RES. 040076 know for sure whether they are or not -- is going to continue to try to restructure their plan projections for expenditures so that we meet with a balanced budget, which is our responsibility by law by the end of the fiscal period.

Thank you. The Chair recognizes Councilman Goode.

Thank you, Madam President. Good morning, Controller. Does the City have a comprehensive strategy for economic growth?

Nothing that I've seen in 15 years.

Who do you believe within City government is responsible for creating such a strategy?

It is, I believe, the Mayor's responsibility. One of the problems we have had in Philadelphia -- and I know that there was a resolution put forth by Councilman Clarke that 75 02/25/04 - WHOLE - RES. 040076 has to do with his district, that he wants to talk about the overall economic development strategy within his own district. That's all well and good, but that's one of 6 councilmanic districts. We ought to have an 7 economic development scheme that affects the 8 entire length and breadth of Philadelphia. 9 Because the only way that any of this really 10 works is that if you have an overall plan on how a TIF affects your scheme, how an abatement affects your scheme, how the low interest loans that are given out in many cases by the City affect your scheme. The fact that we don't have an overall economic plan, I think is a clear indication of the reason why many of the patchwork development schemes that we have don't work and effectively negate each other in many cases. I believe it's the second floor's responsibility as the leader of this City to have a plan. Because that plan then becomes the dream that you have in relationship to where you want to see the City go. That doesn't mean it has to be done in tunnel 76 02/25/04 - WHOLE - RES. 040076 vision. It should be done with your participation because of your concerns. It should be done with Councilwoman Tasco's participation, all of us, because you have input as to districts. You have input as to your expertise over the years in other areas that you've worked and it should be done in a comprehensive way. The buck ends with the Mayor's office on the second floor.

In your role as Controller, as fiscal watchdog, do you have any charge to take into consideration economic concerns or is it just the fiscal bottom line? In other words, is there any direct charge you have as to fiscal watchdog to make decisions or to make recommendations based upon the economic environment we're operating in?

I think if you look at the City Charter, my office is the Auditing Department, and I have probably gone so far beyond the two pages that created the department that, you know, I attack anything that I think is a problem and recommend solutions wherever I think that I have an 77 02/25/04 - WHOLE - RES. 040076 opportunity to recommend solutions. Our mid-year report talked about the problems of TIFs. We talked about the problems with some abatements. One of the things I've always talked about, which is a concern of yourself and Councilwoman Tasco's, is the fact that there's no overall economic strategy and no real coordination of all those different departments in city government that deal with that strategy, if you had one. But I've never been one for being just guided by the three pieces of paper in the Charter that created the Auditing Department.

Well, the reason I asked the question is some might suggest that the whole debate over tax reform will be reduced to we can or cannot do it based upon balancing the budget. So I'm actually asking what is your responsibility as fiscal watchdog in terms of viewing and presenting tax reform as an investment, and what would be your official role in terms of how you view the money that may or may not be spent on tax reduction? 78 02/25/04 - WHOLE - RES. 040076

I don't know how to answer that as my official role, but in relation to guidelines that created my office in 1951, it's been a long time since I looked at them. I will tell you what I will do as Jonathan Saidel, the current Controller of Philadelphia. I'll be up there hip deep in whatever discussions there are, because it is not just simply a matter of dollars and cents. It is a matter of the future of the City that we all love. I'll give you an example. Why does the federal government give us charitable deductions as an itemized deduction on a tax return? They do that because they want to give an incentive to people to give charitable donations because it alleviates the federal government from having to be involved in those activities and it's cheaper in the long run. Taxing recommendations and the way to reform the taxing structure has to have, not only just an impact upon the budget that exists, but it needs to have an impact on budgets that you hope exist, which means that if the Tax 79 02/25/04 - WHOLE - RES. 040076 Commission's reports or any type of tax legislation can work, it needs to effect the economic viability of the people that it's involved with. To me, tax reductions and tax change policy has two things. One, it affects the cash that you have, but if done properly under and over all economic forecasts as to where you want to be years from now, it can affect where that money comes from in the future and the type of economic diversity that I think this City needs for it to be viable within the next century.

Do you believe that the tax reform package has to accompany an economic development strategy?

