COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE OF THE WHOLE Room 400, City Hall Philadelphia, Pennsylvania Wednesday, April 4, 2012 10:18 a.m. PRESENT: COUNCIL PRESIDENT DARRELL L. CLARKE COUNCILWOMAN CINDY BASS COUNCILWOMAN JANNIE BLACKWELL COUNCILWOMAN MARIAN B. TASCO COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN WILLIAM K. GREENLEE COUNCILMAN KENYATTA JOHNSON COUNCILMAN CURTIS JONES, JR. COUNCILMAN DAVID OH COUNCILMAN MARK SQUILLA COUNCILMAN JAMES KENNEY COUNCILMAN BOBBY HENON COUNCILMAN BILL GREEN COUNCILMAN DENNIS O'BRIEN 2 NO. 120164 - An Ordinance to adopt a Capital Program for the six Fiscal Years 2013-2018 inclusive. NO. 120165 - An Ordinance to adopt a Fiscal 2013 Capital Budget. NO. 120166 - An Ordinance adopting the Operating Budget for Fiscal Year 2013. NO. 120167 - Resolution providing for the approval by the Council of the City of Philadelphia of a Revised Five Year Financial Plan for the City of Philadelphia covering Fiscal Years 2013 through 2017, and incorporating proposed changes with respect to Fiscal Year 2012, which is to be submitted by the Mayor to the Pennsylvania Intergovernmental Cooperation Authority (the "Authority") pursuant to the Intergovernmental Cooperation Agreement, authorized by an ordinance of this Council approved by the Mayor on January 3, 1992 (Bill No. 1563-A), by and between the City and the Authority. 3
Good morning, everyone. This is a continuation of the Public Hearing on the Committee of the Whole regarding Bills No. 120164, 12165, 12266 and Resolution 12167. Ms. Lewis, please read the title of the Bill and Resolution.
Bill No. 120164, an Ordinance to adopt a Capital Program for the six Fiscal Years 2013-2018 inclusive. Bill No. 120165, an Ordinance to adopt a Fiscal 2013 Capital Budget. Bill No. 120166, An Ordinance adopting the Operating Budge for Fiscal Year 2013. Bill No. 120167, a Resolution 16 providing for the approval by the Council of the City of Philadelphia of a Revised Five Year Financial Plan for the City of Philadelphia covering Fiscal Years 2013 through 2017, and incorporating proposed changes with respect to the Fiscal Year, 2012, which is to be submitted by the mayor to the Pennsylvania Intergovernmental Cooperation Authority (the "Authority") pursuant to the Intergovernmental 4 Cooperation Agreement, authorized by an ordinance of this Council approved by the Mayor on January 3, 1992, Bill No. 1563-A, by and between the City and the Authority.
Good morning. My name is Rob Dubow. I am the Finance Director. I understand the way we're doing this here is just real quickly the numbers and right into questions.
We'll appreciate it. Use more time for questions.
Okay. And we'll need that. The Finance Department's Proposed General Fund Budget totals $1.3 billion, that's an increase of $87 million over FY12 levels. The increase is caused primarily by an increase in Fringe Benefits and most of that is an increase in pension costs. And our direct appropriations for the Finance Department are $12 million, which is slightly lower than FY12 estimated obligations. 5 We are committed to the Administration's FY13 goal of 25 percent minority, women and disability-owned business participation in City contracting. For FY12 year-to-date we have an overall 36.6 percent participation rate in contracting, and our goal for FY13 is 37 percent. We have a chart that's attached that gives some more detail on that and on the demographics of our office and we would be happy to answer any questions.
Thank you. We will start out, I'm going to ask you about the FY12, the transfer of $1 million from the personal services category within the Office of Property Assessment to the General Fund, if you could just clarify that for me, please.
Right. That transfer is to help with appeals of property assessments that has become actually more important with yesterday's ruling by the State Tax Equalization Board that said that our common level ratio should be about percent. If 24 that is applied to all the appeals we got this 6 year, that could cost the General Fund about $18 million. We want to be able to cross appeal and say that market value should actually be higher which could help reduce that impact, if that's what the --
Well, we knew there was a preliminary ruling from the State Board, so we knew that this was coming.