I think anything that we do has to always have within the back of its mind a development strategy. By that I mean, you heard Governor Schweiker talk about the loss of jobs. I think Philadelphia has to decide what it can be and what it can't be. How we can use these geographic strengths between Washington and New York as an example. 80 02/25/04 - WHOLE - RES. 040076 To look at the schools, the systems of higher education that we have, to try to keep those people here, what's called educational attainment level. To bring those types of businesses here, I think we have to do all that. Or I think a taxing structure needs to be used to promote not only the economic well-being of its budget, but the economic well-being of the population and diversity -- and I'm talking about the economic diversity you're try to create, as well as having a strong middle class, which I think is the economic backbone of any large urban area.

Lastly, on the 10-year elimination of the business privilege tax. What do you think about the proposal to eliminate the gross receipts portion the first five years and then the net income portion in the second five years, as opposed to gradually eliminating them both at the same time?

I think there's an argument either way. The problem with the net income portion is that there are a variety of companies that have large amounts of net 81 02/25/04 - WHOLE - RES. 040076 income, but their gross receipts are located all over the world. Usually they are businesses that have portability where they do computer designs all over the world. They don't have any sales in Philadelphia. So I think we'd have to really look at the tax collections as they come in. Would I like to see the package approved in total? Yes. But I think we have to have a discussion among all of us so that we can get a variety of nine votes and really have a program in place. I'm more than happy to look at anything.

Did you say nine votes?

All right, 12. I'll take 17. But I'm more than happy to have 12 votes on the second time around.

Thank you, Controller.

Thank you, Councilman.

Thank you for coming over. One of the reasons we wanted to have this discussion now is because we were told 82 02/25/04 - WHOLE - RES. 040076 not to discuss any taxes until the Tax Reform Commission completed its report, and we had not had an opportunity to discuss this report. Then we were advised that we should do it during the course of the budget. Well, if you look at the schedule of the budget hearings, you're not going to have too much time to discuss in depth the thinking of the Committee. I don't know if people thought there was some notion we were going to come in here and vote to adopt this plan. My intention is to have this discussion so that these people who spent months and months and $500,000 of taxpayers' money to put this plan together, that it just won't be for naught and it goes away. Well, it was an admirable job and nothing got done because there will be the notion that, well, we can't do it now. But in the overall context of all of this, how do we begin to look at tax reform in this City? It's spread out over a 10-year period, so it's not going to be done in the next budget cycle. So I hope my colleagues 83 02/25/04 - WHOLE - RES. 040076 will understand that. I think they do themselves a disservice to miss the discussion of the legislative intent and the content and the thinking of the individuals who spent so much time looking at it all. I agree with you that to have them not look at expenditures, although they may be outsiders and not understand government, they have some notion -- because I think I may have heard what Councilman Nutter was saying and some of the others -- that in the end, who's going to give us their analysis of the proposals so that there's just, like, another piece to this. Then someone else was saying, Well, given the budget, given the Five-Year Plan, given some of the proposals from the Tax Commission, we think you can do this. So there's a point of discussion. Because what ends up is 9 out of 11 people will say, Well, no, we can't do it right now, and there's no real discussion about how it can be done. If you're given a movement or just 84 02/25/04 - WHOLE - RES. 040076 the actions of Councilmembers, they're not even going to want to hear the discussion. And we're not going to have that much discussion in the next few weeks. You've got two days of tax debate. How can you have two days of discussion in a tax debate? So I agree. I'm just concerned that we will have had a valid position, a vote by the voters who said we want something done about the taxes. We will have these people who spent their time and this money to do it and then politically we don't have the political will because somebody thinks there's a grand conspiracy to embarrass someone, okay, and nothing gets done. And that would be very sad, and a disservice to the voters. I think the voters ought to hold these people accountable to it.

If I can just make a statement. My office can be used as a reservoir for the almost 50 CPAs, if you need any kind of analysis done. I'll drop everything for this Council. And anything that is specifically requested to analyze, you 85 02/25/04 - WHOLE - RES. 040076 have the full usage of my office for any impact on the expenditure side and any analysis that you might need on specific expenditures that are part of the budget. It would be my pleasure.

Thank you. Councilman Goode did steal my question because I asked him this morning who in the City is in charge. And I remember back in '83 before I came to Council, Councilman Joe Coleman put together an Economic Development Committee Task Force to look at the City, but it didn't go anywhere. That's what we do when we don't want to really address an issue. We put forth a committee and put them in charge and the committee does nothing. Fortunately, this Tax Commission did do something. They took their task and their charge seriously and have come forth with a serious document which probably some people don't want to happen. But we don't have someone who sets the policy. I think that's critical. That's why he took my question. 86 02/25/04 - WHOLE - RES. 040076 Thank you.

You're welcome. The Chair recognizes Councilman Kenney.

Thank you, Madam President. Jonathan, thank you for your insight into this issue. I just want to say, all the years I've known you -- it's been a long, long time -- I think we both kind of came into this business around the same time and around the same age group, and I've never seen anyone in public office that is more committed and more forthright and displays a passion that really is needed in this City. You really care about whether this gets done right. You really care about what happens. It's not just about filling a job or filling a role. You really are committed to making this a better City and I'm proud to be your friend and I'm glad you're our Controller. You raised the issue of budget deficits. In the year 2000 when we were sworn 87 02/25/04 - WHOLE - RES. 040076 in for a new term, what was the surplus for the City then?

The surplus before the last fiscal period?

2000.

It was probably around $150 million.

I agree.

And the budgets that we passed in 2001 through 2004, they were all balanced budgets, correct, as our requirement?

Yes.

And the Five-Year Plan that we continue to add to every year projected out were all balanced as a result of the requirements from the State?

Right.

What are the factors in your mind that have put us, whether it's your number or the Mayor's number, that have put us in this situation facing either $40 or $140 -- you know, a $700 million, five-year problem, whatever the number is -- 88 02/25/04 - WHOLE - RES. 040076 what are the major factors in your mind that created this situation?

We've have had a number of unanticipated expenditures, additional transfer of real estate tax collections to the School District, the cost of NTI, the bonds, the additional expenditures of police overtime in relationship to the Mayor's additional usage of uniformed police officers on the streets of Philadelphia. I'm not criticizing them. But I always look at government relationships that when you walk into the market and you've got $60, no matter how cute you are, you're not getting out with $90 worth of goods.

Unless you have a big coat.

Yes. Unless you're going to steal. I look at government the same way. You can have dreams and aspirations, but they're also confined by the parameters of the reality that exists. I think that there was no dramatic reduction of revenue that was 89 02/25/04 - WHOLE - RES. 040076 collected. If that was the case, then that's something -- if, God forbid, 9/11 occurred here, we wouldn't even be having this discussion because there would have been external forces at play. But that's not the case. I think one of the major problems we have is that the expenditures have grown greater than anticipated in relationship to the revenue that was projected. We have actually increased our revenue beyond projections, but expenditures have grown.

You're an accountant by profession in the accounting profession and you teach also. The budget is a tool. It's not just a document that we sit in here and fall asleep on and listen to the Commissioners rattle on and we give them what they want or what they ask for and we pass the budget and the budget is just a document that is meaningless. In business, the budget is a tool that is analyzed on a monthly basis, a quarterly basis. It's adjusted. There's discussion about it. We don't seem to do that in the running of this government, the way a 90 02/25/04 - WHOLE - RES. 040076 business runs. I understand government is not business and every issue a business is involved in should not be replicated in government. I understand that. But as far as the budget as a tool, isn't there a need for this Board of Directors to have some input on an ongoing basis with at least discussion and information about expenditures? Because I know that when we pass these successive budgets, no one ever came back to us and said, "You know, what we'd like to do is, we have a program. It's going to cost a little more money. We need to move some money from here to there. What do you think about that and what effect does it have on our budget?" Collectively, as you said earlier, collectively we kind of govern. What is your view as to the way in which the budgets that we have are used or not used as tools to direct this business or direct this governmental entity? It's really bothersome. Money is spent without just even a discussion. Once we have passed a budget, the document 91 02/25/04 - WHOLE - RES. 040076 almost becomes totally meaningless.