Knew it was coming, okay. All right. You have $850,000 also transferred to the law department.
Okay. All right. Let me ask you a question about $32.5 million supposed to be allocated to fund indemnities. Is this an increase?
It's actually a slight 7 decrease because there were a couple of relatively large cases this year, and we're assuming that won't recur. There were about 3.4 million for two cases, one the Woods case and one the Isaac case, so that increased this year's number.
Okay. And two vacant positions in Capital Budge.
Capital budget, yes. One is the deputy director for capital, that position is vacant, and then another is for someone to fill a position of someone who moved elsewhere. So, there are two vacancies.
Is there a particular reason the deputy director is no 16 longer here.
Oh, that's very unfortunate, I'm sorry. I did not know that. Okay. Are we going to fill the vacancies at all?
Okay. I'm going to turn this over to my colleagues. Chair recognizes Council Member Greenlee.
I just have one question around the new office of property data.
Now, that's under Finance, but other departments are going to be working with you, is that kind of how it works?
Yes, yeah. I mean the issue there is that different departments have different data sets on property and they're often inconsistent, and sometimes can be inaccurate which complicates a whole variety of City services, everything from EMS responses to sending out the bills. So, their job is to coordinate all that and make sure all that makes sense and is consistent, so it involves 9 working with departments throughout the government.
I guess if it's inconsistent there must be some inaccuracies, right?
Sorry about that. I had to throw that in. And just are there new employees involved or are these employees coming from other departments?
There is an increase in our staffing level of four with a fifth to come on next year. Some of those employees were hired from other departments into the government.
Okay, so some come from departments, okay. I mean, it would seem like it's needed, because I know what you mean, different departments give you different information. It's kind of crazy.
On of your Reward Fund was appropriated in FY12, $500,000 I believe it is.
There have been a couple of allocations against it. I don't know whether it has been drawn down. We can get an answer for you. We will get back to you.
From the public safety aspect of it, I applaud you guys for putting it in and look forward to seeing how it is utilized, that in conjunction with the witness relocation money, the things that -- 11
-- mean so much to the justice system. ACS State & Local Solutions, according to of your budget detail, is receiving a contract for $1.4 million for violations, tracking and collection. Can you explain what that is?
Yes. They help with revenue collections for code violation notices and they get a percentage of the collections. And we re-did the contract, I guess last year, and that percent went down. I think it's about 10.9 percent is what they get.
What has been their ROI on that investment of 1.4? What have they actually drawn down in collections compared to that investment?
Hold on one second. I will -- last year their collection was about 10.3 million., because they are getting just under 11 percent, their collections are going to be about nine times whatever they get paid.
Are you aware that 12 the Commonwealth of Pennsylvania, of their continuum of collections, they have a department that goes after particular taxes? Are you aware of their revenue collection efforts at all?
I am slightly aware. Our Revenue Commissioner actually came from the Revenue Department of the state, so he is very familiar with what they do.
You might be interested to note that they have invested 1.4 million, was it? 4.1 million into a collections process that yielded 1,700 percent rate of return equaling $70 million based on their efforts. And, so, when you tell me that we have invested 1.4 and we have gotten 11 million, if you look at what they've been able to do in a way that also employs permanent collectors that sharpen their skills, they go after five essential state taxes and they train their people individually in the nuances of those taxes, in the ins and outs of it, and those trainees, their only problem is that they can't keep them because they're so sought after 13 by the private sector, you know, it's almost like if you were a prosecutor they want you to be a defense attorney at some law firm. Well, similarly, these people are so well trained that after they get their training they can't keep them, but the revenue collections to the state is a hundred -- what, 1,700, 1,700 percent. It's just phenomenal. So, I guess what I'm getting is I would like to take a look at cost comparison to say is it better to farm this out or is it better to train competent permanent Philadelphians to do this collection and will we get a better yield for that.
And it's fair also to say that on the tax side, a couple of the biggest projects that we're planning to do with our IT investment are in our revenue, in collections side, so there is the cashiering system and there's what we're calling Revenue Modernization, and that Revenue Modernization should be accompanied by kind of changes in our procedures that will help us collect more. So, people in Revenue think that that will help us 14 generate a lot more revenue. It looks like it's kind of consistent with what you're talking about at the state, so.