That's always been, as you know, a concern of mine. The only time that Council's involved in any changes in the budget during the fiscal period is when they have transfer ordinances because they need to, by law, come back and ask to move money from one operating department to another. And based upon the PICA legislation that created the oversight committee, it also created, I think, a better accounting system. There's a quarterly report that's put out. That's an internal document that's generated by the Finance Department upon which none of us have any input in relationship to what we'd like to see happen. We're no longer the be-all and catch-all in the Delaware Valley surrounded by suburban farms and villages and apple orchards in South Jersey. I think we need to almost look at our budget and changes in direction, if not on a monthly basis, if you can do it on a weekly basis. I think input from the wealth of talent in Council is a vital necessity 92 02/25/04 - WHOLE - RES. 040076 because you become the eyes and ears of an Administration. Everyone besides the Mayor in his Administration is not elected. He's got thousands of employees, but the only one that's truly elected by the people of Philadelphia is the Mayor himself or herself. Certainly, I've always believed that influences and contributions of knowledge from other elected officials in no way impedes upon my responsibilities, but I think makes me a better elected official by listening to them.

I voice this because the real frustration for me in this environment and in this process is that a lot of what we're going to be told we're not able to do is a result of decisions that were made on expenditures that we had nothing to do about. The real ultimate problem with tax reform is going to be, "Well, we can't afford it right now because we have this deficit. We can't afford it right now because in order to do this we're going to have to cut services somewhere." 93 02/25/04 - WHOLE - RES. 040076 And I think that this is the time we need to do it. It may be the worst environment to do it in because we'll have all the potential excuses for not doing it. But all of those excuses came about as a result of little or no cooperation or sharing of information or even telling us what it's all about. What happens is we wind up getting criticized or put in a bad light because if we have a question, God forbid, about a $60 million overtime issue, we don't want to see the City of Philadelphia have safe streets. Well, that's not the case at all. We all do, but within the confines of our ability to pay for it. And now within the confines of our ability to reform our tax structure is all going to be impacted upon the decisions that were made unilaterally over the last four years. And it's extremely frustrating because I know what the song will be when we get to the point of voting or not voting for these things is that we can't afford to do it 94 02/25/04 - WHOLE - RES. 040076 now because we're in debt.

I don't think that anything should be voted up or down in totality. I think the only time that Council really has, unfortunately, based upon the process, has a real opportunity is during these budget hearings. You can effectively recreate a budget.

But as Councilmember Tasco said, we have very little time. We're usually dealing with this issue mid January. We're not dealing with it now until mid March with a PICA deadline of, what, May 30th?

I know. The problem has always been, if not now, when? I have not gotten to the when point yet in 15 years of being an elected official, so...

Well, what I would ask you to do, because you have a cogent, clear voice on this stuff and a lot of credibility, is to keep on pushing us and pushing the public for us to do something now as opposed to in the future. 95 02/25/04 - WHOLE - RES. 040076 Thank you.

Thank you. The Chair recognizes Councilman Rizzo.

First of all, thanks for your good work, and I think you know that I value your reports, your audit reports. As a matter of fact, your audit report from a few years ago motivated me to look into an issue that has not yet been resolved. And, unfortunately, the City Controller audits but has no enforcement power, which you explained to me. I'm curious, how many departments have you identified problems with the way money is spent? For example, for years and years you've been pointing out that the police overtime program, where police officers work on their days off, the fact that the City pays the police officers. But millions and millions and millions of dollars have not been collected because of, A, shoddy paperwork, the fact that the customers never paid the bill 96 02/25/04 - WHOLE - RES. 040076 but continued to get the service. That is a disgrace. And it's millions of dollars which I believe your representative at the meeting identified that have not been collected by the City, one way or the other. My point is that the Administration makes a statement, which it sounds good that there's not going to be any cuts in police or fire. At least I believe I've heard that said and I doubt that that would be the fact once this budget hits. The Police Department and the Fire Department really need to be looked at, because I get reports regularly -- an example, telephone lines in the communication system when we changed over to the new radio, dozens of telephone lines were disconnected because they weren't used, but we continued to get phone bills for lines that provided no 20 service at all. Radios, batteries that could have been recharged thrown away, $50, $60 dollars a piece that the police officers and fire fighters use. I'm a strong supporter, as everyone knows, of our Police and Fire Department. But 97 02/25/04 - WHOLE - RES. 040076 it seems as though every time you want to look at the Police or Fire Department they say, "You can't look. This is the Police Department. It's privileged information." I really need to hear from you what we can do to try to run these operating departments. Because it took me to at least get the Administration -- and they weren't going to do it willingly on the police overtime issue -- I had to do a resolution, which my colleagues supported. The day before the hearing, I started to get a response from the Administration. And we're talking millions and millions and millions of dollars that the taxpayers of this City were not being reimbursed for. I appreciate the good work of you and your staff, but they have to start listening, because you people are professionals in identifying where they can do better. What is the resistance of them doing what you recommend or communicating why your recommendation isn't a good one, if in fact it isn't a good one? But I can't imagine when 98 02/25/04 - WHOLE - RES. 040076 you point out when money isn't being handled properly how anybody could argue with that. But use the example of years and years and years of pointing out that they had a flawed system in collecting money for police that worked on their days off. It just boggles my mind.

I certainly understand your concern. One of the tests of independence in accounting and as an auditor is that you cannot audit an agency of which you have management responsibilities because that would be an inherent conflict. So the way the Charter reads is that we can make recommendations to run government in a cost efficient way, but we have no ability to enforce that, which is one of the reasons why I allow the different operating departments to have a variety of exit conferences and to report, and I attach their written response to our recommendations to all the audits that you have so nicely thanked me for. And that information is disseminated to all Members of Council and to the Operating Department 99 02/25/04 - WHOLE - RES. 040076 Commissioner, as well as to the Mayor and to those individuals in the Mayor's Administration that are responsible for it. If you criticize the Defense Department of the United States and you're a Congressman, it doesn't mean that you're not patriotic. If you criticize the manner in which the Police Department or the Fire Department live up to their obligations to spend almost 45 percent of our budget, that doesn't make you anti-American or anti-Philadelphian or anti-police or anti-fire. Because if they spend their money in a better way, fire fighters' lives will be saved and police officers technically will be able to do their job in a comprehensive way and, I think, save lives. The only thing that I have ever advocated is that -- and you have done this, so you're actually somebody who can respond to it -- is that the list of recommendations that we had made and its effect upon the cash that is spent and the expenditures that are spent in each one of the operating departments, and 100 02/25/04 - WHOLE - RES. 040076 the question that you had that my office worked with you on as far as reimbursement to the City for officers working on their days off with the same police powers, those questions should come up when the Commissioner is sitting here. You know what I mean? And if they could have saved a $100,000 because they didn't do what they're supposed to do and they knew about it, therefore they had notice on it, I would take $100,000 off their budget for that. One of the ways that my parents always got my attention was when I went from $2 allowance to $1 allowance if I didn't do something. I think unfortunately sometimes in government you have to make sure that people take judicial notice when they get less money.

I think you'll recollect it was significantly more than a $100,000.

I'm using that as an example. And you know that police and fire, they can't use the fact that something is confidential. The only thing that's 101 02/25/04 - WHOLE - RES. 040076 confidential in the police department is the use of RICO (ph) money, money that's acquired for the eradication of drugs and drug forfeiture money. That money is audited by me and then that audit is not sent to you. It is sent to the Attorney General of the State, and the Attorney General then sends that audit report to the Justice Department in Washington.

Don't ever try to ask them how many police officers are on duty in a particular district on a particular tour. They have a big umbrella that protects them from answering that question.

That's public information. That should be disclosed.

So can you think of any other areas, significant areas like we're talking, maybe well over a $100 million that you've been identifying for years and years and years and they've been, for lack of a better word, blowing you off and not doing anything about it? Are there any other areas that we need to know that we as your 102 02/25/04 - WHOLE - RES. 040076 colleagues in Council can -- and that's how I believe you referred to us -- that we can help? Because if they're not responding to you, hopefully together they may respond. It's a disgrace to see all of that money out there, and especially when we're talking about tough times ahead. You mentioned about the state patrols on I-95 through the interstate highways. We're talking another $6 million. Somebody has to do something about these issues when we've identified them and you've spent such amount of time with your resources to identify these areas and no one is doing anything about it. In my opinion, it's a disgrace.