They have predicted dollars. They do, they call it rabbit testing, and what they do is they use a small sampling of what the exposure or non-collectible is under a group of businesses. So, if it's accountants and there is a particular tax that they're not getting receipts for, they go after that group of individuals for the highest yields, so the fattest rabbit that they can chase out of the hole and get they most yield for, they do. So, what I am saying is that if we're looking to add taxes, if we're looking to do all of this, we need to look at what is already on the books to collect. And I am going to be consistent, Mr. President, in insisting upon that before we burden ourselves and then the public with additional revenue enhancements. Thank you.
Thank you. Good work, by the way, Councilman. Very 15 productive trip.
City Council. That's why it was even more productive because you paid for it by yourself. The Chair now recognizes Council Member Goode.
I wish every department would do one for reasons that will be illustrated through my line of questioning. Until four years ago, since 1982, Embeck was situated in the Finance Department. Then OEO was created and situated in the Commerce Department. I don't expect you to answer a question as to whether that was the 16 right move or not, but my question is what responsibility under the Charter in the Philadelphia Code do you still have for contract and diversity?
Well, under the Charter we still have that same responsibility we had before. We have an MOU with Commerce so that Commerce carries out the function, but we still have the same responsibility in the Charter. Does that answer the question?
Do you check the numbers in terms of whether OEO's numbers are right?
No. I see what the numbers are, but I don't attempt to validate them.
For instance, your 17 department spent how much last year on contracting, Fiscal Year '11.
What was the total spent on contracting last year from your department?
Hold on one second. There is -- actually that, the 11.9 is our largest contracts. There are some additional -- let me get to the totals. 18 You know, there are some other contracts and we don't have the '11 amounts for those, so let us get back to you with what the --
I have '12. I don't have '11 with me. For '12 it's about 4 million was the total spent.
Okay. What was your participation rate for fiscal year '11 .
Okay. For the Office of Property Assessment, what was their participation rate for fiscal year '11?
For '11 there was not -- they just started, it was at 33 percent.
If we went through the testimony and looked at the numbers in the testimony, what would the participation rate be for the City?
We just do the testimony, we'd have to get back to you on that.
Thank you, Councilman. The Chair recognizes Council Member Oh. 21
Thank you, Mr. President. Just along that line of questioning from Councilman Goode, could you provide the executive staff number again? There are supposed to be total and then it equals only 7 25, so one staff member is missing in that 8 first column. 9
In terms of the 24 definition of minority, women and disadvantaged 22 business enterprise, it's definition, I am looking at some numbers where there is like 36.12 percent participation. And I'm wondering how are these entities being defined in terms of compliance? For example, there could be a minority or women-owned business where the owner is a minority women and that person may have five employees. A person might be a partner in a law firm of 300 people and all the revenues may come through that one partner and be distributed amongst the 300 people in the firm. Does that count as 100 percent participation?
If their partner was fit into one of the DWBE categories, is that --
My name is Angela Dowd-Burton. I'm the Executive Director for the Office of Economic Opportunity. Thank for your question, Councilman. Right now there is no participation given to partners within law firms. What we have done is defined a goal of analyzing the impact of giving credit for participation where we have partners who are the bankable or the 23 billable partner within a law firm or an accounting firm or financial firm, but to date they are not being included at all with regard to participation.
Okay. Thank you very much. What I would ask for then is a listing of the companies that are participating with this particular vendor.
Okay. Thank you very much. The budget includes an increase of $75 million for additional pension costs.
And last year there was an additional $62 million for pension costs; is that correct?
Okay. Do you have within your discretion or your authority as finance director the ability to plan for the prioritization of paying down the debt?
The way we determine that payment is we get numbers from actuary who calculates what is called the minimum municipal obligation, which is the amount that we're required to pay under state law. So, the only way we can change that amount is if there is something that changes in state law. So, a couple of years ago the state authorized a deferral of a portion of our payment, so that led to a change in our payment, but I can't change that payment from the MMO. I can't go below the MMO unilaterally. I can go above it, but I can't go below it.