I understand that, Councilman. As Councilman Kenney mentioned, when an Administration tells you that they're operational deficit is $114 million, that's based upon their numbers. What about if their numbers can be changed to make government more cost efficient and still provide the services, then their own deficit will go down. I mean, 103 02/25/04 - WHOLE - RES. 040076 these numbers are not -- you know, Moses didn't get them up on Mount Sinai. I think, as I had mentioned when I had spoken off the cuff, that we really have to have a transparent system here. And all of us have to participate because we have tremendous opportunity to do a lot of good. And if we don't force that hand, then I think we have a lot to be called for. I think a deficit can be eradicated a little over here, a little over there, so, as my mother would say, at the end of the day you've got some money. But also the deficit that is broadcast is a deficit based upon the numbers of the person that's broadcasting it. I think you can do a variety of things and be much more imaginative to get to a number that everyone will say, that's the best we can do this particular year. Then let's look at an economic plan. Let's look at some tax reform that can get us one step closer to where we'd like to be.

Could you possibly make a note that I would like to 104 02/25/04 - WHOLE - RES. 040076 have -- and I believe I have it -- the most up-to-date audit of the Philadelphia Police and Fire Department?

I will send them over to you this afternoon.

Thank you, sir. Thank you, Madam Chair.

Councilman Nutter.

Controller Saidel, again, thank you again for your testimony. I wanted to, while we're in the same record, at least provide some perspective on a couple issues that you raised. One, I do respect your forthrightness with regard to what your position may or may not have been at the time of the creation of the Tax Reform Commission. And it is certainly clear since that time that you have been a most enthusiastic supporter of the Commission and of the Commission's work, and I commend you for that. It's helpful to have your voice as a part of the dialog on 105 02/25/04 - WHOLE - RES. 040076 taxes. You do play a critical role in laying out an alternative view to our financial situation and making recommendations. You and I are certainly in agreement in putting the proposal together for the Tax Reform Commission. And one of the reasons that I felt, and many others, that the better way to go as opposed to any of the other ways to create such a body, whether it's by Mayoral Executive Order, whether it's by resolution 12 from City Council or a task force or anything like that, is I strongly felt that if the voters empowered this group of people to do their work, that these groups and organizations, more often times than not, take their charge from the people who help put them together. At times there have been occasions where any of us in the body of politics have put together entities ostensibly for the reason to study something, but in some instances we'd like it to just be studied and maybe ultimately nothing happened. I believe that, empowered by the voters, the Tax Reform 106 02/25/04 - WHOLE - RES. 040076 Commission would take its work seriously and feel compelled to go beyond what often commissions or task forces might normally do. With regard to the technical inability of the Tax Reform Commission, for instance, the first concern that you expressed, that they could not look at the spending considerations as opposed to just the cuts or revenue enhancement, as well as even the date of the issuance of report. Let me state for you very directly that if you look at the bill that was introduced for the Tax Reform Commission, you will see that they had both the power to look at all of the components of the City government on both sides of the accounting ledger, both spending and revenues, as well as the expectation, I believe, that the report was going to be released either on July 1, 2003 or on July 15, 2003. Both of those issues and a few others were changed at the request of Mayor Street and some other Members of City Council. Those of us more directly involved, quite honestly, had to make a judgment call as to whether or 107 02/25/04 - WHOLE - RES. 040076 not the good work of the Commission was more important, at least in terms of getting either 9, and because it was a Charter provision, 5 votes required on the resolution. And I did 6 make that judgment, along with others, that 7 the Commission, once empowered, within reason 8 would do the things that it needed to get 9 done. I thought that the report should come 10 out earlier, and that because of the nature of 11 what was going on last year in the mayoral 12 election, that this issue certainly was one that deserved consideration, if not debate. So I wanted to, at least in the context of the conversation, lay out that there were some compromises made against, quite frankly, the will of those of us supporting it. But you know about the need at times to make those political judgments. Second, Councilman Goode, both on his own and as well as Councilwoman Tasco, were thinking about these questions about whose responsibility it is to have a plan for economic growth. One, I think you're right in terms of where the responsibility lies. But 108 02/25/04 - WHOLE - RES.