If we could do that without damaging the rest of our budget, yes. But, as you can see, pensions have already gone up so dramatically and taken up so much more of our budget that they've already put a tremendous strain on the rest of the budget.
You did testify in 2007 in opposition to Bill No. 060833 which would eliminate the requirement that the Pension Fund be approximately 77 percent funded before payments could be made to the Pension Adjustment Fund.
Do you still think that's a good idea or has your opinion changed?
I still think that payments shouldn't be made to the Pension Adjustment Fund unless the fund has a certain level of health. That was the original idea. So, I think before that legislation you had to be in the upper 70s.
Now we have a pension fund that's under 50 percent funded, and if earnings are high enough we'd still have to make Pension Adjustment Fund payments and I don't think that makes sense.
Okay. The reason I am asking is I anticipate that Council will be asked to make some decisions and I am curious from the Administration's point of view what actions could you do now to address the pension deficit?
Well, our primary focus is to get changes through the collective bargaining process and through the arbitration awards. We actually had a fairly significant change in the arbitration award for correctional officers that required all new correction officers to go into what's called a highbred plan, it has a combination of a traditional defined benefit plan but with much lower benefits and the equivalent of a 401k plan and required new employees to increase their percentage contribution. We think that will help both the Pension Fund netting out we have to put in over the long-term. In the short-term there's probably not much you can do since it's a long-term problem and we need to look at long-term solutions for it.
All right. Thank you very much. I know I'm past my time, Mr. President.
That's 27 okay. Thank you, Councilman. The Chair recognizes Council Member Henon.
I have a few questions, one just to expand a little bit on what my colleague and Majority Leader Councilman Jones had mentioned about the collection, you know, professional contracts. Is the Finance Department responsible for all collections throughout the departments of the City or is it just specifically for the OAR or BAA?
Right. So, their tax collections are the responsibility of the Revenue Department, which reports up to the finance director, but we don't do those collections.
For -- and that is just 28 for OAR, it's not for BAA. Parking ticket collection is done by the Parking Authority.
Okay. Great. My office has been working with your office, so I publically want to thank Paula Weiss and Eileen O'Brien for continuing and ongoing conversations with some of my concerns as we move through the process.
So, especially when it's regards to the code enforcement with the City.
And it's also my understanding that, you know, we should anticipate some changes being made moving forward, and it's important I think that somebody from 0AR or BAA please can answer a few questions so people better understand the process. It would be for me, you know, I would like to get that on the record, so I have a few 29 questions.
Okay. Well, that's Paula Weiss and we'll have her come on up then.
Again, for the record, this better helps -- it will help me, and I'm sure it will help my colleagues, but it will certainly help me on some of the questions that I've had in my short time here. How many staff do you have working for the BAA?
Council, I am Paula Weiss, Executive Director for the Office of Administrative Review. Total for the OAR we have currently 21 staff members, well actually 20, and we're in the process of hiring a 21st for someone who 30 had left -- who left us last summer. of those are in the Code Unit. They process code violations and false alarms, registrations, and alarm fines, as well as processing all the code violation notices issued by various departments and doing some of the initial collection activity.
And how many 9 violations do you process in a given year? 10
In a given year, depending 11 on, you know, what gets written by the 12 different agencies, in FY11 we processed approximately 120,000 code violations.
How many of these violations are settled before being sent to municipal court for, I guess for liens or, you know, for judgements?
For judgements. When you say settled, you mean paid or dismissed as a result of an --
Paid and dismissed now that you've mentioned that. Thank you. 31
Probably about, I would say we hear from about half of the tickets that get issued.
Either settled paid partially or paid in full. Some of them are partial payments if we reach a settlement or an agreement, or perhaps dismissed as a result of an Administrative review hearing where we can determine it was not issued correctly.
No, half are not dismissed. I would about half of the 120,000 that get issued are either paid partially or in full or dismissed for some reason.
-- and do you have a record for those who do make it to court how many have judgements.
Yes. I would have to get back to you with that. We don't take the full remaining half or 50,000 or 60,000 to the municipal court because municipal court wouldn't have the capacity to handle that volume. We have a limitation of 160 cases per week that we're permitted by the Court to file 11 and we try to bundle those looking for starting with our violators who have the most violations and working our way down, so we have a priority list.